Tesla Inc.’s solar roof is off to a good start, and that bodes well for the sprawling solar panel factory that the company plans to open in Buffalo later this year.
Less than a month after the company started taking orders for their solar roof tiles, Tesla executives told analysts from investment firm RBC Capital Markets that the new product already is “sold out well into 2018.”
The solar roof is expected to be the flagship product for the Buffalo factory, a 1 million-square-foot facility on South Park Avenue that is being built with $750 million in state subsidies through Gov. Andrew M. Cuomo’s Buffalo Billion economic development initiative.
The company started taking orders for the solar roof last month from customers willing to put down a $1,000 deposit.
Tesla has not provided specific details about the demand for the solar roof, but the disclosure to the RBC analysts indicates that demand for the solar roofing tiles is comfortably in line with the company’s projections as it prepares to begin production of the roofing panels. The disclosure was made during a meeting with Deepak Ahuja, Tesla’s chief financial officer.
The company plans to start making the solar roof tiles on a pilot basis by the end of this month at its facility in Fremont, Calif. Once all the kinks are worked out there – a process that likely will take many weeks, or longer if unanticipated problems pop up – Tesla said it expects to shift production “shortly thereafter” to its Buffalo gigafactory.
Some of the job postings for high-ranking positions at the Buffalo factory indicate that candidates potentially will spend two to four months working at the pilot production site in California before production begins at the RiverBend facility.
The Buffalo factory, expected to employ 500 manufacturing workers, isn’t expected to reach full production until 2019, two years later than originally expected, as SolarCity’s deteriorating finances led to its acquisition last year by Tesla.
The company’s once-breakneck growth also has slowed, partly because of a decision to cut costs and try to stem swelling losses, and partly because of slowing growth in the residential market. The company also has been focused on the development of its new solar roofing product.
Tesla also brought in Panasonic as a partner that is investing $250 million to make solar cells that will go into the solar roofing tiles and conventional solar panels made at the Buffalo plant. Tesla, in all, has pledged to create 1,460 jobs in the Buffalo Niagara region and support the creation of 1,440 jobs at suppliers and service providers here.
Tesla estimates that the solar roof, despite a higher upfront cost of more than $38,000 for a typical home in the Buffalo Niagara region, would save homeowners $11,300 over 30 years after subsidies and incentives. Elon Musk, Tesla’s CEO, however, has admitted on Twitter that the appeal of the solar roof is lower in areas where power costs and housing values are lower.
Musk has said that production of the solar roofing tiles is expected to ramp up “very slowly” as the company gradually rolls out its sleek new roofing tiles, which from the ground look much like a conventional roof, rather than traditional solar arrays that consist of clunky solar panels attached to the top of a roof.
Tesla has said it plans to start selling the solar roof only in California at first, and then roll it out in other markets. It also initially plans to offer only two of the four roof tile designs that it ultimately intends to sell. Tesla currently offers the roof only with smooth and textured glass tiles. It plans to offer tiles in Tuscan and slate glass designs next year.
The order backlog for Tesla’s roofing tiles is similar to what happened when the company began taking orders for its more affordable Model 3 electric vehicle, selling out roughly a year’s worth of production in a matter of weeks. Tesla is gearing up to begin production of the Model 3 later this year.
It also means that homeowners who have plunked down a deposit for a solar roof, like the prospective Model 3 buyers, will have to be patient, since it could be more than a year before they’re able to replace their roof with new solar tiles.
Tesla is counting on the solar roof to become a groundbreaking product that will help its solar energy business stand out from its competition at a time when the pace of growth within the residential solar market is slowing. Tesla’s SolarCity business installed about 30 percent less solar generating capacity during the first quarter of this year, compared with a year ago, partly because the company is trying to reduce its costs and scale back its growth to weed out less profitable installations.
But it’s not just Tesla. The U.S. residential solar market is forecast to grow by only 3 percent this year, compared with 60 percent in 2015 and 19 percent last year, according to the Solar Energy Industries Association. The trade group also expects the residential market’s growth in 2018 to be at “a limited pace” as installers, including Tesla, look for ways to drive down their stubbornly high costs associated with signing up new customers.
One thing that is unlikely to affect Tesla’s solar energy markets in the near term is the Trump administration’s decision Thursday to pull out of the landmark 2015 Paris climate accord. That’s because residential solar market is largely driven by whether consumers – especially in places where electricity prices are high – can reduce their energy costs by installing solar panels, rather than a broad-based environmental policy.
“Regardless of what the president decides on the accord, we expect America’s solar industry to continue to thrive and create jobs, boost the economy and reduce greenhouse gas emissions,” the solar energy group said in a statement.
As a result, it is the 30 percent federal tax credit on new solar energy installations and mandates at the state level to encourage the development of renewable energy that have been spurring the growth of solar energy and other renewable power sources.
“We’re going a different way as the State of New York. We’re going to follow the accord,” Cuomo said Friday as he announced plans for the state to invest up to $1.6 billion in renewable energy and energy efficiency projects over the next five years.