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The Beginning Of The End For U.S. Utilities? | OilPrice.com

This is very interesting. The authors suggest that utility rates may rise 5% to 6%. This is in spite of low fuel cost. Essentially there has been a tremendous build up of capex coupled with little growth in demand for electricity, and these build in rate growth well in excess of inflation.

Based on projected business-as-usual hefty utility capital expenditure programs, it is not difficult to conclude that central station electricity costs in the U.S. will continue to rise faster than the rate of inflation (fuel costs aside). Given not just the introduction, but more importantly the acceptance of new distributed power generation technologies with declining cost structures, these price increases will make the franchise owning, incumbent utilities that continue to offer a commodity product at an ever increasing price less competitive in the future.

It's important to remember that fuel prices are not a big driver of the 5%÷ rate increases. This means that decreasing fuel prices cannot make utility power more affordable. It looks like residential solar may be down this year, but utilities will need to raise rates soon. This appears favorable for Solar Roofs and other residential solar in the coming years.
 

The author makes a fundamental error at the end. AC electricity is not a commodity, it is a service.

to treat AC electricity as a commodity is to invite, ahh issues

on another spring note
upload_2017-5-19_14-22-3.png


https://www.caiso.com/Documents/Wind_SolarReal-TimeDispatchCurtailmentReportApr26_2017.pdf
 
That question should be revised to read, how much does it cost compared to Solar + replacing your existing roof. If you are looking to upgrade from Asphalt, how much do expect the value of your home to up because you tore off a crappy roof and put on a super sick tile roof. I dont know why I cant get anyone to see the cost is somewhat mitigated by the additional value in much the same way a kitchen remodel does. One major different, you dont have to do a kitchen remodel again in 25 years, but you will need to replace your asphalt roof and it will cost much more then it does today.

Thank you for pointing out that Tesla Solar Roof doesn't really compete with asphalt composition. One economical product it does compete with, however is concrete tiles with conventional solar panels. Concrete tiles will last at least 50 years at a cost of $300 to $500 per square installed. Tesla inactive tiles cost $1100 per square.

A 5kW solar array with top of the line Panasonic 330W panels costs around $20,000 installed before tax credit, $13,000 net. That would be 15 panels comprising 1440 cells over 270sq ft area; 96 5"x5" cells per 18 sq ft panel, mounted at least 4" above the roof deck in order to get enough air flow to minimize operating temperature.

Tesla solar tiles cost $42 per sq ft, with two 6'x6' Panasonic cells per tile, so 0.5 sq ft of cell area. It would take 540 Tesla flat tiles to equal the cell square footage of those 15 Panasonic panels. 7" x 14" exposed surface of tesla tiles = 0.68 sq ft, so it takes 540/.68 = 794 sq ft of Tesla tiles for same productive area. But, since the micro louvers that make Tesla tiles so beautiful are estimated to reduce efficiency by 10%, it would take 1.11 times as much cell area of Tesla tiles to produce the same amount of power; 794 x 1.11 = 882 sq ft = $37000 worth of active Tesla smooth tiles (including installation, inverter, etc.) to equal a $20,000 array of 15 Panasonic panels.

If this 5kW installation is on a new construction 2400 sq ft roof, then it would take a further 1518 sq ft of inert Tesla tiles at a cost of $11 or $16700 more to complete the roof, for a grand total of $53,700. The same new construction roof with premium concrete tile, at $500 per square installed, costs $12,000 + $20,000 solar array; total $32,000. After 30% tax credit, that would be $42,600 vs $26,000; saving $16,600. If the front of your house faces south, pay the extra $17k to avoid seeing ugly black panels every time you come home. If you can use your back roof surfaces for solar, go with panels and save $17k.

Since we are comparing Panasonic panels rated at 91% performance after 25 years, and since Tesla tiles will use Panasonic top quality cells, lifetimes should be comparable. Extending to 50 years, both should still be producing at 85% capacity or better (There is 3% loss in the first year, then straight line diminution after that to 91%, so we could assume a further 6% loss in 25 additional years).

