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SolarCity: A Bigger Boondoggle by the Day

shale gas outrages - Tom Shepstone ReportsTom Shepstone
Shepstone Management Company, Inc.

 

SolarCity, part of the Buffalo Billion Boondoggle engineered by the corrupt Cuomo administration, becomes a bigger boondoggle by the day.

Although we’ve monitored the SolarCity debacle here and the media is full of reports regarding Preet Bharara’s investigations of the Buffalo Billion deal, which may well yet bring down the crime boss himself, no one has done a better job of recording the slow motion collapse of the boondoggle than Jim Heaney at Investigative Post. He is now out with two more reports showing what a phony deal the whole thing is. It is cronyism, corruption and political correctness rolled into one, but what is, perhaps, most interesting is the lessons it provides regarding the futility of massively subsidizing renewables when inexpensive, clean, low-carbon natural gas is available to do the same thing and simultaneously invigorate an Upstate economy desperately needing it.

The big news of late on SolarCity, of course, is the announcement that job creation associated with the project will only be a third of what was originally forecast. You can read all the details here but, check out these highlights (emphasis added):

SolarCity has sharply reduced its job creation commitment for the solar panel manufacturing plant under construction in Buffalo from 1,460 to 500 jobs, according to state records and filings the company submitted to the Securities and Exchange Commission last fall.

The company remains committed to a total of 1,460 jobs in Buffalo, but the majority of them will not be employed at the plant. Documents do not specify what kind of jobs they might be.

…The changes have been noted in the details of public documents since last fall, but have not been otherwise disclosed by state or SolarCity officials…

The reduced manufacturing job commitment represents a setback for the project, the cornerstone of Gov. Andrew Cuomo’s Buffalo Billion program. The state is investing $750 million to build and equip a 1.2 million square foot plant for SolarCity, which has been touted as the largest solar panel manufacturing plant in North America.

The state’s investment works out to $1.5 million per manufacturing job, or $514,000 per job for all 1,460 positions in Buffalo.

The revised manufacturing job commitments are in marked contrast to numbers detailed in previous SolarCity filings with the SEC, an earlier agreement between the company and state, and public statements by Cuomo…

The changes agreed to last fall that reduced the number of manufacturing jobs in Buffalo from 1,460 to 500 also involved an increase in direct jobs statewide from 3,500 to 5,000 within 10 years.

…While the governor and other state officials have continued to praise the SolarCity project, they have not publicly disclosed the reduced jobs at the plant at Riverbend, save for the posting of a revised agreement on the website of the Fort Schuyler Management Corp., which is managing the project.

Notice how SolarCity is playing with the numbers in the same way Congress does budgets; by promising the good stuff down the road…way down the road where it can’t be challenged because its only a projection. The projected installation jobs 10 years from now mean nothing, of course, unless New York continues to massively subsidize the whole enterprise as Cuomo has done to date, a dubious proposition, if there there ever was one, given the unforgiving laws of economics. More importantly, 960 of those 1,460 jobs that were promised have been shifted to never, never or just maybe land, bringing the actual state investment per manufacturing to an incredible $1.5 million per job.

SolarCity CuomoBuffaloBillion.4eb235dd

Worse, as Heaney explains in another post, the financials are deteriorating badly:

The company released its first quarter earnings report Monday afternoon and it was drenched with more red ink than usual. SolarCity lost a record $283.1 million. That was double the $149.9 million it lost for the same period in 2015.

The stock market reacted as you’d expect, with the trading price dropping by 21 percent from the close of trading Monday to Tuesday. SolarCity is now going for $17.54 a share, down from $57.26 as recently as mid-December.

Yet another crisis in investor confidence was triggered by a worse-than-expected first quarter loss and downward projections on solar panel installations, which is the company’s bread and butter…

The rollout of the plant is already behind the original schedule. The company’s future prospects grow bleaker with each passing quarter. Does it have the money, or the chops, to run the largest solar panel manufacturing plant in the Western Hemisphere? Will it even still be in business by the time the plant will open?

A review of that earnings report confirms Heaney’s observations. It starts off with the typical upbeat, make the best of it, statement that “SolarCity kicked off 2016 with solid momentum in installations, financing, and core cash generation.” Following a few pages of such blather, though, the reality surfaces, as it is revealed SolarCity megawatts of solar installed were up 40% year-over-year, but the loss from operations was up 70% and the total net loss was up 93%.

