New York Governor Andrew Cuomo, speaking at the Sustainable Development Capital Region Conference in Schenectady, NY. November 29, 2016. Photo courtesy of HUD.
This is a cautionary tale of what happens when governments attempt to insert themselves in fast-moving markets. Look how the taxpayer money was spent without considering that market forces are more powerful than subsidies. Julie Bykowicz and Ted Mann report in The Wall Street Journal:
BUFFALO, N.Y.—New York spent nearly $1 billion over the past decade on Elon Musk’s ambitious plan for what was supposed to be the largest solar-panel factory in the Western Hemisphere, one of the largest-ever public cash outlays of its kind.
“You almost have to pinch yourself, right?” New York’s then-Gov. Andrew Cuomo said at a construction ceremony for the factory in 2015. “That this is too good to be true.”
New York state paid to build a quarter-mile-long facility with 1.2 million square feet of industrial space, which it now owns and leases to Tesla for $1 a year. It bought $240 million worth of solar-panel manufacturing equipment. Musk had said that by 2020 the Buffalo plant each week would churn out enough solar-panel shingles to cover 1,000 roofs.
The Tesla solar-energy unit behind the plan, however, is averaging just 21 installations a week, according to energy analysts at Wood Mackenzie who reviewed utility data. The building houses some factory workers, but also hundreds of lower-paid desk-bound data analysts working on other Tesla business.
The suppliers that Cuomo predicted would flock to a modern manufacturing hub never showed up. The only new nearby business is a Tim Horton’s coffee shop. Most of the solar-panel manufacturing equipment bought by the state has been sold at a discount or scrapped.
A state comptroller’s audit found just 54 cents of economic benefit for every subsidy dollar spent on the factory, which rose on the site of an old steel mill. External auditors have written down nearly all of New York’s investment.
“It was a bad deal,” said state Sen. Sean Ryan, a Democrat who represents Buffalo. “A cautionary tale is you can’t give governors too much power to get on the phone with egotistical billionaires.”
Action Line: The best allocator of capital is always the market. Government subsidies are an investment by politicians in their own political capital, and in the pockets of their friends. You invest (as the taxpayer), and they win. Click here to subscribe to my free monthly Survive & Thrive letter and become a Survivor.
E.J. Smith - Your Survival Guy
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