SolarCity reverse engineers PV manufacturers’ business models

Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on email

The acquisition of US-based PV manufacturer, Silevo, by the largest US PV installer, SolarCity, has caused a storm and turned recent business trends within the industry on their head.

Since overcapacity raged through the industry, upstream PV module manufacturers in particular have moved downstream to carve out higher margins and ring-fence module sales by becoming EPCs, project developers and even PV energy providers. However, SolarCity, firmly rooted in the downstream sector, has elected to move upstream and become a PV manufacturer.

The obvious catalyst for the upstream move by SolarCity is the fact that the latest round of US anti-dumping duties on Chinese-made solar cells and potentially those from Taiwan seriously impacts the ability of the company to gain access to quality but cost-competitive modules, given its heavy dependence at times on Chinese producers such as Suntech, Yingli Green and Trina Solar.

One interpretation of the move could be that the current key Chinese suppliers would be unable to either supply adequate module quantities from sourcing wafer/cells outside China or wafer/cell pricing would be uncompetitive, or a combination of both when sourced from companies with production operations outside those areas with duties imposed.

However, any strategy by Chinese module suppliers to retain SolarCity’s business, even on a lower supply level, would more than likely include absorption or partial absorption of the new duty cost.

Only recently SolarCity announced a decent sized module supply agreement with REC Solar, technically a European company but with headquarters and cell/module manufacturing (1GW) in Singapore and therefore not under any import duties into the US. The deal with REC Solar could be interpreted as a direct move by SolarCity to de-risk the supply and increased cost hit of using Chinese modules and be seen to be a stop-gap until SolarCity ramps module production in the US over the next couple of years.

SolarCity could be planning to tap a number of other mid-sized cell/module manufacturers to fill the void left by the Chinese. An obvious supply candidate is Hanwha Q CELLS, which has 1GW of cell/module capacity in Malaysia.

However, it looks more likely that, with SolarCity’s planned business expansions over the near term and importantly post the proposed 1GW fab ramp through 2016, the company would continue to supplement in-house module production with outsourced supply, which would more than likely continue to include modules from Chinese suppliers wherever they may be made. 

The move to start in-house module manufacturing could also suggest that Chinese suppliers have baulked at building plants in the US and that strategies touted to potentially build plants in Malaysia and Mexico to supply major players such as SolarCity, on cost or other grounds. However, this may be premature as the second phase of the anti-dumping ruling has yet to be concluded and Chinese manufacturers would be unlikely to have made any strategic decisions yet.

Yet the unique (family) relationship that exists between SolarCity and Tesla executives and initiatives by Tesla founder to build gigawatt-scale battery storage manufacturing plants also suggests that some manufacturing-mentality DNA also exists in SolarCity.

The company touted in a blog that the decision to start PV module manufacturing was based on the principle that PV adoption has only just started and will be a major energy producer for the world in the future, therefore getting into manufacturing now rather than later will be a key competitive part of the overall fully integrated business model and a key part of eliminating all types of secondary costs through the supply chain.

Simply stated, the move to in-house manufacturing reduces SolarCity’s purchasing costs and provides extra gross margin to the bottom line in the future.

The move to acquire and ramp Silevo’s module technology in the US could be interpreted as a major negative to SolarWorld’s business model in the US.

Having a major domestic manufacturer with higher performing modules that has a major captive customer should not be underestimated. Bragging rights for being the largest US module producer with leading-edge technology owned and operated by a US firm could see SolarCity/Silevo gain customers in the US that would have previously remained SolarWorld customers.

Though this remains a moot point at the moment, it will certainly be a key aspect to watch unfold.


The acquisition also raises interesting points in relation to Silevo. The period of acute overcapacity obviously took its toll on the start-up and its ability to become cost competitive.

Although the company had plans to expand capacity and raise funds for the expansion back in 2012, that didn’t happen under its own steam.

Silevo was hoping that its focus on supplying installers focused on high-end markets such as residential and small-scale commercial rooftops would provide the environment to survive and prosper. Its inability to go it alone and expand capacity (32MW only) and become competitive independently was not achievable.

Although SolarCity touted Silevo’s technology differentiation and high conversion efficiencies the financial structure of the acquisition indicates that the Silevo management team and investors have a lot to prove in executing the plan outlined yesterday, specifically being able to ramp the technology and processes to large-scale production levels and achieve the competitive the production cost levels envisaged.

The financial terms indicate that Silevo owners could be in for a further US$150 million windfall in future earn-out payments based on stock-based compensation but these are clearly tied to production and cost milestones.

It looks like payouts are being planned in two 50MW ramp phases at US$50 million a phase, and a final US$50 million in earnings for a 100MW production ramp and production cost level (undisclosed) by 2016.

SolarCity will also benefit from production plant site selection incentives from the State of New York, which could easily offset much of the capital cost of the facility and initial 300MW ramp phases.

Although there is no way of knowing if Silevo can meet or exceed the key milestones expected of it by SolarCity, it will benefit from having a captive customer.

