2017 Investor Roundtable:General Discussion

[neroden]

Thanks for posting some real data. Shows us how the residential solar market has stalled.

US Residential solar has persistently high "soft costs". It's not the cost of the panels or even the installation; it's nonsense like "customer acquisition" and "supply chain".

Look at Australia (Solar Choice has a monthly index) for what the prices OUGHT to be. (I'm sure you can all convert AUD to USD. These are after the Australian tax incentives, but the US tax incentives are about the same size.)

Articles about residential solar system prices in Australia: 1.5kW, 2kW, 3kW, 4kW, 5kW and 10kW. Prices are updated on a monthly basis using data from the Solar Choice installer database.

I'm not sure what's wrong with the US market or why it's so persistent, but I don't believe it can last; I think our prices have to revert to Australian prices.

I believe Musk intends to do that. He should be able to drive the soft costs out of the pricing, because dammit, anyone should be able to, they already have done so in Germany and Australia, and I don't know why they haven't done so yet in the US.

 

[neroden]

So, it will be difficult for Tesla to compete in the utility scale solar business on a cost per watt basis. May be, Tesla can provide some value addition with solar+storage integration. That market is much smaller though.

Musk thinks the market is actually larger and I think he's right.

 

[austinEV]

Musk thinks the market is actually larger and I think he's right.

I anticipate huge pride of ownership in my Tesla roof+battery. Highly zombie apocalypse proof too. (storm proof). I want my own generation and storage, not buying it from a utility even if it is regional.

 

[racer26]

Tesla enables Autosteer on ‘local roads’ for new Enhanced Autopilot vehicles

 

[ggies07]

Nevada did a similar thing, and Solarcity had to leave the state entirely. Apple decided to forego its plans to power its data warehouse in Nevada with its own solar. Instead, Nevada PUC will supply Apple with solar power from its own utility scale solar plant. We can see where the market is heading.

You sure do like to twist things........they had a hard time in Nevada because of the utility commission, not because they couldn't sell there. SolarCity was forced out by cronyism and Nevada would rather keep the utility monopoly than give customers the ownership of their own energy.

 

[AcesDealt]

So, just a quick summary of Baron's CNBC interview on TSLA (some points were covered above):

1. Solar city is a way to capitalize on growth in electricity consumption associated with electrification of transportation. 40% of US consumption of electricity is by single house dwellings. Replacing two ICE cars per house with EV will increase household electricity consumption by 60%, so overall demand is going to grow by roughly 24%.

This is excellent napkin math. When used properly this is all you need. Often you can add complexity without adding a lot of explanatory or predictive power.

One reason for Tesla getting to 1T should be cited, which is that in 13 years Elon is going to have MORE ideas than what the current Tesla operates on. He's not short of huge ideas, which is really why Apple should have bought them by now. One additional avenue of pursuit I can imagine that's relevant to the above napkin math is long-distance HVDC lines to even out the distribution of sun\wind energy.

 

[mmd]

US Residential solar has persistently high "soft costs". It's not the cost of the panels or even the installation; it's nonsense like "customer acquisition" and "supply chain".

Look at Australia (Solar Choice has a monthly index) for what the prices OUGHT to be. (I'm sure you can all convert AUD to USD. These are after the Australian tax incentives, but the US tax incentives are about the same size.)

Articles about residential solar system prices in Australia: 1.5kW, 2kW, 3kW, 4kW, 5kW and 10kW. Prices are updated on a monthly basis using data from the Solar Choice installer database.

I'm not sure what's wrong with the US market or why it's so persistent, but I don't believe it can last; I think our prices have to revert to Australian prices.

I believe Musk intends to do that. He should be able to drive the soft costs out of the pricing, because dammit, anyone should be able to, they already have done so in Germany and Australia, and I don't know why they haven't done so yet in the US.

Edit: I will check theAustrlan link later. I'm not familiar with the pricing etc. in Australia. From your comment, it seems they still have to rely on incentives.

