Elon Musk unveiled the Tesla Solar Roof to much fanfare in 2016, but the concept of solar shingles that blend in seamlessly has been around for

decades.

So this is not a concept that's new.

Its reasons for lack of market traction tend to be based on the fact that it's more expensive than just a solar panel on a

roof.

Solar shingles were first patented back in the 1970s, and long-forgotten companies like AstroPower and PowerLight experimented with it in the 2000s.

In the last decade, larger organizations like Dow Chemical Company and BP Solar have tried it too.

But it never really stuck.

All of my involvement with these products right now is getting calls from either the manufacturers or the homeowners that have these products on the

roof that aren't working, and they say, "Can you, can you fix it or remove it?"

Cinnamon, who founded Silicon Valley-based solar installer Cinnamon Energy Systems, has dealt specifically with AstroPower, Dow and BP products.

But Tesla has had a rocky road too, as costs have soared and complications with the tech persist.

Now, GAF Energy is getting into the game.

It's a subsidiary of Standard Industries, a global industrial manufacturing business that's been around since the 1800s.

We are the world's largest manufacturer of roofing and waterproofing.

GAF Energy just released a shingle called Timberline Solar, which won the Best of Innovation award for Smart Cities at CES.

The design isn't as slick as Tesla's.

It's clear where the solar shingles end and the regular roof begins.

But it's the first product of its kind that can be nailed on just like a regular shingle, which GAF Energy says will make it far more accessible.

A Tesla roof can take weeks, literally weeks, to install.

This is a product that goes up in a day by a roofing crew using the same tools a roofing crew is used to using.

I think that's the game changer that we are bringing to the market, that the product is really designed from a roofing perspective.

Like similar products before, it's aimed at residential customers who want to go solar, but don't like the traditional rack mounted aesthetic.

Many experts though, say the superior aesthetics will always come at a cost.

There's still like three big challenges.

One, these roof tiles are always going to be more expensive simply because there's more parts to manufacture and more parts to assemble on

the roof. Second, they're always going to be less efficient because things that are on the roof run hot, so you're going to get less output per square

foot. And they're always going to be less reliable, because reliability is proportional to the number of wiring connections in the electronics.

But GAF Energy hopes to prove the critics wrong.

CNBC got an early look inside its new San Jose R&D and manufacturing facility to see if it will be the one to finally bring a functional and

affordable solar shingle roof to the market.

Higher costs, alongside reduced efficiency and reliability, have led to the downfall of many solar shingle companies of the past.

Unfortunately, pioneers get a lot of arrows in their back and sometimes those errors are fatal.

So AstroPower went bankrupt.

BP Solar withdrew the product from the market and got hit with a lot of lawsuits.

And Dow Powerhouse also stopped manufacturing maybe about six or seven years ago,

Even when the shingles were backed by big companies, Cinnamon says that the solar cells degraded quickly.

And because the product's wiring and connectors were inaccessibly located behind the shingles, this made it very difficult to troubleshoot problems

with the electronics.

The maintenance and the operation of the product just didn't meet the expectations.

In other words, they were supposed to last for 25 years, and maybe they only lasted for two or three years or five years before they degraded or

there were electronics problems.

Today, shingles comprise just a minuscule portion of the broader solar market.

Maybe one percent would be an optimistic estimate in the overall residential market.

Cinnamon says that when it comes to Tesla, it's too early to tell how it will fare.

There's already been plenty of stumbles though, and the Tesla Solar Roof has undergone at least three different iterations.

While the shingles started off quite small, about 14 inches by nine inches, now they're about 45 inches long and between 15 and 17 inches wide,

according to company marketing materials, likely making them simpler to install and more reliable.

Power density has also increased.

But the product remains extremely costly.

Last April, Tesla hiked prices dramatically for Solar Roof customers who had already signed contracts, calling the added costs "adjustments for

individual roof complexity." One customer, whose price shot up from $72,000 to $146,000, became the lead plaintiff in a

suit against Tesla. The company later said that it would reverse the increases.

