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Tesla Shutters a Dozen Solar Facilities

August 13, 2018

Tesla announced it is laying off 9 percent of its solar workforce and shuttering a dozen U.S. installation facilities.

Tesla announced it is laying off 9 percent of its solar workforce, shuttering a dozen U.S. installation facilities, and ending a partnership with the retailer Home Depot which accounted for approximately half of Tesla’s solar sales.

Tesla has about 100 stores where it sells vehicles, rooftop solar panels, glass solar roofs, and Powerwall, its battery backup system for homes.

The installation facility closures leave the company with about 60 solar installation facilities nationwide.

The terminations include installers, telemarketers, and customer service personnel. Tesla is closing installation offices in nine states.

The changes announced in June are the latest in a series of layoffs and cuts Tesla has made in its solar division in the past two years. Before Tesla purchased rooftop solar panel company SolarCity in 2016, SolarCity employed approximately 15,000 people. Tesla’s solar division had already shed thousands of employees before the latest cuts were announced.

Downsizing SolarCity

In 2016, electric car maker Tesla paid $2.6 billion to acquire SolarCity, a company also headed by Tesla founder and chief executive Elon Musk.

SolarCity was the leader in the rooftop solar panel business, accounting for 30 percent of all rooftop solar sales in the United States in 2014 and 2015 and 25 percent in 2016.

Since Tesla acquired SolarCity, the company’s sales have fallen precipitously. By the third quarter of 2017, SolarCity-Tesla’s share of the U.S. rooftop solar market had dropped to 14 percent, and installations fell 42 percent from the previous year, reports Reuters.

The falling sales could jeopardize Tesla’s joint venture with Panasonic to produce solar modules at a new factory in Buffalo, New York under an agreement with New York state in which the company promised to spend $5 billion in capital and operating expenses at the site over 10 years.

Solar Subsidy Dependence

Tesla is struggling financially despite significant federal tax breaks and tax credits, says Bonner Cohen, a senior fellow at the National Center for Public Policy Research and a policy advisor to The Heartland Institute, which publishes Environment & Climate News.

“If Elon Musk’s solar-power empire is struggling with federal subsidies in place, what will happen when the Investment Tax Credit (ITC) expires at the end of 2021?” Cohen said. “Barring yet another extension of this federal handout, it could be lights out for Tesla and other solar-panel producers.

“Decades of subsidies have shown conclusively neither wind nor solar power can stand on their own two feet,” Cohen said. “Once the subsidies disappear, so too will the business case for rooftop solar power.”

Paying for Customers

Federal and state subsidies allowed SolarCity and other rooftop solar makers to offer no-money-down installations for residential consumers, says James Taylor, a senior fellow with The Heartland Institute. With no up-front money required from the customers, SolarCity went deep into debt to cover production and installation costs.

“Solar power is one of the most heavily subsidized industries in the country,” said Taylor. “The owners of solar power equipment receive a 30 percent federal rebate on their investments, while customers often get solar panels installed for no money down.

“State and local subsidies add to the total,” Taylor said. “For all those taxpayer subsidies, solar power still cannot compete on economic or reliability grounds with conventional power.”

Although a number of states require electric utilities to purchase excess power produced by rooftop solar systems at premium rates, further reducing the net cost to homeowners with solar systems, solar-produced electricity remains much more expensive than conventionally produced power, Taylor says.

“Solar power remains about three times as expensive as conventional power,” said Taylor. “The only ‘market’ for solar power is because of government renewable power mandates that force utilities to purchase the expensive solar power.”

Subsidizing the Wealthy

Taylor says Tesla would not survive without subsidies, which go primarily to relatively wealthy individuals who don’t need them to purchase electric cars—Tesla’s primary business—or to install solar panels on their roofs.

“Tesla remains in business solely because of taxpayer subsidies,” Taylor said. “Ironically, people who buy Tesla automobiles are among the wealthiest Americans.

“Subsidies given to Tesla amount to government forcing the ‘have-nots’ in this country to send money straight out of their small paychecks to the wealthiest ‘haves’ in this country,” said Taylor.

States Spending Big, Too

Seton Motley, president of Less Government, says “clean energy” mandates several states offer above and beyond federal subsidies increase prices further while creating artificial demand for rooftop solar rooftop installations.

“Under Gov. Cuomo, New York has adopted a ‘50 percent clean’ mandate,” said Motley. “New York already gets about 10 percent of its electricity from hydropower plants, such as Niagara Falls, and the rest will come from highly subsidized solar and wind.

“The state of New York also paid $750 million to build a huge production facility in Buffalo to lure SolarCity to set up shop there, which it said it would do, promising to create 5,000 jobs at the location,” Motley said. “However, because the market for residential solar panels is shrinking, the company now estimates it will deliver no more than 500 jobs. This is a staggering investment of taxpayer dollars for so little return.”

Motley says California is similarly forcing residents to support the solar industry.

“An additional mandate that will prop up renewable energy is California’s plan to require all new homes and offices to include solar rooftop installations,” said Motley. “It’s like attempting to solve the homeless problem by adding $50,000 to the price of a new home.”

Joe Barnett (joepaulbarnett@att.net) writes from Dallas, Texas.

Author
Joe Barnett is a former senior director of policy research at the National Center for Policy Analysis and is currently a program development consultant with the Beacon Hill Institute.