Problems with SolarCity — Now Tesla

If you've been up-to-date on the solar industry in the past 10 years, you've probably heard of SolarCity. Though it has since been acquired by Tesla, SolarCity racked up plenty of awards during its run, including placing ninth on MIT Technology Review's 50 Smartest Companies 2015 and being featured on Fast Company's list of the World's Most Innovative Companies in Energy. 

SolarCity, which was started by celebrity tech entrepreneur Elon Musk, made solar affordable for homeowners by leasing out solar systems on 20-year agreements instead of selling them. However, the SolarCity lease agreement came with issues and those problems left customers feeling frustrated and disillusioned with what they thought was going to be a money-saving purchase. 

If SolarCity installed your solar system, contact Tesla for warranty fulfillment or other concerns. If you’ve used SolarCity or Tesla for a solar project, consider leaving a review on our Tesla review page.

Note that Tesla has canceled solar projects across the United States in recent months as it closes some markets, so, for better or for worse, SolarCity/Tesla may no longer be an option to hire for solar projects. 

Here are the top six problems people tended to have with SolarCity: 

1. SolarCity's financials were less than sunny

From an investor standpoint, SolarCity made some people nervous. The problem was not its revenues, which grew 41 percent compounded annually from 2012 til around 2016. The problem was the amount SolarCity spent on sales and marketing. Additionally, general and administrative costs skyrocketed by 85 percent and 79 percent compounded annually. David Trainer at Forbes explains:

"Essentially, the cost of attracting new customers and hiring more workers has far outpaced revenues."

And that's not all. SolarCity is about to receive an even bigger blow to their balance sheet.

One of the things that made SolarCity work was the money it received from the government. First, they accepted more than $11 million in federal stimulus money. But even more impressive is the $411 million in tax breaks they took with the solar tax credit.

Because SolarCity customers leased their solar systems from the company, when the company went under, those systems were acquired by Tesla. These situations can get messy really fast, and there have been complaints of unresponsive customer service, lease challenges, and not honoring sales promises. 

2. SolarCity was more expensive

In their July 2015 review of SolarCity, solar industry observer Pick My Solar compared SolarCity's bids to those of its competitors in California. Shockingly, SolarCity's bids were 34 percent higher than the average for all California solar installers. That's an extra $10,000 for your run-of-the-mill solar system.

This would be understandable if SolarCity used premium equipment, but its equipment was shown to be the same as its competitors.

Pick My Solar's review pointed out that SolarCity prices its projects on a cost-per-watt basis, no matter the size of the project. That rate is always $5.10 per watt. Put on your accountant hat for a second and you start to see why this was a bad thing, as explained by Pick My Solar:

"Having no discrepancy in price is an obvious red flag. Overhead, permitting, engineering, and transportation are generally consistent costs, no matter what the project size — which means more dollars are going to profit margins on larger projects."

Simply put, SolarCity used its $5.10 cost-per-watt model as a way to squeeze more profits out of customers. It might have even caused them to push customers into bigger projects than they need.

3. SolarCity dragged its feet on installations

Did it always? Probably not. But Pick My Solar's review revealed that, while most solar companies in California completed their customers' installations within two to four months after signing, SolarCity took embarrassingly longer to turn things on:

"SolarCity is an outlier here, known to take six months or more to install a system due to backlog and inefficiencies. The MyPower contract confirms this exasperated timeline, stating that the installation will be done within 12 months!"

Of course, to give them the benefit of the doubt, this problem might be unique to SolarCity's California operations. But when customers decide they want to invest in solar power, they probably aren't expecting to wait a half-year to make that decision a reality.

4. SolarCity had a quality assurance problem

Even when the moment of installation finally arrived, things could and did go badly. Search for SolarCity complaints online and you'll hear stories of installers failing miserably in many ways.

One reviewer tells of a SolarCity technician coming to their house to survey and determine requirements, drilling holes in their garage ceiling, and simply leaving dust and chunks of drywall all over cars, the floor, and other items.

And then there's the damage that can occur during installation itself. On the Better Business Bureau page for SolarCity, one customer complaint recounts:

"My home has been damaged by their installation and product. They did not finish the install in one day and it took five weeks and numerous phone calls to get them to finish the job. Then my roof started leaking from their installation leaving my ceiling hanging in ruin."

