When SolarCity co-founder Peter Rive talks about the sprawling solar panel factory that’s going up in South Buffalo, it’s all about the cost.

Not the $900 million that the factory will cost to build and equip – the state’s $750 million subsidy for the plant will cover roughly 83 percent of that expense.

Rather, Rive talks about the money that SolarCity will save by making some of the world’s most efficient solar panels in a factory that it runs itself, reducing its reliance on the Chinese suppliers that now provide all of its solar panels.

He shared that message with Wall Street analysts last week at a gathering that took place just hours before the news broke that Congress was willing to keep propping up the solar energy industry for another five years by extending the federal tax credit on installations.

When Rive spoke to the analysts, SolarCity executives were feeling increasingly optimistic that the 30 percent investment tax credit would be extended, but they still stressed that a renewed federal lifeline wouldn’t deter them from their push to bring down the cost of solar power to the point where it can compete on its own with utility-generated electricity.

“Our cost road map is a freight train. We’re not going to change that,” said Tanguy Serra, SolarCity’s president, during the analyst presentation. “Power is a commodity. We have to be the lowest cost provider.”

This is how SolarCity’s South Buffalo plant fits in with that push.

It now costs SolarCity around $2.84 for every watt of solar energy capacity that it installs. When you factor in the federal tax credit, which effectively chops 30 percent off the cost of a rooftop solar system, SolarCity can save customers in states like California, where electricity costs even more than it does here, about $400 a year on their electric bills.

But those costs aren’t low enough to make solar energy viable in many states, even with the tax credit. And even with the generous subsidy, SolarCity still loses money and burns through more cash than it generates. That’s a big reason why the company shocked Wall Street in October by scaling back its growth target to around 40 percent a year, roughly half its traditional growth rate, to focus on improving its cash flow and putting its business on more solid financial footing.

Even without the Buffalo solar panel factory, SolarCity was pushing to reduce costs by more than 10 percent. The Buffalo factory, Rive said, will allow it to trim costs as low as $2.25 per watt in 2017 and $2 per watt by 2019.

Here’s how:

At the moment, SolarCity relies on solar modules that use conventional technology. It hasn’t changed much over the years, and a typical panel can generate about 260 watts of electricity. Depending on the panel, it usually can convert somewhere between 15 percent and 18 percent of the sun’s energy into electricity.

So it now takes about 24 solar panels to create a rooftop solar energy system that can generate 6 kilowatts of electricity.

That will change once the Buffalo plant is at full production, probably sometime during the spring of 2017. The panels SolarCity will make at the South Park Avenue factory will be able to convert 21 percent to 22 percent of the sun’s energy into electricity. So instead of a typical module yielding 260 watts of power, SolarCity’s panels will be able to generate as much as 350 watts.

That means SolarCity won’t need to install as many solar panels on each roof to generate that same 6 kilowatts of electricity. If fact, a typical system probably will need 33 percent fewer panels – 16 in all.

That will allow SolarCity to expand its potential market because it now will be able to install systems on smaller roofs. Fewer panels also will need smaller racking systems to attach them to the roof. They’ll need less wiring and less other equipment, driving costs down even further.

And by making the solar panels in a factory that will span more than 1 million square feet of space and be capable of churning out as many as 10,000 panels each day, its economies of scale could allow SolarCity to reduce its module cost to around 55 cents per watt, Rive said.

“Fifty-five cents is basically our short-term goal,” Rive said. “That’s the goal we believe we’ll achieve once Buffalo is up and running.”

SolarCity’s target, Rive said, is to have the initial equipment installed in the Buffalo plant during the spring so that production can begin on a limited scale by the end of June.

SolarCity’s challenge will be to learn how to manufacture – and to do it well. The company made panels on a tiny scale at a plant in China and is making them on an even bigger scale on a test line in Fremont, Calif. The ramp-up in Buffalo will be the biggest jump in scale yet.

The panels that SolarCity will make in Buffalo could have an even bigger impact on commercial and utility-scale installations – a part of the solar business that SolarCity sees as a growing market. The panels will use what’s called bi-facial technology, which will allow the modules to generate electricity from the underside of the panels.

For commercial and the biggest utility-scale installations, which typically are installed slightly above the ground, like the solar array at the University at Buffalo, the bi-facial technology will allow it to capture even more of the sun’s energy.

In theory, Rive said, that could push the efficiency of SolarCity’s panels in those installations as high as 26 percent, Rive said.

“It’s really important to appreciate the further potential in this technology over time,” he said.

• [Editor:tianyawei]