The SolarCity-Silevo surprise
Examining overlooked and underreported issues around the SolarCity-Silevo surprise acquisition news
Remarks: In the
crowded solar production field this is a challenging venture,
outstanding anyway in the last years and must be watched in comparison
with the further technological developments in CZ crystal pulling
process, diamond sawing, heterojunction cell technology and
interdigitated back contact.
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
