SolarCity has agreed to acquire solar panel manufacturer Silevo for as much as $350 million in stock in a deal that puts the clean-energy company squarely into the production business.
The San Mateo, Calif., company also unveiled an aggressive and costly plan to build out manufacturing capacity over the next few years, starting with a massive solar panel plant near Buffalo, New York.
“Our intent is to combine what we believe is fundamentally the best photovoltaic technology with massive economies of scale to achieve a breakthrough in the cost of solar power,” SolarCity said in a blog post on Tuesday morning.
“We absolutely believe that solar power can and will become the world’s predominant source of energy within our lifetimes, but there are obviously a lot of panels that have to be manufactured and installed in order for that to happen,” it added.
Under terms of the acquisition, SolarCity will provide common shares worth $200 million at the close of the transaction, plus up to an additional $150 million worth if certain milestones are achieved, according to a filing with the Securities and Exchange Commission. Silevo is based in Fremont, Calif.
SolarCity leases, sells and installs rooftop solar panels for homes and businesses. Tesla Chief Executive Elon Musk is chairman as well as a major stakeholder.
SolarCity said the Buffalo plant will be one of the biggest in the world, a move reminiscent of Tesla’s recent plans to build the largest manufacturing plant for lithium ion batteries. The targeted capacity within the next two years is one gigawatt — or about the output of a nuclear reactor.
On an investor call on Tuesday, Musk said the new plant will be powered substantially through hydroelectric energy generated by nearby Niagara Falls. He said that will provide the dual benefits of lower costs and clean electricity.
But that’s just the start. SolarCity said it plans to build “one or more” plants with “an order of magnitude greater annual production capacity” in the loosely defined timeframe of “subsequent years.” It added it may acquire additional photovoltaics companies and plans to significantly expand its internal engineering capabilities.
Not surprisingly, analysts on the call inquired about the capital costs of the ambitious plans. The company said it is in discussions with potential partners.
SolarCity further explained the thinking behind the plans:
Given that there is excess supplier capacity today, this may seem counter-intuitive to some who follow the solar industry. What we are trying to address is not the lay of the land today, where there are indeed too many suppliers, most of whom are producing relatively low photonic efficiency solar cells at uncompelling costs, but how we see the future developing. Without decisive action to lay the groundwork today, the massive volume of affordable, high efficiency panels needed for unsubsidized solar power to outcompete fossil fuel grid power simply will not be there when it is needed.
To date, the company relied on third parties to provide solar panels. On the call, SolarCity Chief Executive Lyndon Rive said they expect to continue such partnerships, but that “suppliers need to keep up with the cost curve,” as it achieves cost efficiencies from the deal.
This article originally appeared on Recode.net.