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Tesla Energy is ‘battery cell starved’ but the growth outlook is ‘crazy’

One thing we have yet to discuss when it comes to Tesla’s Q2 earnings is how its Tesla Energy division is doing.

In short, solar is stable and energy storage is growing despite cell shortage, but the growth outlook is what is really “crazy.”

Tesla confirmed that it deployed 84 MW of solar energy generation systems in Q2.

It represents an 11% increase over Q1’18, but it’s far below what SolarCity used to deploy – though it was to be expected as Tesla restructures the company to focus on more profitable systems and cash transactions.

They say that cash and loan system sales made up 68% of residential deployments in the quarter, up from 37% in Q2 2017. Previously, SolarCity’s bread and butter used to be leasing.

Tesla is also now solely focusing on selling its vehicles through its own retail locations instead of the many different channels that SolarCity had:

“Our solar sales strategy went through a significant change in Q2, as we prepare to sell energy products exclusively at Tesla retail locations and online. In the short run, our solar volumes should remain relatively stable, but we expect to rapidly grow our retrofit solar sales with our expanding customer base of Tesla vehicle owners. In spite of relatively low solar volumes expected in 2018, cash flow from this business should remain neutral.”

Tesla still aims to differentiate itself in the solar market with different products instead of just competing on price and distribution.

The main new products are the solar roof tiles, which Tesla says it has now installed at ‘several hundred locations’.

Musk explained:

“We now have several hundred homes with the Solar Roof on them and that’s going well. It takes a while to confirm that the Solar Roof is going to last for 30 years and all the details work out, and we’re working with first responders to make sure it’s safe in the event of a fire and that kind of thing. So it’s quite a long validation program for a roof which has got to last for 30, 40, 50 years, but we also expect to ramp that up next year at our Gigafactory 2 in Buffalo. That’s going to be super exciting.”

Update: Tesla has now clarified that “several hundred homes with Solar Roof” includes not only homes with solar roof installed but also with their installation scheduled.

We recently reported on how one of the first Tesla Solar Roof installations has been doing.

As for energy storage, Tesla deployed 203 MWh during the last quarter. It’s lower than last quarter, which was boosted by Tesla’s giant battery system in Australia.

It represents an increase of 106% from Q2 2017 and Tesla plans to triple energy storage deployments in 2018 compared to last year.

Musk called the growth “insane” and CTO JB Straubel added that it is “crazy”.

The demand is undoubtedly there, but Tesla has a lot of catching up to do when it comes to production.

Musk said that Powerwall production is “cell starved”:

“We’re kind of cell starved for Powerwall right now, so we actually had to artificially limit the number of Powerwalls because we don’t have enough cells. So we’re solving for that very rapidly and we expect to ramp up Powerwall and Powerpack production substantially later this year and early next and as well as ramping up retrofit solar and then the Solar Roof.”

The CEO also admitted that they shut down a Powerwall battery cell line to accelerate Model 3 production:

“We did shut down a Powerwall cell line in favor of Model 3 to be totally honest but we kind of had to do that. But we’re adding new cell lines and we’ll be able to address that issue very soon.”

Straubel recently confirmed that the company has now installed over 1 GWh of energy storage and they aim to deploy another GWh of energy storage in just the next 9 to 12 months.

The Powerpack is likely to account for the vast majority of the capacity deployed thanks to several big projects coming up – including the massive ‘up to 1.1 GWh’ Powerpack battery system that Tesla and PG&E are working on.

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