Currents

An Energy Newsletter for Local Governments

New Washington State Legislation is Expected to Spur a Regional Solar PV Market in the State (continued)

So if it's a tax write-off for utilities then where does the money come from? The production credit would be paid for by future sales taxes that would be generated by an expanded sales and manufacturing base for renewable energy. And instead of one lump sum being dolled out to projects like it is in California with their capacity approach, the cost here will be spread over 10 years.

"The state is basically a spectator in this," Friederichs said. "If it encourages businesses to come here, in the end the state will make more money -- it should be an encouragement for them."

Up until 2011 there is a sales tax exemption on solar products. Once that goes away, and the market has picked up, the program should return about $20 million in net cash flow to the state, said the bill's technical advisor Mike Nelson.

Industry Eyes Washington for Manufacturing Expansion

Between owning a Honda Insight hybrid-electric car and his own solar PV system, Nelson himself describes himself as "as green as they come" but when he spoke to state lawmakers about the bills he pushed one angle above all else.

"I don't talk about green, I talk about jobs, that's why we have the bi-partisan support that we have," Nelson said. "We're losing industry, the U.S. is loosing industry, we're loosing megawatts of production capacity."

Capacity-based incentives have spawned a strong solar market in California — with roughly 80 percent of US solar business within the state's borders. But Nelson doesn't think the incentives have done enough to spur manufacturing and job creation.

"It's great that California has a program…that's built up the Japanese PV industry," Nelson said, cynically referring to the importation of solar PV modules from Japanese manufacturing facilities.

Ironically, Washington state used to be national leader in renewable energy manufacturing but has since ceded that position. RWE Schott Solar, one of the biggest names in solar module manufacturing, was once based in Lacey, Washington after they acquired Applied Power. Now all of RWE's North American manufacturing is based in Billerica, Massachusetts and their recent expansions have been in Alzenau, Germany and the Czech Republic.

Former Washington-based solar inverter company Trace Engineering was acquired by Canada's Xantrex Technology Inc. The company has transferred the manufacture of its residential and industrial solar and wind converters to its factory in Arlington, WA, but has outsourced some of its other manufacturing to more competitive factories in China, with a net loss of approximately 100 jobs in the state since 1999.

The relative slowdown of manufacturing could change, however, with the two measures now signed into law. As the bills were winding their way through the state's legislature, manufacturers kept a close eye on the measures since they could provide the impetus for them to make a move back into the state.

Now that the measures are law, Xantrex sees some potential positives impacts for their facility in Arlington.

"We expect this new price incentive will benefit demand for some of our Washington-manufactured products used by homeowners and small businesses," said Mossadiq S. Umedaly, Chairman of Xantrex Technology. "Additionally, Xantrex manufactures some solar inverters outside of Washington and we will be evaluating the potential demand in Washington to see if these should also be manufactured in our Arlington facility as well."

Marc Roper, Vice President of sales and marketing for RWE Schott Solar, was reached for interview before the two items were signed into law, and was already hinting at what effect it might have.

"This particular legislation coupled with some economic multipliers may yield a good mix for us to build a module manufacturing facility," Roper said. "My company is in the position where we're looking to expand module manufacturing not just for the Washington market but also to supply the North and South American markets."

Roper said RWE is looking initially to low cost countries like Mexico for manufacturing but sees a number of factors with both the proposed bills and Washington state itself that could help entice a PV manufacturing move to the state. The cost of Washington electricity is some of the cheapest in the country, which lowers the cost of manufacturing. The proposed business tax breaks (in SB 5111) would be the direct benefit for a company like RWE and the state-based feed-in tariffs would solidify a local market.

"It's important to have a local market, it helps a business to understand how their products are being used in terms of product development, quality and getting engineers out there on site where the product is being used," Roper said. "Something like an advance in a small growing market is the type of thing that could tilt the decision away from a low cost country."

If RWE were to make a move to Washington, they would likely build a facility with an annual production no smaller than 20-40 MW annually with the possibility to expand beyond that.

"The performance-based incentive is an ideal form of policy," Roper said. "Making it work in Washington would be good for the whole country. For us it works out well, we have the capacity to serve North and South America, were just looking for the place to do it - these two bills make Washington a candidate."

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