Thursday, September 18, 2008

From the Local Press

Losing ‘green’ tax credits could have negative local fall-out

By Alexandra Hazlett
The Athens News
September 18, 2008

Set to expire at the end of the year and bogged down because of politics in the U.S. Senate, federal renewable energy tax credits have a wide-ranging impact on the solar- and wind-energy industries, including here in Athens County.

Two local businesses, Dovetail Solar and Third Sun Solar & Wind Power, depend in varying degrees on the tax credits to support their business. According to Matt Bennett, operations manager at Dovetail Solar, about 75 percent of the company’s projects take advantage of the tax credit. Only about a quarter of Third Sun’s projects depend on the tax credit, said Michelle Greenfield, a co-owner.

Without the credits, the brakes could quickly be put on the fledgling renewable-energy industry locally and nationally, Greenfield said.

“We don’t depend on tax-credit jobs for the majority of our business but the industry does,” she said.

The renewable-energy tax credits provide rebates to offset the cost of the installation of renewable energy-generating technology installed on homes and commercial buildings. The tax credit for residential installments is relatively small, Greenfield said, but many commercial projects would not be feasible without them. The goal is to temporarily subsidize the renewable-energy industry in order to give it time to become more competitive with other, more traditional forms of energy.

Bennett predicted that within 5-10 years, solar energy will be competitive enough to no longer need the tax credits.

“On the commercial projects, this is the most significant tax credit available. Up to 60 – 65 percent of the cost can be recouped,” Bennett explained.

The expiration of the tax credits has both short- and long-term repercussions. Greenfield and Bennett both noted a scramble by businesses and citizens to get projects completed by the end of 2008 in order to take advantage of the last year for the credits. Bennett said that Dovetail Solar is booked solid through the end of the year.

The mad dash for January has also caused a shortage in supply of the requisite components for solar-energy systems, Greenfield said.

As part of a larger restructuring of the costs and operations of Ohio’s public utilities, a certain percentage of the utilities’ power is now mandated to come from renewable sources. Starting in January, Ohio Senate Bill 221 will require that public utilities produce 12.5 percent of their power from renewable sources by 2025. Dovetail is installing a $500,000 solar-power system on the roof of AEP’s building in Athens, Bennett noted.

“Even though that seems like a large project, and it is for southeast Ohio, on the scale of things it’s a rather small system,” he said.

The installation, while not large enough to power AEP’s building, would produce enough energy to power about 10 homes, Bennett said.

The renewable-energy tax credits have failed at least eight attempts so far to renew them, and in votes that generally break down along party lines, Greenfield said. The credits are included in an overall energy policy bill that also has provisions for offshore drilling and other energy initiatives.

Bennett said the expiration of the tax credits was “extremely irresponsible” policy, especially when the solar industry is one of the few pockets of growth left in the American economy.

“It’s been very frustrating for those of us trying to build this industry,” he said.

While the expiration of the tax credits will hinder local and domestic business, a lack of a stable, predictable tax climate also deters investment in the industry.

“If these tax credits can’t be extended for a long-term, consistent time frame, then companies won’t invest in retooling a manufacturing plant to a solar plant,” Greenfield said. “If we can get that kind of a window [10-12 years], we could see a huge amount of investment coming in.”

By all appearances Ohio has much to gain from continued growth in the renewable-energy industry. According to the Renewable Energy Policy Project, a policy think-tank started in 1995, Ohio could gain more than 13,000 new jobs in the wind-power component manufacturing industry. Another nearly 6,000 new jobs could be created by the solar-power component manufacturing industry, the project stated.

As the cost of fuel and transportation has continued to rise, there has been a reverse trend in outsourcing.

“People are shifting manufacturing back to the states because of transportation costs,” said Susan Knight of the Blue Green Alliance, a joint initiative sponsored by the Sierra Club and the United Steelworkers.

A good example of this, she said, is wind turbines. Outside of fuel costs and trade-policy concerns, they are simply too large to be easily transported. Thus they must be located near the market.

“We can’t have clean energy here, and have trade policy that promotes its exponential growth abroad,” Knight said. “A mandate is absolutely key to getting our economy shifting and moving forward in the long run.”

So why isn’t Congress planning to renew the renewable-energy tax credits?

According to an Associated Press story that ran Aug. 31, “Senate Republicans have blocked consideration of tax-extender plans by Senate Finance Committee Chairman Max Baucus, D-Mont. GOP lawmakers are protesting efforts to offset the costs with other taxes or other items attached to the proposals. In the House, conservative Democrats promise to block any extension that adds to the deficit.”

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