What's the deal with Tesla solar panels?

Tesla Energy, the division of Tesla responsible for solar and home battery products, makes the well-known Solar Roof that looks like sleek roofing tiles but generates clean electricity.

But the Solar Roof is an expensive product that is best installed on a home that needs a new roof. If you have a newer roof that doesn’t need replacement, it typically doesn’t make financial sense to install a Solar Roof. In fact, Tesla recently dramatically raised the cost of the Solar Roof - double the price, according to some.

This means that the Solar Roof will remain a niche product for now. This leaves a large market of homeowners who want solar at a lower cost. For them, Tesla Energy does regular solar panel installations too.

What’s up with Solar Roof pricing?

Before we get into Tesla’s conventional solar panel business, let’s take a look at the latest with the Solar Roof. As reported by The Verge in April, Tesla Solar Roof customers have said that after months of waiting for their installation to proceed, they received an email that the contract price for their Solar Roof was increasing - more than doubling from $35,000 to $75,000 in one case.

Tesla did not offer a clear explanation why, but I have heard from prospective customers that the complexity of their roof may play a big factor. The presence of protruding features on a roof, like chimneys and vent pipes, or multiple planes and joints make a solar installation more difficult and costly than installing onto a roof that’s just a simple flat surface. This is true with conventional solar panels too.

My guess: the company found that many of its customers were wealthier homeowners with larger homes and complicated roofs, resulting in higher-than-expected costs for the company.

This is now reflected in the addition of a complexity option when you sign up for the Solar Roof:

When you select a complexity option, the quoted price changes. For my home, the price with a simple roof is $32,682, but it increases to $39,242 if I indicate that my roof is complicated.

It’s not clear whether the price on the Tesla website reflects the reported recent price increase.

Tesla installs conventional solar panels too

In addition to their proprietary Solar Roof, Telsa installs ordinary solar panels too. They’re known for having the cheapest prices around. In fact, on their website they advertise a “price match guarantee” in which they will match the price of “a system that includes an inverter, a minimum 10-year warranty and is the same or larger than the Tesla solar system you have ordered.”

According to public data from the California Solar Initiative, it’s true that a Tesla solar installation is substantially cheaper than the industry average. The price of Tesla’s recent solar installations in California is around $2.62 per watt; this is much lower than the California average of about $3.94 per watt.

How have they achieved this? It’s not immediately clear. It’s not through manufacturing scale: Panasonic, their solar panel manufacturing partner at Gigafactory 2 in Buffalo, exited the factory in 2020.

One thing notable is that Tesla tries to make their solar panels installation as cookie-cutter as possible. When you use their online configuration tool, they give you pricing in increments of 4 kw. While you can customize your system to some degree when you work with your Tesla installer, any changes to the non-standard configuration will likely drive up the price.

Another place where they might be saving money is customer service. In the official Tesla discussion forums, you can find several cases where customers have had a great, trouble-free installation process. Not so much for other customers, such as this customer which experienced a roof leak after their installation and had been unable to get it repaired:

My solar panels were installed in November 2020. When the rains came in late December / early January I had water running through the light fixtures on my kitchen ceiling, and the hall ceiling. Tesla came out to do an emergency roof repair on 4th January 2021. Turns out that the installers had drilled many exploratory holes in the roof, but had neglected to fill some of them. The guy did a temporary repair in the rain, but said they would have to come back on a dry day to do the permanent repair.

Tesla is totally unresponsive and uncommunicative, and I have no idea when this will be fixed.

You can find quite a few stories like this on these forums and elsewhere. The bottom line is that you might get a great price and a trouble-free installation from Tesla, but there’s plenty of customers who have reported bad experiences too.

Tesla solar isn’t so cheap anymore

Regardless, the total system price of a Tesla solar panel system will now increase because you can no longer buy a system with only solar panels: you need to buy a Powerwall battery too. Here’s the announcement by Elon Musk:

Solar power will feed exclusively to Powerwall. Powerwall will interface only between utility meter & house main breaker panel, enabling super simple install & seamless whole house backup during utility dropouts. — Elon Musk (@elonmusk) April 22, 2021

This suggests that the rock-bottom prices that Tesla was offering for the solar panel-only option really wasn’t profitable. Pairing it with a popular product like the Powerwall, which is far less of a commoditized product than cheap solar panels, probably allows them to increase their profit margin by quite a bit.

Powerwall installation might help them get around permitting issues

One of the roadblocks to getting a home solar system installed quickly is waiting for local permits and utility interconnection approval. At least some of the complaints in Tesla online forum refer to permitting issues.

With the Powerwall in the mix, it sounds Tesla’s intent is to offer the option of turning on the system before utility interconnection approval. Here’s another tweet by Elon:

Did you buy a Powerwall? Utility permission is required for flowing electricity back to grid, but usually not if stored in our battery. This also enables 24/7 electricity security for your home.

Utility permission is still needed for when Powerwall is full & can stabilize grid. — Elon Musk (@elonmusk) April 21, 2021

This would let the solar panels generate electricity that gets used by the house or stored in the battery, but if the battery is full, the system won’t be able to send excess electricity into the grid where it would earn the homeowner credits.

While this is a less than ideal situation, it would allow the customer to get some use out of their system until their permits are completed.

What solar panels does Tesla install?

Tesla’s Gigafactory 2 in Buffalo manufactures solar glass tiles but hasn’t manufactured conventional solar panels since Panasonic’s exit from their partnership.

When you sign up for a solar panel installation on the Tesla website, it doesn’t specify which solar panels you’ll be getting. However, some customers have reported getting LG panels while others have gotten Hanwha Q.PEAK panels. Both are premium, high efficiency panels with an all-black appearance.

Limiting their product to all-black panels makes sense given that their marketing places a premium on the aesthetics of the system.

Are Tesla solar panels still a good deal?

In terms of absolute pricing, a Tesla solar array with battery storage is probably still a good deal, although there are several manufacturers getting into the battery market, such as Enphase and Generac, that are making battery costs competitive too.

While interest in solar batteries is increasing in California due to scheduled blackouts by PG&E, only a small fraction of homeowners choose it - about 5% in 2020.

Because most homeowners go solar for financial reasons, the required purchase of a battery with Tesla solar panels probably means that many fewer people will choose Tesla.

Why? Solar batteries really only work out financially if a majority of your electricity use is during peak hours and if you can use your battery to shift your grid electricity usage to minimize your time-of-use charges.

If that’s the case for you, it makes sense to consider going with Tesla as your installer, with the major caveat that you should be wary of their poor customer service reviews.