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6 things to watch as Panasonic gears up to start production

The long-awaited start of production at the Tesla Inc. solar panel factory in South Buffalo is fast approaching.

Here’s what’s happening and what to expect in the coming months.

It’s Panasonic, not Tesla, that is starting production first.

Panasonic, a Japanese consumer electronics and energy products giant, has a deal with Tesla to operate in a portion of the South Park Avenue factory.

There, Panasonic will make solar cells and modules – the energy-generating building blocks that are used to produce conventional solar panels and, eventually, the new solar roofing product that Tesla plans to make in Buffalo.

Why Tesla wants to team up with Panasonic in Buffalo

Solar cells are the individual devices, similar in some ways to a semiconductor, that generate electricity by converting sunlight into electrical energy. A solar module is made up of several dozen of typically-square solar cells that are interconnected. Each solar panel contains several modules that are connected.

Panasonic is starting in the middle.

When Panasonic starts production, it won’t be making the solar cells that are the basic ingredient of a solar panel. Instead, Panasonic plans to start out by importing the solar cells from its factories in Japan.

In Buffalo, Panasonic initially will take those imported solar cells and assemble them into modules, said Mark Shami, the president of the Panasonic business unit that will operate within the Riverbend factory.

If all goes according to plan, Panasonic will start making solar modules in Buffalo by the beginning of September. From there, the plan is to rapidly accelerate production, with a goal of producing modules at an annual rate of more than 200-megawatts by October.

After that, the second phase of production will kick in, with the Buffalo plant adding the capacity to produce the smaller solar cells that go into the modules. The company’s current target is to be producing cells and modules at a 550-megawatt annual pace by February.

 As production picks up, so will Panasonic’s hiring.

Panasonic has hired its first batch of 44 production workers. Half of them started in late August. The rest will start after Labor Day. By the end of this year, Panasonic hopes to have hired another 100 production workers, along with a few dozen members of its professional staff, company officials said.

By the end of March, when the company expects to be making solar cells, as well as modules, the company plans to have about 300 workers at the South Park Avenue factory.

Panasonic plans to use “cutting edge technology” to produce solar modules at the Buffalo factory, Shami said.

The company also is hoping to make its solar cells and modules better. Panasonic executives hope that the next generation of its solar technology will be able to convert as much as 25 percent of the sun’s energy into electricity, up from a top rate of around 22 percent in laboratory conditions today.

Column: Panasonic will play big role at Buffalo's SolarCity factory

That would be a big jump, and if Panasonic can pull it off, would be a big help in Tesla’s push to reduce the cost of its rooftop solar at a time when low natural gas prices have made conventional electricity cheaper, making it more difficult for consumers to save money by going solar.

Higher efficiency panels would allow Tesla to install fewer panels on a customer’s roof – or include fewer power generating solar shingles in one of its upcoming solar roofs – reducing the overall cost of the system.

But the research that goes into the effort to make Panasonic’s next generation of solar cells and modules more efficient won’t be done in Buffalo. “All the research and development is done in Japan,” said Terry Van Epps, Panasonic’s talent acquisition manager in Buffalo.

Tesla will be the main customer for the cells and modules that Panasonic produces.

Panasonic’s deal with Tesla helped Tesla in two ways.

First, it saved Tesla more than $250 million. That’s how much Panasonic agreed to invest in its operations within the Buffalo plant, freeing Tesla from having to spend its own money to do solar cell and module production within the factory.

That’s exceptionally important for Tesla, which just raised $1.8 billion in new capital from bond investors to help pay for the launch of its more affordable Model 3 electric vehicle and rapidly ramp up production of the new sedan. It’s the Model 3, not the solar energy business that Tesla acquired in its acquisition of SolarCity, that is first in line for the company’s investment capital. In fact, Tesla CEO Elon Musk said earlier this month that the company’s spending on the Buffalo solar panel factory will be “relatively light for the next few months.”

The deal also locked in Tesla as a key customer for the solar cells and modules that Panasonic will make in Buffalo. The agreement sets up a system for Tesla to buy Panasonic’s solar cells and modules, in amounts that will be determined each quarter and refined in monthly meetings between executives at both companies. The agreement also sets the prices that Tesla will pay for Panasonic’s cells and modules, subject to revision, but the details are not spelled out in a heavily-redacted version of contract filed with the Securities and Exchange Commission.

Tesla is moving slowly.

The electric vehicle maker, now focused on the launch of its first mass-market vehicle, is saying it still plans to start producing solar panels and its solar roofing panels by the end of this year. Musk has said he expects production to ramp up rapidly once it starts.

But unlike Panasonic, Tesla has largely kept quiet about its own production and hiring plans in Buffalo. With a little more than three months left before its end-of-2017 deadline passes, Tesla has yet to hold any hiring events or make any public attempts to recruit the 1,460 workers that it has promised to eventually employ in Buffalo.

Musk has said Tesla will deliver on the job creation and investment commitments it made to secure $750 million in taxpayer subsidies for the Buffalo plant through Gov. Andrew M. Cuomo’s Buffalo Billion economic development plan. But for now, the company isn’t saying how it will do it.

Job fair is key part of Panasonic hiring effort for RiverBend factory

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