LOS ANGELES — Elon Musk unveiled his vision for turning Tesla Motors into a solar-electric company - with the SolarCity plant in Buffalo playing a central role.
Musk, Tesla's CEO and SolarCity's chairman, unveiled plans Friday night for a solar roof that can be customized for individual homes and combined with higher-capacity Tesla batteries that can store twice as much energy as the current model.
Musk has long pushed for better looking rooftop solar systems, and he said the new product – unveiled on four houses on the lot of Universal Studios – shows that it's possible to make rooftop solar so it doesn't look any different from a conventional roof.
"The key is it needs to be beautiful, affordable and seamlessly integrated," he said.
Musk wouldn't say how much the solar roof would cost.
But, he said it should cost less than the combined cost of installing a new roof and the cost of electricity during the life of the roof, which could run more than 50 years in some cases.
Most of the solar roofs will be built at the solar panel plant that SolarCity will operate in Buffalo.
If sales of solar roofs develop as company officials hope, the product will become a key product for the Buffalo plant, said Peter Rive, SolarCity's chief technology officer.
Tesla is designing four models of glass roofs, from Tuscan glass and french slate to terra cotta, that can be customized to fit individual homes. The roofs will have solar panels built into them, which Musk said will be a vast improvement in appearance compared with current solar systems that are installed on top of a roof.
Homeowners will be able to choose which parts of the roof will use the hidden solar technology and which parts will not. But the entire roof will look the same, Musk said.
Tesla's Powerwall 2 battery will be more compact in design and will come with an inverter built in, which will help reduce costs and simplify installations. Inverters change the direct current generated by the solar panels into the alternating current used in American homes.
The Powerwall battery will be able to store 14 kilowatt hours of electricity, up from 6 kilowatt hours in the current model. That's just under half of the 29 kilowatt hours of power that a typical household uses each day.
Musk, facing criticism about his proposed merger between SolarCity and Tesla, said the solar roof is an example of the type of innovative products that the companies can come up with – a task that would be much easier if the merger is approved next month.
The solar roof is a big deal for the Buffalo Niagara region because it is expected to be made at SolarCity's solar panel factory in South Buffalo when the plant opens next year.
The new product will integrate solar panels into the roofing material, allowing consumers to seamlessly add solar power to their homes at the same time that they replace their roof.
It also would be the most elaborate example of the collaboration that Musk envisions between the two companies, which he hopes to merge in a $2.2 billion deal.
"It gets pretty unwieldy if we're not a combined company," he said.
Combining solar energy and battery storage products within a single company is one of the main reasons for combining Tesla and SolarCity into a single entity, Musk has said. A Tesla charger would provide a renewable energy-charging system for owners of Tesla’s vehicles.
The timing of the solar roof announcement also is significant, coming less than three weeks before shareholders in both companies vote Nov. 17 to either approve or reject the merger.
Tesla surprised analysts by reporting Wednesday that it was profitable for just the second quarter in its history, and Musk said he doesn't expect SolarCity to be a cash drain on the electric vehicle maker. The unveiling of the solar roof, coming a week after Tesla said all of its new electric vehicles would come with self-driving hardware, may “set up a ‘yes’" vote for the merger, Barclays analyst Brian Johnson said.
Musk has argued that the deal is a key step toward his vision of creating a sustainable energy giant. Working separately, Musk said, creates too many potential conflicts of interest and makes collaboration complicated – hurdles that would be eliminated through a merger.
Critics, however, have said the merger highlights the financial risks of combining two money-losing companies that need to raise billions of dollars in new capital from investors each year to fund their operations.
SolarCity is counting on the solar roof product to spur sales of its solar energy system. Its once-rapid growth has slowed, and the residential solar market faces intense competition and regulatory hurdles in some states.
With upwards of 5 million American homes getting new roofs each year, that potentially could expand SolarCity’s customer base by 30 percent to 40 percent. Musk thinks SolarCity's roofing product will be an option for homeowners replacing their roofs, as well as for consumers building a new home.
Because conventional solar energy systems typically last for 20 years or more, it’s important that they be installed on relatively new roofs that are unlikely to require repair or replacement during the life of the solar array.
That effectively eliminates millions of homes with roofs that are 10 to 15 years old. About 10 percent of the residential customers who approach SolarCity about installing rooftop solar are turned down because of the condition of their existing roof.
Musk also believes that integrating the solar panels directly into the roof will make the system look better than conventional systems that are mounted on top of a roof. That could be a big selling point for the new systems, he said.
Integrating Tesla's second-generation Powerwall 2.0 battery into the system helps create a more self-contained power generation system for homeowners, with batteries storing electricity generated by the panels during the day so that it can be used at night or at times when the sun isn't shining.
Battery storage also has another long-term advantage for SolarCity, since it reduces the company's reliance on net metering subsidies that allow homeowners to sell the electricity generated by their solar panels to local utilities at prices that are above wholesale rates. Regulators in some states have been capping or reducing those net metering subsidies, which makes it harder for rooftop solar installations to make economic sense.
But since a solar energy system with a battery included allows consumers to store that power until they need it, more of the electricity will be used by the homeowner, reducing the amount of power subject to shifting net metering regulations.