SolarCity breaks ground on huge solar factory in New York, strikes deal with state

SolarCity broke ground on its massive solar panel manufacturing facility in Buffalo, New York on Tuesday, according to a release from New York Governor Andrew Cuomo. The facility, when, and if, fully completed in early 2016 is supposed to make a gigawatt worth of solar panels a year, in the one million square foot facility on 88 acres of land in the development park called RiverBend in South Buffalo.

SolarCity — led by Chairman Elon Musk and his cousins CEO Lyndon Rive and CTO Peter Rive — is following a similar strategy to the one that Musk is using for his electric car company Tesla, with Tesla’s plans to build a massive battery factory outside of Reno, Nevada. The similar strategies are causing some to refer to the new SolarCity factory as Elon Musk’s other “Gigafactory.”

A Silevo cell, image courtesy of Silevo.

A Silevo cell, image courtesy of Silevo.

Solar startup Silevo, which SolarCity announced it would buy for $200 million this summer, previously had a deal to be an anchor tenant at a new manufacturing hub at the RiverBend site, and that hub is owned by the State University of New York’s College of Nanoscale Science and Engineering. Through the acquisition, SolarCity took over that deal and has now agreed to work with the state to spend $5 billion over the course of 10 years to build out and operate the factory, creating local jobs.

The Research Foundation for the State University of New York will cover the initial construction and manufacturing equipment costs of the factory, using $750 million worth of funding from the state of New York. SolarCity will be responsible for construction and equipment costs beyond what the state will cover, and the Foundation will own the facility and lease it to SolarCity in a deal where SolarCity pays a $1 per year for 10 years, plus the cost of utilities. SolarCity expects to spend $150 million initially on the facility.

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In return for the investment, the state of New York will be creating nearly 5,000 jobs according to the Governor. SolarCity will directly be creating 1,450 manufacturing jobs at the factory, and the company says it will employ another 2,000 workers in the state for its solar development business over the next five years. The remaining 1,400 jobs created will be indirect supplier and support jobs in the state, according to a Governor release. According to an SEC filing, the deal is subject to the state of New York finalizing the funding amount by October 17th.

This factory is the first time that SolarCity is moving into solar cell and panel manufacturing in a major way. The company has previously built up its business around financing and installing rooftop solar systems.

Founded in 2007, Silevo developed a new type of solar cell design using not only silicon (the main material in traditional solar panels), but also combining different materials for other cell components to squeeze more energy out of the system and to improve the cell’s efficiency. The company uses more efficient single-crystal silicon as the base layer, and then it adds on a “tunneling oxide layer” and a layer of amorphous silicon to alter the voltage and current of the cells.

SolarCity CEO Lyndon Rive has called Silevo’s tech “what we believe is fundamentally the best photovoltaic technology.” But since this is the first time Silveo’s technology is being produced at commercial scale there is an element of risk to scaling up this technology so quickly.

SolarCity discloses some of the biggest risks in this SEC filing when it comes to building the factory:

[blockquote person=”” attribution=””]Successfully achieving volume manufacturing of solar cells at our projected yield, efficiency and quality levels will be difficult, and we have little experience in high-volume manufacturing. . . If we cannot achieve planned yields over time, our production costs could increase and we may be unable to produce a sufficient amount of our solar panels to meet our installation needs.[/blockquote]

According to local media the factory is just in the very first stages of development. The local reports:

[blockquote person=”” attribution=””]Right now at the site, construction teams are busy clearing it and already have offices and heavy equipment in place. A sign is posted at the parking lot entrance showing what the innovation hub will look like once complete. There is also what appears to be a hospitality tent set up and ready to go for the groundbreaking.[/blockquote]

According to another SEC filing from SolarCity, the company plans to raise $500 million through the offering of convertible senior notes.