Tesla Motors Inc (NASDAQ:TSLA) is making good on its promise to bring in Panasonic to help with solar manufacturing, now that Tesla's acquisition of SolarCity is complete. The company announced on Tuesday that Panasonic will invest $256 million in SolarCity's Buffalo, New York, manufacturing facility, with a goal of starting production in the summer of 2017.

The hope is that the partnership will bring higher-efficiency solar panels to SolarCity and Tesla, and a greater level of integration. But the idea that Panasonic was needed in the first place is a bit of a mystery.

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Why Panasonic is needed

In June 2014, SolarCity announced the acquisition of Silevo, a solar technology start-up that hoped to make high-efficiency solar panels in a plant in Buffalo, New York. To pay for the plant, SolarCity got the state to throw in a $750 million subsidy in exchange for commitments to meet minimum investments and hire workers in the state. It seemed like SolarCity was on its way to becoming a solar manufacturing giant, with a target of production beginning in 2016.

But in the summer of 2016, as part of the acquisition of SolarCity, Tesla announced plans to bring in Panasonic to make solar cells using technology similar to Silevo's. It seemed that Silevo's technology wasn't working out as planned -- if it were, Panasonic wouldn't be needed at the plant at all.

It now appears that Panasonic will essentially take over cell manufacturing using its own technology, which adds a thin amorphous silicon layer to the cell to increase efficiency. What's interesting about moving to this technology is that Panasonic suspended operations at a solar-cell plant in Osaka, Japan, because of weak demand. If the technology was a true differentiator on efficiency at competitive costs, the company could have looked outside Japan to markets like the U.S., where high efficiency is in high demand. But Panasonic's technology wasn't differentiated enough to thrive on the open market, so it's interesting that Tesla chose Panasonic as the partner for Buffalo.

Tesla has a bigger plan for solar cells

Tesla hopes the Buffalo plant will help advance higher-efficiency solar panels that pack more power generation into each rooftop solar install, and will provide cells for Tesla's solar roof. This will also further vertically integrate the manufacturing business. Tesla now designs and makes solar panels, roof racking, and an energy storage product with an inverter. In theory, having development of these products under one roof should make for a more seamless design and install for Tesla.

For Tesla to differentiate itself from competitors in solar, this integration will be key. And the Buffalo facility could be where Tesla's solar vision comes together. 

Tesla has a lot to prove in solar

Saying you're going to make a high-efficiency solar panel or a solar roof is one thing, but actually doing it is apparently proving more difficult than Elon Musk and SolarCity had planned. Panasonic wouldn't have been asked to invest $256 million in the Buffalo solar facility if Silevo's technology were working as expected. And we still don't have confirmation that solar panels coming from the facility will be higher-efficiency than those from competitors, or cost-competitive.

Making solar panels is easier said than done. Tesla bringing in Panasonic shows that Silevo/SolarCity/Tesla are finding that out the hard way.

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