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Tax credits for solar in Washington: connections missed

The costs are high enough to require tax credits. But the legislature's record on the issue this year was one of misses rather than hits, even when lawmakers decided to do something.

Solar panels do double duty in Las Vegas, generating power and providing shade to cars in a parking lot.

Solar panels do double duty in Las Vegas, generating power and providing shade to cars in a parking lot. J.N. Stuart/Flickr

Tax breaks for solar power and Washington's legislature did not have much luck with each other this past session. One tax break zipped through the legislature, but the intended recipient, a long-time Tri-Cities company, soon picked up and moved to Utah without warning — stunning its supporters. Meanwhile, another solar power venture at Cle Elum really wanted a tax break. But that proposed tax break quietly died in May amid elays in sending it to the state Senate.

Solar power barely has a fingerhold in Washington — it provides significantly less than 1 percent of the state's power production. But it got a boost in 2006 when voters passed Initiative 937 to require that 15 percent of the state's electricity must come from alternative sources — wind, solar, biomass, and others — by 2020. Interim targets are 3 percent by Jan. 1, 2012, and 9 percent by 2016.

One obstacle for solar power is that it is one of the most expensive methods of electricity production. It takes $7 to $10 million worth of solar panels to produce one megawatt. That's where the tax breaks come in — to help defray the costs. And two solar-power tax-break bills were introduced this past legislative session. At a time when the Obama administration is running into trouble trying to promote solar energy, the experience in Olympia may reflect the larger challenges facing efforts to expand solar as a source of electrical power.

One bill specifically targeted the Tri-Cities company, Infinia Corp., which has existed since 1967 and which developed the Stirling engine for use in solar power generation and other energy-conservation machinery. Several months ago, Infinia unveiled the PowerDish, a new solar-power generating device developed in Kennewick, with each unit capable of producing 3.2 kilowatts.

In January, state Sen. Debbie Regala, D-Tacoma, introduced a bipartisan bill to lower the business and occupation tax rate from the normal manufacturing level of 0.484 percent of a firm's gross receipts to 0.275 percent for solar-power companies using Stirling engines, a device designed by Infinia and manufactured outside of Washington.

The state Senate passed the bill 47-0, and the House passed it 95-0. Gov. Chris Gregoire signed it into law on April 27.

Washington's Sens. Patty Murray and Maria Cantwell had also steered earlier federal money toward Infinia to help it grow, the Tri-City Herald reported. That money included $3 million to develop a prototype air conditioner that uses a Stirling engine and $1.5 million for a cryocooler to support high temperature superconductor power lines, the paperreported.

But in late June, Infinia announced that it would lay off or move roughly 100 Tri-Cities employees to its manufacturing facility in Ogden, Utah — home of Mike Ward, who took over as Infinia's CEO in April. Only about 15 research and development people will remain at Infinia's Kennewick site, the Herald reported.

Gary Peterson, a vice president of the Tri-Cities Industrial Development Council, said TRIDEC does not know any more about the move than the Tri-City Herald's report that Infinia wants to switch its emphasis from research in Kennewick to manufacturing in Ogden. TRIDEC received no heads-up prior to the late June announcement, Peterson said.

State Rep. Larry Haler, R-Richland, shepherded the Senate tax break bill through the House, having no idea that Infinia planned to shut down most of its Kennewick operation. "I'm unhappy that they didn't let us know. We offered them the sun, the moon, and the stars. .... It took me by surprise," Haler said.

Infinia requested that questions be submitted to it in writing. In its written responses, Infinia said the decision to move to Utah went from idea to execution in less than two weeks — too quickly to inform legislators or TRIDEC.

Infinia has no manufacturing facility in Kennewick. But its manufacturing partner on the PowerDishes is Ogden-based Autoliv America, which specializes in making airbags. Infinia's response contended that an airbag "is very similar to a Stirling engine in its tolerances, reliability, and approach" to manufacturing. The written response did not elaborate on the similarities between airbags and specialized engines.

Before Ward become Infinia's CEO, on April 9, he was Autoliv America's president. Autoliv America has 13,000 employees and $2.1 billion in annual revenue, according to an Infinia press release.

Infinia built its PowerDish manufacturing facility next to Autoliv's Ogden plant "as we learned more and transitioned," the company's response said.   

"Tax breaks are great and were very appreciated, but the reality is, the company is years from generating any revenue that would make those tax breaks valuable. Since the company has no revenue, the tax breaks really do not benefit the company. You need revenue to make tax breaks work," the response read.

However, on April 8, 11 days before Ward was announced as Infinia's new CEO, the company announced that it had sold 2,900 to 3,000 PowerDishes to an Indian company. The federally-owned Ex-Im Bank lent $30 million to the Indian buyer to purchase the solar-powered generators in 2012, the Tri-City Herald reported.


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Comments:

Posted Wed, Nov 2, 5:45 a.m. Inappropriate

"Meanwhile on Jan. 19, Rep Deb Eddy, D-Kirkland, introduced a bill that would take the solar power percentage of a utility's electricity purchases and double that amount in crediting the utility in reaching its 3 percent, 9 percent, and 15 percent I-937 targets."

Oh, what a tangled web we weave when first we practice to deceive.

Why can't green energy advocates be honest with the public?

BlueLight

Posted Wed, Nov 2, 8:19 a.m. Inappropriate

I have looked into solar panels for our house, and even with tax cuts it doesn't make financial sense just yet. Other countries are moving faster on solar because the government actually subsidizes the cost to get demand flowing and lower the nonsubsidized market price faster. Tax breaks are well and good, but until the middle class has the **cash flow** to install solar, it's a pipe dream.

smacgry

Posted Wed, Nov 2, 3:32 p.m. Inappropriate

It certainly is true that the cost of solar is an "obstacle" to its development. However, it doesn't follow that tax breaks are necessary. Solar is just as expensive with tax breaks as without tax breaks; the tax breaks just put a big part of the cost on us taxpayers.

The second bill, by the way, is not a tax bill. It would have no effect on anyone's tax revenues. Rather, it would relax the renewable energy requirements for the utilities. They would be allowed to burn more coal and natural gas if they built solar projects. Why is this a good deal for the environment or for the public?

Glenn

Posted Wed, Nov 2, 3:42 p.m. Inappropriate

Perhaps the reason the Teanaway solar credit giveaway did not pass the Senate last spring is that the truth emerged: it was special-interest legislation promoted by and meant for one large company to get federal aid for a marginal project: inappropriate location (there are lots more sunnier places, even in Washington); grossly exaggerated estimates of power production; and minimal job creation (and temporary at that). This is an example of what NOT to do with taxpayers' money. And of well-intentioned public policies (credits to utilities for clean energy) hijacked in the hunt for private profits.

Sarar

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