We did find that we basically made some significant mistakes in assessing the difficulty of certain roofs.

But the complexity of roofs varies dramatically.

GAF Energy says its shingles are designed for easier installation.

The company already offers an integrated solar roof product, where the panels are a part of the roof itself, and says that it has installed over

3,000 of these since the product's launch in 2017.

Already, we've installed more solar roofs than Tesla and the next largest competitor.

So we're already the leader by far in integrated solar roofs.

GAF Energy debuted its solar shingles on January 3rd, 2022.

They're 64 by 17 inches, nearly 20 inches longer than Tesla's shingle.

Each GAF shingle has a max power output of 45 watts, whereas Tesla's latest shingles are 71.7 watts, a 22 percent power increase over

its previous iteration.

The size of the shingles is right now because it's the optimum between the cost and the ability to align them on the roof.

Of course we can do smaller panels, as small as a single cell, just the cost of that.

The electronic components for GAF's shingles are housed in front, in a wire channel that runs along the left hand side of each shingle.

The expectation is that this will make them easier to service than shingles with wiring connections buried underneath.

Currently, GAF Energy does not offer an energy storage product, though the system can be paired with existing battery storage systems from other

companies.

What really sets GAF Energy apart, it says, is its deep connection to the roofing sector.

David Winter, the Co-CEO of parent company Standard Industries, says that one out of every four residential roofs in the U.S.

comes from GAF. And that means the company has a major leg up when it comes to finding new solar customers.

The natural moment to actually put solar on a roof is that moment when you're already about to replace your roof.

It makes literally no sense to put like brand new PV on an old roof that's well into its warranty.

So we're the people that are sitting at the proverbial kitchen table with the homeowner at that moment that they need to replace their roof, where we

can introduce the idea of solar

That keeps GAF Energy's sales and marketing costs for their solar products far below the industry average.

And that's actually critically important, because according to Wood Mackenzie, customer acquisition costs normally represent about 23 percent

of the total cost of a residential solar system.

In fact, the single largest constituent cost of solar today is finding customers.

It's almost $5,000 a customer,

Even with solar shingle's checkered history, GAF Energy believes that it can convince customers to not only go solar, but to get shingles too,

without costly sales and marketing campaigns.

Again, we're part of the world's largest roofing manufacturer.

We have access to materials that typical solar companies don't have access to.

Second, we have access to roofers.

Just as the market size for roofing is larger than the market size for solar, we have a lot more people that can actually install this.

No one has ever specifically try to make a solar product that a roofer can install.

And we've done it, and our product goes on with just a nail gun.

It goes on twice as fast as typical solar.

Additionally, GAF Energy touts the fact that it assembles and partially manufactures its shingles at its facility in San Jose.

While the company still imports its PV cells from Thailand, it believes that having some manufacturing located in the U.S.

gives it a leg up.

What that allows us to do is take improvements in our product from the lab and get them instantiated in the product very, very quickly.

If you think about the alternative, or in fact the current model, if you innovate in your product, you then have to fly a team from the United

States to typically Southeast Asia to try to execute the changes on the product line.

And what you see is changes to your product take quarters and years, literally.

Whereas here, it takes hours and days.

The actual cost of the shingles remains one of the biggest questions, though.

GAF would not provide CNBC with any specific details about pricing, except to say that in many cases, getting solar shingles is about double that of

getting a new roof without solar.

Let's say in many parts of the country, you have a $15,000 cost for a roof.

Getting a solar system, adding that would be another $15,000.

Getting a solar shingle roof for $30,000 would be a far better deal than anything on the market today.

Tesla's projected cost for an average-sized 1,700 square foot Solar Roof in the Bay Area is about $40,700 before incentives kick in.

That price tag also doesn't take into account the caveat on Tesla's website, which states that a roof of this size could be subject to a price

increase of over $10,000, based on its complexity.

Since GAF is targeting customers who are already planning to get a new roof, another way to think about it is this.

The national average for a new asphalt shingle roof is about $8,500, and the average cost of a 6-kilowatt rack mounted solar array is about $16,500,

before subsidies and energy savings are taken into account.

