Renewable energy enthusiasts and anyone considering "going solar" got exciting news last week. SolarCity Corp. (SCTY.DL), chaired by Tesla Motors (NASDAQ: TSLA) CEO Elon Musk, signed an agreement to acquire solar panel maker, Silevo.

SolarCity is already one of the top installers of residential solar panels in the United States in part due to a business model allowing customers to avoid up-front costs. The addition of Silevo opens manufacturing possibilities for the U.S. company. The clean energy market is currently at $250 billion worldwide, the U.S. market being worth $17.7 billion of the total, according to Pew.

Great news for U.S. manufacturing

I wrote about U.S. tariffs imposed on cheap Chinese solar panels here and noted that one of the main problems facing U.S.-made solar panels was the difficulty in competing with similar products sold at a far cheaper price than they could afford to match.

One such Chinese solar panel manufacturer, JinkoSolar, announced in March it had achieved what the U.S. Energy Department's solar initiative, SunShot, had been working toward for the past three years: a cost-per-watt of under a dollar, or a reduction of total photovoltaic system costs of 75%. Although JinkoSolar's PV systems are low-cost, coming in at around $0.50 per watt, at press time Musk was insistent that with high enough volume, SolarCity would be able to lower its panel price to be competitive with JinkoSolar's. The company plans to use its unique high-efficiency panel design to sell fewer panels that will do the same job as cheaper, lower-efficiency panels. While they may initially cost more than JinkoSolar's panels, installing fewer panels will save on space, installation and maintenance costs, and material itself in the panel-making process.

During the press conference Musk said:

In order to really have a dramatic impact on solar power and in particular in order to have solar power compete on an unsubsidized basis ... with fossil fuel energy coming from the grid, it's critical that you have high-efficiency solar panels at a total installed cost which is as low as possible. There are really just two key endeavors for that: one is that economies of scale and the other is being sure that the fundamental technology is being scaled as best as it can be.

The panels themselves are about 15% to 20% more efficient than most basic panels sold today. "They incorporate thin films of silicon, which increase efficiency by helping electrons flow more freely out of the material, and they use copper rather than silver electrodes to save costs," notes the MIT Technology Review.

The U.S. alone consumed over 58.6 million tons of renewable energy (oil-equivalent), according to the BP (NYSE: BP) Statistical Review. The report shows that although renewable energy was the second-smallest overall percentage of the U.S. energy market (lagging behind biofuels for the No. 1 spot) it grew 16.2% over 2013, showing the largest growth percentage across the board in U.S. energy markets. However in comparison to the almost 19 million barrels of oil the U.S. consumed daily in 2013 it becomes clear that other renewable energy sources have a long way to go if they ever hope to catch up with oil, coal, natural gas, or nuclear energy.

The demand for energy is tremendously high and the customers are there; companies simply have to reach them. With the switch to high-efficiency U.S.-made panels SolarCity hopes to do just that.

Production plans

Although Silevo's primary manufacturing plant is currently in China, SolarCity wants to open one estimated to cost $350 million in Buffalo, N.Y., that will be three times the size of the current largest PV module manufacturing plant in the United States.

Co-founder Peter Rive indicated in a telephone press conference Tuesday SolarCity officials believed no import tariff, low energy and space costs, and having a highly automated manufacturing facility would aid in the achievement of competitive costs on the solar market.

SolarCity's initial target capacity for its Buffalo plant is to produce greater than one gigawatt within the next two years. Rive said the company hoped to exceed that goal. Ultimately the company expects to be installing tens of gigawatts a year, Musk added, which would put it among the top producers of photovoltaic cells worldwide. For comparison, U.S. solar installations in 2013 reached a total of just 4.4 gigawatts, about a third of what China produced during the same time period.

SolarCity plans to reach such numbers by focusing on manufacturing advanced panels instead of basic panels that are currently flooding the market.

Musk said the goal of the plant was to produce power cheaper than that of "coal or fracked gas." Switching to renewable energy sources is in our benefit as a society, but it is still significantly costlier to install and use solar panels than to pay to use the power that comes from the grid. As the U.S. solar industry has grown over the past decade, even as much as 41% over 2013, according to a report by Green Tech Media research and the Solar Electric Industries Association, now may be the right time to break into the manufacturing side of things.

Looking ahead subsidies that currently benefit renewable energy companies will likely disappear possibly keeping those who had not already moved production to the U.S. to outsource for cheaper labor and materials. Additionally utility companies are already eyeing funds given to homes and businesses that contribute solar power to the grid; continuing to pay for individuals to give power to the companies will eventually result in more contributors than clients. The future of the grid is uncertain but SolarCity believes the use of solar power and PV cells will continue to rise.