Share this article

print logo

The $750 million question: When will SolarCity open?

By now, the sprawling solar panel factory in South Buffalo was supposed to be buzzing with activity.

If everything had gone according to the original plan, hundreds of factory workers would be working at the Tesla Inc. factory.

Instead, on a recent weekday afternoon, only about 50 vehicles were in the factory's parking lot, which has spaces for 500, and just a couple of workers wearing safety vests walked in and out of a factory that is about the size of a dozen Home Depot stores.

Backed by $750 million in taxpayer money, the nearly $1 billion factory is the centerpiece of Gov. Andrew M. Cuomo's Buffalo Billion economic development initiative and meant to be a beacon of hope for an economically depressed city.

So here's the $750 million question: When will SolarCity deliver on its promise?

The answer is tied to repeated delays that are not unusual for a project that has involved three different owners, vastly expanded in scope and introduced a major new product to the mix. And Elon Musk, Tesla's chief executive officer, has a long history of backing ambitious projects with equally ambitious timetables that often prove to be far too optimistic.

There are signs that the factory is getting closer to opening, although not on anything close to the accelerated timetable state and company executives first outlined. Some equipment is being installed in Buffalo. Experienced solar manufacturer Panasonic has been brought in to make solar cells at the facility. And Tesla is starting to test production of its solar roof tiles at its pilot factory in California – a key step before production shifts to Buffalo.

The giant SolarCity plant at RiverBend in South Buffalo in November. (Derek Gee/Buffalo News file photo)

The delays so far largely stem from ownership changes, SolarCity's deteriorating finances and shifts in the technology the plant will use and the products that the factory will make. With those issues now largely settled under Tesla's ownership, the plant appears to be on track to open sometime this year, first making conventional solar panels and then the new solar roofing tiles that Tesla introduced last fall.

Tesla's target is to have the factory reach full production sometime during 2019, three years later than the original schedule.

Tesla advertises jobs

Tesla has promised to hire 500 people to work in the factory within two years of its completion and create a total of 1,460 jobs in Buffalo within five years. But the clock does not start ticking on those deadlines until all of the manufacturing equipment has been acquired and delivered to the factory – a condition that has not yet been met.

Howard Zemsky, the Buffalo developer who heads Empire State Development, said he remains confident that the solar panel factory still will create all of the jobs that Tesla has promised.

"There have been some bumps along the road, as you would imagine in a dynamic industry with three owners," Zemsky said.

"It's irrefutable that the company is on a substantially better launch pad than any of us could have possibly imagined at any point in the last three years," Zemsky said. "Does having three owners in three years slow things down? Of course. Is it in the best possible position to succeed going forward? I think, absolutely."

Tesla officials say hiring has started – the company outlines 19 different types of job openings on its website and its partner, Panasonic, lists 30. But Tesla executives also decline to say how many workers have been hired or provide details on their timetable for building up the factory's workforce.

Officials at local job training sites that have worked with Tesla and its predecessor, SolarCity, say they have heard of only a smattering of factory workers being hired.

Plans for factory revised

Tesla, which leases the factory from the state, hasn't given a public tour of the South Buffalo facility since last fall. It turned down a request from The Buffalo News to see inside.

While Tesla officials have been reluctant to discuss specifics about its Buffalo factory, they say the company is making progress in bringing the factory online. Equipment is being installed and more deliveries are expected in the coming weeks.

They note that plans for the factory have been revised since Tesla introduced a new solar roofing tile product last October that is expected to account for a major portion of the plant's production.

Tesla also struck a deal with Panasonic last December to produce solar cells at the Buffalo plant and bring in an investment valued at more than $250 million.

A worker drives equipment across the roof of the massive Solar City manufacturing facility at RiverBend while it was under construction in May. (Derek Gee/Buffalo News file photo)

The company said it is finalizing the floor plan for the Buffalo factory as it prepares to start making the solar roof tiles on a test basis this month at its much smaller pilot facility in Fremont, Calif. Company officials said Tesla is ordering the final pieces of equipment for the South Park Avenue factory and "actively recruiting" local employees in Buffalo.

Initial production at the Buffalo plant this summer will involve conventional, high-efficiency solar panels produced by Panasonic. Production of the solar roofing tiles is expected to shift to Buffalo shortly after the completion of successful pilot production at Tesla's California plant, Tesla officials said, without being more specific.

A year from now, Zemsky said he expects the plant to have more than 250 workers in place – half way to its goal of having 500 factory workers – and be ramping up production and hiring rapidly.

"It has all of the ingredients for great success," Zemsky said. "When that cake comes out of the oven – whether it's in the second quarter or the fourth quarter or mid-2018, I don't know – all of the ingredients are there for tremendous success. That's what I believe."

Musk known for delays

Musk, Tesla's CEO, wants to turn the company into a renewable energy powerhouse that combines its electric vehicles with solar energy and batteries to both power its vehicles and store electricity from its solar panels.  The Buffalo plant is a key part of that vision, with an ambitious plan to pump out 10,000  panels daily from what will be the largest solar manufacturing plant in the Western Hemisphere.

But analysts note that Musk has a long history of tackling ambitious projects with even more ambitious timelines that often are delayed repeatedly. Tesla's Roadster electric vehicle, for example, launched nine months later than expected, while its Model S was delayed more than six months and its Model X was more than 18 months behind schedule.

Tesla has "a soft track record" in meeting its vehicle delivery targets, said Barclay's analyst Brian Johnson in a note to investors earlier this year.

"If you look back on this project five years from now, eight years from now, I think we'll say something like, I don't know why we were wringing our hands over which quarter of the year it was," Zemsky said.

