The name Tesla can bring to mind many things. Maybe you think about its CEO, Elon Musk, or about electric cars. Perhaps you even think about space ships going to mars. Chances are, you do not immediately think of solar. Yet, since Tesla bought SolarCity in 2016, it has been a major player in the solar energy market for home and business.
What are they like as a solar provider for businesses? Whether you are interested in going with Tesla for your company’s solar provider or merely curious because of the controversy that perpetually surrounds the company, this article will discuss the pros and cons of Tesla as a commercial solar provider.
Is Tesla a Good Solar Company?
This is a complicated question to answer. Tesla offers products and pricing that are attractive to businesses. If your business goes with Tesla, you could have, at the very least, a solar array installed at your company’s facility that works for your company’s energy needs, not against them by driving up your utility bill every month.
Tesla also offers a scalable storage solution with which your company can store the energy that its solar system has generated. Tesla’s storage solutions are home runs for the company and give you a clear incentive to use their service as a way to keep production in your facility operational during a power outage, among other things.
But Tesla also has a problem with its service record. In general, Tesla has suffered in the realm of customer service, with poor response times being one of the top complaints. Tesla’s commercial wing has come under particular scrutiny with its brief legal battle with Walmart in 2019, an episode that drew attention to faulty solar panels.
These problems came up at a time when Tesla’s solar brand was struggling, and the company was implementing measures to bolster a business that had dropped ever since its 2016 acquisition of SolarCity. So both product and performance need to be considered when deciding if Tesla is a good solar company.
Benefits of Solar Through Tesla
There are dramatic and compelling reasons to have Tesla install a solar array for your company:
- Cost savings on energy
- Solar Incentives for unused energy
- Potential for energy storage and usage
- Reputation in the community
There is an intangible benefit to solar that is hard to quantify but is worth considering. What goes through your mind when you see a solar installation over a business? Maybe it is on top of their building, or possibly it is on an installation that makes use of a carport, giving customers shade while generating clean energy.
Chances are, when you see solar panels connected to a business, you think that the business is forward-thinking, looking toward a better and cleaner way of doing things. Again, it is hard to quantify this, but when you have an image of doing what is best for the community, people believe you will do what is best for your customers.
By switching your company to solar, your business can experience tangible and intangible benefits. It is important to break these down along with looking at what Tesla provides because before you even get to specifics of Tesla’s service, the very fact that you are going with solar through them is a benefit to your company.
What Tesla Offers for Businesses
As you have already seen, within the ups and downs of Tesla, going solar gives your business a financial advantage. Now it is time to break down the services that Tesla offers by going solar with them. In 2019 Tesla began introducing ways to give their customers more control over how they enter the solar world.
The advantage of Tesla’s options is that they are focused on cost savings for their customers, a deliberate and strategic move on Tesla’s part to bolster their floundering solar business. And Tesla has even structured its commercial pricing so that the more you invest in solar efficiency, the more you save.
Tesla gives businesses the option to own or to subscribe to their service (essentially renting their solar panels), as well as the opportunity to work with their Powerpack energy storage technology to provide your business the ability to stay in production during power outages, as well as other benefits.
As this gets broken down, keep in mind that there are positives and negatives for each route that you take. If you choose to go with Tesla, you will need to know as much about your business’s needs as what Tesla provides. Could you benefit from a subscription service? Is solar savings all you need? Or do you need a more in-depth solution?
Owning a Solar System from Tesla
When it comes to benefits, few things are more tangible than the money you did not have to spend on the service that you absolutely need to stay in business. A change to Tesla solar means less money to the utility company and more in your pocket through energy savings. While this may sound oversimplified, it is literally the case.
A company that purchases or leases a solar installation from Tesla can save as much as 5 to 18 cents per kWh. This variance will likely depend on what state in which you are doing business. Add that up over the thousands of kilowatts that your company uses in a month, and that is a lot of money saved.
