Solar Roof Is Dead On Arrival – Yet Another Reason Why Tesla’s Merger With SolarCity Makes No Sense

Tesla (NASDAQ:TSLA) in an unusual presentation Friday evening, put together a press event to discuss a new product that the Company will enable with SolarCity (NASDAQ:SCTY).

By the end of the presentation, details on cost, performance, or any other specifications were nowhere to be found – other than that the solar shingles look beautiful. Per the company, the product will not be available till next summer. With almost a year to go for purported availability and no specs to offer, why do the product unveil now?

Make no mistake. Solar Roof was a dog and pony show to sell Tesla’s merger with SolarCity to fans and investors.

In spite of the lack of details, what was disclosed was sufficient to conclude that this product is going nowhere.

Firstly, we need to point out that solar shingles is not a new concept. A Google image search will show many different solar shingles including some aesthetically pleasing options. However, none of these have been successful and many companies pitching these products have gone bankrupt.

While there are many reasons for the lack of success, the most important reasons are that the cost of these products was high and the performance was low. These products did not make any economic sense in spite of their supposed aesthetic advantages. We discuss later in this article why the solar roof solution has no practical merit.

Coming back to Tesla, just about the only thing that is going for the Solar Roof concept, and the only thing that Mr. Musk emphasized, is the look of the products (4 different varieties – see image below).

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The High Cost of Rooftop Solar Subsidies

Section VII: Conclusion

Current solar subsidies and net metering schemes through U.S. states continue to draw capital away from its most efficient use, often at the benefit of U.S. solar panel producers and installation companies, such as SolarCity, but at the expense of electricity consumers.

The costs associated with facilitating these distortions are numerous. Given that solar customers are often paid the retail rate for excess electricity produced, and do not share the burden of maintenance costs, electrical grids are finding they cannot keep up with the current dichotomy they are facing of rising costs and a decreasing customer base. Thus, many studies conducted by states have found evidence of cross-subsidization between non-solar customers, who are often less-affluent, and solar customers, who are often more-affluent.

Proponents of government assistance of solar energy have attempted to highlight job growth as a means to justify the immense support needed by the solar industry in order to stay afloat. These job growth estimates not only employ skewed survey data, but also fail to take into account many of the dynamic effects that result from the government’s intervention, such as the consequences of draining tax revenues and foregone investments, increased cost of energy utilizing a greater share of consumers’ budgets, jobs foregone by investing in solar energy production, and jobs created in the base case scenario if solar energy were not subsidized in its current form.

States should seek to restructure their net metering schemes and subsidies in order to promote the most efficient use of taxpayer dollars and normalize investments based on the fundamentals of different electricity generating methods. While utility-scale solar has proven more efficient than residential solar installations, both continue to lag behind traditional electricity generation methods that are able to generate greater output per dollar.

Any future technological development of solar energy alternatives relies heavily on whether the government will be able to take a step back and allow the market to distribute capital efficiently, thereby allowing the most competitive electricity options to survive and facilitate effective progress of solar power and other electricity options.

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