Plans have changed

A lot has changed since Cuomo first announced a deal to build a solar panel factory for fledgling manufacturer Silevo in 2013.

Since then, Silevo was acquired in 2014 by SolarCity, which quickly said it would increase the scope of the South Park Avenue factory five-fold, with plans to expand the Buffalo plant's capacity so that it could produce enough panels to generate 1,000 megawatts of electricity a year.

Then SolarCity, which had built a dominant market share as the nation's largest installer of residential rooftop solar, saw its market slow. While company officials initially expected to install about 1,200 megawatts of generating capacity in 2016 – which would have been enough to easily absorb the expected production of the Buffalo factory – it instead installed less than 900 megawatts.

The company, which relied heavily on money it raised from investors to support leases that allowed homeowners to install solar panels with no money down, then saw its borrowing costs rise and concerns increase that its ever-growing appetite for new capital was becoming more than the market would bear. SolarCity's losses also swelled, totaling more than $1.5 billion in 2015 and 2016 combined.

As SolarCity's financial health weakened, Musk stepped in, with Tesla buying SolarCity in November.

Tesla makes its mark

Under Tesla's ownership, SolarCity's business has undergone further changes. The company has scaled back marketing, shifted its sales strategy and cut more than 3,000, or 20 percent, of its jobs.

And it moved to stand out from its competitors by developing a line of solar roofing tiles.

Tesla started taking orders for the solar roof last month, requiring a $1,000 deposit from customers. Without providing specifics, Tesla officials said demand for the solar roof has been strong, giving the company a "very large" backlog of orders for the tiles, which will account for a big part of the Buffalo plant's production

Tesla also brought in Panasonic – an experienced solar manufacturer with its own high efficiency solar panel technology – as a partner at the Buffalo factory to make the solar cells that will go into the panels and roofing tiles the factory will produce. Tesla now says the panels produced at the Buffalo plant will be a hybrid product that combines elements of the high-efficiency technology from both Silevo and Panasonic.

As part of that deal, Panasonic is investing $256 million in the Buffalo factory, further easing Tesla's financing demands as it gears up for production to begin.

Building costs increase

As plans for the solar panel factory have changed, so has the agreement between the company and the state.

The original deal between SolarCity and the state has been amended 10 times since 2014, partly to reflect the increase in the scope of the project.

The changes also reflect a shift in how the money invested in the factory by the state has changed. With the total cost of building and equipping the SolarCity plant now estimated at more than $950 million – with the state picking up $750 million of that expense – more of the state funding has been allocated to pay for the construction of the building, while less was devoted to the purchase of equipment.

In turn, the amendments shifted more of the state's money toward construction costs, which have run about $125 million over budget, according to state documents reviewed by The Buffalo News.

Workers install utilities in the enormous mechanical building at the factory at RiverBend while it was under construction in January 2016. The company has not given a public tour of the site since November. (Derek Gee/Buffalo News file photo)

The changes are not insignificant. Part of the original deal, touted by state officials, was that the agreement protected taxpayers against Silevo – and later SolarCity and now Tesla – failing to live up to their end of the bargain. That's because the state would own both the building and much of the equipment inside it.

By shifting more of the state funding toward the building, the contract amendments have reduced the amount of state money being used to purchase equipment and increased Tesla's obligation to purchase machinery. Tesla – not the state – will own any of the equipment purchased with the electric vehicle maker's funds.

The state, which originally committed to spending $400 million on equipment, now is obligated to buy $275 million of the factory's machinery. Tesla's commitment increased to $125 million, more than double its original obligation.

The News requested from several agencies information about state payments related to work or equipment purchases at SolarCity. The governor’s budget office supplied six months’ worth of requested documents. None of the reports, each running one or two pages, provide many details about what the money spent on other than such things as “construction activities” or “manufacturing equipment.’’

As construction of the factory wrapped up, payments have turned to a trickle since March compared with some of the biggest-spending periods over the past couple years. Those state payments do show money has been spent with companies, including Burkle North America, Applied Materials and Singulus, that supply equipment used to make solar products.

Few details on hiring

SolarCity has done some hiring outreach. Last fall, it contacted Erie Community College to hire students trained in building management and maintenance, such as heating, ventilation and air conditioning backgrounds, said Mark Hoeber, the academic dean of technology programs and the point person between the college and SolarCity.

“They were asking us for students,’’ Hoeber said.

Hoeber, who has met with SolarCity personnel executives, said the company has hired some students. To date, he said, the company’s hiring outreach to ECC has been for non-manufacturing jobs at the plant and not for the kinds of positions the company will need once it begins operations.

In late 2015, SolarCity turned to several churches, community centers and other places to help it recruit future workers for the factory. The city's Buffalo Employment & Training Center held two job fairs by the company in December 2015. The company held additional job sessions late last year.

Demone Smith, who heads the training center, recalled that SolarCity a couple years ago sent word it was looking to hire people with advanced manufacturing skills.

“The hiring deadline kept being pushed back and back and back,’’ Smith said. The delays became long enough, Smith said, that those who might have been interested in joining SolarCity could wait no longer and took other jobs.

Still, Smith said, SolarCity has hired some people – he did not have a precise number – from the training center. The state Labor Department has taken over some of the local recruitment effort for SolarCity that had previously been done by local agencies.

Smith said he speaks regularly with a SolarCity executive who is a point person for contacts by various government officials and private groups. Smith said he believes SolarCity’s purchase by Tesla and the Panasonic manufacturing arrangement has contributed to delays in opening the factory.

News Reporter Justin Trombly contributed to this story.

There are no comments - be the first to comment