If you go with Tesla’s subscription service, these savings could potentially increase. The subscription service is much cheaper than what it would cost to own a solar array. Of course, this means that not owning your system, a couple of the other benefits would not apply to you. So there is more than just the cost savings of solar to think about.
How It Breaks Down
Tesla offers three sizes of solar systems for businesses. They come in a small, medium, or large kind of format.
- 40 kW
- 120 kW
- 240 kW
With Tesla, you can decide to purchase these systems outright through a purchase agreement, and Tesla will then install them and be the solar service provider. The price for each system is around:
- 40 kW – $65,000, which is the purchase price of $88,000 less the federal tax credit of $23,000
- 120 kW – $142,000, which is the purchase price of $192,000 less the federal tax credit of $50,000
- 240 kW – $256,000, which is the purchase price of $345,000 less the federal tax credit of $89,000
There is no doubt a significant sticker shock when reading over the prices. Keep a couple of things in mind. Residential solar arrays have a lower price because they are smaller systems. But overall, it costs Tesla less to deploy a commercial system, so you are not paying as much as you would if the commercial systems had residential prices.
Each system carries with it significant energy savings that should also put the sticker price into perspective. Broken down by system:
- 40 kW will save you an estimated $308,000 over 25 years
- 120 kW will save you an estimated $630,000 over 25 years
- 240 kW will save you an estimated $1,260,000 over 25 years
There are some states in which going with solar comes with an additional incentive that could put cash in your pocket. These 30 states (plus Washington D.C. and three territories) have what is called a Renewable Portfolio Standard (RPS), and they include (among many others):
The RPS adopted by these states requires that utility companies generate a percentage of their energy from renewable sources. That means that if you are generating solar energy, and your utility comes up short in meeting its requirement, it has to buy energy from you.
Most states target between 10% and 45% renewable energy, but some states make utility companies meet a target of 50% or greater renewable energy. In those states, you are more likely to get paid for solar generation, and they include:
- New York
If you buy your system from Tesla, you are eligible for these incentives. However, if you go with Tesla’s subscription rate, you are not, because Tesla owns the equipment. So the incentives (including tax breaks) go to Tesla.
Subscribing to a Solar System from Tesla
In the latter half of 2019, Tesla unveiled what it called its subscription service, first for residential, then for commercial later in the year. This service allows businesses to subscribe to solar from Tesla to receive the energy-saving benefits, but not the tax breaks or the incentives.
As you noted above, the prices of the units included the federal tax credits, which are applied to the purchase of solar units. The credit is currently at 26%, but it will drop in the next couple of years. So while the model might be attractive, keep in mind that the window for federal discounts on your solar purchase will close eventually.
Because in the subscription model, Tesla still owns the system, they have the right to claim the tax credit. They also have the right to claim the incentives if you are in one of the states with an RPS.
How It Breaks Down
The subscription service has straightforward and simple terms with equally simple pricing. In brief, the terms of a subscription are:
- The subscription includes the cost to install the unit
- You do not have to sign a long term contract
- Whatever energy the system generates is what you pay for.
- You can cancel the service at any time
- You can have the system removed at any time, though Tesla will charge what they call a nominal fee to remove it
- You can have a qualified contractor remove it, but it must be returned to Tesla
The subscription service also includes support and warranty from Tesla, much as if you owned the system yourself. Subscription pricing is figured out according to the size of the system that Tesla installs for your business. This pricing includes:
- About 13 cents a kWh for a 40 kW system
- About 11 cents a kWh for a 120 kW system
- About 10 cents a kWh for a 240 kW system
As you can see, the pricing goes down the larger the system. So if your business has a large building that requires high energy consumption, the larger systems are actually cheaper for you to subscribe to and benefit from.
All in all, the Tesla Commercial Subscription is a very reasonable way to get into solar. If you have any doubts about what solar can do for you, this gives you the chance to try it out with very little commitment.
