The clock is ticking on Tesla's promise to bring 1,460 jobs to Buffalo.
While the sprawling solar panel factory on South Park Avenue has been operating for more than a year, it wasn't until mid-April that state and Tesla officials agreed that the facility was essentially complete.
That started the clock on Tesla's promise to create 1,460 jobs at the RiverBend factory within two years and to bring 5,000 jobs to New York within 10 years. Tesla made the commitment in exchange for the state spending $750 million to build and equip the plant.
The completion date — set as April 16 under an agreement between the companies that is expected to be filed shortly with the Securities and Exchange Commission — is important because it starts a job creation timetable that Tesla must meet. It must pay penalties of as much as $41.2 million for every year that it falls short.
Those job-creation targets also have changed through a series of revisions that have been made to the RiverBend agreement over the last four years.
A review of the RiverBend agreement, which has been modified 10 times over four years, found that Tesla no longer must bring 1,440 jobs to the region from suppliers and service providers at the South Park Avenue factory.
The original agreement between the state and SolarCity called for 1,460 jobs at the factory and another 1,440 jobs at suppliers and service providers located in the Buffalo Niagara region for a total of 2,900 local jobs.
But subsequent revisions to the deal eliminated the requirement to bring in the 1,440 jobs from suppliers and service providers — a mandate that would be difficult to quantify and burdensome on Tesla's supply chain.
Tesla officials noted that the company already has surpassed its first employment target of 500 jobs, which comes due in April 2019. But the company will have to more than double the size of the factory's current workforce of more than 600 to meet its second job creation target in April 2020. The revised agreement calls for Tesla to create 1,460 jobs in Buffalo by April 2020, including 500 manufacturing jobs at the factory.
The job targets are in play at a time when Tesla's solar energy business has been shrinking as the company ramps up production of the Model 3 electric vehicle. For more than a year, Tesla, which moved into the solar energy business after acquiring SolarCity in November 2016, has been keeping a lid on its solar business to preserve cash it needs for the Model 3. Producing the Model 3 in high volume is seen by analysts as being essential for Tesla, which has never had a profitable year.
Tesla's first-quarter solar energy deployments were half as much as they were a year ago, and the company no longer is the nation's biggest residential rooftop installer. The 76 megawatts of solar generating capacity that Tesla installed during the first quarter was the lowest for any quarter since late 2013 and less than a third of its deployments during the first quarter just two years ago. Tesla is expected to report on its second-quarter solar deployments when the company releases its earnings Wednesday afternoon.
Last year, the company deployed just 522 megawatts of solar energy generating capacity — a little more than half of the stated 1,000-megawatt capacity of the Buffalo factory. That drop puts Tesla on a pace for solar business to be less than half the stated capacity of the Buffalo factory in 2018.
That's not what state officials expected when they agreed to spend $750 million in taxpayer money to build and equip the Buffalo factory. At that time, the solar energy business — then run by Tesla CEO Elon Musk's cousins — was expected to keep growing and easily absorb every solar panel that the Buffalo factory could produce.
Tesla is operating the RiverBend factory in a partnership with Panasonic, which makes conventional solar cells and panels at the plant and has built up a workforce of more than 300. Panasonic's employees at the factory count toward Tesla's job targets in Buffalo, state officials said.
Tesla's solar energy business is focusing on its new solar roofing product, which it started to install on customer roofs on a limited basis this spring.
Yet as it tries to conserve cash at the money-losing solar energy business, Tesla has pared back its solar sales channels. The company has stopped selling door-to-door, and now it also is scrapping a deal to sell rooftop solar through kiosks in Home Depot stores. Tesla last month said it would cut its workforce by 9 percent, or about 3,500 jobs, including the shutdown of more than a dozen solar energy installation facilities.
Instead, Tesla is focusing on online sales and sales through its electric vehicle stores, where it can showcase its cars, battery storage and solar energy offerings in a single stop for consumers who the company believes already are interested in sustainable energy.
While the Buffalo plant initially was slated to hit full production two years ago, its development has been slowed by ownership changes, uncertainty over federal tax credits for solar power and, most recently, tariffs on imported solar panels that have altered the cost-benefit equation for solar power.
"Despite the myriad of changes, be it in ownership, in federal tax incentives for renewables, or tariffs — you name it — and despite a lot of hand-wringing about all of these changes, they continue to march forward," said Howard Zemsky, the Buffalo developer who is the president of Empire State Development.
"I do believe their commitment to solar and renewables and to the Buffalo plant is part of their core philosophy, their corporate mission and DNA," Zemsky said. "I think that’s a good place to be for the long haul."