There is also this about the crucial role unfair state mandates such as net energy metering (NEM) and subsidies play in the success of the SolarCity business plan.:

In stark contrast with Nevada’s approach, SolarCity and some of our solar peers along with all of the major utilities in New York announced a partnership that provides a roadmap for NEM to continue at retail pricing through 2020…

We are grateful to the creators and backers of the Reforming the Energy Vision (REV) in New York for giving us the opportunity, and for the utilities of New York—ConEd, National Grid, NYSE&G, Central Hudson, Orange and Rockland, and Rochester G&E—for recognizing the benefits that distributed solar brings to the table and being open to how true collaboration can make it work for all constituencies involved. We hope more states can follow their example and look forward to a distributed solar future that is embraced by everybody.

NEM is the system where solar gets fed into the grid at full retail price even when it’s providing energy not needed at the time and, therefore, valueless. It might better be called highway robbery metering and that’s why Nevada dropped it and other states are re-evaluating. SolarCity loves it though because they are, in the end, the robbers who get those indirect subsidies to sustain their economic model. And, of course, they are completely enthralled with New York’s Reforming the Energy Vision (REV) program promoted by their friends at NRDC, Bill McKibben and Mark Ruffalo. Why wouldn’t they love a system that forces utilities to buy their product when they don’t need it? Why wouldn’t they love a State that gives them an additional $1.5 million for every manufacturing job they create?

solarcity _riverbend_factory

SolarCity Plant Under Construction

The SolarCity boondoggle, the key element of the Buffalo Billion fiasco now being looked at intensely by Preet Bharara is in serious trouble, Andrew Cuomo is in bigger trouble and the taxpayers of State of New York are in the biggest trouble of all. Meanwhile, the same people who brought it forth have refused to entertain hydraulic fracturing and natural gas pipelines that would lower carbon emissions, create jobs and deliver clean inexpensive energy without any gimmicks or subsidies.

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13 thoughts on “SolarCity: A Bigger Boondoggle by the Day

  1. Why such a negative approach to alternate energy ? Could it be people have more say in costs and a handful can’t make profit from their ventures……HVHF will never be safe but will ALWAYS remain Industrial next to our homes ….Period !

    • Perhaps you think a solar manyfacturing plant is not industrial? One that uses toxic chemicals daily, and for the life of the plant? Drilling and cracking are only around for a relatively short time by comparison. Look at any completed wellpad and compare to the Solar City facility.

      Of course at the rate Solar City is losing money, that plant may never be used.

  2. “Because of the seasonal snow load, the 23-acre roof of what is planned to be the world’s largest solar-panel factory won’t sport a single solar panel, project engineers say”
    “Cuomo overcame Buffalo’s meteorological disadvantage with an offer too good for any firm to refuse. The development site, once occupied by a steel factory demolished years ago, was taken over by SUNY Polytechnic—qualifying it as one of Cuomo’s START-UP NY zones, which means that the SolarCity operation won’t pay state or local taxes”

    http://www.city-journal.org/html/cuomo-way-14444.html

  3. “Meanwhile, in Buffalo, New York taxpayers effectively have become business partners with Elon Musk, the tycoon who chairs SolarCity but is probably best known as chief executive and main shareholder in SpaceX, which builds rockets, and of Tesla Motors, maker of much-hyped electric cars. As the Wall Street Journal recently reported, Musk has engaged in some decidedly “unconventional” financial-engineering tactics to keep his business empire afloat. For example, SpaceX has been the biggest buyer of $214 million in bonds issued by SolarCity to finance its aggressive expansion—and Musk has taken out nearly a half-billion dollars in personal credit lines, secured by his shares in SolarCity and Tesla stock, to buy shares of those two companies when they needed capital.”

    http://www.city-journal.org/html/cuomo-way-14444.html

  4. The stock price is not relevant here. Buying and selling stock does not provide any revenue to the company, except on the initial public offering. It is just drone-like speculators guessing how much revenue, growth and, possibly, dividends will affect the price at which they buy or sell.

    If you play “follow the links”, you come to a Buffalo News story on May 10, 2016, which has this tidbit at the end (http://www.buffalonews.com/columns/david-robinson/solarcity-still-needs-buffalo-20160510):
    But SolarCity’s no-money-down financing plans means that the company needs to raise billions in new money to pay for its steadily rising installations. This year alone, SolarCity needs to raise about $2.8 billion in financing, Tanguy Serra, the company’s chief financial officer, said during a conference call Monday.
    “Financing, for us, is really like working capital,” Serra said.
    While SolarCity already has raised about $1.1 billion, its financing costs have been rising as investors have grown more wary. And SolarCity has sought to ease its reliance on the financing markets by trying to generate more cash than its operations use by the end of the year, even if it means slowing the company’s growth.”
    If they can’t afford to finance the installations, then any production anywhere is a drain on their balance sheet. The cost of lines of credit and the quality of their corporate bonds will determine production for the next few years.

  5. surprise! Cuomo needs $485 million MORE right now to cover costs on his utterly corrupt Buffalo Billion project that just slashed job projections by 65%. the sooner that guy is behind bars the better.

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