Solar has been on an amazing growth trajectory. As we approach the milestone of 2 million homes with solar power, we need something more beautiful to reach the mass market. Enter the Tesla solar roof.

Tesla’s solar roof has redefined the popular conception of what residential solar can be. In an industry that has done very little product-level innovation, Tesla’s new product is a radical reimagining that has left consumers in awe.

Industry wonks have tried to make sense of Tesla’s solar roof by digging into the numbers and converting dollars per watt to dollars per square foot. But in the mind of the customer, Tesla’s solar roof will be the definition of next-generation solar — whether it makes economic sense or not.

Elon Musk’s initiative has captured a latent yearning on the part of customers for a tailor-made design that integrates with their homes and the way they live. As the CEO and founder of SunTegra, a competing solar shingle and tile company, I’ve seen first-hand that the next generation of solar customers want a low-profile, more integrated solution that blends in with their home.

Until now, the customer challenge has been awareness. Most homeowners didn’t know that alternatives to conventional rack-mounted systems even existed. Thanks to Elon Musk and his ability to capture the media’s attention, this is no longer a problem.

To achieve broader market adoption, solar roofs will have to be competitive, available when a roof needs replacing, and easy to install.

Is the Tesla solar roof price​d competitively?

As the founder of a company that already manufactures and sells solar roofing products, I was very interested in deconstructing the economics of Tesla’s solar roof product relative to conventional rack-mounted solar and other solar shingle products that already exist on the market. Here is what I found.

Based on Tesla’s online calculator and released information, the company has pegged the installed price of its solar tiles at $42 per square foot. By estimating the output and size of their solar tile, I have calculated that $42 per square foot translates to an installed price of approximately $3.50 per watt for just the active solar panel area.

Today, the average price for conventional solar with a premium all-black solar panel is about $3.25 per watt — making Tesla competitive with a higher-cost system. Of course, the competitiveness of the price truly depends on when the customer will receive the product and whether Tesla can earn a reasonable profit. I expect Tesla’s pricing will have to be higher longer-term.

Another thing to remember is that the solar portion of the roof is only part of the equation. If you buy the Tesla solar tile, you still need to buy the non-solar glass tiles for the rest of your roof.

Based on information released by Tesla, the installed price for the non-solar glass tiles is approximately $11 per square foot. This installed cost is expensive if compared to high-volume common roofing materials — $3 per square foot for asphalt shingles and $7 per square foot for concrete tiles — but is similar to lower-volume, high-end roofing materials such as ceramic or clay tiles, standing seam metal and slate.

Based on these roofing costs and Tesla’s published aggressive pricing, Tesla’s total roof solution requires a premium for the most common types of roofing materials, but is economic for high-end roofing materials.

In comparison, the SunTegra solar roof solution offers a lower premium for more common roofing materials compared to conventional solar, but is less economic than the Tesla roof for high-end roofing materials.

Although high-end roofing products represent a smaller portion of existing housing stock, they likely overlap quite well with Tesla’s high-end target customer, who is also shopping for the latest Tesla electric car. From a business perspective, it makes sense that Tesla is doubling down on its loyal customer base.

When will the Tesla solar roof be available in volume?

In order to really change the market, the Tesla solar roof product will have to be made available in high volume. If history is a guide, Tesla has a habit of hyping products before they are ready to scale. Many in the industry believe the same will be true for Tesla’s solar roof. Tesla likes to dangle the beta to generate interest, and then deliver the final product behind schedule.

There are two factors that lead me to believe that high-volume rollout of Tesla’s solar roof will take several years.

The first factor is practicality. Tesla’s solar roof is still in development and has likely had limited field testing. A solar tile roof, as it is contemplating, requires many electrical connections and needs to reliably function as a roofing material. The product and installation methods need to be developed and regulatory issues have to be addressed before high volume can occur. From experience, I know this takes time.

The second reason is cost. As I alluded to above, my own estimate is that Tesla’s initial pricing is closer to the actual cost and that the company will have to charge a higher premium to make a profit. That leads me to believe that its strategy will initially focus on low-volume test customers that will be forgiving as Tesla works out the kinks.

Will competitors fill the gap?

If in fact Tesla has created market demand without a product to deliver scale, there may be an opening for companies like SunTegra. (Others are making the same argument in the pages of GTM.) The residential solar industry has flattened out and needs new products to energize sales. If Tesla’s solar roof initiative is successful, other solar retailers such as Sunrun, Sunnova and Vivint will be looking for product partners that can help them compete.

Tesla’s solar roof initiative won’t transform the solar market overnight, but it has helped redefine what residential solar can be. I believe the market will follow suit. Welcome to the solar mass market.

Original Source: https://www.greentechmedia.com/articles/read/will-teslas-solar-roof-change-the-solar-market

Original Date: May 31, 2017

Original Author: Oliver Koehler

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