You are speaking as if soft costs are not costs. Speaking from my own experience, these include sales & advertizement, roof inspection & fixes, permitting process, individual inverter installation, net metering installation/enabling, etc. These are all amortized over a small amount of electricity generated. It doesn't have the scale. The panel pricing may be same for utility scale and resindential. So, this ONLY becomes a dominant factor for utility scale, not residential.

Regarding your last part: You have been in TSLA long enough to know there is a big gap between what Elon intends vs. the reality. A grain of salt is recommended.

 

[erthquake]

Musk thinks the market is actually larger and I think he's right.

Agreed. As more people acquire EVs, they're going to want more "free" electricity to charge their cars.

 

[RobStark]

I think the right idea for a range extender, if one were necessary (they're not!), is actually a turbine engine.

They're tough to make, as they require high-precision machining, but have the fewest moving parts, and the fewest things to go wrong, AND they'll run on basically anything that burns.

 

[neroden]

You are speaking as if soft costs are not costs.

Soft costs are elevated WAY too high in the US.

I haven't provided the references which do the cost breakdown -- go find them yourself, it took me a lot of research -- but they're MUCH MUCH higher in the US than they are in Germany or in Australia. This is just not right. In short, US residential costs are too high.

I'm not expecting Elon to do anything which hasn't already been done in both Germany and Australia. I do wonder why the solar installers in the US are wasting money on sales & marketing when they could be offering cheaper prices and getting more business as a result.

(Here's an old but still accurate article about the problem:
Why Solar Panel Installation Is Three Times Costlier in the U.S. than in Germany
)

We've had some drops in price since then but the US costs are *still* elevated way above the German or Australian prices. I found an article a while back which gave a breakdown; inverter costs have normalized, installation costs have normalized, permitting costs are only a bit higher -- profit margins and marketing account for most of the price difference, which is insane.

This is trivial for Elon to deal with.

P.S. This article embeds a more recent breakdown of soft costs, most of which are, to use your phrase, not real costs. Look for the DoE picture of soft costs.

SolPad: A Compelling Foretelling Of Residential Solar’s Future

(Ah, here's the original at DOE:
Soft Costs | Department of Energy
)

"Supply chain" costs == profit margins for suppliers, eliminted by vertical integration.
"Customer acquisition" == marketing, eliminated by making the product cheaper and "cooler" so that it sells itself.
"Indirect corporate costs" == assigned overhead, eliminated by economies of scale.
Those are *30%* of the cost of a solar install in the US. (Much lower in Germany and Australia.)

And I haven't even figured out what "transaction costs" are but at 6% of the cost of an install, they're too big.

P.P.S. to show just how whacked out the US Residential Solar market is, apparently "customer acquisition" costs actually *increased* by 10% in 2016. Which is just insane.
Report: How Much Does a Solar PV System Cost in 2016?

Musk can undercut the market simply by not advertising.

P.P.P.S.

It looks like "transaction costs" relate to financing and contract writing. As the price comes down, and as it becomes more common to install panels for cash, or for a homeowner to get a home equity loan to install the panels, or for them to be rolled into the cost of new construction; and as contracts become more standardized; transaction costs should drop to near-zero.

Small Business Solar PPA: The Solution to Transaction Costs

 

[Intl Professor]

One reason for Tesla getting to 1T should be cited, which is that in 13 years Elon is going to have MORE ideas than what the current Tesla operates on. He's not short of huge ideas, which is really why Apple should have bought them by now. One additional avenue of pursuit I can imagine that's relevant to the above napkin math is long-distance HVDC lines to even out the distribution of sun\wind energy.

Here's another idea. Mostly we think the "boring" part of the company will be large tunnels for physical transport. But what if he/they discover breakthroughs in smaller sizes suitable for conduits, thus shielding such power lines from weather, including solar storms! Direct conduits through mountain ranges rather than the circuitous (pun intended) routes over the mountains. Etc., etc., etc. as a supposed Thai King once said.

