Silevo’s promise of efficiency lured key player SolarCity into acquisition - The Buffalo News
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Silevo’s promise of efficiency lured key player SolarCity into acquisition

FREMONT, Calif. – When solar energy systems installer SolarCity decided to start making its own solar panels, company executives looked at about 20 different manufacturers.

They decided to buy Silevo – one of the two companies at the heart of the state’s RiverBend clean energy and technology hub.

They did it because they were drawn to the company’s technology, which they believe can produce some of the most efficient solar panels on the market today.

And they did it because New York’s efforts to lure Silevo to Buffalo meant it already had a site and plans in the works to open a factory here – allowing it to build off that work when they decided to make the plant here one of the biggest in the world.

“It was really that combination of an advanced technology that was ready to scale that was the key,” said Elon Musk, SolarCity’s chairman.

In fact, Silevo executives said they had been talking with state officials in the weeks leading up to the SolarCity acquisition announcement about the potential to eventually make the Buffalo factory five times bigger than their original plan. And that expansion dovetailed nicely with SolarCity’s lofty plans for Silevo, which include expanding the Buffalo plant so that it can make enough solar panels in one year to generate one gigawatt of electricity, five times more than the 200 megawatt capacity Silevo was planning.

And now, with SolarCity’s backing, the foundations of Silevo’s business – and its plans for a mammoth factory in Buffalo – are on much firmer ground, said Shyam Mehta, senior solar industry analyst at GTM Research.

“I think Silevo is a very important part of SolarCity’s long-term strategy,” he said.

“Silevo’s technology is certainly very interesting and has promise,” he said. “It has the potential to be a very valuable technology. I would not go so far as to say it is a game-changer as yet.”

Analysts note that Silevo still is a relatively young company, built around a new technology that, while promising, has yet to be proven in high-volume production. And like many early-stage companies, Silevo still is losing money – although as a private company, executives won’t say how much – relying on money it has raised from venture capital firms to fund its operations so far. The 200-employee company has annual sales between $32 million and $40 million, industry officials said.

They caution that the solar panel business is highly competitive, pitting Silevo against lower-cost Chinese producers whose panels are less efficient, and other, deep-pocketed companies, like Solar Frontier, which is backed by oil giant Royal Dutch Shell and also considering locating a solar panel production plant in the Buffalo Niagara region.

“There will always be a lower-cost supplier,” said Matt Feinstein, a senior solar industry analyst at Lux Research.

But Silevo isn’t out to be the cheapest. Instead, the company is staking its future on technology that it says is more efficient than most other solar modules on the market. Silevo’s panels combine elements from both of the main technologies used in today’s marketplace with production techniques used to make semiconductors in a way that company executives say makes their panels among the most efficient on the market.

“They’re pursuing the high-efficiency technology. They’ve been pretty well ahead of the curve,” Feinstein said. “Their product is legit. I think the way they’re doing things is intelligent.”

Long-term investment

Richard Bergman, an Amherst homeowner, earlier this year replaced the rooftop solar power system he installed a decade ago with a new one built around Silevo’s solar panels.

The old system provided about 20 percent of the power Bergman consumed at his home. The new system should produce about 60 percent of his needs.

“Basically, for the same panels on my roof, I’m generating almost three times the power,” said Bergman, who bought the Silevo system with about $10,000 of his own money and energy efficiency incentives.

Even then, solar power is a long-term investment for Bergman. The upgrade is expected to take about eight years to pay for itself through reduced electricity bills and the modest credits Bergman will receive from National Grid when his panels generate more power than Bergman needs and he’s able to sell that electricity to the utility, said Darrin Harzewski, who’s in charge of solar business development at CIR Electrical Construction Corp., the Lackawanna contractor that installed Bergman’s system.

“Anything it produces first goes to the house, then it goes back to the grid,” Harzewski said.

Greater efficiency

Lower-cost solar panels can convert about 18 to 19 percent of the sun’s energy into electricity. Silevo’s modules from its 160-employee Chinese factory have achieved efficiency rates of 21 percent. In research settings, Silevo’s technology has converted as much as 23 percent of the sun’s energy into electricity, said Chris Beitel, Silevo’s executive vice president.

Efficiency is important because as solar modules are able to convert more of the sun’s energy into electricity, fewer panels are needed to generate the same amount of power as a less-efficient array. Fewer panels also mean less hardware, wiring and lower mounting costs.

