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Why is Tesla Solar so Inexpensive Compared to Others?

holeydonut

Supporting Member
Jun 27, 2020
873
518
East Bay NorCal
4Q Sunrun(now merged with Vivint) numbers are out. If you want an answer to the original question, their sales cost is noted as $.85/Watt for 4Q20 and likely doesn't include a LOT of indirect sales cost that's baked into general costs.

So Tesla is selling installs at $2.01/Watt and the #1 installer in the nation by far likely has a cost line >50% of that for just sales.


I'm still amazed at how many people are unaware of solar as a reasonable alternative to whatever their status quo is. I've got neighbors who just think Solar is a luxury that doesn't have much short or long term value.

Sunrun spends an outrageous amount on lead-gen, affiliates, inside sales, and other functions. Tesla just assumes interested leads who do basic research on Google will stumble upon their offering with little fuss.

It'll be interesting to see how the race to the bottom pricing affects the industry in the long-term.
 

Laketime

Member
Dec 13, 2020
118
47
LI NY
I'm still amazed at how many people are unaware of solar as a reasonable alternative to whatever their status quo is. I've got neighbors who just think Solar is a luxury that doesn't have much short or long term value.

Sunrun spends an outrageous amount on lead-gen, affiliates, inside sales, and other functions. Tesla just assumes interested leads who do basic research on Google will stumble upon their offering with little fuss.

It'll be interesting to see how the race to the bottom pricing affects the industry in the long-term.
As a finance person I feel the industry has terrible messaging. They keep talking about break even but that's the wrong way to look at it. It should be like any other investment- return on investment. When someone buys a 5% muni they don't say in 20 years I'll break even- they look at the income generated (along with other factors). When you buy a solar system you should look at how much you earn off of your investment every year (as long as you plan on staying for a while). In my case it is 14% tax free per year, which is untouchable with the given risk I took on. It's one off the best investments you can make.
 

holeydonut

Supporting Member
Jun 27, 2020
873
518
East Bay NorCal
As a finance person I feel the industry has terrible messaging. They keep talking about break even but that's the wrong way to look at it. It should be like any other investment- return on investment. When someone buys a 5% muni they don't say in 20 years I'll break even- they look at the income generated (along with other factors). When you buy a solar system you should look at how much you earn off of your investment every year (as long as you plan on staying for a while). In my case it is 14% tax free per year, which is untouchable with the given risk I took on. It's one off the best investments you can make.


I'm a finance person... and the only reason I'm getting PV+ESS is to stick it to PG&E. Hatred > ROI
 

brucet999

Active Member
Mar 12, 2015
2,671
1,482
Huntington Beach, CA
As a finance person I feel the industry has terrible messaging. They keep talking about break even but that's the wrong way to look at it. It should be like any other investment- return on investment. When someone buys a 5% muni they don't say in 20 years I'll break even- they look at the income generated (along with other factors). When you buy a solar system you should look at how much you earn off of your investment every year (as long as you plan on staying for a while). In my case it is 14% tax free per year, which is untouchable with the given risk I took on. It's one off the best investments you can make.
I too looked at solar as an investment rather than as a cost to be recovered. I went with premium all-black panels, so my ROI was "only" 8% and tax free, but that amounts to the same as an 11% pre-tax ROI; far better than any other low risk investment. When I asked my solar installer why they don't use investment return instead of break-even time in their sales approach, he told me that the vast majority of prospects do not think in those terms. Same reason car dealers talk about monthly payments instead of price, I guess.

To be fair, unlike stocks or mutual funds, my solar has no liquidity. Not even likely to increase the value of my house, since appraisers generally do not support the added value of solar because "it is too difficult to measure" - as if one couldn't easily compute the reduced annual electricity cost and apply the prevailing home loan rate to arrive at a value.
 
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holeydonut

Supporting Member
Jun 27, 2020
873
518
East Bay NorCal
I went with premium all-black panels, so my ROI was "only" 8% and tax free, but that amounts to the same as an 11% pre-tax ROI.

