Last week, SolarCity Corp (NASDAQ:SCTY) announced that it would acquire Silevo Inc for $200 million, which could go up to $350 million if Silevo meets certain goals. In his typical way to surprise investors, SolarCity chairman Elon Musk announced that he will build one of the world’s largest solar panel manufacturing plants in New York. The plant will produce Silevo’s high-efficiency panels. Elon Musk says this would make solar power far cheaper than power from fossil fuels.

SolarCity SCTY

SolarCity becomes a fully vertically-integrated solar company

Silevo purchase makes SolarCity Corp (NASDAQ:SCTY) a fully vertically-integrated solar company. Kevin Bullis of MIT Technology Review says that the acquisition would help the San Mateo-based company reduce installation costs and produce inexpensive solar power. Silevo has achieved the panel efficiency of 21%, with goals to achieve 24% efficiency in the next few years. It doesn’t have the highest panel conversion rate because SunPower Corporation (NASDAQ:SPWR) has already commercialized 21.5% efficiency. Anyway, SolarCity doesn’t have to be the best. It simply has to be better than the panels it buys at a similar price on the open market.

Bullis says Elon Musk’s decision to build a large factory in the U.S. is a daring move. Many U.S.-based solar manufacturers have failed miserably due to fierce competition from Chinese rivals. However, SolarCity Corp (NASDAQ:SCTY) has little choice as it has to bring down costs to keep growing. Another important thing is that Silevo claims it can make its high-efficiency panels as cheap as conventional ones by scaling up the current production capacity from 32MW to 1000MW or more.

SolarCity to get a temporary boost from New York subsidies

Kevin Bullis says it’s impossible for Silevo to attain cost reductions it is hoping for without sacrificing on quality. Subsidies from New York state could provide a temporary boost. One intangible factor that most experts seem to be ignoring is Elon Musk. The serial entrepreneur has a history of surprising markets with disruptive technological advances. And he has the vision to turn ideas into reality.

It would be interesting to see what Elon Musk and his R&D team do with solar modules inverters going forward. Silevo’s target of 24% efficiency is in sight, but that would be a history in about a decade. Maybe, Musk already has his eyes fixed on 30% panel efficiency.

SolarCity Corp (NASDAQ:SCTY) shares were down 1.12% to $68.23 in pre-market trading Wednesday.