on November 21, 2013 - 9:21 PM
, updated November 21, 2013 at 10:07 PM
The Cuomo administration is committing $225 million – the biggest single investment by the state in a new business venture in the Buffalo Niagara region – to try to turn Western New York into a Silicon Valley for green-energy companies.
The massive investment, which accounts for nearly a quarter of the funds pledged through the Buffalo Billion initiative, is part of an all-in effort by Gov. Andrew M. Cuomo that, within the next 18 months, would build a pair of state-owned high-tech facilities, bigger than a Walmart store, packed with the type of state-of-the-art equipment and machinery that clean energy firms covet but can’t afford on their own.
“It’s probably the most exciting economic development announcement that we’ve had statewide since I’ve been governor,” Cuomo said. “This project, I believe, is a game-changer for Western New York.”
At the heart of Cuomo’s plan is a six-building hub for clean-energy research, development and manufacturing that will be built on 90 acres of a 200-acre brownfield site of the former Republic Steel plant on South Park Avenue.
Two California companies – one making a new type of LED lighting and the other solar panels – have committed to move into the center’s first two buildings, pledging to invest $1.5 billion of their own money in a venture expected to bring 850 jobs to the site. That brings the entire investment in the project, including the state’s portion, to $1.7 billion. State officials said almost 800 of the positions are expected to be filled by new hires from Buffalo Niagara or by those who move here from elsewhere.
The idea is to create a cluster of green-energy businesses – all drawn to the site by the coveted resources inside the state-owned facility – that will build on itself, becoming a powerful magnet that will attract other businesses in the same industry.
Adding further to the appeal: Companies that move into the 90-acre site’s four other buildings – but not the two California firms – likely will be able to avoid paying any state taxes for 10 years under the Start-Up New York program that begins next year.
“How do you compete with zero taxes?” Cuomo asked.
Leading the way to the new complex, to be called the Buffalo High-Tech Manufacturing Innovation Hub at Riverbend, are two companies now based in California.
Soraa, a Fremont, Calif., company that makes high-efficiency LED lighting with different material than most lights of that type, is pledging to invest $750 million of its own funds in a facility that will employ 375 people. Soraa executives said the company will relocate its R&D and manufacturing operations to RiverBend.
Thomas Caulfield, Soraa’s president and chief operating officer, said the company’s technology can produce LED lights that are brighter and more cost-effective than LED lights that use conventional technology. The investment in the Buffalo facility will help it further expand and refine its technology.
“The light quality and efficiency will continue to improve,” he said.
Silevo, also based in Fremont, makes solar panels that it says are cheaper and more efficient.
The company said in June that it wanted to build a factory in the United States to increase its market share and avoid the shipping costs on products made at its factory in China. Zheng Xu, the company’s chief executive officer, said the company picked the Buffalo site despite being courted by four other states that offered “very competitive incentives.”
Xu said the benefits of the clean-energy hub, combined with the pool of engineering talent produced at Western New York universities and the region’s low-cost electricity, helped sway the company, which expects to produce its solar panels here just as cheaply as it can make them in China.
Silevo, which has about 40 employees at a California office that will remain open, hopes to eventually hire 475 people to work at its Riverbend factory, which is expected to be ready to begin production in early 2015.
Once the facilities are ready, the companies are expected to take a year to 18 months to get up to full employment, said Alain E. Kaloyeros, the senior vice president and CEO of the SUNY College of Nanoscale Science and Engineering.
The jobs could cover a wide range of skill levels, from high school and community college graduates, to people with advanced university degrees, Kaloyeros said. Green-energy jobs also tend to pay about 50 percent more than the average job, which would further the economic impact from the green-energy investments.
Kaloyeros, the driving force behind the Albany nanoscience initiative, said the two companies were picked to be the pioneering businesses at the clean- energy hub from a group of about 30 firms from within the industry that were vetted by state officials.
“Those weren’t just two companies that were picked because they showed interest in New York,” he said. Kaloyeros said Soraa and Silevo were picked because their technology has been shown to be viable and the companies have shown a strong bent for innovation.
The companies also use sophisticated manufacturing methods, not unlike those used by computer chip manufacturers, “that China cannot steal and put them out of business,” he said.
Silevo, for instance, has orders for solar panels that could generate about 300 megawatts of electricity. With the company’s Buffalo manufacturing plant expected to have a capacity to produce solar panels with a combined generating capacity of about 200 megawatts each year, Silevo’s current order backlog is big enough to keep the plant operating at full capacity for 1½ years, Kaloyeros said.
Xu, the former Applied Materials executive who co-founded Silevo in 2007, said the company currently is not profitable, although he hopes the business will break even by next summer. Once the Buffalo facility is fully operational, he said, the company could be earning gross profits of as much as 30 to 35 cents for every dollar of sales.
“The production costs in Buffalo are as good or as cheap as in China,” where the company’s factory can, in a single year, make enough solar panels to generate 30 megawatts of electricity, Xu said.
Silevo may have to raise “a little bit” of money from investors to fund its investment, but Xu said he expects its next major round of fundraising to come through an initial public stock offering, possibly in 2015 or 2016.
Behind the state’s plan is the hope that the same type of economic development strategy that has lured billions in investment and created thousands of new jobs through the nanoscience industry in the Capitol District can be duplicated with the green-energy industry in Buffalo.
The idea is to build a research and development center that has the right combination of expensive equipment needed by clean-energy firms to develop new products – gear that is too costly for them to buy on their own.
By giving those businesses access to the facilities, the Cuomo administration hopes green-energy firms will flock to the Buffalo hub, much as chip manufacturers have beaten a path to Albany and the cutting-edge facilities that the state built years ago under Kaloyeros’ direction.
“He’s taken the best of his model to Western New York,” Cuomo said. “It’s a different application. Albany is in the chip-making business. This is in the clean-energy business.”
But the overall concept is the same: “The companies come to us because they want access to the facilities we own,” Cuomo said. As that happens, “then you start to get what you call a cluster economy.”
Within hours after Thursday morning’s announcement, Kaloyeros said it was apparent companies in the green- energy industry already are taking notice: He received an email from the CEO of an unidentified company that previously spurned the state’s entreaties. Now, the executive was asking to meet with Cuomo and talk about the green-energy opportunities at the Buffalo hub.