BTW, those who complained that a 30 year production guarantee on a lifetime of "infinity" meant an expensive dead roof after that, should remember that electronic products often far exceed warranties. Tesla Tiles could still be producing 73% of rated output after a century.
 
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Thank you for pointing out that Tesla Solar Roof doesn't really compete with asphalt composition. One economical product it does compete with, however is concrete tiles with conventional solar panels. Concrete tiles will last at least 50 years at a cost of $300 to $500 per square installed. Tesla inactive tiles cost $1100 per square.

A 5kW solar array with top of the line Panasonic 330W panels costs around $20,000 installed before tax credit, $13,000 net. That would be 15 panels comprising 1440 cells over 270sq ft area; 96 5"x5" cells per 18 sq ft panel, mounted at least 4" above the roof deck in order to get enough air flow to minimize operating temperature.

Tesla solar tiles cost $42 per sq ft, with two 6'x6' Panasonic cells per tile, so 0.5 sq ft of cell area. It would take 540 Tesla flat tiles to equal the cell square footage of those 15 Panasonic panels. 7" x 14" exposed surface of tesla tiles = 0.68 sq ft, so it takes 540/.68 = 794 sq ft of Tesla tiles for same productive area. But, since the micro louvers that make Tesla tiles so beautiful are estimated to reduce efficiency by 10%, it would take 1.11 times as much cell area of Tesla tiles to produce the same amount of power; 794 x 1.11 = 882 sq ft = $37000 worth of active Tesla smooth tiles (including installation, inverter, etc.) to equal a $20,000 array of 15 Panasonic panels.

If this 5kW installation is on a new construction 2400 sq ft roof, then it would take a further 1518 sq ft of inert Tesla tiles at a cost of $11 or $16700 more to complete the roof, for a grand total of $53,700. The same new construction roof with premium concrete tile, at $500 per square installed, costs $12,000 + $20,000 solar array; total $32,000. After 30% tax credit, that would be $42,600 vs $26,000; saving $16,600. If the front of your house faces south, pay the extra $17k to avoid seeing ugly black panels every time you come home. If you can use your back roof surfaces for solar, go with panels and save $17k.

Since we are comparing Panasonic panels rated at 91% performance after 25 years, and since Tesla tiles will use Panasonic top quality cells, lifetimes should be comparable. Extending to 50 years, both should still be producing at 85% capacity or better (There is 3% loss in the first year, then straight line diminution after that to 91%, so we could assume a further 6% loss in 25 additional years).

BTW, those who complained that a 30 year production guarantee on a lifetime of "infinity" meant an expensive dead roof after that, should remember that electronic products often far exceed warranties. Tesla Tiles could still be producing 73% of rated output after a century.

I honestly never said that it was not completive with asphalt. Just depends on your situation. My roof is asphalt and if it was even close to being end of life, I would probably hold out for the solar roof. This is only because my house and neighborhood can support a house with a $50,000 roof with $20,000 more for the solar component. It's not competitive with asphalt in most of the country because the average home price on America is ~$220k, so owners just can't justify 1/4 of the homes value on the roof.

What it comes down to is $11 /sq.ft. is very economical for a tile or slate roof. Add solar and $37 per sq.ft. for the active part of the roof is expensive but in some ways it's the only solution, like houses that face south or like my roof where my south facing area is to small for 100% if my demand. If the roof was available today and being installed,I would certainly have considered it and paid a premium to upgrade my roof from asphalt. The key for me would be that the value of my home would go up almost in perfect parity with what I am spending. I looked at doing my basement, it would have cost $20k and only added $10-15k in value. As it stands, solar will add $25k and probably cost me nothing out of pocket after 5-8 years. But that value will go down over 25 years as the cells age.

Solar roof doesn't have to be for everyone because Tesla already sells solar. Solar roof will help sell batteries and help sell solar in places where people have nicer roofs they don't want to cover up. There are a lot of commercial properties that would fit as well and new construction. If they can capture 10% of the 5 million new roofs, that would be a game changer for a solar company and sell a lot of batteries in places with no net metering.
 
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My understanding is that Solar Roof efficiency is slightly lower than panels due to coating to make solar tiles indistinguishable from the rest when viewed from the street.

