The joint Tesla Motors (NASDAQ:TSLA)/SolarCity (NASDAQ:SCTY.DL) conference call Monday night gave us a peek at what Tesla wants to do with solar panels and the solar roof long-term. And there's one puzzling piece investors should scrutinize more closely.
The best solar panel in the world?
On the conference call, Elon Musk talked casually about surpassing every other solar power company in the world in technology and cost in the blink of an eye. Here's a quote from Musk:
The combination of SolarCity's technology on the Silevo front as well added to Panasonic's cell technology will make the most efficient as well as the cheapest solar cell in the world.
He went on to talk about making 22% efficient modules and moving beyond that to 24% efficiency. These are efficiency levels only a handful of companies have achieved on a laboratory scale, let alone on a mass scale and at low costs.
For example, SunPower (NASDAQ:SPWR) recently announced a record 24.1% efficient solar panel made in the laboratory, and 22.8% efficient modules coming out of manufacturing. SunPower didn't just begin making high-efficiency panels overnight. It's been in the solar industry for decades and the basic construction processes it uses to manufacture its cells have been in use for over a decade, giving it well over 1 billion cells worth of experience. And as CEO Tom Werner has said in the past, "Making solar panels is hard."
Meanwhile, SolarCity and Tesla are new to the solar cell manufacturing business. Musk approved the acquisition of Silevo in 2014, and the company has not yet shown the ability to make a high-efficiency solar panel at mass scale, much less at a competitive cost structure. And that fact that Tesla is bringing in Panasonic to help with solar panel technology is a sign that maybe Silevo's technology isn't working as planned.
Also worth noting: Panasonic doesn't have the best track record in solar manufacturing. Its most efficient module is 19.7%, according to data sheets, and the company currently has about 1 GW of manufacturing capacity for its HIT cells (technology that's supposedly similar to Silevo's). But the product was doing so poorly that early this year, the company suspended production at a plant that makes a third of its cells, and laid off employees, according to a report in The Japanese Times.
So, we have Silevo, with unproven technology and manufacturing, bringing in Panasonic, which has struggled with its own technology. And we're told they are combining forces to build the world's best solar cell at the lowest cost?
Don't believe everything you hear in solar manufacturing
Anyone who has been following the solar industry for more than a few years knows that claims about cost and efficiency don't mean much until product actually comes off a production line at low cost. Dozens of solar companies from Solyndra to Evergreen Solar to Energy Conversion Devices have come up with concepts that supposedly were going to make solar cells more efficient, lower cost, or more attractive to customers. All of those companies and dozens more failed in the process.
Other companies have made high-efficiency claims, only to be unable to manufacture their products in commercial quantities.
There's a reason that most solar companies today use fairly standard equipment to make solar cells and modules that are all fairly similar. Manufacturing solar cells is really hard, especially at scale, and once a process is perfected and cost effective, it spreads like wildfire across the industry.
Silevo and Panasonic are using a fairly complex heterojunction technology combined with Silevo's Triex technology to make a solar panel that could be more efficient. But until it's proven they can actually make the module at low cost, investors should take a skeptical view.