To be fair, unlike stocks or mutual funds, my solar has no liquidity. Not even likely to increase the value of my house, since appraisers generally do not support the added value of solar because "it is too difficult to measure" - as if one couldn't easily compute the reduced annual electricity cost and apply the prevailing home loan rate to arrive at a value.

In Contra Costa County, California, a homeowner has to submit a form BOE-64-SES to exempt new construction solar (and ESS) projects from property tax assessment. Without this, the County will likely increase the appraised value of the home due to the green energy investment.

 

Laketime

Member
Dec 13, 2020
118
47
LI NY
I went with premium all-black panels, so my ROI was "only" 8% and tax free, but that amounts to the same as an 11% pre-tax ROI.

To be fair, unlike stocks or mutual funds, my solar has no liquidity. Not even likely to increase the value of my house, since appraisers generally do not support the added value of solar because "it is too difficult to measure" - as if one couldn't easily compute the reduced annual electricity cost and apply the prevailing home loan rate to arrive at a value.
Why were your panels so much more money? Are they a solar roof style? The panels we had done through Tesla are all black and trimmed on all visible sides. The reason I mentioned staying in the house is because of the liquidity factor. Where we are there is a noticeable bump in home values when there is an owned system on the roof, especially so if there is backup as well. When I first saw your location I thought we were neighbors, but alas I'm in Huntington NY, we are sorely lacking your beach...
 

Laketime

Member
Dec 13, 2020
118
47
LI NY
When you both speak of 'tax free' and tax free per year can you expand on your meaning here please? And how that relates to 'all-black panels?
It places the system and it's investment into the context of return on investment. With the exception of municipal bonds, when you purchase an investment the income is taxable as either ordinary income or cap gain. (Yes, there is simplification here such as state vs fed taxes). While the energy generated from a system does not produce a stream of income, it does provide an offset of expenses. You are going to have to pay for electricity out of pocket unless you generate your own. So when a system offsets that expense it is in a sense providing a tax free income (that is used to offset an after tax expense). If you pay $25k after incentives for a system and it generates $2500 a year in electricity then you could say you are earning 10% a year off of your investment (or that you have a 10 year payback as the solar companies describe it). The color of the panels does not play into this but if you pay a lot more money for your system than say buying through Tesla then your return will be less...
 
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tmyl21

Member
Jul 15, 2014
216
24
Hamilton NJ
Our conversation with the IRS. We spent a great deal of time on the phone with the IRS seeking answers to these questions. Everyone there was extremely helpful, but it took being transferred to several individuals within the organization, before we were able to get a hold of someone with some expertise in anything related to our questions. The first thing we learned is that there is no explicit ruling in IRS documentation relating to Renewable Energy Credits, so any information we were given was based on the interpretations of the individuals at the IRS that we consulted. Therefore, they were unable to provide anything in writing. The key question we were told to ask in this situation was “Are the SRECs sold in order to make a profit.” As long as that answer is no, then the individual we spoke to saw no reason why SRECs should be considered taxable income. Since you are selling the SRECs in order to recoup your investment in solar which supports the government’s intitiative towards clean energy, then you are not profiting from the sale of SRECs. However, if you have begun to turn a profit on the investment as a result of inflated SREC prices (or any other reason), then you should report it to the IRS and pay taxes on the revenues from any SRECs you sell to make a profit.
 

tmyl21

Member
Jul 15, 2014
216
24
Hamilton NJ
No definitive ruling or expectation from the IRS or governing body which really surprises me. If anyone has any knowledge as to the contrary please post your findings bc I'd love to hear it.
 

