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Jun 20, 2014  | Tom Cheyney  | 1 Comment

The SolarCity-Silevo surprise

Examining overlooked and underreported issues around the SolarCity-Silevo surprise acquisition news

The reverberations of the blockbuster news of the SolarCity-Silevo surprise acquisition deal extend well beyond the solar community, with the Wall Streeters in particular scrambling to put their spins on the implications. When Elon Musk speaks, people listen—and then fall all over themselves to contextualize and analyze what he says. He is, after all, the new black of the 21st century business world, a worthy heir to the throne of Jobs. When his triumvirate of companies—Tesla, SpaceX, and SolarCity—generates headlines, there’s an inherent gravitas just by virtue of the Elon factor. Despite the voluminous commentary, hand-wringing, and second-guessing, several key aspects of the SolarCity’s vertical integration move have either been underplayed or overlooked.

For starters, let’s not forget one simple fact: it’s not a done deal yet. It’s a definitive purchase agreement but still essentially a proposed acquisition. From the way it’s being reported, you’d think that Silevo was already absorbed into the mothership. The SEC filing says the parties expect to “consummate the transaction in the third quarter of 2014.” Do I think the deal will close? Yes. But until it does, the heavy lifting of selecting and ordering the equipment, lining up the materials, building, and ramping that first gigawatt fab won’t be finalized.

Second, the real magic in the Silevo technology takes place at the PV cell level, not at the panel level. Many of the stories I’ve seen call Silevo “a module manufacturer” and talk about SolarCity getting into the “module business” via the acquisition. Silevo is a cell company that also makes panels, not vice versa. Silevo’s Triex cell technology–a hybrid crystalline-silicon scheme using n-type wafers, benefiting from “tunneling junction” architecture, integrating an amorphous-silicon emitter into the film stack (not unlike Panasonic/Sanyo’s HIT cells), and replacing silver with copper for the metallization–is the secret sauce here.

I’ve spoken to Silevo several times since the company emerged on the scene a few years ago. It was always stated that the 156mm cells would be integrated into modules using standard assembly methods and equipment and that outsourcing the panel process to a contract manufacturer was an option. This means that there is plenty of room for innovation at the panel level, something alluded to by Elon and the Rive brothers in the conference call. They spoke of designing more aesthetically pleasing modules and leveraging the Zep Solar mounting solutions and possibly module-level electronics to reduce costs and provide a simpler to install, system-level package for the rooftop.

Third, bringing a large factory online, especially one with a high level of automation featuring dozens of cell and module production lines, is a not-insignificant task. To be successful, SolarCity-Silevo must work closely with their supply chain partners, from design and construction through equipment selection, procurement, installation, and qualification, to materials selection and delivery systems, and more. All this for a Silevo technology that, although it’s running on a 32MW line in China, has never been built out at scale before. Let’s think about that 32MW number: a gigawatt cell fab would need 30 cell production lines of that size, let alone a similar installed capacity of module lines (essentially, this is two factories in one). I expect the New York facility’s lines to be significantly larger than the one in the existing Silevo, but even 100MW/line adds up to a massive undertaking.

Ace PV analyst Finlay Colville of NPD Solarbuzz brings up some related points about the ramping of such a large fab and the supply chain requirements thereof in an interview at PV Tech. “For now, it is far more important if a 100MW Silevo fab can work–not if a 1GW or 10GW fab has legs. And also, it should be noted that there is no standard tooling to do this type of cell technology. Any gigawatt worth of capacity may still be based on a selection of 30-40MW throughput tools used for the first time in production. SunPower’s ability to scale high-efficiency cells is as much about learning the process over 20 years as it is about developing the tool specifications to enable this in a commercial setting.”

This daunting task raises a big question that few are talking about: is the upstream PV manufacturing supply chain ready to digest and execute on such a tight deadline gigawatt-level order? (And that’s just for starters, given Elon’s notion of many 10GW fabs to come.) Can the equipment companies, most of which have been hammered during the past few years because no one was ordering tools, flip the switch on their own factories and supply chain and provide scores of tools on ratcheted-up lead times? Do they even have enough capacity of their own to deliver on large orders from SolarCity-Silevo, let alone fill possible bookings from their other customers likely to be adding new production capacity?

Then there’s the issue of the n-type monocrystalline wafers—the essential building blocks of the Triex technology. There is a limited supply of this flavor of silicon, with the vast majority of ingot and wafer production geared to p- and n-type multicrystalline and p-type mono. SolarCity-Silevo will not be the only customer in gigawatt need. (Hello, SunPower, hello, Qatar Solar!) Some forecasts suggest a possible polysilicon and wafer shortage by 2016, with demand exceeding supply across the board, making the n-type dilemma all the more difficult. One interesting side note: SunEdison, a quasi-competitor of SolarCity’s, has supplied its Silvantis n-type wafers to Silevo, raising the question of whether that relationship would continue after the acquisition.

In addition to Finlay’s incisive observations cited above, there are several other in-depth analyses of the SolarCity-Silevo deal worth mentioning. Mark Osborne adds his two cents’ worth in an editor’s blog at PV Tech, while the Casual Analyst weighs in with skeptically raised eyebrows at Seeking Alpha. Matt Feinstein of Lux Research provides a solid breakdown and commentary in his post on the SEMI website. PV magazine’s Jon Gifford interviews Goetz Fischbeck of Smart Solar, who offers a European view of the transaction. For those seeking more background on Silevo’s Triex technology, Christian Roselund’s 2012 Solar Server interview with Silevo’s Chris Beitel sheds technical light.

Brad Mattson, no stranger to the challenges of scaling production from his semiconductor past, is now attempting to take his CIGS thin-film PV company Siva Power on a gigawatt-scale ride of its own. He’s rooting for Elon and the Rives to pull this off. “I could say a lot a different things but basically, I love this news,” he wrote in an email. “It combines two of my passions, winning through giga-scaling and manufacturing in the U.S. Of course, I’d love it more if they were scaling thin film, but it is great all the same. I hope and think SolarCity will make it work. They are really smart guys.”


Sources: SolarCity, Silevo, SolarCurator, PV Tech, NPD Solarbuzz, PV magazine, SEMI, Lux Research, Seeking Alpha, Solar Server, CIR Electric

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