Author: Robert Walton Published: March 26,2019 Utility Dive
The iconic company’s biggest promise was trifecta-integration of solar generation, energy storage and electric cars. So far, that has not happened.
Two years ago this week, Tesla CEO Elon Musk revealed — in a tweet, of course — that the company would soon begin taking orders for solar roofs. In Tesla news-time, two years is a lifetime. Since then, other tweets have gotten Musk in trouble with federal regulators while the company has also started to produce electric cars and turn a profit. Tesla has built a legion of supporters — who buy both its products and company shares — while detractors point to an array of flashy announcements and product launches that have not come to market at scale but have at times helped to support stock prices and deals. Along with the widely-panned Boring Co.’s first mile of tunnel outside Los Angeles and ambitious Space X promises, the Tesla solar roof has so-far fallen short of promises.
Tesla’s solar roof was designed to tie together an energy-transportation company strategy, while at the same time offering customers a high-end, integrated roof/housing product that didn’t look like solar photovoltaic panels.
Along with it, Tesla’s broader SolarCity business has seen declining solar panel installations as it shifted its sales and financing models. Last year, the company announced it was changing its sales tactics and would not continue its partnership with Home Depot for residential solar sales.
In the fourth quarter of 2018, the company says it deployed 73 MW of retrofit solar systems, a 21% decrease sequentially.
“There’s been a lot of skepticism ever since they bought SolarCity. There was a lot of skepticism around the deal in the first place … but certainly Tesla, from the outset, their long-term mission was around a circular generation strategy.”
Jeff Osborne, an analyst at Cowen & Co., has had a “sell” rating on Tesla for three years now. “But it’s not from the perspective of a bankruptcy,” he said, referencing an extreme-bear case against the company. “I’ve been more negative because competition is coming.”
“There’s been a lot of skepticism ever since they bought SolarCity,” Osborne told Utility Dive, pointing to a family connection between Musk and the leadership at SolarCity. Founders of the solar company, Lyndon Rive and Peter Rive, are Musk’s cousins; both men have since stepped down from Tesla
“There was a lot of skepticism around the deal in the first place … but certainly Tesla, from the outset, their long-term mission was around a circular generation strategy,” said Osborne.
On that front, nothing has changed, according to Tesla. Customer acquisition costs are one of the most expensive parts of solar generation. Tesla wants to tie solar generation with energy storage and transportation, improving margins as it sells three related products.
Tesla declined to make someone available for an interview, but supplied a statement. “Similar to our approach to selling vehicles, we are also shifting sales of our energy and solar products worldwide to online only,” a spokesperson said
Most residential solar and Powerwall orders are already “placed outside our retail stores, including online or via referral, and we believe this shift to online sales, paired with a dedicated Energy Advisor from our support team, will result in the best, most seamless customer experience in the industry,” the company said.
Despite slow installations, Tesla said in its fourth quarter note that it plans to “ramp up the production of Solar Roof with significantly improved manufacturing capabilities during 2019, based on the design iterations and testing underway.” The company said it was continuing to install solar roofs “at a slow pace to gather further learnings from our design changes.”
Tesla losing solar innovation edge
But while a multi-targeted sales approach may still be successful, some of Tesla’s advantage as an innovator may have worn away.
Tesla’s idea of an integrated solar roof is built around its tiles, with customers essentially replacing their roof. Rooftop solar has for years revolved around retrofitting a roof with panels, and while Tesla’s “tiles” may be unique to the company the idea of selling solar to homeowners in need of a new roof is not.
GAF Energy — owned by Standard Industries, one of the largest roofing companies in the United States — is selling a “building-integrated photovoltaic offering,” and other companies have similar products.
“Our business model taps into an existing market — homeowners getting a new roof,” GAF Energy President Martin DeBono told Utility Dive. The idea is to make it easy for customers to say “yes.”
GAF Energy launched in January of this year and has so far received more than 200 purchase orders — and expects to hit about 2,000 orders through the end of 2019. Because it is owned by Standard Industries, DeBono said GAF Energy can tap into an existing network roofing partners.
The company handles everything in the process, “from permitting paperwork to finding an electrician, so contractors need only concentrate on sales and basic hardware installation,” he said.
“Tesla argued people would go to the mall and buy solar. But it’s not something that’s an impulse buy. … It’s a premium-priced product.”
So what does a a business like GAF Energy mean for Tesla and its solar business? Probably not too much, according to Navigant Senior Research Analyst Roberto Labastida.
“They do seem to be losing some ground on innovation,” Labastida told Utility Dive. But he added that Tesla is roughly 90% a transportation company, and that innovation in home energy is being pushed more by companies like Sonnen, which is developing community energy aggregation projects, and SunRun, which recently aggregated home solar+storage into a wholesale capacity market.
But Labastida said Tesla could still find opportunities with the solar tiles because the industry doesn’t offer many “premium products.”
“From the hardware side I think the tiles are something different, and it might be a smart move to move,” Labastida said. “They are already in touch with people who can buy cars that are quite expensive … so a premium product makes sense for them.” Osborne maintains his doubt, questioning whether solar generation is simple enough to tack onto another purchase.
“Tesla argued people would go to the mall and buy solar,” he said. “But it’s not something that’s an impulse buy. … It’s a premium-priced product. They’ve never disclosed how many they’ve installed, but it’s low digits.”
But he added, “investors don’t really care about the solar arm.”