Elon Musk's biggest challenge yet: Recharging Buffalo, NY

[M II A II R II K]

Elon Musk's biggest challenge yet: Recharging Buffalo, NY


11 Jun 2015

By Tim Mullaney



Read More: http://www.cnbc.com/id/102748671

Elon Musk has earned a reputation as a man not afraid to take big risks and tackle big challenges. But is the touch Musk has shown in building a manufacturing empire for the 21st century—from SpaceX rockets to Tesla Motors electric cars and batteries—ready to help put a shine back on a depressed U.S. manufacturing city?

- SolarCity, the nation's largest seller of residential solar-power systems—of which Musk is chairman—is building a giant plant in Buffalo, New York, to make rooftop solar panels at a long-shuttered Republic Steel plant. Henry Ford had River Rouge; Musk and SolarCity have a Buffalo solar panel manufacturing plant named Riverbend.

- As the factory rises, a promised 5,000 jobs are just beginning to materialize. But it's not just a bet on Buffalo. How far the solar panel plant can go will also determine how well the domestic solar manufacturing industry can reclaim share after much of it was unable to survive the first half of this decade in a market roiled by steep price cuts and a trade war against Chinese solar panel makers.

- "You have a brownfield that has had no meaningful activity for years and you put in 3,000 jobs, not counting [its impact on] the local dry cleaner and mini-mart owner," said Peter Cutler, director of communications and special projects at Empire State Development in Buffalo.

- Roughly 1,400 people are expected to work for suppliers, and another 2,000 supplier jobs are estimated to be generated in the rest of New York, said Alain Kaloyeros, president of the State University of New York Polytechnic Institute, who led the New York side of negotiations for the SolarCity incentive package.

- "For [local] manufacturing, this is a gain of more than 5 percent, and Buffalo still has an outsized concentration of jobs in manufacturing,'' said Adam Kamins, a regional economist at Moody's Analytics. "To boost that with a modern industry is significant. If Buffalo can become a leader, which it's positioned to do, an investment like this can pay off.''

- The plant will make enough panels each year to produce a gigawatt of electricity, or a little more than 1 percent of the nation's power. That's slightly more than all the panels SolarCity buys now from outside manufacturers, but if the company maintains its historical 80 percent annual growth rate, the demand will be there by the time the plant hits full capacity, said SolarCity CEO Lyndon Rive, who is also Musk's cousin.

- As aging Rust Belt cities go, Buffalo has been in better shape than many. Despite losing 10,000 manufacturing jobs in the last decade, the metro unemployment rate is 5.5 percent, exactly the national average. (By contrast, Detroit is at 6.2 percent.) But the city is part of a relatively depressed upstate belt New York Gov. Andrew Cuomo wanted to help out when he came to office in 2011.

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[dc_denizen]

elon musk is a genius. Still early days but I think he will evaluated as the better of Steve jobs by future business historians. Great news for buffalo.

[Austinlee]

Nice

[mrnyc]

damn. would be nicer in the cleve, but good for buffalo.

[TexasPlaya]

Interesting incentive package NY setup to secure this deal. Thought it was strange to open this up in upstate new york, but money talks.

[dc_denizen]

I wonder what the cost of living comparison looks like between Buffalo and some of the job-poaching cities like Dallas and Atlanta and Charlotte. Success is going to turn the tables on these cities eventually. Buffalo is probably cheaper than all of them, plus you have the Adirondacks, Finger Lakes, and Canada in your backyard.

[kcexpress69]

Nice choice!! Glad to see Buffalo in the mix when it comes to reviving depressed rust belt cities

[Downtown Bolivar]

I was just there today taking a look--it's a very impressive building taking shape. To be clear, the article makes it sound like Solar City is being located within the old Republic Steel plant and that isn't true. The plant was long gone and in fact they spent a lot time on site work excavating the basements of the old and hauling out scrap. The original steel plant employed about 10,000 people and was largely shuttered in the 80's along with the much larger Bethlehem steel plant to the south to of the city. It's great to get some manufacturing back into the city--before this project, it looked as if Buffalo was going to get out of the manufacturing business.

[montréaliste]

I'm very happy about that bit of news. It is great to see an overhauled locomotive like Buffalo get back on track.

[Wheelingman04]

Great news. Buffalo is a gem waiting to shine brightly.

[mstem58]

I agree, it is great news and it's in addition to all the other economic development happening, from the IBM IT tech center, the medical campus with an explosion of construction projects including the largest medical school project in the country as well as a new childrens hospital and construction of a new headquarters for Delaware North Corp. which will include a Westin Hotel. This is in addition to the new Harbor Center at the Citie's Canalside and numerous loft apartments going up in old abandoned warehouse buildings as well as in new construction.
BTW: Erie county showed a slight increase in the latest census estimate.

[bobdreamz]

Originally Posted by TexasPlaya

Interesting incentive package NY setup to secure this deal. Thought it was strange to open this up in upstate new york, but money talks.

I keep seeing these ads here in Florida for New York state and how companies won't have to pay taxes for the first 10 years.

http://startup.ny.gov/

[Eightball]

Really seems to be a race to the bottom with these ridiculous incentive packages so many states are willing to give out nowadays... would love to see this addressed on a national level. There's no net gain when a company just moves from state to state.

[llamaorama]

I wonder how the "cost of doing business" we hear about from politicians changes as one moves up the skill/income scale.

Sure-if you wanted to start a manufacturing plant or call center in the US, to compete with overseas the workers are only going to get paid $11-$15/hr. Companies are going to shop for locations in southern states where it is possible to skimp on benefits and workmans comp and other things.

But what about a high tech facility that mostly employees educated workers with higher salaries? Red vs. Blue state differences might matter less than cheap real estate and the right workforce, etc.

[Dr Nevergold]

Originally Posted by TexasPlaya

Interesting incentive package NY setup to secure this deal. Thought it was strange to open this up in upstate new york, but money talks.

It really isn't strange to open up shop in Buffalo, the city is so cheap to do business in that with Cuomo's new 0% taxes for business, combined with many reverse tax incentives and infrastructure development, companies looking to do business there actually can do so more cheaply than almost anywhere in America.

In the 5 years I spent there, I saw a city I first visited in 2001 go from depressing to a relative boom town. Highways that hadn't been improved in decades were getting redone, bridges revamped that hadn't seen maintenance in decades, new skyscrapers for the first time in many years, and a renewed sense of self. Buffalo is absolutely on an uptick, and its sad most people think its still the 1970's when the problems really took root. It isn't that period anymore.

Something these old American-side Great Lakes cities can prove to us is that you don't have to have hundreds of thousands of people moving into an area to reuse, repurpose, and be successful. If Buffalo maintains its roughly 1.1 million regional population and learns how to bring old neighborhoods back to life, it will become a first set of American cities that have learned how to become sustainable. And sustainability is not something America has traditionally been that good at. Americans LOVE to get up, walk away from problems and go somewhere else. Pittsburgh is the first city to really succeed in a revitalized, repurposed central city. Buffalo is showing how to be sustainable as well.

The odd thing is, these cities saw the worst capitalism could deal a city. There's something these cities teach all of America in regards to sustainability and getting there after a market collapse.