When it was still called ‘SolarCity’, Tesla’s solar business was so strong in the residential market that it was installing over 30% of the solar arrays in the US.
Some assumed that SolarCity was riding the growth of the industry while others suggested that the company was driving that growth.
But now that Tesla acquired the company and shifted their strategy toward fewer installations with higher profit margin, they are linked to an overall fall in installations in the market.
After years of impressive double-digit growth in the US, residential solar installations is on pace to fall for the first time this year, according to a report by GTM Research.
They expect the market to fall 13 percent and they attribute a large part of it to SolarCity slowing down deployment under Tesla.
GTM’s Austin Perea said:
“If SolarCity accounted for a 30 percent share of the national market and you cut those installation volumes effectively in half, that’s really what we are looking at in terms of the market downturn in 2017,”
SolarCity was contributing to the rapid growth of the solar market in the US through pioneering no-money-down solar leases and power-purchase agreements.
It enabled many homeowners to go solar while SolarCity kept finding ways to raise more money to finance those installations while collecting monthly payment for the electricity generated by those systems.
The model represented the vast majority of SolarCity’s sales and it was good for deployment, but it was difficult to make profitable. When Tesla took over the company, they accelerated a shift toward direct sales of solar installations instead of leases, which resulted in an important drop in installations – though they remain a market leader.
In Q3 2017, Tesla stated that they’d installed 109 MW of solar power in the quarter and that 46% of it was sold versus leased.
In comparison, SolarCity deployed 189 MW of solar during the same period last year.
I think we are seeing a temporary slow down of Tesla’s solar business as they wait for a whole new strategy powered by their own products.
SolarCity was at its core an installer. They had a few exclusive products when it comes to mounting equipment, but the actual solar panels, inverters, and all the core components were purchased from suppliers selling the same products to competitors.
Now Tesla plans to have its own line of products with exclusive panels from Panasonic, its own solar roof tiles, and its own energy storage solutions to combine with energy generation.
As it’s often the case with Tesla, the problem seems to be timing. Gigafactory 2 in Buffalo is seeing some delays, which is slowing down the deployment of this new strategy. Once the factory is running, we should start to see Tesla’s solar business for what it really is.
In the meantime, it opens the door for other companies to carve themselves a space in the market, which was difficult to do when SolarCity was aggressively marketing its products.
Tesla is instead marketing its solar products to its existing user base and incorporating them into its stores.
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