Nanosolar Inc. will occupy a former Cisco Systems facility in south San Jose, converting it into a manufacturing plant for "thin-film" solar cells, which are produced in narrow flexible sheets. The company, based in Palo Alto, also will open a factory in Germany, the world's largest market for solar technology.

The $102 million plant on San Jose's Hellyer Avenue will make enough solar cells each year to generate 400 megawatts of electricity, roughly enough to light 300,000 homes. The facility will be ready for commercial production next year.

The move further strengthens Silicon Valley's position as a hotbed for research into renewable energy. A cheaper, more efficient solar cell has become a kind of holy grail for a small army of local engineers, entrepreneurs and venture capitalists.

"Silicon Valley has no birthright to be a leader in solar power, but we can earn it," said Martin Roscheisen, Nanosolar's chief executive officer. "The capability is there. The talent is there."

Founded in 2002, Nanosolar seeks to drastically reduce the cost of solar cells by getting rid of traditional materials and manufacturing processes.

Unlike the standard solar cell, Nanosolar's don't use silicon. Instead, a blend of metals including copper and gallium is placed on metal foil in a process much like printing. The solar film is 100 times thinner than a silicon wafer but can produce roughly the same amount of energy, Roscheisen said.

Companies have experimented with thin-film solar cells for years but have had trouble finding a cheap way to mass-produce them.

"This is still a market in its infancy," said Joel Makower, co-founder of Clean Edge, a research firm that follows renewable energy. "The real question is how quickly can Nanosolar, or anybody else, get up to scale?"

Nanosolar, he said, also will have to prove that its products last. Standard silicon-based solar cells have been sitting on rooftops for decades, enduring blistering heat and freezing cold. They often last more than 20 years.

Nanosolar chose to locate in the Bay Area to tap the local pool of highly trained workers. The factory is expected to employ 200 to 300 people.

San Jose beat out other Bay Area cities, including San Francisco, that wanted the facility.

The company, which didn't want to build a plant from scratch, needed a specific kind of building -- one with 20-foot ceilings to accommodate the machinery and enough electricity to run them. San Jose also offered to handle any of the company's permit applications quickly. Although San Francisco made similar offers, Roscheisen said San Jose had more experience accommodating fast-growing companies.

"The difference is, it's kind of routine for San Jose to do these things, and it's exceptional in San Francisco," he said.

E-mail David R. Baker at dbaker@sfchronicle.com.

This article appeared on page D - 1 of the San Francisco Chronicle