Tax credits for solar in Washington: connections missed
by John Stang
Solar panels do double duty in Las Vegas, generating power and providing shade to cars in a parking lot. Credit: 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.
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.
The House passed that bipartisan bill 95-0 on Feb. 26. Nearly a month later, the Senate Environment, Water and Energy Committee greenlighted the bill, but it sat unacted-upon until the the regular legislative session ended on April 22.
The House reintroduced the bill on April 26, when the new special session began. But nothing happened until May 24 — the next-to-last day of the special session — when the House passed it again 91-3. The bill never reached the Senate, as the legislature ended its special session on May 25.
An Eddy staff member said the representative was frustrated by the lack of action on the bill. Eddy referred questions on that lack of action to Matt Steuerwalt, a lobbyist with Seattle-based Strategy 360, which tracked the bill through the legislature, saying that he had the best grasp of what happened. Strategy 360 also represents the Teanaway Solar Reserve near Cle Elum, which is trying to develop a 73-megawatt solar power plant there — enough to provide electricity for 45,000 homes. In comparison, the Bonneville Dam near Portland produces 1,050 megawatts. The Columbia Generating Station nuclear reactor provides 1,150 megawatts. Near Walla Walla, 454 wind turbines create 104 megawatts. However, Steuerwalt said he did not know why the House delayed floor action for a month in the regular session and for another month in the special session — essentially killing the bill.
Phil Rockefeller, who resigned from the state Senate in June after Gov.Chris Gregoire appointed him to the Northwest Power and Conservation Council, was chairman of the Senate’s Environment, Water and Energy Committee. The Democrat from Bainbridge Island said the bill was poised for a full Senate floor vote, but Senate Majority Leader Lisa Brown, D-Spokane counted votes before hand, and knew not enough were present to pass the bill. So it never went to a floor vote. Rockefeller did not know why a predicted majority of the Senate would have opposed the bill. Brown could not be reached for comment on the reasons given to her.
Rockefeller noted that the bill would have tweaked Initiative 937, which “is a tough, multer-layer, opaque public policy area.” Utilities and environmental groups have done some complex, nuanced jousting for years on if and how that law should be changed.
Teanaway has set a $300 million price tag to install 400,000 photovoltaic panels in the eastern Cascades timberland. That area receives slightly less than the national average in sunlight, but it is owned by a sister company of Teanaway. In 2009, the Northwest Power and Conservation Council indicated its formulas put the project”s cost at $525 million to $750 million. The long-discuss project would be estimated to create 225 construction jobs and 35 permanent jobs.