DowDuPont licenses solar shingles to RGS Energy

Updated — RGS Energy has acquired the rights to globally commercialize the third generation of Powerhouse brand solar roof-integrated shingles from DowDuPont Inc. for a total of $3 million plus quarterly royalties on net sales.

Two earlier versions of the energy-producing shingles, which lie inconspicuously flush with roofs, were installed on about 1,000 houses in 18 states before the former Dow Chemical Co. halted production in August 2016.

The Midland-Mich.-based company's merger with Dow Corning of Wilmington, Del., prompted a reevaluation of the solar platform and a decision to transition it to a licensing business model.

Denver-based Real Goods Solar Inc., which does business as RGS Energy, was a likely candidate. Founded in 1978, RGS bills itself as the nation's original solar company and had been the warranty service provider for Powerhouse 1.0 and 2.0 shingles since 2015. The enhanced Powerhouse 3.0 system, which is expected to receive Underwriters Laboratories certification in the first quarter of 2018, comes at an opportune time, according to RGS CEO Dennis Lacey.

About 80 percent of U.S. homes have asphalt roofs and about 5 million of those roofs need replacing every year, Lacey said, pointing to potential demand from the replace-and-remodel market in addition to new home construction during an Oct. 4 conference call.

The global market for building integrated photovoltaic products will grow at a rate of 12.2 percent annually from $2.5 billion in 2016 to $4.3 billion by 2021, Lacey said, citing BBC Research.

RGS will be ready to meet demand, he added, with a new version of Powerhouse shingles that uses traditional silicon solar cells instead of copper indium gallium selenide (CIGS) technology, which proponents say significantly reduces the cost while improving panel efficiency. The shingles also are durable and should outlast an asphalt roof, Lacey said, adding RGS will offer a 20-year warranty like Dow did for earlier generations of the product.

Powerhouse shingles will look good, perform well and be priced right, he added.

“Of course, there will be competition but we feel good about the anticipated pricing,” Lacey said. “In fact, we expect this product to be priced below other solar roof-integrated shingles currently on the market, making Powerhouse the best product available to customers from a value perspective.”

The latest shingles consist of a base assembly and electrical connector into which a solar laminate is inserted. Dow holds numerous patents covering the technology and now all are exclusively licensed to RGS.

As the licensee, RGS has agreed to make an upfront payment of $1 million followed by a milestone payment of $2 million within 30 days of UL certification and then pay running royalties of 2.5 percent of the net sales price of each licensed product every quarter.

The terms are described in an Oct. 4 filing with the U.S. Securities Exchange Commission along with some supply chain plans.

RGS says it will use third-party manufacturers and is in talks with various companies in China to produce the solar laminate. That manufacturer then would ship the component to an unnamed U.S. injection molder of the base assembly and integrated flashing system.

RGS plans to work with some businesses that previously made components for the Powerhouse brand, according to Kirk Thompson, business director for Dow Solar. After all manufacturers are in place, RGS will apply for UL certification with help from Dow's technical experts.

“Powerhouse 3.0 leverages much of the Powerhouse 2.0 design, enabling best in class installation, enhanced aesthetics and rapid certification as many structural and interconnect features are not changed,” Thompson said during the call. “We are very excited for RGS to bring back the Powerhouse technology. The award-winning Powerhouse products present the next step in residential solar PV solutions.”

Dow developed its roof shingles that double as solar panels in 2008. The product was named one of the 50 best inventions of 2009 by Time magazine. Other accolades followed, including the 2012 Breakthrough Award from Popular Mechanics.

When Dow stopped production more than a year ago, the competition reported solar shingle sales spikes of Apollo II by CertainTeed Corp. and SunTegra by Integrated Solar Technology LLC. Now there's also SolarCity, which was acquired last year by Tesla Inc., taking orders for a roof tile that captures solar energy. Installations are expected to begin by the end of the year.

Still, Thompson said Powerhouse is poised to regain market share.

“I think Powerhouse 3.0 will be a viable alternative to a significant percentage of the population,” Thompson said. “Over the previous product generations Dow has listened to the feedback it received from roofing professionals and homeowners alike. We believe 3.0 is the best Powerhouse yet and the best PV on the market.”

RGS says it will use television and other media to aggressively market the shingles as it expands the number of regional roofing companies used for installation throughout the U.S. Then, it will focus on international markets.

In addition to competition heating up, the solar industry is concerned about a potential tariff on imports of solar cells and modules into the U.S. In April, Georgia-based Suniva filed a Section 201 petition with the U.S. International Trade Commission a week after it declared bankruptcy.

Suniva said it lost more than $50 million after Asian countries flooded the market with below-cost modules and pushed prices to record lows. Suniva is asking for new tariffs on solar cells and minimum prices for imported solar modules.

The company is calling for duties of 40 cents per watt on imported cells and a floor price of 78 cents per watt on modules, according to Greentech Media, which says those prices would make America the highest-priced solar country if implemented.

Lacey said isn't clear if the Powerhouse solar laminate that will be produced in China would be penalized. However, RGS factored the potential costs into business models, he added, along with roofers' desired profit margins for selling and installing Powerhouse 3.0 systems.

“We have our supply chain lined up so we have a feel for that cost of goods sold if you will,” Lacey said. “We put all that in to our models and what popped out was an attractive return for our shareholders and when we did that analysis we did it with tariff pricing. So, if the tariff doesn't apply or go into effect, it's that much better for us.”