What Tesla's inverter means for solar

In January 2021, Tesla launched a new product: the Tesla Solar Inverter. In the realm of Tesla announcements, this one went a little under the radar for the general public. It's nowhere near as flashy or exciting of a launch as any of their electric vehicles, the initial Powerwall or Solar Roof. But don't let that fool you into thinking this announcement is insignificant. By building its own Solar Inverter, Tesla has the potential to drive the cost of solar even lower. Here's what Tesla’s announcement means for the solar industry.

• Cheap solar panels vary in quality: usually, a higher price reflects a higher efficiency rating and, therefore, higher quality.

• Polycrystalline solar panels are typically cheaper than monocrystalline panels.

• Your payback period may be longer if you shop for solar panels with the lowest price tag.

• Solar shoppers should use the EnergySage Marketplace to browse various brands of solar panels based on price, efficiency, quality, and more.

The Tesla inverter is a standard string inverter technology: it consists of a central inverter box installed on your wall with multiple 'strings' of solar panels connected to the same central inverter. Each string takes the direct current (DC) electricity produced by your solar panels and funnels it to the central inverter, where the electricity is converted to usable alternating current (AC) electricity to power your home.

Notably, Tesla Solar Inverter is designed as a standalone inverter and not as a hybrid inverter, meaning if you pair your solar with storage, you'll still want a battery with its own inverter, like the AC-coupled Powerwall, as opposed to a DC-coupled system.

Here's how its technical specifications stack up:

The Tesla inverter technical specs

Tesla launched their inverter in two sizes: a 3.8 kilowatt (kW) and a 7.6 kW version. The inverter is 'stackable,' meaning you can add as many of them together as you need to meet the output of your solar panel system, providing a lot of flexibility to system sizing and installation. The two separate inverter sizes–3.8 kW and 7.6 kW–are designed to fit with Tesla's standard system sizes: for the small system, you'd need one 3.8 kW inverter; for the medium system size, you'd want one 7.6 kW inverter; for the large, you'd want one of the 7.6 kW and one of the 3.6 kW; and so on and so on.

The Tesla inverter has four maximum power point trackers, or MPPTs, allowing you to connect four separate, independent strings of solar panels to the inverter. This is particularly valuable if you want to install your solar panels on multiple roof planes (i.e., parts of your roof that face different directions) or if your roof sees shade at various points during the day.

The Tesla inverter warranty

The warranty on the Tesla inverter is 12.5 years. While this may sound like a strange warranty term in an industry that typically provides warranty coverage in round years, there is some method to the extra-six-months-of-coverage madness: most solar panels are warrantied for 25 years, meaning the Tesla inverter is warrantied for exactly half of the solar panel system's overall warrantied lifetime.

Rapid shutdown compliance

Rapid shutdown is an electrical safety requirement set for solar panel systems by the National Electrical Code (NEC). Written in part by the National Fire Protection Association (NFPA), rapid shutdown requirements are designed to keep first responders safe by providing a way to quickly de-energize a rooftop solar panel system in an emergency. To read more about rapid shutdown requirements and compliance, check out our article about the NEC requirements and how the requirements vary by state.

The most commonly installed string inverter systems–think SolarEdge, SMA, Fronius, or Delta–typically require optimizers or rapid-shutdown devices at each solar panel to comply with rapid shutdown requirements. On the other hand, Tesla is opting for string-level rapid shutdown, with devices installed at the end of each string on your roof. According to the Tesla inverter datasheet, these rapid shutdown devices provide arc-fault and ground-fault detection (which are both ways to ensure that the grid and your solar panels operate safely), making them rapid shutdown compliant.

A Tesla special: Over-the-air updates

Over-the-air updates are unique to Tesla's inverter. In the same way that Tesla provides software updates to its electric vehicles over wifi or that apps on your phone periodically update via wifi, the company plans to similarly provide over-the-air updates to its inverters, updating the software of the inverter with any future updates on the fly. The battery has a wifi/ethernet connection and 4G LTE connectivity to achieve this.

How to size a solar panel system with the Tesla inverter

Though Tesla doesn't provide any inverter sizing guidelines for its systems (i.e., how many inverters you need for different amounts of solar), the most recent Tracking the Sun report from Lawrence Berkeley National Laboratory suggests a typical inverter-loading-ratio of 1.16, meaning a 7.6 kW inverter is typically paired with an 8.8 kW system. At the same time, though, Tesla primarily offers solar panel systems in pre-determined sizes, which conveniently match the power ratings of its new inverters.

When did the Tesla inverter become available?

Homeowners that placed solar orders through Tesla beginning in January 2021 automatically began receiving the new Tesla inverter as a part of their installation.

According to our most recent Solar Marketplace Intel Report, the residential inverter market is currently dominated by SolarEdge and Enphase. Here's how the Tesla inverter stacks up to the two company's most popular options on EnergySage, the SolarEdge EnergyHub, and the Enphase IQ7 Plus:

*Register for EnergySage to see the cost of different inverters.

