When Tesla Motors Inc (NASDAQ:TSLA) bought SolarCity this fall, it marked a big strategic shift for the company. Tesla is no longer just a supplier of batteries to rooftop solar installers like SolarCity; it is now a full-fledged solar company. 

SolarCity employs tens of thousands of people selling and installing solar systems, and it is also building a manufacturing plant and has a large financing arm that handles billions of dollars in solar financing deals. This makes Tesla a complicated player in solar energy, but there are three ways it can really differentiate itself from its peers in 2017. 

Image source: Tesla.

Manufacturing has to live up to expectations

Tesla CEO Elon Musk and SolarCity have spent two years talking about making solar cells and panels, and in 2017, the rubber has to hit the road. When SolarCity bought Silevo in 2014 and began construction on a 1 gigawatt (GW) solar panel manufacturing plant in New York, the thought was that SolarCity could be a technology leader as well as a sales and installation giant. It's been a difficult process, to say the least. 

Silevo has yet to produce solar panels at scale, and when Tesla bought SolarCity, one of the impacts was that Panasonic would be brought in to help with solar manufacturing. None of the companies has said a lot about what the details of Panasonic's involvement will be, but the fact that a third party would have to be brought in is concerning. And the time to make efficiency advancements before competitors do is coming to a close. 

SolarCity thought it could make cells that were 22% efficient with Silevo technology, which would lead to 19% to 20% efficient modules. That would be an advance, but with mono-PERC technology -- which will have high teens efficiency -- starting to be rolled out by Chinese manufacturers, there's not a huge advantage to this product SolarCity/Silevo hasn't even proven it can make. And industry leader SunPower (NASDAQ:SPWR) is already producing cells that are 25.1% efficient and modules over 23% efficiency, so the Tesla/SolarCity/Silevo group is falling behind and has to catch up fast. 

Then there's the solar roof, which is a great headline but mostly a mystery right now. We don't know price, efficiency, or anything about installation, so it's tough to say whether that product will impact Tesla in 2017. 

What's clear is that Tesla has to get solar manufacturing right this year. If it can, it will have a high-efficiency product with traditional solar panels and potentially a compelling new product with the solar roof. 

Ditch reliance on the lease

In 2016, the residential solar industry came to the quick realization that third-party financing from the lease/power purchase agreement (PPA) won't be the dominant paradigm forever. More loan financing is coming available and customers want the choice that comes with self-selecting everything from panels to financing. 

This takes away a key differentiator for SolarCity, which has been able to leverage its size to lower financing costs for its lease/PPA. Now, the company needs to make the transition to loans, and fast. But there's opportunity here. 

Large installers are fairly slow in making big changes to their business models and Tesla can be a leader in moving to the loan. If it does, it could mean more upfront cash generation from solar, which would fund solar manufacturing and even the Model 3 expansion. Loans could be a boon for Tesla in 2017 if it makes a big transition and leaves its third-party financing model behind. 

Image source: Tesla.

Energy storage is Tesla's biggest differentiator

The single biggest advantage Tesla has in solar is that it can integrate design up and down the supply chain. Solar panels, racking, inverters, and energy storage design are now all in-house, and that could allow the company to lower costs and offer new products to customers. 

In 2017, I would expect energy storage with the Powerwall 2 to become a much larger part of the business. And with the ability to integrate the inverter with storage, there are multiple ways to create value for customers with energy storage. Look for the company to leverage this fact this year. 

The SolarCity acquisition may have been a great move

Now that SolarCity is part of Tesla, the company has to make the transition to a solar installer and manufacturer. In a highly competitive industry, that may be easier said than done. But with a high-efficiency manufacturing plant under way, scale that beats all competitors, and an integrated energy storage product, Tesla could be well positioned for the future. Now it just has to execute to create value for shareholders and customers.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.