Tesla (NASDAQ:TSLA) turned itself into a solar power company the moment it bought SolarCity last fall. CEO Elon Musk seems to think SolarCity's business belonged with Tesla all along, having described their separation as an "accident of history." And in October, just before the acquisition closed, Musk made the case for the two companies being better together by unveiling the solar roof, which wowed investors in both.
Even so, Tesla's ownership of SolarCity has already become more than a little problematic. Tesla is slowly shutting down SolarCity's business, reducing solar deployments, and hoping to make up volume as it moves to an unproven retail model. But the real problem may be the solar roof. Yes, Elon Musk's most ambitious solar product ever may already be dragging down his solar ambitions.
Why buy a solar system from Tesla at all?
With the solar roof, Musk captured the imagination of people well beyond the traditional solar customer. I live in a state that doesn't have a lot of solar installations (Minnesota) and I still encounter people asking when or how they can get a solar roof. And given Musk's promise that it'll look great, save you money, and be incredibly durable, it's easy to see why.
But Fast Company's profile of the development of the solar roof begins to show why this new product might be a problem. When Musk first mentioned it during an August 2016 conference call, the product didn't even exist. And when he introduced it to the world in October, it wasn't actually functional. But it still captured people's imagination.
Now think about this product introduction from a customer's perspective. I'm looking to go solar and I'm a Tesla fan, but what about the solar roof? Will it work with my home? How much will it cost? How much energy will it produce? I'm intrigued by the product, even though it hasn't even hit the market yet.
Given that, why sign a contract to install traditional solar panels from Tesla when the solar roof is on the horizon? As EnergySage CEO Vikram Aggarwal pointed out in an op-ed in the San Francisco Chronicle, while Musk may have expanded the interest in rooftop solar overall, he may have done so at the detriment of solar installations near-term, particularly for Tesla's products, because people want to wait to see if they can get a solar roof.
The solar roof isn't all it's cracked up to be
Despite all the excitement surrounding the solar roof, there were always questions around it. Tesla hasn't given specifics about how much energy the solar roof will generate, how it will be installed, or what its degradation characteristics look like. These are things solar companies usually answer with months or years of testing on their products.
What's a little crazy for customers is that Tesla itself may not have the answers to all of these questions. The solar roof was literally not working yet at the October reveal, so it's very possible Tesla just worked out the kinks within the last few months. And if customers are expected to have the solar roof for decades -- or as Musk says "infinity" -- the product should be rigorously tested. I don't see how that could have happened given the short product-development time frame.
The solar roof could be a short-term negative for Tesla's solar ambitions
If Musk, in fact, wants to save the world by having everyone drive electric vehicles that they charge with solar energy from their homes' roofs, the solar roof may actually be hindering his goals. It's like a shiny object that everyone wants to look at, but when push comes to shove very few will buy because of its extremely high cost. And if thousands, or tens of thousands, of people are delaying their decisions to go solar as they wait for more information about the solar roof, it could cost Tesla a lot of solar customers in the meantime.