Why is Tesla Solar so Inexpensive Compared to Others?

[holeydonut]

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.

 

[trautmane2]

kept my $100 deposit, and canceled the order.

Did you try to get the $100 back? I was told and have also read about others who were told that you can get the $100 back if your deposit was in good faith and the project got dropped for some reason.

 

[Laketime]

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]

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

 

[Laketime]

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

That is a regional thing. Here we have 1:1 net metering, no on/off peak and a utility that hates reliability, not ratepayers...

 

[brucet999]

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.

 

[holeydonut]

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.

CAA e-Forms Service Center - Contra Costa: BOE-64-SES

Form BOE-64-SES on CAA e-Forms Service Center

www.capropeforms.org

 

[Laketime]

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...

 

[tmyl21]

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?

 

[Laketime]

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...

 

[tmyl21]

Gotcha and thank you for the point of view.

Also it can be noted that SREC's which we both enjoy and love are tax free income in essence.

 

[wjgjr]

Gotcha and thank you for the point of view.

Also it can be noted that SREC's which we both enjoy and love are tax free income in essence.

As far as I am aware, SRECs are taxable income according to how the IRS has interprets them (though I believe it was only through a private letter ruling.)

 

[tmyl21]

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]

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]

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.

 

[tmyl21]

Interesting yeah I agree with you and that frame of theory despite the fact that it would hit my pocket.

 

[brucet999]

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.

CAA e-Forms Service Center - Contra Costa: BOE-64-SES

Form BOE-64-SES on CAA e-Forms Service Center

www.capropeforms.org

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

 

[brucet999]

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]

Tesla's panels may be all black now, but they are not premium quality, from what I have been able to learn.

I'm not sure where you're doing your research, but Tesla uses good quality panels. These are what they install now: Q CELLS Q.PEAK DUO BLK-G6+ 340 | EnergySage

5 star rating, 25 year manufacturer's warranty, guaranteed to maintain 85% of original capacity after 25 years.

Very comparable to Panasonic: Panasonic HIT VBHN330SA16 | EnergySage

 

[TexasEV]

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?