The Tesla Powerpack
By going with Tesla as your solar company, you also have access to their storage solutions, namely the Powerpack. Like the Powerwall for residential use, the Powerpack is a storage solution that allows you to retain the energy that is generated by the system but not used.
Keeping this energy in the Powerpack then gives you options for how to use it later. Before you look at the options for using it, consider that it is a benefit that the Powerpack gives you any options at all. Without it, all your energy decisions are ultimately held in check by the utility company.
How You Can Use the Powerpack
The first way the Powerpack can benefit your business is by storing energy for you to use in an emergency. If the power grid is shut down, you have the option to immediately draw power from your reserves. This means production or service does not grind to a halt but keeps going because you have the energy to do it.
The Powerpack can be used in a strategic way as well. You can use stored energy to:
- Engage during peak usage hours in order to save money
- Act as a reserve to kick in so as to lessen peaks in the load
- Use it as a way to enable cost-effective load shifting
The Powerpack is scalable with other Powerpacks to a limitless degree. So, given your resources and your company’s needs, you can connect together as many Powerpacks as you need to accomplish your energy goals. You just need to know how much electricity your facility requires for an emergency or peak response or load shifting.
You can even connect enough Powerpacks to establish a microgrid, your own electricity hub. If you establish a microgrid that is powered by solar, you are generating clean energy to run your business instead of draining natural resources. Also, you are not hampered by the demands and constraints of a utility company.
How It Breaks Down
Get ready for another sticker shock. The Tesla Powerpack is not cheap, but, as with solar panels themselves, you have to keep in mind the pricing structure and what you will be saving in the long run by using Powerpacks in your energy strategy.
One Powerpack holds about 232 kWh of energy, and for that, you pay around $172,000. Yep, that is a lot. Bear in mind that the price drops with the 26% tax credit down to about $127,000 (and change). Now, this is how the pricing compares with the number of units that you buy:
- One unit: $172,000
- Three units: $350,000
So if you buy three Powerpacks, you can pick them up for $350,000, and with the tax credit, that is around $259,000. It starts to look a little more reasonable. If you buy only one unit, you pay about $550 a kWh for that unit after the federal tax credit. But for three, you pay $372 per kWh.
Since business owners will likely require more than one unit for their facilities, it is nice to know that Tesla structures the price to benefit you if you buy in bulk. But the one drawback to note is that there is no subscription service for Powerpacks. But with Tesla, you can buy the units separately.
If you were to look at only what Tesla advertises, you might be willing to say, Sign me up! But Tesla, just like every other company, is more complicated than what they advertise. And unlike most other companies, Tesla has had more than its share of trials and controversies.
A glance at genuine consumer reviews on the internet can give you a mixed impression. Tesla is not the worst company out there, but they are not hitting it out of the park either. They are plagued by unreasonable haters and lovers, yes, but they also have the people who see both sides. Their customer service is not more than middle-of-the-road.
When discussing Tesla’s reliability, you have to look at the company’s recent history and take into consideration what the Tesla solar business has been through over the last few years. Then you also have to look at their product and if it is good enough that you are willing to put up with a checkered past.
Solar in a Slump
Tesla completed the purchase of SolarCity in late 2016. At that time, SolarCity was the top dog in the solar industry. Since Tesla bought the company, solar installations decreased until they reached an all-time low in about mid-2019.
To put it into perspective, look at what the two companies installed side-by-side, SolarCity in its hey-day and Tesla in its slump:
- SolarCity – 258 megawatts worth of solar panels in one quarter in 2015
- Tesla – 29 megawatts worth of solar panels in the first quarter of 2019
At this time, Tesla had a lot that they were trying to do, and the impression was that they simply were not interested in the solar industry (in spite of the fact that Tesla was trying to ramp up for a scalable version of the solar roof). The Automotive arm of the company was plagued with product problems to which Tesla directed a lot of resources to fix.
