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Tesla’s Solar Panel Troubles Offer Lessons for Building Owners

Tesla may be one of the most valuable companies in the world, but that doesn’t necessarily mean you’ll want to purchase solar panels from them. Tesla Energy, the company’s clean energy subsidiary, develops, manufactures, and sells photovoltaic solar panels and battery energy storage systems like its ‘Powerwall’ to residential, commercial, and industrial customers. From almost the start of Tesla Energy from when it was founded in April of 2015, it has been mired in controversies, from solar panel fires to angry customers. No matter what you think of mega-billionaires like Tesla’s CEO Elon Musk, it’s become evident to many observers that Tesla’s clean energy division is facing serious issues. And these issues can offer lessons to building owners looking for commercial solar power companies.

The Tesla Energy subsidiary was founded in 2015 when Musk said the company would apply its electric vehicle battery technology to its Powerwall home energy storage system. The following year (2016), Tesla acquired SolarCity, a solar energy company, for $2.6 billion and added solar energy generation to the Tesla Energy business. The acquisition was controversial because SolarCity was facing liquidity issues at the time of the deal, and Tesla shareholders weren’t informed. Multiple shareholder groups filed a lawsuit against Musk and Tesla’s directors (the directors settled the suit in January 2020, while Musk is still involved in the litigation). But that’s only the beginning of Tesla Energy’s troubles.

In August 2019 Walmart sued Tesla after alleging solar panels on the roofs of seven of their stores caused fires. SolarCity had installed and managed the solar panels on the roofs of 240 Walmart stores but had since been acquired by Tesla Energy. Walmart alleged the solar panel fires were caused by negligent installation and maintenance by untrained and unsupervised personnel. A few months later, Walmart and Tesla settled the suit on undisclosed terms, but the story of Tesla Energy’s solar panel fires hasn’t gone away. A recent Reuters report revealed that Tesla Energy is under investigation by the U.S. Securities and Exchange Commission (SEC) about its failure to inform its shareholders and the public about potential solar panel fire risks. Steven Henkes, a former field quality manager at Tesla, blew the whistle on the company, claiming their solar panel systems had defective electrical components. Rather than disclose this to customers, Henkes says Tesla told the public it simply had to conduct maintenance on the systems.

Last but not least, many Tesla Energy customers have railed against the company for poor customer service. Part of the uproar comes from Tesla’s rollout of its Solar Roof, a solar shingle project Musk introduced in 2016. Tesla announced in 2018 it would begin installing the Solar Roofs within the next few months, but the anticipated project has been pushed back several times. Then in April 2021, Tesla sent a message to customers who had pre-ordered the Solar Roofs that there would be a 30 percent cost increase for the projects. Tesla soon faced a class-action lawsuit from Solar Roof customers, and the company said it planned to let some customers who had signed contracts before the April 2021 price increase revert to the original price. Tesla’s Solar Roof is a tiny sliver of the company’s overall business and a niche product for wealthy consumers. Still, Bloomberg reports Musk is fixated on making the project work, which has proven to be incredibly difficult to do cost-effectively. Tesla is known primarily as the foremost electric vehicle maker, but Musk wants the company to be a one-stop shop for all clean and renewable energy needs.

So, what does all this mean for property owners? For one thing, it means that when choosing a vendor for a solar panel installation or another renewable energy project, the flashy brand name isn’t always the best bet. Tesla announced a commercial solar panel program in 2019, only available to California companies. Business owners in the Golden State can install solar for as little as $1.07 per watt with Tesla and sign up for a ‘subscription’ that enables them to forgo upfront installation costs and long-term contracts. Musk says ordering commercial solar from Tesla is so simple, you can do it in 30 seconds. This all sounds pretty great, but it may be too good to be true. For residential solar, at least, Tesla’s customer service has been historically bad. “Because they are such a large company, they don’t have the ability to give you the type of one-on-one service that you need when going solar,” Catherine Lane wrote on SolarReviews. Tesla’s residential solar customers have reported it takes a while to get a hold of someone, which can be costly and frustrating if you need a repair to fix the system.

It’s not just the customer service, either. For residential solar, Tesla’s warranty is vague, and there’s conflicting information about it, which is likely the same for its commercial warranties. The company’s website reports no annual degradation rate for the panels and says the panels will operate at least 80 percent of their original nameplate capacity for at least 25 years. SolarReviews says this is a huge red flag because they don’t outline how much the solar panels will degrade each year as most solar installers do. Also, 80 percent after 25 years is below what most other solar installers offer in their warranties. Most companies offer between 86 and 88 percent, making Tesla’s claim of 80 percent look pretty weak. Most solar panels have a degradation rate of up to 2 percent for the first year of operation and then an annual rate of 0.5 percent from years 2 through 25. Between the shoddy customer service and the vague warranty, those are two reasons why Tesla’s solar panel installations have gotten lukewarm and downright scathing reviews from some customers.

Large solar companies like Tesla Energy can sometimes offer lower prices, but they may not always be the best bet. A solar panel installation can be a significant investment, even if you decide to lease the system, and they have lifespans that extend for more than two decades. This is why choosing a solar company with good customer service is crucial. After the system is set up, property owners will want to know that a service rep is only a call away if a problem comes up. Going with a local solar company is sometimes better than a national giant because of more personalized customer service. 

But even with local companies, property owners would be wise to check references and extensively research them. Another takeaway from Tesla Energy’s solar troubles is to do thorough research about solar panel warranties. Solar panels typically have warranties that cover performance, equipment, and product. A performance warranty usually guarantees about 90 percent performance after 10 years and around 80 percent after 25 years, while equipment warranties guarantee 10 to 12 years without the installation failing. A product warranty covers the integrity of the solar installation and protects against problems like manufacturing defects and wear and tear. A more extended period for a product warranty is generally the best, as with most warranties, especially if you buy the system outright. Either way, getting a solid warranty can prevent serious headaches, even though solar panels require little maintenance and can perform trouble-free for a long time.

It’s been five years since Tesla acquired SolarCity and began its foray into solar energy. Despite its brand name, Tesla lost its market-leading position in solar energy in 2018 and accounted for 6.3 percent of the residential solar market through the first quarter of 2019, according to Wood Mackenzie. The company installed 92 and 85 megawatts of solar in the first and second quarters of 2021, respectively. That’s less than half of what SolarCity was installing per quarter before Tesla acquired it. For property owners, investing in and installing solar panels can be a complicated and expensive process, and it may be tempting to go with a well-known name like Tesla. But as Tesla’s solar troubles show, the big name isn’t always the best.

Tesla’s solar division may rebound soon, as Musk hopes it will. In the meantime, building owners would be wise to check out other companies that may offer more reliable customer service, better warranties, and don’t come with all the baggage. Tesla’s market cap reached $1 trillion in October 2021, making it just the sixth company to do so in U.S. history. It’s one of the most valuable companies in the world, but it doesn’t necessarily mean it’s the right choice when investing in solar panels for your building.

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