Larry Rulison | The Times Union (Albany, N.Y.)
ALBANY — Gov. Andrew Cuomo’s deal with SolarCity to build a $900 million solar panel factory in Buffalo is based on a funding model developed at the SUNY Polytechnic Institute in Albany that turns the tables on traditional economic development.
Instead of providing SolarCity with state grants or tax breaks to subsidize the cost of the factory, the state will use its own money to build and equip the facility and SUNY Poly will retain ownership.
SolarCity will essentially be allowed to use the one million-square-foot factory for free over a 10-year period — as long as it lives up to a promise to create 3,500 jobs and invest $5 billion expanding its operations in the state.
But that comes with a catch. If it doesn’t live up to its promises, the company could face up to $412 million in penalties, or $41.2 million for every year it is in violation of its deal with the state, according to a filing made with the U.S. Securities and Exchange Commission.
The deal represents a major change in how the state is building its high-tech economy with SUNY Poly essentially as the developer and landlord. It also follows the model that New York is now using to attract computer chip companies to a site it owns outside of Utica.
“Rather than giving money directly to private companies, the state invests in core infrastructure and equipment and uses that equipment as the incentive to attract companies to establish themselves in these new high-tech facilities,” Cuomo’s office said Tuesday, explaining the way the deal was structured.
The deal also shifts a substantial amount of the risk in the venture to SolarCity, which has never made solar panels before. The company will be using technology developed by a California company called Silevo, which SolarCity acquired this week in a $350 million deal.
Silevo currently makes solar panels at a 34-megawatt factory in China that has just 165 employees.
But the factory it is planning in Buffalo would be the largest ever built in the United States, employing 1,465 employees and capable of churning out one gigawatt’s worth of solar panels a year, enough to power 150,000 homes.
SolarCity, the largest solar installation firm in the U.S., believes it can significantly reduce its overall costs by making its own panels instead of buying them from others.
“It certainly is a significant challenge,” said Michael Barker, a senior analyst with NPD Solarbuzz, a solar industry research firm based out of Santa Clara, Calif.
A SolarCity spokesman declined comment, saying security regulations bar the company from discussing details of the deal as it seeks to raise $500 million in a separate bond offering with investors.
However, in the bond offering documents, the company admits that it faces a “number of risks” with its Buffalo plan, including everything from operational costs to issues with Silevo’s technology.
“Any failure to achieve our per watt cost projections would cause our financial condition and operating results to suffer,” the company said.
This article was written by Larry Rulison from Times Union and was legally licensed through the NewsCred publisher network.