This Isn’t A Bad Idea From Tesla – How To Slash The Costs Of Solar Installations

Whether this is actually going to work or not is another thing but this is still a good idea – a decent attempt say – from Tesla. There’s only so much of the cost of a solar power installation which is the power system itself. As with the equipment, only so much of which is the panels and a goodly chunk is the inverter etc, so with the total package. The equipment is some part of the cost, installing it all is another part of that total system cost.

And if the equipment costs have been falling, as they have been precipitously, then it’s about time someone started to aim at those installation costs. They have been becoming an ever larger portion of the total system cost after all:

Tesla plans to sell its solar panels at a price that’s 38 percent lower than the national average in an attempt to halt the decline of its solar business. The New York Times notes that the head of Tesla’s solar department, Sanjay Shah, wants to sell panels for between $1.75 and $1.99 a watt, compared to the national average of $2.85.

Well, that’s great. Good luck and all that. But simply slashing prices might increase sales but it doesn’t do much for the net income of the company. There has to be a cut in costs too.

This is not the first time Tesla has cut prices for its solar energy products. Last November, the company reduced the prices for its household solar power systems to improve sales, Reuters reported at the time, citing the company’s senior vice president for energy operations, Sanjay Shah. The price cut was substantial, at 15 to 25 percent, which translates into US$3,000-5,000 per system. The move is part of an ongoing restructuring of SolarCity.

It’s also true that everyone is cutting costs all the time. That’s what generally declining costs for solar mean. But they are thinking along the right lines still:

He said that they plan on simplifying the quoting and buying process by cutting down on site visits and involving the homeowner more. Shah said: “We spent hours and hours and days and days on the process. It adds cost. It adds time. We needed to have a very streamlined process.” Homeowners will take pictures of their electric meters, circuit breaker boxes and other equipment and send the images to the company in order to design the system, which will now only be sold in increments of 4kW of solar panels.

As at the top, it may or may not work but it’s a good idea. As hardware costs continue to fall installation becomes an ever larger part of the total system price. Thus those installation costs have to be where price advantage is gained.

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Frank
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Frank

It’s not equipment or system design, it’s SALES COST. People that knew they wanted solar used to have no choice but to pay the standard 35% markup to cover sales commissions. Why am I paying $4k sales commission from something I know I want? Tesla has now ended that, it’s equivalent to cutting out car dealerships.

Jonathan Harston
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Jonathan Harston

In another age, when I sold software on disk, I used to give customers a choice of disk format. Very quickly I dropped that and just sent them a 5.25″ and a 3.5″, and let them throw away the one they didn’t want. The costs of providing the choice was greater than the loses from just having a single instantly dispatchable product.

chiguy31
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chiguy31

The federal tax subsidy is going away, raising the real cost to homeowners.

Cutting equipment costs and cutting installation costs (assuming that they can do so in a tough labor market), means that net costs to the homeowner will remain nearly flat.

The real benefit to Tesla will be a price advantage vis-a-vis the competition.