From one side, it means that not all current players will survive. But from other side, it means that agile and forward-thinking players not only will survive; they will be much richer and stronger. And it’s the reason why I put to article title “New business and career opportunities for bright people.”.
I read endless discussions about household generation of renewable energy with all pros and cons. The same discussions are still happening for electric cars, which are just fraction of today’s car fleet. Despite very strong cons, I believe that both technology will have great future and step by step literally take place under the Sun.
My confidence based on considerations of economical sense, individual perceptions of freedom and prestige, government policies and public opinion inclinations.
In general, there is no difference why supply/demand exists; if it’s time to make money, it’s better to figure out “how” then “why”. Anyway, let’s check most strong proses.
Economical Sense. Considering area of roof and current level of solar panels technology, there is no problem to generate two-three times more electricity then average household consumption (see the table). Theoretically, using batteries, household needs wire only for peaks and long periods with no Sun.
Today, solar energy can’t be self-sufficient mainly because of battery prices. Keeping energy for full week would cost around $50000 for li-ion battery. To avoid this investment, commonly used solution is “selling” energy overproduction to general grid and redistributing it to other customers.
Less than a year is remaining till Tesla’s GigaFactory starts producing batteries for business consumers and housing market on high scale and full capacity. Reaching this threshold in seemingly unrelated industry potentially is going to make serious effect on whole roofing business over next decade.
Let’s start from fact that Tesla has already shown some glimpses of future they want. They presented an idea of shingles directly integrated with solar panels covered by highly durable quarts glass. For people, who worked years in shingle manufacturing industry with high rate production, it looks like pipe dream of a new kid in a block. If we take current plant technology level, it is hard task to integrate solar panel to shingles and make sure that it works properly. Shingle manufacturing culture is still far from auto or electronic manufacturing. So, one can think that if such solar panel integrated shingles come to the market, it is going to be very expensive and niche product.
Such conclusion can become a costly mistake. The idea of solar shingles shows typical disruption technology treats, and it’s already possible to understand why. For last century, we had many good examples of disruption technologies including ones killing retail industry right now. All stories have one common theme: after some period, no one cares about how good and efficient previous set of technology was. It is just out of general market, period. It’s true for products, services, communications, transportation, etc. And now it’s time for energy generation and consumption. Our beloved roof is going to be next battlefield, no matter if there will be just advanced solar panels or artistically designed shingles with invisible solar panel film integrated directly into body of the product.
To follow possible scenario with roofing technology, I’d like to illustrate how disruption technology works using dynamics of car industry from 1895 to 1960 versus previous technology indicator (number of horses). Keep in mind that trucks and passenger cars had similar dynamics.
It looks that horse industry was in good shape till 1915-1920, when horse population (and usage) started quickly losing positions. From this data comparison, you can clearly see that “new” technology not replacing old one at once, but countdown was fast.
Reason for replacement was not just speed of car, it was set of truly new values. They included prestige, freedom, satisfaction, convenience and ability to use it night and day anywhere customer can get. And it totally replaced all function of horses including entertainment part. And instead of 25M horses in 1915, there was 60M passenger cars by 1960.
You can easily see common elements with many other disruptive technologies from television vs radio, smartphones vs phones and VHS cameras. From this standpoint, solar shingles considered as mixture of values do the same; they combine important construction elements with personal power generation. And, most important fact is that the product creates customer’s perception of freedom, prestige and high self-esteem.
Is it easy to predict behaviour of disruptive technologies? Can someone give warranty about size and speed of new market? Many examples show that for disruptive technology demand follows supply. We all remember “if I asked what they need, they would have told me about faster horse!”. Another example: Many year ago, AT&T got prediction that “it will be just 900k mobile phones in 2000”. It was 100x more, and relying on the survey was a reason of epic fail for one of telecom leaders.
Today, there is not so many obstacles to organize mass production of new and relatively simple product. Having financial resources, it’s matter of two-four years to build plant, run lines and stabilize quality. After that, picture of Horses vs Year will repeat itself, but much faster, probably with 5x compression. So, old generation of shingles could be marginalized before 2030 if customer buys the idea.
Roofing Industry. Challenge from Solar Panels and Cheap Battery.
With current prices for panels/batteries, the investment into solar panels makes financial sense only due to government initiatives. Typical ROI point can vary from 10 to 25 years. After start of mass production, with prices dropped by 50%, it should work without any subsidies.
Personal freedom and prestige
With rise of the idea and technology of electric car, next big idea is going to be about energetically self-sufficient household.
Considering total area of household, Sun provides much more than enough energy to cover electricity consumption, even through modern solar panels. For heating, cooling and hot water, average household can use heat pump. See for example here: https://en.wikipedia.org/wiki/Heat_pump and here http://www.hoval.com/blog/com/how-to-choose-heat-pump.
Combined with energy saving technologies such as recuperation, smart HVAC, advanced insulation and powerful battery, there is no need for external electricity and natural gas. If you directly calculate price of combined solution, you will come to something around $100k-150k. Life time of panel and heat pump is around 25 years, although battery life is much shorter. So, today, it is cheaper to stay on utilities.