Some estimate about a 10% reduction in efficiency penalty for the micro louver layer that makes the tiles look so good from street level, a small price to pay to get rid of the ugliness of conventional panels, IMO.

I wonder, though, how much of an efficiency penalty there will be for mounting tiles directly to the roof deck? Even if mounted on battens, there would be no 4" to 6" gap with free air flow beneath them, as with conventional panels, to help reduce heat build-up, that reduces solar panel output.
 
RoofCalc.org - Roofing Prices Calculator

This is a nice tool for estimating cost of conventional roofs. You can see that there are many issues that can impact the cost per square:
Roof slope - higher slope increases cost, flat is also higher cost
Roof complexity - increases cost
Tear-off - number of layers to remove increases cost, new roof no cost
Number of Levels - increases cost
Roofing material - durability costs more
Region - Pacific highest, mid-Atlantic to New England above national average

So one of the basic problems we have in comparing Tesla's $1100 per square (100 square feet) cost is that it is a national price that covers full cost of installation over all the variables above (except roofing material). So to quote such a broad national price, Tesla needs to consider worse case cost scenario and regional concentrations. So a very costly scenario roof in California can very easily can cost well in excess of $1100 per square. Just play with the pricing tool till you see it.

Tesla may well need to give detail bid prices that fairly adjusts for all these variable that drive costs. Certainly they will need separate pricing for new roofs to work with developers and contractors. If they fail to have appropriate adjustments in pricing, they will be disadvantaged in certain regions and for simpler roof. Imagine missing out on new roofs because you have a inflexible pricing scheme that includes the cost of removing an old roof. Imagine missing out on business in Texas because you are priced for California. A national pricing may be fine for a simple web estimator to get people to make deposit, but when it comes time to writing contracts for actual roofs a more detailed pricing scheme may be warranted.

As an investor, I think it is important to understand that because of the variability in bidding roofs, Telsa bears will always be able to call up examples where some local roofer is cheaper than Tesla's national pricing. It will be equally true that some Tesla bull will also be able to come up with examples were local bids are higher than the national pricing. Such anecdote swapping is just noise and not terribly helpful for evaluating Tesla's prospects. This is also true for rooftop solar as well. You can always find competitor bids that are lower and higher than is typical for a given installer. So Tesla must decide what segments it wants to target and develop suitable pricing for those segments. Ultimately each homeowner or home developer will make a very specific choice among competing bids for a given roof. What is necessary at this point is that Tesla's combined roof and solar pricing is within range of competition. There is absolutely no need to be to low cost competitor for all roofs. If that were the case, Tesla would be leaving far too much money on the table! They simply need to be within range of competition, and this will be enough for those who value the aesthetics, brand, convenience, integration, etc. to choose Tesla, even at a premium to other bids. Moreover, Tesla solar roofs could be supply constrained for many years. So it should be priced as a premium roof to return the most gross profit per limited supply.
 
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Thank you for pointing out that Tesla Solar Roof doesn't really compete with asphalt composition. One economical product it does compete with, however is concrete tiles with conventional solar panels. Concrete tiles will last at least 50 years at a cost of $300 to $500 per square installed. Tesla inactive tiles cost $1100 per square.

A 5kW solar array with top of the line Panasonic 330W panels costs around $20,000 installed before tax credit, $13,000 net. That would be 15 panels comprising 1440 cells over 270sq ft area; 96 5"x5" cells per 18 sq ft panel, mounted at least 4" above the roof deck in order to get enough air flow to minimize operating temperature.

Tesla solar tiles cost $42 per sq ft, with two 6'x6' Panasonic cells per tile, so 0.5 sq ft of cell area. It would take 540 Tesla flat tiles to equal the cell square footage of those 15 Panasonic panels. 7" x 14" exposed surface of tesla tiles = 0.68 sq ft, so it takes 540/.68 = 794 sq ft of Tesla tiles for same productive area. But, since the micro louvers that make Tesla tiles so beautiful are estimated to reduce efficiency by 10%, it would take 1.11 times as much cell area of Tesla tiles to produce the same amount of power; 794 x 1.11 = 882 sq ft = $37000 worth of active Tesla smooth tiles (including installation, inverter, etc.) to equal a $20,000 array of 15 Panasonic panels.