“We can install more power on that same rooftop,” Beitel said. And the higher efficiency helps offset the higher cost of Silevo’s panels.

“The more efficient your panel, your other installation costs come down,” Mehta said. “It’s a huge lever to bring down your nonpanel costs.”

Solar panels also become less efficient as the temperature rises, but Silevo said the performance of its panels declines at a slower pace than conventional technology. While conventional panels might be 20 percent less efficient on a hot summer day, Silevo’s efficiency drops by about 10 percent in similar conditions, Beitel said.

Silevo also is developing “bifacial” panels whose undersides will have the ability to absorb sunlight that is reflected off the surface below the modules. That technology works best in installations that are mounted on the ground, such as the solar panel array at the University at Buffalo’s North Campus in Amherst, or in systems that allow the panels to rotate toward the sun as it moves across the sky. But it could increase efficiency as high as 26 percent, SolarCity executives said.

“We think it’s something that’s really going to drive the next wave in terms of cost and performance,” Beitel said.

That’s important in less sunny places, such as the Buffalo Niagara region. “To really make solar mainstream and make it a global-type option for energy generation, we need to improve the low-light response,” Beitel said. “We need to be able to get enough energy out in New York, which has tough winter months.”

“If you can get a technology that can generate more electricity during those low-light days, you’re going to reduce the overall cost of electricity,” he said. “This is one of our key areas of focus for the next wave, making these panels optimized for all types of weather.”

Cutting production cost

Solar panel prices have dropped significantly over the last few years, but they still aren’t low enough to make solar power systems economical without government incentives aimed at increasing the use of renewable power sources.

SolarCity executives say they believe they can cut the cost of Silevo’s solar panels by producing them at its high-volume factory in Buffalo. They said Silevo’s design requires fewer production steps than most other solar panels, which will help reduce expenses further. Making the panels in Buffalo will reduce shipping costs, compared with China.

And they said Silevo’s panels, which use copper as a key component instead of more expensive silver used in most other solar modules, give the company a further cost advantage. In conventional panels, the cost of silver is second only to the cost of the silicon that forms the basis of each panel.

By producing its panels in Buffalo, SolarCity will dodge an upcoming tariff of as much as 14 percent on panels imported from China, where it now gets all of its panels. At the same time, a 30 percent federal tax credit for solar installations is set to expire at the end of 2016, which would make it even harder for solar systems to compete against electricity generated from conventional sources.

Peter Rive, SolarCity’s co-founder and its chief technology officer, is confident that the surge in demand the company expects – with installations of up to one gigabyte expected in 2015 – will help it push prices down enough to make its solar system competitive without subsidies.

“Our costs will be low enough,” Rive said. “We’re basically on the cusp here of unsubsidized solar being cheaper than fossil fuel generation.”

Industry on an upswing

The solar industry already is on a major growth spurt. The electricity-generating capacity of new solar projects installed last year jumped by 41 percent last year as installation costs tumbled by 15 percent, according to a report by GTM Research and the Solar Energy Industries Association. More solar projects were installed in the 18 months leading up to the beginning of 2014 than during the previous 30 years combined.

Still, the solar industry is littered with companies that went bust, including high-profile failures such as Solyndra, a startup that touched off a political storm when it filed for bankruptcy and defaulted on a $535 million federally guaranteed loan in 2011.

“The solar module business is extremely competitive,” said Mehta, the GTM Research analyst. “The historical track record for venture capital-funded solar module startups has not been great in recent years.”

Alain Kaloyeros, the chief executive officer of the SUNY College of Nanoscale Science and Engineering in Albany, said Silevo is different because its focus is on developing technology that bolsters the efficiency of their solar modules. “The Chinese cannot compete with the U.S., and with these companies also, in this high-innovation, high-quality product sector,” he said.

“We didn’t want situations like Solyndra,” Kaloyeros said. “They got a lot of money from the federal government, but they wanted to compete with the Chinese with cheap products, and they went out of business.”

Mehta also said he has more confidence in Silevo’s prospects. He thinks Silevo’s management, dominated by executives who previously held high posts at Applied Materials, “understands the importance of focusing on both efficiency, as well as manufacturing cost. They also have the benefit of scaling up in a more stable solar supply market than many of their failed peers.”


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