Tesla Motors' announcement that it plans to partner with Panasonic to produce solar modules at the SolarCity factory in Buffalo likely would mean sweeping changes to the way the plant will operate.
Panasonic - already Tesla's partner at the electric vehicle maker's battery gigafactory in Nevada - would take on a major role in operating the Buffalo factory and help shape the technology behind the high-efficiency solar panels to come out of the South Park Avenue plant.
The partnership with Panasonic - a company with 30 years of experience making solar modules - also would potentially ease concerns about the ability of Tesla and SolarCity, both new to solar panel manufacturing , to take on the task of running what is expected to be the biggest solar panel factory in the Western Hemisphere.
"I like it. I like it a lot," said Howard Zemsky, the president of Empire State Development, which is overseeing the state's $750 million investment to build and equip the 1.2 million-square-foot factory on South Park Avenue for SolarCity as part of the Buffalo Billion economic development initiative.
"It brings a world class leading technology manufacturer to the table," Zemsky said. "I believe it further positions SolarCity to succeed in both the short and long term and assures a smooth ramp up of the plant."
But Tesla's plan to collaborate with Panasonic at the Buffalo factory comes with a big if: The deal is contingent on shareholders approving Tesla's $2.2 billion acquisition of SolarCity during a vote on Nov. 17.
If the merger is approved, Tesla and Panasonic have signed a non-binding letter of intent to collaborate on making solar cells and modules at the Buffalo factory.
Under that arrangement, Panasonic would make solar cells and modules at the Buffalo factory. Tesla would work out a long-term deal to buy those solar cells and modules from Panasonic and use them in a solar energy system that would combine the solar panels with Tesla's Powerwall and Powerpack battery storage products.
"By working together on solar, we will be able to accelerate production of high-efficiency, extremely reliable solar cells and modules at the best cost,” said JB Straubel, Tesla's chief technical officer and co-founder, in a statement.
Elon Musk, SolarCity's chairman and Tesla's CEO, said in mid-August that SolarCity was thinking about bringing in a partner to make the solar cells – one of the main building blocks of a solar panel - at the Buffalo plant.
Each solar panel has dozens of solar cells. The solar cells, which convert sunlight into electricity, are the core part of a solar panel.
"Both companies would be operating in the plant as it is envisioned," Zemsky said. "Panasonic would focus on the conversion of wafers to solar cells and SolarCity would focus on the conversion of cells into modules."
The agreement would expand Tesla's relationship with Panasonic, which is spending $1.6 billion so it can produce battery cells within Tesla’s $5 billion lithium-ion battery gigafactory, now under construction in Nevada. Those batteries will be used for Tesla's Model 3 electric car and energy storage products for home and utilities.
"We expect that the collaboration talks will lead to growth of the Tesla and Panasonic relationship," said Shuuji Okayama, vice-president on Panasonic's Eco Solutions Co., in the statement.
The Buffalo plant originally was intended to house Silevo, a small California company that was developing high-efficiency solar panels. SolarCity acquired Silevo in 2014 and expanded the scale of the Buffalo factory to make it five times bigger than originally planned.
“Panasonic [photovoltaic] cells and modules boast industry-leading power generation performance, and achieve high quality and reliability," Okayama said in the statement.
But SolarCity isn't giving up on Silevo's technology, either, said Kady Cooper, a SolarCity spokeswoman.
The Silevo technology "remains an important and applicable component of the end solar module," Cooper said.
"Both SolarCity/Silevo and Panasonic have been working on similar cell architecture on similar process equipment already," she said. "Together, we will combine the best cell components from both and integrate them into the new solar module that will be produced in Buffalo."
Silevo briefly set a world record for the world's most efficient rooftop solar panel late last year, with modules that could convert more than 22 percent of the sun's energy into electricity. A week later, Panasonic said it had developed modules with a 22.5 percent efficiency, and another solar company, SunPower topped that in June with modules it said achieved 24.1 percent efficiency. Panasonic, on its website, said its modules have reached 23.8 percent efficiency.
Both Silevo and Panasonic use solar cell technology that is built around thin layers of silicon, which helps improve efficiency compared with conventional solar cells with a single layer of silicon. Both technologies claim to perform better in warmer temperatures and both have technology that can generate energy from both sides of the panel.
The Buffalo plant’s revised plan called for producing enough solar panels to generate 1,000 megawatts of electricity, although Peter Rive, SolarCity’s chief technology officer, said this summer that improvements to the equipment design and factory layout could allow it to produce more than 1 gigawatt in panels.
Tesla and SolarCity plan on Oct. 28 to unveil a new solar roofing product that will combine SolarCity's solar panels with a second-generation Powerwall 2.0 battery made by Tesla.
"This agreement further cements Western New York’s position as a national leader in clean power technology and cutting-edge innovation,” Gov. Andrew M. Cuomo said in a statement.
The proposed merger has spurred concerns among some investors and analysts because of the close ties between the two companies, with Elon Musk being the biggest shareholder in both firms, as well as being chairman and SolarCity and CEO of Tesla. Several members of each company's board of directors also have close connections.
Some analysts and investors also have raised concerns about the steady losses and growing debt levels at SolarCity, which needs to constantly raise new money from investors to fund its solar installations. Shareholders have several multiple lawsuits aiming to block the merger, arguing that Tesla's board breached its fiduciary responsibilities.
While Musk has called the merger a "no-brainer" that will create a renewable energy powerhouse, some investors have viewed the deal as a bailout for cash-strapped and debt-laden SolarCity.