Since Elon Musk shared his dream to power every home with solar energy, critics have been voicing their opinions about how viable the goal is. Some have cited the likely burden of the initial cost of installing a solar panel roof as being too big to bear for most people, thus making the project a pipedream.
Over the past several years, however, SolarCity, the company behind the project, which is now part of Tesla Inc. (TSLA, Financial), has made considerable progress. Therefore, the dream that seemed too big to achieve is finally becoming a realistic project. Just this past August, the company announced the first tiles had been fitted onto houses and are generating electricity.
The roofing solar panels are designed just like any other tile and are equipped with the required technology to capture sunlight and convert it into electric energy. The initial assumptions and estimations by analysts projected the tiles would be very expensive to install.
Following the company’s announcement of the first installations and the estimated price per square foot, however, some analysts have come up with interesting theories that suggest, in the long run, homeowners could be essentially be spending less than what it would have cost them for normal roofing tiles.
According to a report published by Inhabitat, homeowners that invest in Tesla’s solar panel roofing tiles could end up saving 20% on what they would have spent on normal tiles. Most of these savings will not be realized at the time of installation, however. Homeowners will realize a huge chunk of savings through tax advantages as well as reduced costs of energy consumption in the long term.
To compete with traditional roofing tiles, Tesla was posed with the challenge of pricing its tiles at under $24.50 per square foot. The company did even better, pricing tiles at an estimated $21.85 per square foot according to the Consumer Report. When you factor in government rebates and incentives, the deal becomes even more compelling than traditional roofing tiles in the eyes of homeowners.
This has captured the attention of various commercial property management companies. While initially not part of Musk’s dream of a solar-powered world, commercial property developers and managers are beginning to consider tweaking their energy supply sources to include clean energy.
Unlike household properties, commercial properties will find it hard to replace the entirety of their power supply with solar. Nonetheless, reports indicate that by incorporating solar panel roofs, they can save as much as 20% on energy costs by powering some operations of an office building with solar energy.
One of the early adopters of this new roofing technology is Cincinatti-based real estate company, Grandin Properties, which late last year indicated it was “investing more than $600,000 to install rooftop solar panels, a new roof, and structural improvements.” It was expecting to produce about 61,000 kilowhatts per year from the new project.
Grandin Properties is not the only property management company looking to adopt clean energy sources for subsidiary power supply in its properties. There is a national campaign to use 100% clean energy in the U.S., which includes commercial properties. There are already tremendous developments in some states, such as Colorado, which has set its sights on achieving a 100% clean energy target by 2040.
Essentially,Tesla should benefit from Colorado residents embracing clean energy in their homes. But again, this is not only restricted to individual houses. To achieve 100% renewable energy, commercial properties, including offices, industrial plants and shopping malls, will have to answer the same call. This is probably why some people are a little skeptical about ever achieving this goal.
As such, it is correct to say that in the long run, Tesla might be able to capitalize on opportunities emanating from the commercial property market with its solar panel roof tiles. This increases the company’s addressable market when added to the core target market, which is residential property.
Conclusion
Musk’s dream of a solar-powered world is no longer as huge and unrealistic as it may have initially been perceived. Following the first installations in August and a price that is competitive with that of normal roofing tiles, everything now appears to be within reach and makes business sense.
Disclosure: I have no positions in stocks mentioned in this article.