If this 5kW installation is on a new construction 2400 sq ft roof, then it would take a further 1518 sq ft of inert Tesla tiles at a cost of $11 or $16,700 more to complete the roof, for a grand total of $53,700. The same new construction roof with premium concrete tile, at $500 per square installed, costs $12,000 + $20,000 solar array; total $32,000. After 30% tax credit, that would be $42,600 vs $26,000; saving $16,600. If the front of your house faces south, pay the extra $17k to avoid seeing ugly black panels every time you come home. If you can use your back roof surfaces for solar, go with panels and save $17k.

Since we are comparing Panasonic panels rated at 91% performance after 25 years, and since Tesla tiles will use Panasonic top quality cells, lifetimes should be comparable. Extending to 50 years, both should still be producing at 85% capacity or better (There is 3% loss in the first year, then straight line diminution after that to 91%, so we could assume a further 6% loss in 25 additional years).

BTW, those who complained that a 30 year production guarantee on a lifetime of "infinity" meant an expensive dead roof after that, should remember that electronic products often far exceed warranties. Tesla Tiles could still be producing 73% of rated output after a century.

Wow that's for the GREAT info. We've been considering a 6.3kW solar system using 19 Panasonic 330W high efficiency panels on our size limited Spanish clay tile sunny SoCal south facing roof... and have been anxiously waiting for Tesla Solar to give us answers so we could decide whether to wait for the Spanish tile Solar Roof or go ahead with the definitely uglier conventional solar panels.

Since our annual SCE electric bill is only $1,500 because we save ~ $450 utilizing SCE's Summer Discount Plan adding solar has a long R.O.I. and would require tearing off 1/2 of our Spanish clay tile roof... and probably a main service panel upgrade. Because of this we've decided to hold off solar decision until Tesla has pricing on their Spanish clay tile Solar Roof.
 
Wow that's for the GREAT info. We've been considering a 6.3kW solar system using 19 Panasonic 330W high efficiency panels on our size limited Spanish clay tile sunny SoCal south facing roof... and have been anxiously waiting for Tesla Solar to give us answers so we could decide whether to wait for the Spanish tile Solar Roof or go ahead with the definitely uglier conventional solar panels.

Since our annual SCE electric bill is only $1,500 because we save ~ $450 utilizing SCE's Summer Discount Plan adding solar has a long R.O.I. and would require tearing off 1/2 of our Spanish clay tile roof... and probably a main service panel upgrade. Because of this we've decided to hold off solar decision until Tesla has pricing on their Spanish clay tile Solar Roof.

One other thing to consider is that the Tuscan Tile version appears to have only half the active area of other tiles because the PV cell is in the flat portion, not the curved section. That means that it would take twice as many installed square feet of Tuscan tile to produce the same amount of electricity as any of the three flat versions.

As to that long ROI, I realized that for people who would take money out of savings or equities investments to pay for PV, it is instructive to look at it as an alternative investment. If I spend $14k (after tax credit) on a 5 kW solar system, and it saves me $960 annually on my electric bill, then that alternative investment will earn me 6.85% - tax free. At 35% combined Federal and state income tax rate, that money would have to return 10.55% before taxes to equal the ROI of the solar. The only drawback is that it is as illiquid an investment as your house.
 
Wow that's for the GREAT info. We've been considering a 6.3kW solar system using 19 Panasonic 330W high efficiency panels on our size limited Spanish clay tile sunny SoCal south facing roof... and have been anxiously waiting for Tesla Solar to give us answers so we could decide whether to wait for the Spanish tile Solar Roof or go ahead with the definitely uglier conventional solar panels.

Since our annual SCE electric bill is only $1,500 because we save ~ $450 utilizing SCE's Summer Discount Plan adding solar has a long R.O.I. and would require tearing off 1/2 of our Spanish clay tile roof... and probably a main service panel upgrade. Because of this we've decided to hold off solar decision until Tesla has pricing on their Spanish clay tile Solar Roof.
BTW, Broker Don, assuming you are in real estate, can you help the rest of us to evaluate the value at sale of solar power? I've seen the often cited study by Laurence Berkeley National Lab, but its results seem to have been derived from sales in silicon valley, where environmentalist values are arguably more prevalent than elsewhere.

