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State may sell $50M in unused Tesla facility equipment in storage

About $50 million in equipment that the state purchased for use at the Tesla Inc. solar panel factory in Buffalo is being stored in a Niagara County warehouse because it isn't needed at the RiverBend facility.

State officials confirmed reports by former Tesla employees that equipment that the state purchased to make solar panels at the Buffalo plant has been moved out of the facility to a former Bell Aerospace building in Wheatfield.

Tesla doesn't need the equipment, which was purchased years ago, as it begins to ramp up production of the solar roof that is expected to be the primary solar energy product at the RiverBend factory.

Officials from Empire State Development said the state is considering its options for the state-owned equipment. They said the equipment isn't technologically obsolete.

"We are seeking alternative uses for the equipment, including making it available to other high-tech businesses that are considering a move or expansion in New York, or selling to interested bidders," Empire State Development said a statement.

Those other uses could include being part of an incentive package to attract other solar cell manufacturers to the state, or academic research.

Tesla is paying to move and store the equipment, state officials said.

Tesla's solar panel factory in South Buffalo is affected by a big drop in deployments. (Derek Gee/News file photo)

The state, as part of its incentive package for the RiverBend factory, initially agreed in 2014 to spend $400 million on equipment that would be used in a factory that New York planned to spend $350 million to build.

That $750 million investment pledge by the state under the Buffalo Billion economic development plan eventually ballooned to $958.6 million as costs rose. The state ultimately spent $660 million to build the factory and $298.5 million on equipment, according to a state report.

State officials, led by then-SUNY Polytechnic Institute CEO Alain Kaloyeros, contended at the time that the structure of the incentive package, with the state owning the equipment and the building, offered protection to taxpayers in the event that the project didn't pan out as planned. If that happened, taxpayers could use the building and equipment to attract other companies, argued Kaloyeros who has since been convicted and sentenced to 3½ years in prison in a corruption case related to the construction of the Tesla factory.

The state's initial plan to develop the RiverBend factory involved a California startup company, Silevo, that was trying to develop high-efficiency solar panels. Silevo then was acquired by SolarCity, at the time the dominant installer of residential rooftop solar systems, which expanded the scale of the Buffalo factory.

But SolarCity relied on a debt-driven strategy that offered consumers solar panels at no upfront cost, eventually putting it on the verge of collapsing under the weight of its debt. Tesla, the electric vehicle maker whose CEO, Elon Musk, also was SolarCity's chairman, stepped in to buy SolarCity in 2016.

Under Tesla, the focus shifted to a solar roof product that had solar cells built into glass shingles, rather than conventional rooftop solar installations. Tesla, strapped for cash and resources as it launched its less costly Model 3 sedan, also diverted resources away from the solar business, causing installations to plummet to their lowest level since 2013. Development of the solar roof also took much longer than first indicated, with installations only now beginning to slowly increase.

State officials said the shift in focus to the solar roof meant that some of the equipment no longer was needed by Tesla, which former employees said had been stored in unused portions of the RiverBend factory.

But as Tesla prepared to increase production of its solar roof and shifted production work to Buffalo for electronic components for its electric vehicle superchargers and battery products, it needed more space, and loaded crates of equipment it didn't need on to trucks to take it to the Niagara County storage facility.

Tesla also has purchased additional equipment for use at the Buffalo factory, state officials said.

Panasonic, Tesla's partner at the Buffalo factory, said last week it would stop making solar cells and modules at RiverBend by May and be out of the facility by September. Tesla's demand for conventional solar panels has plunged as its installations have dwindled, and the company has been using Chinese suppliers for the solar cells in its solar roof.

Panasonic's pullout will result in the loss of 380 jobs, but Tesla said it may hire some of the workers. The company also said its employment in Buffalo now tops 1,500, which would allow it to avoid a $41.2 million state penalty had it fallen short of the target by April 2020. State officials said they must verify Tesla's employment, which includes contract workers hired through staffing agency who can qualify to become Tesla employees after 90 days. Tesla's starting wage is $17 an hour.

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