You’ve surely heard about Elon Musk’s Gigafactory, which could be game-changing for inexpensive batteries. Now he’s bringing the concept to SolarCity (Nasdaq: SCTY), which he also chairs.
SolarCity announced that it wants to "achieve a breakthrough in the cost of solar power" and thus it too is building a Gigafactory. The top solar installer in the US – installing almost a third of all residential solar systems – will now also be a manufacturer, with more than 1 gigawatt of capacity – one of the largest solar panel production plants in the world.
And that’s just the beginning – they plan to build one or more significantly larger plants in the following years. The long term goal is to be involved in every aspect of the solar business.
It’s an interesting move because solar manufacturing has been about the worst place to be for the last five years or so because of intense competition, razor-thin margins and over-supply.
SolarCity explains their decision this way: "We are not trying to address the lay of the land today, where there are indeed too many suppliers, most of whom produce relatively low photonic efficiency solar cells at uncompelling costs, but how we see the future developing. Without decisive action to lay the groundwork today, the massive volume of affordable, high efficiency panels needed for unsubsidized solar power to outcompete fossil fuel grid power simply will not be there when it is needed."
Over the coming decade alone, the company says it will install tens of gigawatts per year. And over the longer term, even if solar generates only 40% of the world’s electricity by 2040, that means installing over 400 GW of solar capacity every year for the next 25 years, says SolarCity.
To get into the manufacturing side, SolarCity is acquiring Silevo, which makes the "best performing" high efficiency panels that can scale quickly at low cost, they say. "Our intent is to combine what we believe is fundamentally the best photovoltaic technology with massive economies of scale to achieve a breakthrough in the cost of solar power."
They are paying Silevo with $9 million in cash, $168 million in stock and are taking responsibility for $23 million of debt.
Silevo is in the early stages of building a 200 megawatt plant in Buffalo, NY, which SolarCity plans to expand to 1 GW over the next two years. Elon Musk says he’s thinking of it as a "pilot" plant, which could end up also making inverters and even battery storage. It’s not too big to be thinking in terms of 10 GW, he says.
Silevo has a 32 MW plant in China and factories in California. Its solar technology is a mix of elements from standard crystalline silicon and thin-film solar cells and achieves about 20% conversion efficiency.
If SolarCity realizes its vision, it will be one of the world’s most vertically integrated solar companies – involved in manufacturing, installation, operations and maintenance and finance. Other US vertically integrated solar companies are First Solar, SunPower and SunEdison.
Read our article, SolarCity Opens to Investors Small and Large.
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