SolarCity Buys Solar Maker, Plans Massive Factory

on June 18, 2014 at 10:00 AM

Aleo Produces Solar Panels

Elon Musk’s decision last week to invite other car manufacturers to use Tesla Motors’ technology was bold. But the Tesla CEO, putting on his SolarCity chairman’s hat and working with company leadership partners Lyndon and Peter Rive, might have surpassed that move on Tuesday.

The trio announced that SolarCity – heretofore a solar power financier/installer – would buy solar panel manufacturing startup Silevo, scale it up to massive production in upstate New York, drive the cost of unsubsidized solar below the cost of grid power, and take over the world.

OK, maybe not take over the world – but SolarCity’s ambition here is big. They’re talking about gearing up for “mass adoption of solar.” More tangibly, they’re talking about a factory capable of producing 1 gigawatt of solar panels just a few years from now.

That would make it among the world’s largest, but the man who coined the phrase “Gigafactory” for Tesla battery manufacturing is actually eying solar factories “bigger than that, on the order of 10 gigawatts.”

The acquisition cost SolarCity $200 million in stock straightaway, with another $150 million possible if performance targets are hit. SolarCity’s stock price soared more than 17 percent on the day, as investors seemingly accepted as a given that Silevo, which has won backing from venture capitalists and the state of New York, can smoothly build its production capacity (now at a tiny 32 megawatts) and reap the benefits of economies of scale.

The strategy makes theoretical sense – scale is vital to making solar manufacturing economical. But Silevo’s “Triex” technology is relatively untested, and many a solar manufacturer with promising tech has stumbled in its pursuit of scale.

And, anyway, isn’t there a solar glut?

Yes, though not as much as there used to be. In any case, SolarCity’s point is that there aren’t enough of the right kind of panels, the kind that the company believes can move solar from fast growth to hyper-speed growth.

“We’re seeing high volume production of relatively basic panels but not high volume production of advanced panels,” Musk said in a conference call with investors and media. “In order to really have dramatic impact on solar … in order to have solar power compete on an unsubsidized basis with the grid, with fossil fuel energy coming from the grid, it’s critical that you have high efficiency solar panels at a total installed cost which is as low as possible.”

Other companies (First Solar, SunPower) are vertically integrated, but not in the way that SolarCity aims to be – not with its leadership in marketing and financing for the non-utility-scale market.

Other companies also make high-efficiency panels (SunPower again). But SolarCity clearly believes that Silevo’s “tunneling layer” technology will give it comparable if not better efficiency, at 24 percent, while a claimed “simple” manufacturing process will result in costs that could beat even standard panels.

Higher efficiency will also translate into lower costs elsewhere: SolarCity said in a presentation [PDF] that a 6-kilowatt system would use 18 340-watt Silevo panels instead of 24 250W standard panels, would take up less space, and would require less money for installation/labor, balance of system and mounting hardware.

Add it all up, Musk said, and “demand grows exponentially as the price drops.”