This has likely been a factor in Tesla’s improved profitability, and now allows the company reduce costs to below those of its competitors. Online sales means far fewer salespeople and a minimal cost to acquire customers. This is roughly 13% of total system costs. In fact, NREL’s latest cost breakdown found customer acquisition to be the second-highest cost in the stack, after only modules, at price of $0.35 per watt for the typical system (chart below, gray). National Renewable Energy Laboratories (NREL) show the cost of selling solar, also termed customer acquisition, as a major component of soft costs. While Tesla has never published detailed cost breakdowns, other sources including the U.S. However, along the way Tesla was doing something else: getting rid of the cost of selling solar. Deployment fell further with Tesla closing retail stores and moving sales online, which has reduced Tesla/SolarCity from the largest residential solar company to third- or fourth-largest as of the first quarter of this year. Musk moved sales off the street and into Tesla stores as well as towards direct sales and away from leases and power purchase agreements.Īlong the way cash generation increased, but quarterly sales volumes and market share both fell. Elon Musk has never shown the interest in rapid growth in solar sales that his cousins Lyndon and Peter Rive did. However, after Telsa bought out SolarCity, things changed. This approach, the financing unlocked by the third-party model and an emphasis on growth over profitability allowed SolarCity, Sunrun and Vivint Solar to grow rapidly into the largest national installers. In the first half of this decade, growth in residential solar was driven by third-party solar companies, who deployed teams of often-inexperienced sales persons to go door to door and sell solar. But Tesla isn’t just undercutting the big third-party solar companies, as its prices are also well below the $2.98 per watt-DC that Wood Mackenzie reported as the average residential solar price in the fourth quarter of 2018, and also below the $3.05 per watt reported by EnergySage as the average on its marketplace in the second half of 2018. However, it is significantly below Tesla’s competitors, with Sunrun reporting $3.17 per watt in the fourth quarter of 2018, and Vivint reporting $3.18 per watt. We can’t verify this, as this is our first time using the online calculator, and Tesla hasn’t provided average system prices on its quarterly results calls. Media outlets are claiming that this is Tesla delivering on its promise to cut residential system costs 16%. Assuming the full 30% federal Investment Tax Credit (ITC) is claimed, this falls to $1.93 and $1.85 per watt.įor at least four states (Colorado, Pennsylvania, Washington and Utah), the price is even lower, at $2.50 per watt and $1.75 per watt if the ITC is fully claimed (see the screen shot at right). This week, Tesla’s online sales calculator shows that the company is selling residential PV systems at a cost of $2.85 per watt in California and Massachusetts, and $2.65 per watt in New York, Texas and Florida – the largest markets. But soft costs – the non-hardware portions including installation, sales, permitting and overhead – have been much harder to reduce, meaning much slower declines in this segment.īut this doesn’t mean that soft costs can’t be reduced, and sometimes what it takes is a new approach. Reductions in PV module costs have driven much of this decline. Quarter after quarter and year after year the price of installed systems just keeps getting lower, enabling large-scale solar to out-compete conventional generation, and reducing the payoff times for rooftop solar under net metering. One persistent fact of growth of solar as a technology is that it just keeps getting cheaper.
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