By Tony Farina
Will Solar City, the nation’s largest solar provider, ever come close to delivering the 3,000 jobs in Buffalo and 5,000 total jobs upstate that were forecast in 2013 when Gov. Andrew Cuomo unveiled plans for the state to invest $750 million through the Buffalo Billion to establish the 1.2 million square foot GigaFactory?
The job estimates have come down amid deep concerns about the financial stability of Solar City and the solar industry and now there are several lawsuits challenging Solar City’s much-needed merger with Tesla Motors, which would provide badly needed cash.
And even if the legal challenges to the merger fail, there was already concern on Wall Street, where a leading energy industry analyst previously downgraded the chances of a successful merger from 100 percent to 50 percent because of Solar City’s uncertain financial position.
As reported in PoliticoNewYork, UBS energy analyst Julien Dumoulin-Smith believes that if the $2.3 billion merger fails, the financial position of the factory in Buffalo would be considerably more challenging.
“A lack of further cash draw would necessarily imply no more construction progress, which would render the factory incomplete indefinitely,” the analyst wrote. And the problem is that if the merger is rejected by nervous Tesla shareholders, there’s no sign that there are other bidders out there ready to step in, raising serious questions about the viability of Solar City.
Despite Gov. Cuomo’s continued optimism about Solar City’s future, the green energy commitment the state has made is clearly in trouble on several fronts, not the least of which is the scheduled expiration at the end of the year of federal solar investment tax credits that save businesses and homeowners 30 percent off the price of solar installations. According to the latest published reports, the credit would disappear for residential installations at the end of 2016 and the credit will drop to 10 percent for businesses. So far, Congress has done nothing to stop that from happening. And with a presidential election in full swing, it all may depend on what happens in November.
One local investor, with considerable experience in the energy industry, offered this comment when asked about Solar City’s future: “It is doomed to fail,” he said, speaking on the condition of anonymity, citing among other things uncertainty about what the next president’s position will be on international energy tariffs and the growing challenge across the country to the solar energy boom if the federal tax credit dries up.
For Gov. Cuomo, a Democrat, the commitment to green energy has political benefits, but now he is faced with so much uncertainty about Solar City’s viability that even a photo op at the state’s Solar City investment earlier this month couldn’t ease concerns.
“Clean energy has to happen, that we know,” said Cuomo at the site where the shell has been completed on South Park but there’s not much inside. The legal effort to block the Solar City-Tesla merger won’t be heard until next month and despite the governor’s best efforts, the Solar City story has not been written.
And, of course, there is the continuing investigation by U. S. Attorney Preet Bharara’s office into the Buffalo Billion that has generated corporate nervousness about pumping any more money into the governor’s upstate development plans.
There’s no indication that Bharara has taken his foot off the accelerator of the corruption probe even as the centerpiece of the state’s Buffalo Billion initiative, Solar City, faces the uncertainty of being able to deliver on all the hype, given the cash challenges it faces.