Tesla has just announced a major price cut for their solar panel systems. The new pricing for the company’s systems will be about 10 percent cheaper than the national average.
This is big news for Tesla. The company is finally cost competitive with the rest of the industry.
Solar panel price information is a major focus of Solar-Power-Now.com. One of the primary missions of this site is to help homeowners find the most affordable solar possible. Up until now, the large solar installation companies have not been able to offer good value to their customers. As we approach summer of 2019, this may be the point in time when this idea changes.
Let’s take a look into the numbers.
According to the Solar Energy Industries Association, the average price paid for solar panels is about $2.98/watt. Tesla’s new pricing ranges from $1.75-$1.99/watt. This is their pricing after the federal tax incentive. Before that potential savings are applied, their pricing is actually $2.65/watt, installed. This means that, normally, homeowners that need an 8 kilowatt system, (which is close to average size) the pre-tax incentive cost is about $24,000. Tesla’s new pricing for the same sized system is only $21,200, pre-tax incentives.
For homeowners that do not use that much electricity, a 4 kilowatt system from Tesla would cost about $10,600. After the 30 percent federal tax incentive, the total cost is only $7,420. Financed over ten years at a 5 percent interest rate, payments on this system would only be $79/month.
It’s fair to say that it is the cost of solar that holds some homeowners back from going solar. Many still think that it is too expensive. The reality is that it has been financially attractive for quite a few years now. It’s that much more attractive now.
How is this pricing suddenly possible? Tesla has crunched the numbers based on the idea that they can drastically cut labor costs by having their customers order online and also assist with providing the company the information it needs to get the install done (such as pictures of their roofs, electric breaker boxes, and circuit breakers). The company is also looking to lower labor costs by eliminating the door-to-door sales model that Solar City used. Sales are expected to be generated via their physical stores and via the internet.
Another way in which the company is attempting to streamline the process to lower costs is to only offer 4 different sized solar packages. Their systems are only available in 4, 8, 12, or 16 kilowatt sizes. This could potentially be seen as a drawback, because homeowners will not be able to precisely size a system based on their energy usage. For example, many homeowners may be forced to either buy a system that is slightly too large or one that does not quite cover their energy needs.
It’s fair to say that Tesla has realized that they can’t get away with high prices for solar, as opposed to their expensive cars. They’ve certainly learned some lessons from the recent failure of Solar City, the company that Tesla just acquired. It’s actually quite ironic that Solar City did not survive considering how much business they did and how high the company’s prices for solar was.
Solar power in the United States is already a good deal. Return on investment averages are about 15 percent. Systems pay for themselves in about 8 years, on average. This amounts to tens of thousands in savings over the guaranteed life of 25 years or more for a solar panel system. All these numbers would improve under this new pricing.
Along with Tesla, any company that can offer prices that are less than the current costs should be able to find plenty of customers. This could really be the tipping point in which homeowners finally take advantage of the massive savings that solar can provide.