wjgjr

Member
May 11, 2020
974
731
Silver Spring, MD
Our conversation with the IRS. We spent a great deal of time on the phone with the IRS seeking answers to these questions. Everyone there was extremely helpful, but it took being transferred to several individuals within the organization, before we were able to get a hold of someone with some expertise in anything related to our questions. The first thing we learned is that there is no explicit ruling in IRS documentation relating to Renewable Energy Credits, so any information we were given was based on the interpretations of the individuals at the IRS that we consulted. Therefore, they were unable to provide anything in writing. The key question we were told to ask in this situation was “Are the SRECs sold in order to make a profit.” As long as that answer is no, then the individual we spoke to saw no reason why SRECs should be considered taxable income. Since you are selling the SRECs in order to recoup your investment in solar which supports the government’s intitiative towards clean energy, then you are not profiting from the sale of SRECs. However, if you have begun to turn a profit on the investment as a result of inflated SREC prices (or any other reason), then you should report it to the IRS and pay taxes on the revenues from any SRECs you sell to make a profit.
The money from SRECs either needs to be considered taxable income or it can, as you note, potentilly be considered recouping your investment. Either seems reasonable, but it has to be one (there is no free money.) The problem with treating it as helping to recoup your investment costs is if you claimed the ITC. In that case, you would need to reduce your ITC claim by the amount you received from the SRECs. This is an old article - SRECTrade | Are SRECs taxable? « SRECTrade Blog - but it discusses the issue, and also links to the private letter ruling from the IRS - https://www.irs.gov/pub/irs-wd/1035003.pdf.
 

brucet999

Active Member
Mar 12, 2015
2,671
1,482
Huntington Beach, CA
In Contra Costa County, California, a homeowner has to submit a form BOE-64-SES to exempt new construction solar (and ESS) projects from property tax assessment. Without this, the County will likely increase the appraised value of the home due to the green energy investment.

I do not recall any such form here in Orange County. If there was, it was taken care of by our installer.
 

brucet999

Active Member
Mar 12, 2015
2,671
1,482
Huntington Beach, CA
Why were your panels so much more money? Are they a solar roof style? The panels we had done through Tesla are all black and trimmed on all visible sides. The reason I mentioned staying in the house is because of the liquidity factor. Where we are there is a noticeable bump in home values when there is an owned system on the roof, especially so if there is backup as well. When I first saw your location I thought we were neighbors, but alas I'm in Huntington NY, we are sorely lacking your beach...
Tesla's panels may be all black now, but they are not premium quality, from what I have been able to learn. Premium quality panels like SunPower (now Maxeon) and like Panasonic HIT, cost more but suffer no light induced degradation (LID), a phenomenon causing loss of 2% to 3% of production in the first few days of use. Not surprisingly, the cheaper panel manufacturers don't cite this spec, but you can infer it from their 25-year degradation warranty graphs when they start at 97% or 98% instead of 100% or 99.7%.

Premium panels also guarantee less than 10% degradation after 25years, while ordinary panels run closer to 20% degradation (from their initial 97% after LID) at 25 years.
 

willow_hiller

Active Member
Apr 3, 2019
2,950
12,671
Maryland
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TexasEV

Well-Known Member
Jun 5, 2013
7,640
8,464
Austin, TX
It places the system and it's investment into the context of return on investment. With the exception of municipal bonds, when you purchase an investment the income is taxable as either ordinary income or cap gain. (Yes, there is simplification here such as state vs fed taxes). While the energy generated from a system does not produce a stream of income, it does provide an offset of expenses. You are going to have to pay for electricity out of pocket unless you generate your own. So when a system offsets that expense it is in a sense providing a tax free income (that is used to offset an after tax expense). If you pay $25k after incentives for a system and it generates $2500 a year in electricity then you could say you are earning 10% a year off of your investment (or that you have a 10 year payback as the solar companies describe it). The color of the panels does not play into this but if you pay a lot more money for your system than say buying through Tesla then your return will be less...
But unlike a municipal bond that returns the principal at maturity in 30 years, the value of solar panels goes to 0 after about 30 years when the panels reach the end of their useful life. How do you account for this in your ROI calculation?
 

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