Additionally, it’s worth noting that Tesla previously installed the Delta M4-TL-US inverter if online comment boards are to be believed. Here’s a link to the inverter that Tesla eschewed in favor of their own.

It may not seem like it at first, but these two questions go hand in hand: the reason why Tesla entered the fray as a solar inverter manufacturer and what it means for the solar industry are inextricably linked.

It's all about the cost of solar.

At a high level, solar costs consist of two distinct components: hardware costs and soft costs.

Hardware costs cover buying, storing, and shipping solar equipment: solar panels, solar inverters, and "balance of system," or BOS costs, including racking wiring and other miscellaneous hardware components. Soft costs include any non-equipment costs: sales and marketing, permitting and interconnection fees, inspection, overhead, profit, and the cost of actually installing your solar panels. Over time, hardware costs have generally decreased while soft costs have remained relatively high.

If you want to reduce the cost of solar, you have two options: reduce the soft costs or the hardware costs. With Tesla's introduction of standard system sizing and online shopping in 2020, Tesla was able to carve out a significant chunk of the soft costs of solar panel systems, allowing the company to sell solar panel systems at the lowest price per watt in the industry, according to their marketing.

With the introduction of its own Solar Inverter, Tesla is now tackling the second part of the solar cost stack: hardware costs. While the cost of solar panels and inverters has declined significantly over the past decade, Tesla is banking on pushing the cost of inverters even lower by making the components themselves. And by keeping everything in-house, Tesla should be able to generate cost reductions throughout the rest of the supply chain, from distribution to warehousing, and from maintaining and tracking inventory even to standardizing the installation process for their crews throughout the country.

But why an inverter specifically?

At their announcement, an inverter was the only major piece of a solar (plus storage!) installation that Tesla didn't produce in-house. They already manufactured solar panels (both the solar roof and regular solar panels, though the relationship with solar panel manufacturer Panasonic at their Buffalo gigafactory remains a bit up in the air, according to media reports). However, they no longer manufacture their solar roofs and panels.

They also manufacture batteries (the Powerwall 2) and all components that link the battery to the rest of your solar panel system, like the Gateway and their Automatic Transfer Switch (ATS).

What's more, Tesla already has experience with power control systems and inverters: they've manufactured and refined the inverter that's included inside Powerwall energy storage systems over the last 5+ years. Additionally, Tesla manages the largest fleet of solar systems in the US, meaning they have experience installing and maintaining many different brands and types of inverters. As a result, Tesla must believe they already have the technical know-how and ability to design a cost-effective, reliable, standalone solar inverter in addition to the storage inverter they've been making for years.

While this product launch is exciting and has the potential to impact the solar industry significantly, a few outstanding questions will ultimately determine how widespread the impact of the new Tesla inverter will be on solar.

• Will bringing the manufacturing of inverters in-house improve or hamper existing supply chain issues?
  Over the last few years, storage manufacturers–including Tesla–have experienced several supply constraints, sometimes taking several months to get batteries to customers who have ordered them. While bringing inverter manufacturing in-house provides Tesla with more insight into the entire supply chain/production process of creating the components, if they cannot ramp up production quickly, they could run into similar supply and delivery constraints as they have with the Powerwall.

• **Will the Tesla inverter be available to all solar installers or only to Tesla's crews?
  **While Tesla has installation crews nationwide, you don't have to be a Tesla installer to access and install the Powerwall. If the Tesla inverter is available to all installers nationwide, it will impact the industry more than if it's only available to Tesla's crews.

• **How will the new inverter perform in the field?
  **This is a brand-new product, so it's hard to know how it will perform and stack up to its competitors until we see data from it operating in the field. We'll withhold final judgment on the quality of the inverter until we see how they perform in actual homes.

• Are over-the-air updates actually that important for an inverter?
  While valuable for electric vehicles, can over-the-air updates provide that much value for inverters? Indeed, providing updates to potential bugs is a helpful feature to avoid installer truck rolls and retroactive maintenance. That said, it's hard to see why homeowners care about software updates to their inverter without seeing it in action.

• **How much of a cost reduction will producing their inverter generate for homeowners?
  **As we mentioned above, the cost of inverters has declined rapidly in the last decade. Are there truly that many further cost reductions to be had? It will be interesting to see how much their inverter will reduce an already low price-per-watt for Tesla solar panel systems.

• **Will Tesla inverters take SolarEdge and Enphase market share, or will it be a one-for-one swap with the Delta inverters Tesla currently uses?
  **At the end of the day, this is the big question: if Tesla inverters can't take market share from Enphase and SolarEdge, the overall impact on the solar industry will be very muted.

On EnergySage, you can compare solar equipment options using our Buyer's Guide: check out the best solar panels, solar inverters, and solar batteries available today. We've done the hard work of transcribing the technical details of different inverters into an online, searchable, filterable database so that you can select various inverters and compare how they stack up against each other head-to-head.

If you see the equipment you like and want to receive custom solar quotes for your home, sign up for a free account for EnergySage today. All we need is your email, your street address, and an estimation of how much you spend on electricity each month, and we'll go out and get you custom solar quotes from reputable local installers.