Like key rival, SunPower, ring-fencing its production operations from outside competitive forces by using its own modules in projects has proved that the business model works and the same should be expected for SolarCity and Silevo.

Technically, Silevo may not now become the next SunPower, but SolarCity is definitely attempting that goal.

Silevo single busbar cell technology. Image Silevo
19 August 2021
The utility-scale PV market is poised for exponential growth and yet the industry still has many fundamental opportunities to improve on standards and best practice. Tracker shade loss has been one of those topics that deserve more attention, but has been typically handled by derate factors rather than trying to accurately forecast the loss over the life of the system. Join Nextracker’s subject matter experts, Aron Dobos and Neelesh Umachandran, and Rounak Kharait, director of solar energy assessments at DNV, for a webinar about why shade modeling matters and recommendations on what the solar industry should do about it.
25 August 2021
Energy Next is a new industry exhibition focusing on the latest renewable energy and energy efficiency technology, which will be held for the first time in 2021 in Sydney, Australia alongside the Clean Energy Council’s Australian Clean Energy Summit, the peak gathering of leaders driving Australia's energy transformation. Organised by the same people behind Australia’s largest clean energy event, All-Energy Australia, Energy Next will give visitors two days of access to key suppliers in the industry, free-to-attend professional development and industry workshops, and networking opportunities to better understand clean energy issues and solutions and learn about the latest developments in this transformational, dynamic sector.
25 August 2021
The Intersolar Summit Brasil Nordeste takes place in Fortaleza, Brazil. It addresses leading local and international experts on solar power and renewable energy in the region. The Summit’s mission is to provide in-depth education, enable high-quality networking opportunities, expand the use of PV technologies at regional and national level and strengthen the local PV industry. The Intersolar Summit Brasil Nordeste is organized by Intersolar South America - Latin America’s largest exhibition and conference for the solar industry: Solar Promotion International GmbH, Pforzheim, Freiburg Management and Marketing International GmbH (FMMI) and Aranda Eventos & Congressos Ltda, São Paulo as co-organizer.
25 August 2021
Join us to hear directly from the CTOs and heads-of-research from the top-20 cell/wafer producers to the PV industry today. The event will focus on predicting the key metrics underpinning the next big shift to n-type with answers to the key questions: When will the transition to n-type happen? Which companies will be first to 10 GW capacity and production? Who will be the key equipment suppliers for the new production lines? Which n-type process flow/architecture will emerge as the front-runner? What will polysilicon purity and wafer thickness levels look like for optimized n-type manufacturing? What will the upstream poly/wafer supply-chain look like in 5 years from now?
26 August 2021
In this webinar, JA Solar will present its product portfolio based on the latest technologies to improve your PV projects, ensuring maximum reliability and performance. During the webinar we will receive insight from JA Solar about its solar technology roadmap and how the manufacturer is providing customers with innovative solutions to suit their needs, while we will also analyse how to determine the best product solution for each solar project.
6 September 2021
The 38th European Photovoltaic Solar Energy Conference and Exhibition will be held online from 6 - 10 September 2021, allowing PV experts from all around the globe to participate with just one click! The EU PVSEC is the world's leading forum for PV Research and Development and the biggest Conference on PV Solar Energy worldwide. That is why PV experts from all around the globe are keen on gathering together each year to be part of this specialist’s event, to present and discuss the latest developments in Photovoltaics, to network and to conduct business.

Read Next

PV Tech Premium
July 30, 2021
Not only will solar be the dominant source of new power generation in Europe by 2025, cementing its position as the third largest market for solar globally, but the continent has placed the asset class at the very heart of its COVID-19 recovery strategy. As part of a week-long special report on PV Tech Premium, Liam Stoker, Edith Hancock and Jules Scully explore the drivers for solar in Europe, the key markets and the challenges that remain.
July 30, 2021
First Solar has unveiled plans to construct a 3.3GWdc module assembly facility in India, bolstering its manufacturing footprint outside of the US.
July 30, 2021
Anglo-Australian mining company BHP, in partnership with Canada’s TransAlta Renewables, is to build two solar farms and a battery storage system to help power its Mt Keith and Leinster nickel mines in Western Australia
July 30, 2021
German energy giant RWE has upgraded its earnings forecast for 2021 after “exceptionally positive” earnings trend
July 29, 2021
Tracker and racking provider Arctech has delivered SkySmart II tracking system to a 575MW agriculture-sharing solar project located in Nangong City, Hebei Province, China.
July 29, 2021
Unigreen Energy, owned by Hevel majority shareholder Ream Management LLC, has broken ground on a wafer and cell manufacturing plant that will produce 1.3GW of silicon n-type monocrystalline ingots and wafers as well as 1GW of heterojunction technology (HJT) solar cells.

Subscribe to Newsletter

Upcoming Events

Upcoming Webinars
August 19, 2021
At 9am (PT) | 6pm (CEST)
Solar Media Events
August 25, 2021
Solar Media Events
October 6, 2021
Solar Media Events
October 19, 2021