Why SolarCity Is Considering Partnering With a Solar Cell Maker

August 10, 2016, 3:40 PM UTC
August 4, 2015- Buffalo, NY-- Governor Andrew M. Cuomo today participated in the “topping off” ceremony of the new, 1.2 million-square-foot SolarCity GigaFactory, which will manufacture solar panels at the RiverBend site in South Buffalo. As part of the ceremony, the Governor signed a steel beam that was raised into place atop the rapidly developing facility, commemorating the significant milestone for the project that broke ground just 11 months ago. The project will create nearly 3,000 jobs in Western New York and a total of nearly 5,000 jobs in the state. The SolarCity facility will be the largest of its kind in the Western Hemisphere, with one gigawatt of annual solar capacity when it reaches full production.
Photograph by Philip Kamrass — Office of Governor Andrew M. Cuomo

Solar installer SolarCity, which is the in the process of being acquired by electric car maker Tesla Motors, has been discussing if it wants to partner with a big solar cell manufacturer to make its solar panels.

Solar cells are the core parts of the solar panel that convert sunlight into electricity. Dozens of solar cells are arranged like a honeycomb into a solar panel.

For years, Tesla (TSLA) has been buying battery cells from Japanese giant Panasonic (PCRFY) to package together for use in battery packs in order to power its electric cars. At Tesla’s massive battery factory under construction outside of Reno, Nev., Panasonic is playing a key role by installing its battery cell manufacturing machines to churn out more battery cells.

SolarCity (SCTY) has been planning on making solar panels at a factory in upstate New York after buying a solar startup called Silevo about two years ago. If SolarCity decides to bring in a big solar cell maker partner, it could be an example of Musk and Tesla’s growing influence on the company as it undergoes the planned merger.

Striking a deal with a big solar cell maker could also indicate the limitations of the original solar manufacturing technology that SolarCity acquired for at least $200 million. It can be particularly difficult to scale up newer manufacturing technology.

SolarCity chairman and Tesla CEO Elon Musk said on SolarCity’s earnings call on Tuesday afternoon that the company is “entertaining some discussions with strategic partners on the solar cell manufacturing.” He said “some of those could head in an interesting direction.”

Even with a partner, SolarCity would still assemble solar modules, which make up a panel, and would produce the overall solar roof system. On Tuesday, Musk said that SolarCity planned to make a roof with solar panels integrated into it.

Musk emphasized that SolarCity’s “default path” is still to “continue with the cell engineering internally,” and grow that team—assuming the acquisition deal goes through. But Musk noted that “there may be some merit to bringing in a strategic partner as Tesla has with the battery cell manufacturing.”

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Partnering with a solar cell maker would be a major change for SolarCity, which appears to be evolving significantly following the Tesla deal. SolarCity says it now plans to focus on developing new solar products, with plans to launch two new products this year.

Critics have long questioned whether or not SolarCity could effectively scale up the startup Silevo’s manufacturing technology. Silevo was founded in 2007 and developed a new type of solar cell design that uses silicon combined with other materials to make the cell more efficient and to generate more electricity from the sun.

For more on why Wall Street isn’t a fan of the SolarCity-Tesla deal, watch:

Traditional silicon solar panels have taken many decades to become as cheap as they are today.

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