So if a customer bought a new roof and regular solar panels independently, they could expect to pay about $25,000.

So, if GAF Energy's shingles are indeed twice as expensive as a new roof, in some cases it could be cheaper to get solar shingles than to get a new

roof plus rack mounted solar.

Customers may be wary though, as Tesla also touted its shingles as an economical option for those who needed a new roof.

But it's yet to produce the product affordably at scale.

GAF has already installed its shingles on a couple of houses so far, but again, it did not make pricing information for these homes available.

And since the systems are brand new, it remains to be seen how effectively and reliably they'll operate.

Unlike shingles of the past though, GAF claims that customers won't have to sacrifice anything in terms of efficiency.

They'll get the same amount of electricity for a given square footage area that you would with a traditional back mounted system.

Because solar shingles are flush with the roof, they get hotter than regular solar panels, and that generally reduces their efficiency.

To counteract this, GAF Energy says that it is using high efficiency cells called mono PERC cells, which perform better than traditional

monocrystalline PV cells at high temperatures.

Still, it's hard to see how efficiency could be equivalent.

Given the GAF shingle's dimensions and its 45 watt rating, it would produce, at maximum, 5.96 watts per square foot, whereas Tesla's 71.7

watt shingle would produce 13.58 watts per square foot and an average-sized 300 watt solar panel would produce about 17 watts per square

foot.

GAF says that the smaller size of its shingles as compared to traditional solar means they can be strategically placed in the sunniest areas, thereby

increasing efficiency.

Of course, this type of real world performance will be the true test, and GAF hopes to assuage customer's doubts with its 25-year warranty.

I've worked at venture-backed startups where it's like, hey, we'll put a 20-year warranty out there, and if we're not around in 20 years, who cares?

I guarantee you Standard Industries will be around in 25 years, and therefore we have to design products that last that long.

GAF Energy is already working on version 2.0 of Timberline Solar.

And moving forward, they hope to offer a wider variety of styles beyond just asphalt shingles.

The goal is that any homeowner considering putting on a roof will consider putting on a solar roof.

It's always going to be more expensive, but there are financing options, there's electricity savings.

Still, Cinnamon doesn't think that shingles will ever be mainstream, and that Musk's approach at least, is inevitably leading to customer

disappointment.

If it were just to become a high-end niche product, it could be really successful.

I think the marketing mistake that he's making is that he's trying to position it as a solution for all solar customers.

And given the reliability and durability of standard solar panels, many experts just can't imagine that there's a big market of customers willing

to pay much more for shingles.

So in my experience, cost is what drives most decisions.

I mean, you have a homeowner that's going to look at several factors, and almost every single one of them is going to come down to cost.

But GAF Energy maintains that its product will be cost-competitive, and that the superior aesthetics will draw in a significant percent of

customers.

It is my hope that maybe, I don't know, in five, ten years when you are thinking about changing your roof, you will pick solar roof because it

makes economic sense, because it's attractive and because you will have same warranty as the rest of the roof.

I think that in the immediate term, we would expect a five percent attach rate.

I think that in the intermediate term we'd get ten percent.

And ultimately, the only people that would choose not to put solar on their roof would be those where they either have heavily shaded areas or

they're in a location where they just don't get any sunlight.

Over five million new roofs are installed in the U.S.

every year. And so if one out of every four is indeed a GAF roof, a five percent attach rate means that GAF Energy expects to install somewhere in

the vicinity of 62,000 solar roofs in the very near term.

If that actually happens, it would be a huge game changer.

Because as GAF says, its current, industry-leading integrated solar roof product has been installed just over 3,000 times, a miniscule fraction of

the overall roofing market.

But in an industry where the price of solar panels dropped by nearly 90 percent in a decade, the future is anybody's guess.

All you can say about the future is that in 50 years, it's going to look completely different than now.

And so I would imagine that the solar of the future, of course has rooftop mount, probably has solar

roofs, probably does have houses that can be completely self-sustaining, right?

So I think it's just the beginning.