Should factories be big or small? It depends what you are making.Some execs like Charlie Gay at Applied Materials have advocatedsupersizing cell manufacturing facilities. To cut costs and gaineconomies of scale, they argue that the thing to do is build cellfacilities that produce over a gigawatt of cells a year and consumenearly a ton of silicon an hour. OptiSolar, the fast-growing solar company that crashed spectacularly, talked about putting glass factories to make substrates for thin-film cells under the same roof as cell lines.

But when it comes to modules, Roger Little, CEO of equipment makerSpire, says it’s better to go small. Put fifty factories capable ofchurning out 50 megawatts of modules a year, he told me in the hallwayat Surviving the Shakeout, a conference we held this week. You couldhave one in each state.

sunfabline webready 090307 Solar Factories: Big or Small?

Why? Policy is one reason. Both the federal government and thevarious states are linking green technology growth to job growth. InOregon, for instance, a module maker can potentially qualify for a $3million grant under the American Recovery and Reinvestment grant and a$5 million grant from state on a $10 million investment in productionequipment. (A whole 50-megawatt factory, buildings and all, might run$20 million.). The factory would generate product worth $140 million ayear and EBITA net income of around $15 million.

There are old factories out there for sale too. Drywall makerSerious Materials has generated heaps of goodwill in recent months byrevitalizing factories in Illinois and Pennsylvania.

Module manufacturing also only adds a portion of the overall cost ofmaking a panel and doesn’t require the same ornate capital equipment orprocesses as producing cells. If you analogize it to electronics,making cells is like producing chips while modules are PCs. If the cellcosts are $1.80 a watt, the module costs are only 54 cents per watt.

Distributed manufacturing would also cut down transportation costs.Factories could be set up next to utility scale solar farms. No cratingor shipping needed — just truck the modules over on a fork lift. Afactory next to the utility farm could churn out modules capable ofproducing a kilowatt of power.

In all, the plan could produce 3,000 jobs said Little. Will it beadopted? Who knows, but there’s a good chance that local politicianswill love it.