Natural Gas NOW
New York’s decision to invest in solar crony capitalism instead of simply allowing natural gas development may prove to be its most foolhardy decision ever.
The Los Angeles Times came out with an excellent piece recently regarding the solar crony capitalism of Elon Musk, the guy to which New York State is planning on throwing hundreds of millions of taxpayers money for the sake of upstate economic development when all it had to do was allow natural gas development, which would have financed itself, as all real capitalism does. It reveals the nature of Musk’s various enterprises, which are heavily dependent on government subsidies, as is the case with nearly all solar schemes.
Even so, the story failed to capture the musky odor of what happening, which is little more than the latest iteration of the age-old hustle routine performed by snake oil salesmen, mud hustlers and Wizards from Oz. When you’re really good at it, and Musk is, you don’t even need to sell that hard; the victims will fall over themselves rushing to get in on the act, the same way Tom Sawyer’s friends eagerly helped him whitewash the fence.
The entire piece, which tallies Musk’s $4.9 billion taxpayer take for his solar crony capitalism and other ventures, is well worth reading, but here’s the relevant part for New York:
Musk has similar success with getting subsidies for a SolarCity plant in Buffalo, N.Y. The company currently buys many of its solar panels from China, but it will soon become its own supplier with a new and heavily subsidized factory.
An affiliate of New York’s College of Nanoscale Science and Engineering in Albany will spend $750 million to build a solar panel factory on state land. SolarCity estimated in a corporate filing that it will spend an additional $150 million to get the factory operating.
When finished in 2017, the 1.2-million-square-foot facility will be the largest solar panel factory in the Western Hemisphere. New York officials see the subsidy as a worthy investment because they expect that it will create 3,000 jobs. The plant will replace a long-closed steel factory.
“The SolarCity facility will bring extensive benefits and value to this formerly dormant brownfield that provided zero benefit to the city and region,” said Peter Cutler, spokesman for Empire State Development, New York’s economic development agency.
New York is nothing if not a reactionary state. Breathe a few words about what’s politically correct and its leaders are on it, before you finish the sentence, with some over-the-top reaction intended to show the rest of us rubes how it’s done. That’s New York in a nutshell and why it’s such a mess. The solar crony capitalism detailed by the Times is hardly the only example but New York always does it one better, or one worse, as the case may be. That’s why it’s so vulnerable to schemes and when one looks at the SolarCity deal, it sure looks like one.
Son of a chiropractor father and a mother who taught massage and reflexology, Rive’s business career began at age 12, when he began teaching ballroom dance lessons to adults four times his age. He started his first company at 17, selling homeopathic remedies for arthritis, constipation, and other maladies. He adopted a network-marketing model, enlisting his mother’s clients and their friends as salespeople. The money flowed in—up to $20,000 a month. Soon Rive was spending so much time on his business that the principal of his public high school threatened him with expulsion.
Just the kind of guy you’d want to throw state money at, right? The whole SolarCity deal also got the attention of investigative reporter Jim Heaney, who wrote this in October of last year:
Gov. Andrew Cuomo is investing $750 million of taxpayer funds and the hopes of a community desperate for an economic recovery in a company that is losing money, weathering two federal investigations and facing, by its own admission, an uncertain economic future.
To hear Cuomo tell it, the construction of a solar panel manufacturing plant operated by SolarCity Corp. will be a “game changer,” a catalyst to reviving the Western New York economy. Indeed, the company is regarded as a leader in the burgeoning solar energy industry, has acquired promising technology to manufacture solar panels and has enjoyed soaring stock prices since it went public in December 2012.
But company officials, in their most recent filing with the Securities and Exchange Commission, expressed reservations about SolarCity’s long-term prospects.
“It is difficult to evaluate our business and prospects due to our limited operating history,” the company said in its quarterly report filed with the SEC for the period ending June 30.
The company’s short history has been written in red ink. SolarCity has lost $452.6 million since 2010, including $88.4 million the first half of this year, according to its filings with the SEC.
“SolarCity has been consistently unprofitable,” the financial magazine Barron’s declared in an August 2013 story entitled “Dark Clouds Over SolarCity,” which concluded that “the absence of sunlight surrounding SolarCity suggests that investors should steer clear of its shares.”
…The company that New York taxpayers are investing so heavily in has not been able to produce a profit for its shareholders.
The company’s SEC filings report net losses of $452.6 million from 2010 through June 30 of this year. The losses have grown larger each year, and if trends for the first half of this year hold, losses in 2014 will be nearly four times those of 2010.
Put another way, SolarCity is currently spending more than $2 for every $1 of revenue it takes in.
The company faces legal, as well as financial challenges.
SolarCity is one of three leading solar energy companies under review by the U.S. Treasury and Justice Department to determine if they inflated their installation costs to obtain federal tax credits and grants. The companies, according to press reports,charged customers considerably more than the industry standard to install rooftop units. In addition, the IRS has audited two of the investment funds SolarCity established with partner firms to finance portions of its work.
Heaney’s excellent and balanced investigation isn’t the only place you’ll find caution expressed. Here’s some of what the SolarCity’s SEC registration statement says about its solar crony capitalism:
Our business currently depends on the availability of rebates, tax credits and other financial incentives. The expiration, elimination or reduction of these rebates, credits and incentives would adversely impact our business.
U.S. federal, state and local government bodies provide incentives to end users, distributors, system integrators and manufacturers of solar energy systems to promote solar electricity in the form of rebates, tax credits and other financial incentives such as system performance payments and payments for renewable energy credits associated with renewable energy generation. We rely on these governmental rebates, tax credits and other financial incentives to lower our cost of capital and to incent fund investors to invest in our funds. These incentives enable us to lower the price we charge customers for energy and for our solar energy systems. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as solar energy adoption rates increase. These reductions or terminations often occur without warning.
That about says it all, doesn’t it? The whole thing is a raid on taxpayers, from the Federal and state incentives given to businesses and homeowners to install the solar systems down to the exemptions from both state income and property taxes and the direct subsidies from Empire State Development. It is solar crony capitalism from beginning to end with the taxpayers paying the bill every step of the way. Here’s more from Heaney (emphasis added):
The state investment includes $350 million in cash and $400 million in loans that New York will cover through grants if SolarCity meets its employment goals. In addition, the company won’t pay state corporate taxes because the state Legislature, at Cuomo’s behest earlier this year, eliminated corporate taxes on manufacturers. A state entity will also own the plant, meaning SolarCity will not pay property taxes.
That’s about as much solar crony capitalism as you can fit into one politically correct green project. It is for a supposed 3,000 jobs. Meanwhile, New York refuses to approve fracking, which the state’s own environmental impact statement says would likely create 53,569 jobs (see page 6-216) even as Susquehanna River Basin Commission data indicates there has been no negative impacts and no degradation trends with respect to water quality after several years of fracking south of the New York border in Pennsylvania. The Final SGEIS from the state’s Department of Environmental Conservation, in fact, reads like an endorsement for natural gas development until you get to the new parts that read like (and probably were) written by the NRDC gang that Andrew Cuomo is forced to try appease.
New York is a dysfunctional state and that’s why it’s a perfect target for the Musk bilk-em strategy. Solar crony capitalism found a home in New York. Musk’s defense?
Musk said the only government incentives he directly bargained for were state incentive packages for a launch site in Texas for SpaceX and Tesla’s battery plant in Nevada, but those incentives were already available to anyone applying for them, he said.
Tom Sawyer lives!