But, we are talking about future. And, if we add here two electric cars with free energy for commuting, it looks that breakeven is somewhere nearby.
With customers eventually switching from traditional electricity, role of electric companies is going to change from generation to providing reserve capacity and smart distribution. How soon will it happen? All major players already invest heavily into smart grids which target distribution of electricity coming from thousands of big and tiny sources. From customer side, it will mean higher cost of getting electricity just from wire, as peak generation equipment is extremely expensive. So, on final phase, cost of electricity will force everyone to solar shingles.
Policies and fashion dictate to be green. So, advertisement, resources and initiatives are coming to renewable energy direction. Nuclear energy, coal and oil are under presser of ecological lobby. It will probably stay this way for years despite recent political changes. By the way, even current solar panels installation helps to avoid emission of up to 40 tons of CO2 for 25 years. So, for all eco-friendly folks, who is buying electric cars, solar panel is only real option to avoid burning dirty substance and to make our planet better.
Prices tendency. For prices of panels/batteries and installation, most important fact is that prices quickly go down, even without real mass production. For example, for li-ion technology it fell from $1000/kWh in 2010 to $227/kWh in 2016. For the same time, solar panels dropped price from 6.5$/W to below 4$/W for total installation price. So, making simple interpolation in time and growing scope, it’s clear that, very soon, for average household, price is not going to be obstacle.
Last, but most important question is why should shingle manufacturers care about solar tech at all? May be, panels are going to be always separate product?
Unfortunately, separate solar panel is not that natural on a roof, it causes all sorts of problems and it looks ugly on otherwise beautiful piece of architecture. So, there are and will be inventors who come with great solutions to make solar panel integral part of the roof. Once it set, there is no way back. So, solar shingle is a perfect fit for Potter’s “Threat of substitute products”.
How to start. Company should check the market, as there are already couple companies who have started. It is important to rethink competitors/partners proposals and experience and build own comprehensive vision about coming opportunities and risks. Gathering combined motivated R&D and Business team is a critical factor of success.
How to start in silo based environment. I know from my personal experience that silo environment can easily derail any initiative, prevent critical information from circulation and сhock resources when they most needed. Fortunately, Corporation can always open new company and provide it with right resources.
Next stage. If market takes off, it’ll be time to make money. Again, make sure you have strategy, best people, financial resources, patents and strong sales/marketing. The winner gets all, your business can quadruple in just several years.
Clouds. It is obvious that solar roofing will require new or at least not traditional IT infrastructure. As IT and Enterprise Architect I could explain details, but it is far beyond the scope of the article and it is not always free information.
Outcome. The result of timely technological switch to solar roofing can provide a lot of room for company growth, possibly dozens of % per year. Missing the opportunity can lead to serious problems including losing market share. Let’s take conservative estimate of potential yearly market, it is roughly 1% of US/Canada households and $10k solar shingle price per roof. It gives $12B/year, which is comparable with total shingles market today.
Strategic benefit. It’s much easier to sell to roofing contractor products which generate new revenue flow, for example 5000$ per roof. Imagine competitors trying to get deal using traditional cost savings rhetoric.
Risks. As any investment, initiative of building solar shingle product can be costly, and if improperly managed it can fail because company just can’t make it or because market is too competitive or initially too small. I worked as IT Manager for investment company which rebuilt plants and implemented new technology to re-sale the business later with good margin. So, from that experience, I can roughly estimate lunching of new plant or rebuilding old plant for new product will cost not less than $ 200M. So, it’s already huge investment, but it’s adequate to potential market of 12B/year.
For real estimate of ROI, there should be formal project with engineering/consulting partners. And no doubts, timing is extremely important; missing window of opportunity by couple years can lead to losing any chances to have profit or even be presented on market.
Another important concern is next. If North American companies are too slow with decisions and creativity, all solar shingles inevitably will come from oversees with lowest possible price. Considering latest tendency in China, they have plans to develop full scale middle class by 2035 and switch to electric cars and clean energy instead coal. For them, it’s literally question of life and death. I recently spoke to fellow IT consultant who moved from Beijing to Toronto just because she tired to wear mask for several months in row.
All together, it means high probability of appearing standard solar shingles with cheap battery in most residences in China. In worst case scenario, it could be the end of North America roofing industry. NA market just will be flooded with solar shingles from oversees with price lower than local asphalt shingles.
Here is some links, just in case if someone wants to repeat calculations:
(1) https://electrek.co/2017/01/30/electric-vehicle-battery-cost-dropped-80-6-years-227kwh-tesla-190kwh/
(2) https://blogs.scientificamerican.com/plugged-in/the-price-of-solar-is-declining-to-unprecedented-lows/
(3) http://www.theecoexperts.co.uk/likely-kwh-sq-ft-solar-panels
(4) http://www.lightsonsolar.com/solar-basics-kw-and-kwh/
(5) https://www.roofingcalc.com/roof-replacement-cost/