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New solar roof a high-stakes gamble for Tesla-SolarCity venture

With his new solar roof, Elon Musk is trying to take the emerging solar energy industry in a direction that has stymied most who have tried it before.

It's a high-stakes gamble, and SolarCity's solar panel plant in Buffalo will play a central role.

[Gallery: SolarCity unveils new solar roof styles]

The rewards could be big. If he succeeds, Musk will have opened up a big new market for SolarCity, one that could easily double its installations by capturing just a sliver of the overall replacement roof market.

If the venture between Tesla and SolarCity fails, Musk will have stumbled, just as Dow Chemical did when it tried to market solar shingles. Dow, like the dozen other solar roofing ventures that have failed in recent years according to Greentech Media, wasn't able to come up with a product that was affordable and as efficient as conventional rooftop solar.

[SolarCity unveils new solar roofs that would largely be built in Buffalo]

When Dow launched its solar shingles in 2009, it thought it would turn into a $1 billion business within five years. Instead, it pulled the plug on the venture in June. About a dozen companies still make solar roofing products, but none have gained anything near the commercial scale that, first Dow, and now Musk envisions, according to Greentech Media's Eric Wesoff.

Musk also is shooting for another short-term goal - a crucial shareholder vote on the proposed $2.2 billion merger between Tesla and SolarCity on Nov. 17. Tesla already surprised investors by reporting a $22 million profit last week when analysts were expecting a loss. And the company plans to release more financial information about the merger on Tuesday.

By combining Tesla's second-generation battery storage product with the new solar roof, Musk is trying to win over skeptical shareholders who need to be convinced that the merger will do something good for the electric vehicle maker - and not just saddle it with a cash-guzzling, debt-laden solar energy company that is a long way from turning a profit.

"Solar and batteries go together like peanut butter and jelly," Musk said Friday after unveiling the solar roof at an event at Universal Studios in Los Angeles.

The event, in a courtyard surrounded by four movie-set homes used to film the "Desperate Housewives" TV show, served as a showcase for the new solar roof. Each house was outfitted with one of the four different types of solar roof, although befitting a movie set, none was actually wired to generate electricity.

But it did show how Tesla and SolarCity have come up with a solar roof that doesn't look anything like a conventional rooftop solar setup. These look like regular roofs, except they're made of shingles that have solar modules encased in durable glass. Musk says the roofing is tougher than conventional roofing products made out of clay or slate or terra cotta, and will last twice as long as the asphalt shingles that are so common in the Buffalo Niagara region.

Musk, who has always been a big believer in the consumer appeal of cool-looking products, thinks the new solar roof can take rooftop solar to an entirely new level, just as Tesla, with its sleek-looking sedans and SUVs, has made electric vehicles sexy.

The first electric vehicles, Musk said, looked like golf carts. With its focus on style, Tesla pushed electric vehicles into the mainstream - at least for consumers who can afford vehicles costing $70,000 and up.

"We really need to make solar panels as appealing as electric cars," he said. "Have you ever seen a solar roof that you'd want?"

Musk said he hopes to start installing the first solar roofs next summer, probably in California.

If he succeeds, he hopes a combined Tesla-SolarCity will offer a new choice to the 5 million American homeowners each year who replace their roofs. And then there are the millions of others who build new homes each year. An efficient, affordable solar roof would give them a new choice.

But that's the big question. Can Musk make the solar roof affordable? And can he make it as efficient as conventional solar?

Musk wasn't giving any prices on Friday night. Instead, he said Tesla expects to be able to make the roof at a price that will be competitive with - and perhaps cost a little less - than what a homeowner would pay to install a conventional roof and then pay their local electric utility during the life of that roof.

"We feel pretty confident we can achieve a cost that's basically equal to the cost of a roof, plus electricity," Musk said.

What Musk didn't say is that the solar roof product probably won't have equal appeal everywhere. In places like California and Hawaii that have high electricity prices, a solar roof likely would be appealing. In places where power prices are lower and the utility cost savings are less, consumers are more likely to pass.

But that's OK to Musk, because there are plenty of roofs in places where electricity is expensive. Even if SolarCity captures 5 percent of those 5 million new roofs each year, it would double the company's annual volume, said Peter Rive, the company's chief technology officer and Musk's cousin.

As for efficiency, Musk said the SolarCity-Tesla solar roof would probably lose about 2 percent of its rated efficiency. SolarCity is planning to make high-efficiency panels in Buffalo, so even with that drop-off, the roofing product still likely would be more efficient that conventional modules, but the gap wouldn't be as large.

But to Musk, the solar roof is a symbol of what he thinks Tesla and SolarCity can do together to help build a renewable energy powerhouse - and a reason for skeptical Tesla shareholders to vote in favor of the merger. The combined company would drop the SolarCity brand. Everything it does would be under the Tesla name.

So  Tesla solar panels will generate the electricity that will be needed in ever-greater quantities as electric vehicles replace gas-powered cars and trucks. Tesla's slimmer and more efficient $5,500 Powerwall 2.0 batteries can store the electricity produced by SolarCity's solar panels during the day and allow consumers to use it at night or when a storm knocks out the power. And the integrated roof and battery system can charge Tesla's electric vehicles.

"That's where we're headed," Musk told more than 500 Tesla owners and other invited guests Friday night. "I hope you agree that's the future you want."







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