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Price of Tesla’s solar shingles may not be through the roof

Tesla Motors' solar roof might not be quite so expensive after all.

When Tesla CEO Elon Musk unveiled new solar shingles three weeks ago, the big question that wasn't answered was how much it would cost. Consumer Reports suggested the upfront cost could be upwards of $70,000, before incentives.

Now, Musk is saying the roof could cost much less. In fact, Musk said the company's solar roof - whose solar modules will be a key product made at the RiverBend solar panel factory when it opens next year - could wind up costing less than putting a conventional roof on a home.

[Related: Tesla merger with SolarCity approved by shareholders]

"The basic proposition would be: Would you like a roof that looks better than a normal roof, lasts twice as long, costs less and, by the way generates electricity? Why would you get anything else?" Musk said after shareholders from both companies approved Tesla's $2.1 billion deal to buy SolarCity. "And then electricity is just a bonus."

If that pans out, it would be a big turnaround in the solar roof's expected pricing from just three weeks ago, when Musk unveiled the new solar shingles on a Hollywood set.

At that time, Musk said homeowners would save money only if they factored in the savings in their electric bill that resulted from having solar power over the life of the roof - a consideration that could add $30,000 to the cost for a customer with electric bills of $1,000 a year over the 30-year life of the roof, or $60,000 for homeowners whose annual electric bills average $2,000.

Despite the promise of long-term savings, an upfront price that high could have put a big dent in the pool of potential customers for a solar roof - estimated to include the 5 million Americans who need to put on a new roof each year.

But bringing the cost of a solar roof down below what consumers would spend to simply install a conventional roof would make the decision to go with a solar roof much more financially appealing.

"That would be massive," said Howard Zemsky, the president of Empire State Development, which is overseeing the state's $750 million investment to build and buy most of the equipment for the South Buffalo solar panel factory.

[Related: SolarCity-Tesla merger solidifies RiverBend plant]

From the start, Musk and SolarCity executives have declined to give any pricing details about the new solar roof. And Musk didn't go into specifics in his comments on Thursday, either. Nor did he specifically say how the expected price of the roof could drop so much in just three weeks. But he did give some clues.

Part of it has to do with what Musk described as an inefficient roofing market, with roofing materials going through several different suppliers and service providers - each adding their own mark-up to the price - before it reaches a consumer.

"The roofing supply chain is incredibly inefficient," Musk said. "The whole supply chain from where they're made to where they're finally installed is really inefficient. So just by cleaning all that up, there are huge gains, it turns out."

Tesla thinks it can do better by making and installing the roof itself. Musk also thinks Tesla's roof will cost less because it's made from glass, rather than some of the heavier materials that are commonly used in roofs in other parts of the country, such as slate, terra cotta and clay tiles. Musk expects Tesla's high-strength glass tiles, even with solar modules inside them, to weigh anywhere from 67 percent to 80 percent less than those conventional materials. He also expects them to be thinner and less prone to breaking.

"Most of the cost of the tiles is actually transport," he said. "They tend to be quite fragile, so the in-process breakage of ceramic and concrete tiles is very high."

SolarCity and Tesla engineers have designed four types of solar roof that look like conventional asphalt, clay-tile, terra cotta and slate shingles. Unlike conventional rooftop solar, where the solar panels are attached to the roof, the solar roof has the solar module built into the shingles, which are encased in durable glass. The solar modules aren't visible when you look at the roof from an angle, only when viewed from directly above.

Musk is hoping the solar roof can be a big-selling product for the combined company, since it looks like a conventional roof and opens up the potential for selling rooftop solar to homeowners with aging roofs. Until now, rooftop solar has been limited to homeowners with relatively new roofs that aren't likely to need repairs or replacing during the estimated 20-year life of the solar panels.

The solar roof also is a step toward Musk's vision of integrating SolarCity's solar panels with the batteries that Tesla makes - all sold through Tesla's network of nearly 200 electric vehicle stores nationwide. That combination will allow homeowners with a solar roof to store the excess power its shingles generate during the day in a Tesla Powerwall battery that homeowners can tap into at night, when they're making dinner, doing laundry or watching television.

"We're trying to make an integrated product, so  you have an integrated solar roof with a Powerwall and an electric car," Musk said. "You just go into a Tesla store, and just say "yes."  It just happens. It all works. It's seamless and you love it."

That self-contained setup also would reduce Tesla's reliance on subsidies that are pegged to the value of the electricity those solar arrays generate. And if Tesla is able to bring the price of a solar roof down to the cost of a conventional roof, it would eliminate the need for other subsidies, including a 30 percent federal tax credit that analysts believe could be threatened during a Trump administration.

"Assuming it pans out that we're able to do a solar roof for less than a normal roof, before you even take into account the value of the electricity ... then subsidies don't really matter," Musk said.

The first solar roofs are expected to go on sale next year, initially in California and then in other states with high electricity costs. Solar panel production at the Buffalo factory is expected to begin on a limited basis by the end of June and then gradually increase.

"We expect to start doing the solar roofs in volume sometime next year," Musk said. "We'll roll them out one at a time. We'll start out in three month intervals, start with the one that appears to be the most popular and then roll out each new variant out roughly in three month cycles."

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