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Solar energy: building a new industry in WNY from the ground up

One of the world’s biggest solar panel factories is arising from the rubble of a long-abandoned steel plant in South Buffalo.

The potential exists for a second solar panel plant in Buffalo, the product of a budding relationship between the state and a prominent Japanese solar module manufacturer.

With SolarCity pledging to create 2,900 new jobs from its new factory now under construction in the RiverBend complex on South Park Avenue and its suppliers, and with Japanese-manufacturer Solar Frontier studying the feasibility of opening a plant here, state officials are optimistic the region is moving toward becoming a center for solar energy manufacturing.

But building an industry from scratch isn’t cheap. To do it, the state is pledging to invest $750 million from Gov. Andrew M. Cuomo’s Buffalo Billion economic development initiative to build and equip SolarCity’s factory. It also would provide millions of dollars in support for Solar Frontier, if the company decides to build a plant here.

“This is part of establishing the governor’s Buffalo Billion initiative and establishing Buffalo as a hub for renewable energy,” said Alain Kaloyeros, the chief executive officer of the SUNY Polytechic Institute and a key player in the governor’s efforts to make Buffalo a global center for clean energy.

Already, the SolarCity plant, scheduled to open sometime during 2016, would be one of the world’s biggest factories, with the annual capacity to make enough solar modules to generate 1,000 megawatts of electricity. SolarCity executives have said they need the Buffalo plant’s capacity to meet what they see as the continued rapid growth in the demand for new solar energy systems.

If SolarCity’s projections are accurate, the Buffalo plant’s capacity would essentially match the company’s demand for solar panels in 2016. If demand keeps growing – an assumption based on expectations that the cost of solar energy systems will keep dropping – SolarCity has agreed to give the state an exclusive four-month window to negotiate a potential expansion of its Buffalo manufacturing capacity, to as much as 5,000 megawatts.

And if the state succeeds in landing Solar Frontier, it could go a long way toward establishing the critical mass of suppliers, trained workers and infrastructure to turn the region into a magnet for other energy ventures, especially in the solar industry.

“It becomes the center of the universe,” said Pradeep Haldar, the SUNY Polytechnic vice president who is spearheading the negotiations with Solar Frontier. “The solar business is growing by leaps and bounds, especially in the U.S., so this is a huge opportunity.”

Luring a panel maker

Solar Frontier, which signed an agreement with the state last April to study opening a solar panel factory in Buffalo and establishing its U.S. headquarters in Albany, agreed last month to supply solar modules for a new, highly energy-efficient building on the SUNY Polytechnic campus in Albany.

Officials said it was a key first step in cementing the relationship between the state and Solar Frontier, one of the world’s leading manufacturers of solar panels, with the establishment of a research and development arrangement the next major hurdle. The third milestone would be an agreement to set up a factory in Buffalo.

“The governor doesn’t want a pure R&D relationship. It doesn’t make sense for us,” Kaloyeros said. “The R&D ... is the foundation for setting up manufacturing in Buffalo.”

State officials have described Solar Frontier’s collaboration with the nanoscience college as an important part of the company’s interest in setting up production facilities outside Japan, where it currently produces all of its modules.

Solar Frontier specializes in CIS thin-film solar panels, which use glass instead of a traditional silicon base. The company has said its panels can top 21 percent in efficiency, better than most conventional solar modules and about on par with the efficiency of the panels SolarCity expects to produce in Buffalo. Most thin-film solar panels are made with expensive high-end glass, but Solar Frontier’s technology can use normal glass, which costs only about a tenth as much.

Residential use grows

Solar energy and wind projects have accounted for a little more than half of all new power-generating capacity during two of the past three years, according to a report by GTM Research.

New solar projects accounted for 10 percent of all new generating capacity during 2012, but that share jumped to 29 percent in 2013 and it had captured 36 percent of the new projects through the first three-quarters of last year. Only natural gas, which has boomed because of the plunge in commodity prices caused by the huge increases in shale gas production, outstripped solar energy’s share of new generating capacity.

While much of solar’s growth has come from massive utility-scale generating projects, mainly in states like California, Nevada, North Carolina and Texas, the residential solar market also has been expanding rapidly.

Residential installations – SolarCity’s target market – jumped by an annual pace of 58 percent during the third quarter and new capacity topped the 300 megawatt mark for the first time during a single quarter.

“Residential solar has become a remarkably consistent, growing market,” said Shayle Kann, a GTM Research senior vice president. “By the end of this year, there will be more than 600,000 homes outfitted with solar, and we see no signs of a slowdown next year. By 2017, we expect the residential sector to be the largest in the U.S. solar market.”

That bodes well for the Buffalo Niagara region if the state succeeds in building a critical mass of solar industry manufacturers here, said John R. Frank Jr., senior vice president of the electronics group at CH2M Hill, a Colorado-based engineering firm.

“The opportunities in New York are tremendous,” he said.

The key will be getting the SolarCity factory off the ground and running efficiently – a step that will send a strong message to the rest of the solar industry about the appeal of the Buffalo market, and the region’s efforts to develop a marketable brand in the renewable energy industry.

“A lot of eyes are going to be on it from around the world,” Frank said. “That’s going to become the next level of branding.”

Cost, tax breaks drop

Two factors are driving solar energy’s growth: Costs are coming down as components become less expensive – the cost per watt of residential solar systems dropped by 6 percent from the first quarter to the third quarter of last year, GTM Research said – and installers get volume-related efficiencies.

In addition, lucrative federal and state incentives have helped narrow the gap between the cost of solar systems and power purchased through a utility.

GTM Research analysts believe the solar market’s tipping point – where it will be able to compete on even footing with utility-generated power – is when the cost of solar is 10 percent less than utility power. Just three states – California, Arizona and Hawaii – have reached that point. In most states, including New York, solar power still costs at least 5 percent more.

With incentives set to shrink, SolarCity is pushing to reduce its costs and make its solar energy systems more competitive with utility-produced power. The Buffalo solar panel factory is a big part of that strategy, with SolarCity executives believing that the high-efficiency modules it will produce here will help it reduce costs, as will the savings it gets from producing panels at such a high volume.