Already there are amazing technological changes in the plumbing industry. A neighbor had to replace a drain pipe or fix it under the slab of the house. No problem. Fill an inflatable gadget with a valve at the end. Squeeze like a tube of paste some stickum out the house end to fill the tube. Let it stand, then push another inflatable gadget in, fill with hot water, expand to leave a sleeve encasing the original pipe, let stand, and exit. A one day job and about 1/3 the cost of digging down to the pipe and conventional replacement. I may have that overly simplified, but.... I don't know about maintenance, but some of the long distance routes could just be part of a hyperloop system.

I do like the idea of a hyperloop through a mountain range. There would be heat problems, of course, but that could be a source of energy as it would be just by ordinary drilling. I'd stick to the Earth's mantle and avoid known intersections of the tectonic plates and other flaws. However, one could imagine aliens colonizing the planet who would have technology capable of building connectors over such obstacles and a blues tuneful corporate theme song called building bridges over troubled faults.

But now I decline into the ridiculous, plain plaid ridiculous as Ohmman might say. Seems to be the temper of the times, however.

 

[jhm]

One additional avenue of pursuit I can imagine that's relevant to the above napkin math is long-distance HVDC lines to even out the distribution of sun\wind energy.

Why would you want to sent power thousands of miles just to charge a battery?

 

[adiggs]

Why would you want to sent power thousands of miles just to charge a battery?

As a direct answer to the question (and not necessarily for or against the idea), a high enough capacity line that would enable moving solar energy from the American Southwest to the Pacific Northwest might someday (clearly not today, and maybe not for decades) be an effective means of providing renewable energy during the winter months when the sun disappears here, but it gets all comfortable there.

I believe that's a more specific and tangible example of the comment "even out the distribution of sun/wind energy".

 

[JBRR]

Elon Musk on Twitter

This is just so brilliant.
5 million $ worth of PR for like 10k$ cost. And only Tesla understands to do this. This is how Tesla gets to spend 0$ on marketing.

 

[esk8mw]

Anyone else just see a bunch of tweets about the "Muslim ban" from Elon that disappeared almost instantly? Something about it being not right, but I couldn't fully read them in time.

 

[T3slaTulips]

As a direct answer to the question (and not necessarily for or against the idea), a high enough capacity line that would enable moving solar energy from the American Southwest to the Pacific Northwest might someday (clearly not today, and maybe not for decades) be an effective means of providing renewable energy during the winter months when the sun disappears here, but it gets all comfortable there.

I believe that's a more specific and tangible example of the comment "even out the distribution of sun/wind energy".

Here in W. Michigan we get 46% of possible sun time. Yesterday was the first really sunny day since early December.

 

[racer26]

Anyone else just see a bunch of tweets about the "Muslim ban" from Elon that disappeared almost instantly? Something about it being not right, but I couldn't fully read them in time.

Someone did: Elon Musk on Twitter

 

[AcesDealt]

Why would you want to sent power thousands of miles just to charge a battery?

Why would anyone do that indeed.

 

[DaveT]

Anyone else just see a bunch of tweets about the "Muslim ban" from Elon that disappeared almost instantly? Something about it being not right, but I couldn't fully read them in time.

Elon just tweeted regarding his deleted tweets:
"@Samcornwell they were earlier drafts that I accidentally published. I said the same thing a week already." - @elonmusk

 

[AcesDealt]

Here in W. Michigan we get 46% of possible sun time. Yesterday was the first really sunny day since early December.

You guys have a lot of windpower up in the thumb. Dunno how or if that gets down to, say, Detroit. Long distance transmission is very efficient and presuming dynamics of wind/solar don't change much over 50 years, that's a lot of time to amortize the high cap.ex of these lines. Currently batteries wear out at such a rate as to make them quite expensive relative to the generation itself and not sure how fast that's gonna change.