Solar seemed to go by the wayside, and the company’s viability in the solar market was further called into question by an ongoing lawsuit initiated by some of the company’s own shareholders. The suit alleged that Tesla had paid too much for SolarCity and that Musk (cousin to the two former owners) should have recused himself from the venture.
Solar in a Rebound
Starting in 2019, Tesla redirected its strategy and began making changes to its solar business. It finally arrived at a scalable version of the solar roof. With this improvement, Tesla additionally offered residential owners a price match guarantee on their services.
Tesla also began offering the solar subscription service that was discussed earlier. Through this service, first homeowners, then business owners, could subscribe to solar. The offer was even extended to business owners who lease a building. So they too could get solar with the permission of the building’s owner.
The efforts that the company made toward improving the solar business seem to have started paying off:
- Solar installations in 2020 saw an 18% increase from the previous year.
- 2020 additionally saw a revenue increase of about $300 million from the prior year
- The Tesla storage solutions (like the Powerpack) also became the stars of the company
All of this is good news for Tesla. If nothing else, it shows that they do, in fact, care about the solar arm of their company. Being green is not just about cars. It is about home and business as well, and Tesla is a big part of making the change happen.
But unfortunately, Tesla has had more than just problems implementing a strategy for the solar part of its company. It has had product issues as well. In August of 2019, Walmart took legal action against Tesla, demanding that the company remove its solar installations from over 240 stores and pay for damages caused by fires.
The suit alleged that the fires originated from the panels having not been installed and maintained according to industry standards. It was not just one or two fires but seven fires that affected different Walmart locations from 2012 to 2018.
The lawsuit came at the worst possible time for Tesla when the company was dealing with a host of other problems and had only just begun to implement the strategy for improving its solar business. Then, after the suit by Walmart was filed, Amazon claimed that a Tesla solar panel had caused a fire at a fulfillment center in California.
Fortunately for Tesla, the suit brought by Walmart was settled out of court quickly. Only two months later, in November of 2019, Walmart dropped the suit, and the two companies said jointly that they were working together to resolve the problems that had occurred.
But the lawsuit exposed more than just a problem with Walmart. It was a problem that could be found in other solar panels as well, including panels in the residential market. Furthermore, it eventually came out that Tesla knew about the problem and had been quietly trying to remedy it for the past year. The causes of the fires seem to have been:
- Faulty Amphenol connector
- Faulty SolarEdge optimizer panels.
Tesla also seems to have known about the faulty parts because, in 2018, they began something called Project Titan, a secret attempt to quietly switch out the defective panels for new ones.
After the Walmart incident, stories began to circulate of residential fires that had happened apparently due to Tesla Solar panels as well, leading one to wonder if the same parts were in question and if Tesla knew about those as well.
While Tesla and Walmart have made nice, Walmart’s allegation of poor maintenance should be noted in light of the fact that Tesla apparently knew about the problem and, in relation to Walmart anyway, did nothing until they were sued.
Tesla Product Reliability Now
It should be pointed out that no major solar panel failures have made it into the news since Walmart sued Tesla and the roof fires became public. With all the other strategies that Tesla has put into action to try to move their solar brand forward, one would hope that product safety and customer service would be among their priorities.
It should also be noted that Tesla did, at least, attempt some action to remedy the problem of the faulty panels in 2018, even though they did it secretively. It is worth keeping this in mind because it is always tempting to think the worst of a company when something like this happens.
That said, the taste of deception is hard to wash out of your mouth. This is especially so when deception seems to have clouded Tesla’s solar brand from its questionable buyout of SolarCity (Musk was also a shareholder in the company) to the use of mockups instead of real solar tiles in the unveiling of the solar roof.
It is tempting to see the Walmart lawsuit as one more episode in a history of subterfuge that has derailed what could be a paradigm-changing company. At the end of the day, you have to decide if their products make it worth it to give them another chance to make things right. Because after all, companies, like people, do sometimes change.