Finally, sometimes the equipment just wasn't installed correctly. "Many of the consumers complain that they have spent months trying to remedy faulty installation, only to receive either continuous boilerplate responses from customer service or no response at all," says Tori Richards of Watchdog.org.

Granted, even the best solar companies get bad reviews; the perfect company simply doesn’t exist. 

But SolarCity’s problem was more than just a few poorly trained technicians. All three of these stories highlight how poorly SolarCity sometimes performs in customer service, leaving customers hanging for weeks on end with serious issues. When you're signing a lease with a company for 20 years, this is not the kind of customer service you want to be stuck with.

5. SolarCity's 20-year lease wasn't always advantageous

A power purchase agreement can sound like a no-brainer. Customers get solar power with no money down, and, if all goes according to plan, they pay less per month than they do for their current power bill. Unfortunately, when you're talking about the next 20 years, the likelihood of things going wrong is high and, in general, we recommend customers purchase their solar over going with a lease or PPA.

Pick My Solar points out that the utilities that bought excess power from SolarCity would inevitably lower their rates in response to so many customers turning to solar:

"Some predict it will lead to tens-of-thousands of contractual [power purchase] agreements that leave homeowners paying more for their solar system than they would be paying for electricity from the grid."

This is exactly what happened to one customer in Half Moon Bay, California. For $600 upfront, SolarCity told Jeff Leeds he could expect to pay $182 per month for the next 20 years as part of their "performance guarantee." Fifteen months later, Leeds found himself in a very different situation:

"The local utility company has raised its rates and instead of a lower bill, Leeds is pushing $500 a month with no way out for the next two decades. And he has the eyesore of solar panels that cover most of his roof."

And then there's the problem of equipment. The rate at which solar technology is advancing all but guarantees that the equipment that customers sign a lease for today will be obsolete in a few years. Richardson explains:

"No matter how rapidly solar technology evolves, the SolarCity lease ties each homeowner to technology that is cutting edge only at the signing of the 20-year contract."

And what about in 20 years? The equipment customers are tied to might very well be unusable.

6. SolarCity didn't prepare customers for their true-up bill

No list of SolarCity problems would be complete without the dreaded true-up bill. Countless online complaints against SolarCity speak of customers assured by the company that their system would cover all their energy needs. And even if it didn't, they could expect nothing but tiny, harmless monthly electric bills for the next 20 years. But then customers were surprised when one very large electric bill arrives at the end of the year.

One victim of the true-up bill, Angelina of Riverside, California recounts:

"After receiving our first true-up bill from Edison we were in shock to see that we owed them $1,150.00. Upon calling customer service we were told that our system was only designed to cover 60% and that 100% was not possible. We would never have agreed to 60%. Conveniently, the sales rep that we spoke with no longer worked for the company because she mislead people... But in no way, shape, or form was SolarCity going to honor what we were told and what we agreed to."

To be fair, true-up bills aren't a problem just for SolarCity customers. It happens with every major solar installer when salespeople gloss over the subject and focus only on those monthly savings. And sometimes, customers are actually to blame.

Solar expert Craig Lawrence explains on Quora that there are two possibilities. One is that your solar system failed to produce the electricity it promised. If you see that your system is producing less than was promised in your lease, you have a production guarantee and can push SolarCity to fix the problem.

The second possibility Lawrence points out is that the customer's consumption has actually gone up dramatically:

"There is a psychological effect when some people get solar that says, 'Hey, I can use a bunch more electricity because I'm making all of this clean solar energy!' I've seen this happen many times, and it can wipe out your savings from your solar."

In these cases, it seems that customers should have been able to work with SolarCity customer service to pinpoint the causes and possible fixes to the problem.

Regardless of the cause, however, SolarCity needed to do a better job of setting realistic expectations before customers get locked into leases.

Vet companies with these lessons in mind

As mentioned earlier, some of these problems aren't unique to SolarCity. True-up bills and the downsides of long-term leases affect customers of most solar installers. 

But the things we learned from SolarCity’s problems can inform future customer decisions. 

Ready to go solar? Read reviews for the top-recommended solar companies in your area.