SolarCity Corp Combining Its Manufacturing Plans With Tesla Motors Inc

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SolarCity Corp (NASDAQ:SCTY) has a grand plan energy storage, and it involves Tesla Motors Inc. (NASDAQ:TSLA). During a private conference in New York, SolarCity CEO Lyndon Rive said, in the next 5-10 years, every solar system his company sells will come with battery storage system. And the San Mateo-based company will still be able to produce power cheaper than utility companies.

Tesla’s Gigafactory to supply battery packs to SolarCity

Also present at the conference was the visionary entrepreneur and Tesla founder Elon Musk. Musk said Tesla and SolarCity are uniquely compatible. The vast manufacturing operations of two companies will make solar the most affordable source of electricity in the U.S. The San Francisco-based EV maker is building a $5 billion battery manufacturing plant in Nevada. Musk says the Gigafactory will double the global output of Lithium-ion batteries.

Elon Musk disclosed at the conference that a portion of Gigafactory’s output will be set aside for “grid-scale storage.” That means the electric car maker will keep manufacturing battery packs for SolarCity, only on a much bigger scale. SolarCity already sells battery packs to some of its customers for backup storage. The battery packs from Tesla will help SolarCity resolve the intermittency problem that has so far limited the use of solar power.

The U.S. solar installer has doubled its revenue every year since its inception in 2006. Lyndon Rive aims to maintain that pace. While Tesla will be supplying battery packs, SolarCity plans to build a giant solar panel factory in New York. In June, the company acquired Silevo, a high-efficiency panel maker, to compete cheap Chinese panels.

Risks remain for Tesla and SolarCity

The economies of scale coming from Tesla’s Gigafactory and SolarCity’s New York plant would help realize Rive’s ambition of keep growing at a faster pace. However, neither company is without challenges. For Tesla, an unexpected superior technology coming soon after Tesla builds its Gigafactory could render its investments obsolete.

SolarCity also faces the exact same risk. Lyndon Rive says Silevo has the “next-generation” technology that can compete with the low-cost panels from China. But many other U.S. panel makers, including Solyndra, have claimed that they could do the same.

SolarCity shares fell 2.09% on Friday to close at $64.61.

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