What are you seeing in Orange County?

What do appraisers say?
 
BTW, Broker Don, assuming you are in real estate, can you help the rest of us to evaluate the value at sale of solar power? I've seen the often cited study by Laurence Berkeley National Lab, but its results seem to have been derived from sales in silicon valley, where environmentalist values are arguably more prevalent than elsewhere.

What are you seeing in Orange County?

What do appraisers say?

Great question... but my company (Ashwill Associates Commercial Real Estate) and I only sell commercial real estate (industrial, office & retail buildings & land). We've only seen a few commercial properties with solar so not enough to give a definitive opinion.

Ashwill email logo SMALL.jpg


There's no question solar will be a perceived value to some buyers, especially if their eco minded of can see the history of significantly reduced electric bills. The problem is getting buyers to understand and agree on what value solar add to the sales price.

However some buyers, especially high end homes, will probably be put off by conventional solar panels if they negatively affect the curb appeal. We've considered adding conventional solar panels to our Newport Coast home but only on the portion of our roof that most buyers and our neighbors wouldn't see. Tesla's Spanish clay tile look alike Solar Roof is the preferred option... so we're waiting until pricing & this model of the Solar Roof is available.

Sorry I couldn't provide a better answer. Commercial and residential real estate are very different markets... Which is why 100% of the top real estate agents in each discipline specialize on one or the other.
 
Great question... but my company (Ashwill Associates Commercial Real Estate) and I only sell commercial real estate (industrial, office & retail buildings & land). We've only seen a few commercial properties with solar so not enough to give a definitive opinion.

View attachment 227735

There's no question solar will be a perceived value to some buyers, especially if their eco minded of can see the history of significantly reduced electric bills. The problem is getting buyers to understand and agree on what value solar add to the sales price.

However some buyers, especially high end homes, will probably be put off by conventional solar panels if they negatively affect the curb appeal. We've considered adding conventional solar panels to our Newport Coast home but only on the portion of our roof that most buyers and our neighbors wouldn't see. Tesla's Spanish clay tile look alike Solar Roof is the preferred option... so we're waiting until pricing & this model of the Solar Roof is available.

Sorry I couldn't provide a better answer. Commercial and residential real estate are very different markets... Which is why 100% of the top real estate agents in each discipline specialize on one or the other.
I just had a conversation about solar value-add with two residential real estate appraisers in SoCal. I was stunned by their answers.

Their approach is the epitome of laziness. Simply put, they just arbitrarily add $10,000 to the value of a home with solar.

I asked how they arrive at that, since solar arrays have all different capacities, therefor value. "Oh, that's too much work to figure out. We just add $10,000 to the home value." "We will look at the original cost, but never appraise for more than 30% of cost because when you look at comps, no one is paying that much more for the same house with solar."

Now there is classic circular logic. Buyers don't pay as much for solar as it may be worth, so these two appraisers don't appraise higher. Do you suppose buyers won't pay more because appraisers don't appraise more and so the banks won't lend more? If appraisers won't bother to plug power production into a spread sheet to arrive at a proper value because "that's too much trouble", then sellers cannot get what their solar is worth.
 
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I just had a conversation about solar value-add with two residential real estate appraisers in SoCal. I was stunned by their answers.

Their approach is the epitome of laziness. Simply put, they just arbitrarily add $10,000 to the value of a home with solar.

I asked how they arrive at that, since solar arrays have all different capacities, therefor value. "Oh, that's too much work to figure out. We just add $10,000 to the home value." "We will look at the original cost, but never appraise for more than 30% of cost because when you look at comps, no one is paying that much more for the same house with solar."

Now there is classic circular logic. Buyers don't pay as much for solar as it may be worth, so these two appraisers don't appraise higher. Do you suppose buyers won't pay more because appraisers don't appraise more and so the banks won't lend more? If appraisers won't bother to plug power production into a spread sheet to arrive at a proper value because "that's too much trouble", then sellers cannot get what their solar is worth.

