SolarCity seeks to beat the grid by making its own panels

SolarCity thinks the cost of solar power isn't going down fast enough. To speed up the solar industry cost curve, the company today said it plans to acquire a solar panel manufacturer, giving it access to efficient cell technology to fuel its planned growth.

With the move, SolarCity becomes a vertically integrated solar energy company able to produce the hardware and install the end product on rooftops. For businesses and institutions considering installing on-site solar power, SolarCity's bold move means solar could match the price of grid energy sooner in certain areas. Even for those that consider leasing, SolarCity’s attempt to ratchet down prices means solar energy could become financially attractive in more cities and states.

"In order to have solar power compete on unsubsidized basis with fossil fuel energy coming from the grid, it's critical that you have high efficiency solar panels and a total installed cost as low as possible," said Elon Musk, the chairman of SolarCity in a conference call today. The “key threshold” is meeting grid-supplied energy, he said.

The company SolarCity acquired is called Silevo, a startup that developed a process for making silicon solar panels with an efficiency of 21 percent, compared to 17 percent or 18 percent for standard silicon panels. That makes a dramatic difference in the amount of energy a set of solar panels can generate, said Peter Rive, the company's chief technology officer. A 6-kilowatt system that normally requires 24 panels will only need 18 and the associated cost of wiring the labor are lower as well, he said.SolarCity

For a business or city building that chooses to install solar panels, high-efficiency cells means they can generate more energy from available space and lower their monthly utility bills. In a densely packed city, more efficient panels means there's greater distributed energy potential on the available rooftop space. The Silevo panels also operate relatively well in high heat, so the amount of power they generate during peak hours — typically the most expensive power — is higher than conventional panels, Rive said.

The challenge with high-efficiency solar technology has always been cost. Despite the benefits of packing more power capacity into a given space, the additional price of premium technology didn't always translate into lower energy costs, Rive said.

SolarCity intends to scale up Silevo's technology to bring down the production cost. Within the next two years, the company expects to start shipping solar panels from a factory in upstate New York (powered largely by inexpensive and clean hydro power) with an annual capacity of one gigawatt, which would make it one of the largest solar panel factories in the world.

"The path to ultimately having solar power way cheaper than coal or fracked gases is to combine huge economies of scale with the most advanced technologies," said Musk. The company has already acquired a mounting rack company called Zep Solar and will look for other acquisitions in the future to wring costs from delivering solar, executives said.

Musk, of course, is also the CEO of Tesla Motors, another vertically integrated company which intends to build a gigawatt-scale battery factory in the U.S. Most of the production from that factory will supply the company's electric vehicles, but Tesla and Solar City also intend to deliver batteries connected to rooftop solar systems and for utility-scale solar. If solar with on-site storage is cheaper than grade-supplied power, that will create "exponential" growth in solar, Musk said.

SolarCity made its name by pioneering the field of solar financing, which allows people to pay a monthly lease to get solar power without having to acquire the actual hardware. A critical piece to making leases economic is the 30 percent federal investment tax credit, but that will shrink to 10 percent in 2017. That leaves SolarCity and the rest of the solar industry looking for ways to lower the cost of delivering energy from solar, both for leased and purchased systems. And without a sufficient supply of panels, SolarCity won't be able to maintain its rapid growth.

By acquiring efficient cell technology and buildings its own factory, SolarCity hopes to expand solar’s reach and further disrupt the electric utilty industry status quo. “Being fully vertically integrated allows us to control the cost of solar per kilowatt-hour installed, which ultimately is the metric that matters,” said CEO Lyndon Rive. That will allow the company to provide energy lower than the grid without subsidies. “If you do that, potentially the market is infinite for the next 30 or 40 years.”

Top image of SolarCity installer by orngejuglr via Flickr