Tesla signs two utility-scale solar deals totaling 600 MW, shifting from residential solar to power AI infrastructure as Musk warns of power constraints.
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Tesla has signed two long-term power purchase agreements for utility-scale solar projects, a pivot from the residential solar push that defined the company's 2016 acquisition of SolarCity. The combined capacity of the projects is about 600 megawatts.
ContourGlobal, a global power producer, announced Tuesday that Tesla agreed to buy 1 terawatt-hour of electricity a year from Project Sterling, a solar and battery storage project in Arizona. The deal covers roughly 90% of the project's expected output, enough to power about 100,000 U.S. homes annually. Commercial operations are expected to start in 2028, ContourGlobal said. The company described Sterling as its "largest renewable asset to date."
Separately, renewable developer Zelestra said Tesla would purchase the entire output of its 140-megawatt Lumen Farm solar project in northeast Texas. Zelestra CEO Phil North said the project will support Tesla's "growing energy needs in Texas." Full operations are expected by 2029.
Neither agreement identified which Tesla operations the power will support. Spokespeople for ContourGlobal, Zelestra, and Tesla did not respond to requests for comment.
The deals mark a strategic shift from 2016, when Elon Musk framed the $2.6 billion SolarCity acquisition as a way to combine solar energy, battery storage, and electric vehicles for consumers. "Tesla customers can drive clean cars and they can use our battery packs to help consume energy more efficiently, but they still need access to the most sustainable energy source that's available: the sun," Tesla said at the time.
The rooftop solar business has not disappeared. Tesla said in its first-quarter shareholder update in April that it had begun "meaningful customer deployments" of residential solar panels produced at its New York Gigafactory. The company continues to sell Powerwall home batteries.
In recent years, Musk has focused more of his solar ambitions on the grid as AI drives surging power demand. Tesla has warned investors that data centers supporting its AI services will have "substantial power requirements." The company expects 2026 capital expenditures to exceed $25 billion as it builds factories and infrastructure for projects including its Robotaxi business and the Optimus humanoid robot. Both depend on large-scale AI training infrastructure. Tesla also plans to build a semiconductor research fab as part of its chip manufacturing ambitions.
"The solar opportunity is underestimated," Musk said on a January earnings call, adding that solar paired with batteries was the "best way" to add more power to the grid. During Tesla's July 22 earnings call, he said hyperscalers are struggling to secure enough electricity for AI compute. "There's far more power available from the sun than anything else, by far," Musk said. "We think power constraints are going to be – they already are – a major issue for AI."
The two latest solar deals make Tesla a major buyer of utility-scale solar power. The commitments tie the company's AI ambitions directly to renewable energy procurement. Zelestra said it expects full operations for Lumen Farm by 2029. ContourGlobal said commercial operations for Sterling are expected to start in 2028.
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