Tesla, Inc.'s (TSLA) solar roof, which the company unveiled at an event in November last year, will cost $21.85 per square foot. Consumer Reports magazine had estimated a price point of $24.50 per square foot for the tiles. However, Tesla's estimated price point for its tiles comes with a catch: the calculations were made for a home thirty five percent of whose roof area is comprised of solar tiles. The Palo Alto-based company has designed a calculator on its website that provides estimates of percentage of solar tiles required on roofs for homeowners depending on their location and home size.
The calculations also include the $7,000 cost of a Powerwall battery, which integrates with the solar panels to provide power at night. For example, a 2,392 square foot Berkeley home, which was the average home size for a single family home in 2010, will have 50 percent solar tiles on its roof at an estimated figure of $40,400. According to Tesla, its non-solar tiles are cheaper as compared to regular tiles and its solar tiles have an actual price point of $42 per square foot.Installation of the first set of roofs will begin in California in June this year and will be rolled out overseas next year. During a call with journalists, Tesla CEO Elon Musk said the roofs contained a "shocking amount of technology" in their connectors. "This is a connector that has to last for more than 30 years. It has to be weatherproof, heavy rain, snow, slush, salt, water leaking – it’s like connector hell,” he said.
The solar roof were unveiled by Tesla after it completed the acquisition of solar panel maker SolarCity Corporation last November. Tiles for the roofs are made of quartz glass and will be available in four different materials. They have an average lifespan of 30 years and the company has provided infinite warranty for them. (See also: Tesla Unveils Solar Roof and Next Generation of Powerwall.)
While the solar roofs represent a technical and design breakthrough, Tesla has a steep climb to carve out a market for them. The costs could become a deterrence for average consumers. According to a previous estimate by Consumer Reports the installed cost of a textured glass tile solar roof from Tesla was $73,500 on a 3,000-square-foot surface. (Tesla's estimated price is for its Tuscan tiles). For context, the average cost of installing solar panels on roofs in a standard U.S. home (approximately 2,700 square feet in area) was between $25,000 and $35,000 last year. (See also: SunPower CEO Skeptical About Tesla's Solar Roof.)
In its pricing, Tesla is highlighting the energy savings and tax credits that consumers can earn after installing solar tiles. The free electricity generated by the roofs that could mitigate the upfront expense. Consumer Reports estimates this to be worth $60,000 over a period of 30 years. But uncertainty about the technology as well as future regulation could inhibit customers from buying the roofs. (See also: Will Tesla's New Solar Roof Be Worth the Cost?)
Further complicating the debut for Tesla's solar roofs are the changes in the market for residential solar panels. According to GTM Research, the market for residential solar declined quarter over quarter last year for only the second time in five years. The decline is expected to continue this year as the market's dynamics change. For example, customers have become partial to cash and loan purchases over long-term leases, which could have been an option for homeowners unable to afford the roofs. (See also: 2017: A Turnaround Point for the Solar Industry.)
To be sure, this does not mean that Tesla is embarking on a foolish experiment. Barry Cinnamon of solar panel equipment maker Spice Solar has a more optimistic take on Tesla's prospects. He estimates installation and solar costs for the roof to be between $26,500 and $36,000 for new homes and between $33,000 and $37,500 for a retrofit from an existing roof. "Innovations in the business model related to solar roof installations, for which both Tesla and SolarCity are well known, can further reduce costs," he wrote. (See also: A Solar-Powered Home: Will It Pay Off?)