Tag: solar panels

Guest Post: The Two Stories of Tesla’s Solar Panels

Temple U. Professor Misty Blessley provides interesting blog topics monthly.

In our 2023 OM blog, New York State Built Elon Musk a $1 Billion Factory, we learned that building a solar panel facility was “a bad deal” for NY. The state built a massive plant and provided solar-panel manufacturing equipment. Tesla’s end of the deal was to churn out enough solar-panel shingles by 2020 to cover 1,000 roofs on a weekly basis.

These solar panels are finally on the verge of materializing, and with this are two stories. One connects Tesla’s long game in vertical integration and the other is New York’s long-delayed economic vision.

Tesla’s Long Game in Vertical Integration
Tesla’s new residential solar panels fill the company’s missing piece. The firm was missing the energy generator (aka solar panel). Despite the solar factory in New York, Tesla spent years relying on third-party suppliers for its solar panels. Now, it can fully optimize performance across the entire home energy stack. Tesla can vertically integrate the full chain from generation (solar panels), to conversion (inverter), to storage (Powerwall), and to consumption (EV charging).

New York’s Long-Delayed Economic Vision
This pivot finally gives New York its payout. By bringing solar panel manufacturing in-house, Tesla is delivering the kind of industry and employment the state originally hoped for. The region, once defined by its industrial decline, gains a foothold in the clean energy manufacturing economy. The move aligns with federal and state incentives that reward U.S.-made components, strengthening the economic logic behind NY’s investment. Tesla’s shift toward a unified home energy ecosystem mirrors the vision that justified the state’s $1 billion bet. The factory, once criticized as a stranded asset, now becomes the manufacturing backbone of Tesla’s residential energy strategy.

Tesla didn’t just release new solar panels. It connected the car in the driveway to the sun, and in doing so may have finally delivered the manufacturing story NY was waiting for.

Classroom Discussion Questions:
1. How is vertical integration good for Tesla? For Tesla owners? To compare this to an internal combustion engine, it is somewhat like having petroleum, a refinery and a gas pump in the garage or driveway.

2.  Knowing that Tesla’s occupation of the Buffalo facility is long overdue, what stipulations should a city or state impose on a firm when incentivizing a location decision to the tune of $1 billion?

OM in the News: New York State Built Elon Musk a $1 Billion Factory

The new Tesla facility in Buffalo was supposed to house a huge solar-panel operation, the largest one in the Western Hemisphere, but the project hasn’t turned out as planned. “It was a bad deal.” writes The Wall Street Journal (July 7, 2023).

But we have written about government incentives many times in this blog and discuss them in detail in Chapter 8 of our text, Location Strategies. When NY’s then-Gov. Andrew Cuomo, cut the ribbon in 2015, he proudly stated: “This is too good to be true.”  It seems he was right.

New York 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 also bought $240 million worth of solar-panel manufacturing equipment. Tesla said that by 2020 the Buffalo plant each week would churn out enough solar-panel shingles to cover 1,000 roofs. It is, however, averaging just 21 installations a week. The suppliers that Cuomo predicted would flock to a modern manufacturing hub never showed up. Auditors have written down nearly all of New York’s investment.

The state has agreed to amend the terms of its subsidy 12 times over the years, including by reducing the number of jobs to be created in manufacturing and shifting deadlines to accommodate the company. “In terms of sheer direct cost to taxpayers, this may rank as the single biggest economic development boondoggle in American history,” says a think tank founder.

Buffalo, once an engine of manufacturing, has stagnated for generations as industrial companies headed south. Previous efforts at renewal largely fell flat. In 2012, Cuomo said he wanted to spend $1 billion in state taxpayer money to turn Buffalo around.

America’s governors are swept up in an arms race of awarding packages of taxpayer money to attract industrial megaprojects. Last year, states gave each of eight company facilities more than $1 billion in tax breaks and other aid. In Wisconsin, a factory by Taiwan’s Foxconn that was to employ 13,000 workers in exchange for some $3 billion in state subsidies sits mostly empty. Suburban Virginia offered tax breaks to win a competition for Amazon’s “second headquarters,” but much of that project is on hold.

Classroom discussion questions:

  1. What incentives do governments often offer companies to entice relocation?
  2. What are the major factors that companies consider when making location decisions? (Hint: see Chapter 8 in your Heizer/Render/Munson text).

 

 

OM in the News: The Problem with Solar

California has been pushing for rooftop solar power, building up the largest solar market in the U.S., reports The Los Angeles Times (July 15, 2022) More than 20 years and 1.3 million rooftops later, the bill is coming due. Since 2006, the state, focused on incentivizing people to use solar power, showering subsidies on homeowners who installed panels but had no plan to dispose of them. Now, panels purchased under those programs are nearing the end of their 25-to-30-year life cycle.

The majority of solar panels are ending up in landfills

Many are winding up in landfills, and in some cases, contaminating groundwater with toxic heavy metals. Only 1 in 10 panels are actually recycled. The challenge over how to handle truckloads of contaminated waste illustrates how cutting-edge environmental policy can create unforeseen problems. “The industry is supposed to be green,” said an industry expert. “But in reality, it’s all about the money.”

“This trash is probably going to arrive sooner than we expected and it is going to be huge,” writes Harvard Business Review. “While all the focus has been on building this renewable capacity, not much consideration has been put on the end of life of these technologies.” Disassembling panels and recovering the glass, silver and silicon is extremely difficult.

Highly specialized equipment, furnaces, and workers are needed. Panels are classified as hazardous materials, which require expensive restrictions on packaging, transport and storage. The economics of the process don’t make a compelling case for recycling. Only $2 to $4 worth of materials are recovered from each panel. It costs $20 to $30 to recycle a panel versus $1 to $2 to send it to a landfill.

The number of installed solar panels in the next decade will exceed hundreds of millions in California alone, and that recycling will become even more crucial as cheaper panels with shorter life spans become more popular.

A lack of consumer awareness about the toxicity of panels and how to dispose of them is part of the problem. “There’s an informational gap, a technological gap, and a financial gap,” say experts. The only solution seems to be extended producer responsibility, in which the cost of recycling is built into the cost of a product at its initial purchase. Business entities in the product chain — rather than the public — would become responsible for end-of-life costs, including recycling costs.

Classroom discussion questions:

  1. Supp. 5 in your Heizer/Render/Munson text deals with this issue in detail. Which model(s) can be applied here?
  2. What is the “systems view,” the “commons view,” and the “triple bottom line view” in this case?