As an industrial real estate broker, we see seller's improvements not being worth what they paid for them all the time on property... Especially additional office space which is valuable to some buyers and a liability that must be removed for others. Same goes for LED lighting upgrades, “Cool-Roof” systems, adding skylights, electrical main service panel upgrades, etc. Buyers like these upgrades but won't give them anywhere near the actual cost of the improvements.

Solar SHOULD increase value more IF buyer's could understand their VALUE. A simple approach I'd use as a selling broker would be to "capitalize" the electric bill "savings" the same way appraisers "capitalize" rent in an "income approach" appraisal:

EXAMPLE for a 6kWh solar system quote we received recently:

$200 / month savings X 12 months / 10% capitalization rate = $24,000

The only problem with this is VERY few buyers understand capitalization rate ("cap rate")... and will argue a high "cap rate" for solar since it has a limited life span which will lower the value. Investment property cap rates are currently ~ 5% in our super-heated low inventory SoCal commercial (non owner occupied residential) real estate market.

However the appraisers are correct in valuing all improvements, including solar, based on what BUYERS will pay for them, not cost. The harsh reality is Cost has little or no relation to resale Value.

Tesla's Solar Roof will almost assuredly garner higher valuation from buyers since it will look so much better... and anything Tesla is cool now. However it will probably take a years of resales of home with Tesla Solar Roofs to have appraisers adjust Tesla Solar Roof resales accordingly. It won't just happen overnight.

Just my professional opinion after selling industrial buildings in Orange County & Corona for 36 years.
 
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Tesla's Solar Roof will almost assuredly garner higher valuation from buyers since it will look so much better... and anything Tesla is cool now. However it will probably take a years of resales of home with Tesla Solar Roofs to have appraisers adjust Tesla Solar Roof resales accordingly. It won't just happen overnight.

This is two fold actually. The Solar roof will appreciate with the value of home over time. You dont see this if you just look out 5 years, but if you look out say 20 years, the roof value is equal to the cost to replace and the likelyhood it will need to be replaced by the new owner. Its a big part of an appraisal and even insurance, how old is the roof. If a roof lasts 100 years, the cost to replace it in 100 years is much higher then the original cost. A $50,000 solar roof will cost $100,000 in 2035 and $200,000 in 2117. I know these time frames are crazy but my point is that an asphalt roof in 25 years is worth -$20,000 because it needs to be replaced with a $20k roof, including inflation. That same roof as solar tiles would actually add $50,000 to the value because the roof only part does not need to be replaced for another 75 years. My guess is that the solar tiles will be very easy to upgrade over time, say every 30-35 years. This is something that will be captured in the appraisal because it really does matter how much life the roof has left on it when you buy a home. Aesthetics mater as well, so imagine the person buying your house with awesome Solar Tiles that still has 70 Years of life left on the inactive tiles and probably still generates electricity at 75%+ of the original spec?
 
Some estimate about a 10% reduction in efficiency penalty for the micro louver layer that makes the tiles look so good from street level, a small price to pay to get rid of the ugliness of conventional panels, IMO.

I wonder, though, how much of an efficiency penalty there will be for mounting tiles directly to the roof deck? Even if mounted on battens, there would be no 4" to 6" gap with free air flow beneath them, as with conventional panels, to help reduce heat build-up, that reduces solar panel output.

Any thoughts about: Forward Labs' new solar roof is 33% cheaper than Tesla's - and it can be installed in half the time ?
 
This is two fold actually. The Solar roof will appreciate with the value of home over time. You dont see this if you just look out 5 years.....

you're joking right?

over time the value of any solar diminishes greatly. A 1kW roof once was $8k now can be replaced by a 5kW for $3k . (Aus figures)

same will happen for solar tiles, a $50k solar roof will do the work of 'tomorrow's' $10k commodity solar roof. and will be valued the same way. Kinda like kitchen appliances.

add to that, the tsunami of pain that utility solar will bring to all mid day energy suppliers (nuclear, coal, residential solar).
Curtailment is no longer a theoretical construct, it has arrived.
https://www.caiso.com/Documents/Wind_SolarReal-TimeDispatchCurtailmentReportApr26_2017.pdf