We recently explained how Tesla needs to build what it is calling a "gigafactory" for batteries in order to survive. The rest of the world is not building enough lithium ion storage to meet what Tesla thinks will be surging demand, so it has decided it must do it itself by making a very costly factory.
Today, SolarCity (Elon Musk's other company) announced it will have to do the same for solar panels. The firm unveiled plans to build one of the world's largest high-efficiency solar panel plants.
"We expect to have to install 10 gigawatts [of high-efficiency panels] a year," Chairman Elon Musk said on a conference call announcing the move. "If you look at the current capacity in the world, we're not able to do that right now."
It's not just a supply question. Solar panel prices have been falling in recent years, but have begun to bottom out, and could soon begin climbing again as government subsidies for renewables start getting phased out. And in a call with BI, CTO Peter Rive said recent U.S. moves to slap tariffs on Chinese panels served as a "catalyst" for looking into building the firm's own manufacturing plant in the U.S.
Will the demand be there? The firm's own polling suggests there is. But if you assume that electricity customers are price agnostic, rooftop solar still has some ways yet to go to become cost competitive with fossil fuels. Musk recognizes this, and and beating fossil fuels at their own cost game remains his ultimate goal. As of last year, the levelized cost of energy for rooftop generation remained about double coal.
Goldman has explained that it still very much believes in SolarCity. Its systems have a great shot at getting to parity as long as storage costs come down. But as Goldman, and Barclays, have said, storage costs will come down only if the real gigafactory, Tesla's, can take off.
SolarCity thus needs its two gigafactories to continue to thrive.
Musk continues to be the most ambitious executive acting to address climate change. Let's see what happens next.