Arizona losing fight for solar jobs among Western states

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by Ryan Randazzo - The Arizona Republic

Arizona is getting its "clock cleaned" in the competition among Western states to land solar-panel manufacturing companies within their borders, according to the economic-development group that is losing the fight.

At least nine companies that make solar equipment have passed up the Valley of the Sun in the last year in favor of neighboring states, according to the Greater Phoenix Economic Council.

From those nine projects alone, Arizona is missing out on more than 3,800 jobs, $2.3 billion in investment and $732 million in state and local revenues during the next decade, GPEC President and CEO Barry Broome said.

Adding insult to the solar losses - four of the projects went to notoriously rainy Oregon.

"That's an eye-opener," Broome said this week as he endorsed a state tax-incentive package to help bring solar manufacturers to Arizona. "Some people would argue that Oregon is not that business friendly."

GPEC still has 11 solar companies scouting Phoenix for new manufacturing locations, representing 4,800 jobs and $5.5 billion in investments, but Broome isn't confident that without incentives his group will be able to out-compete Oregon, New Mexico, Texas, Nevada, California and Colorado.

"We've been essentially shut out," he said.

Attractive jobs

Solar-manufacturing jobs should be attractive to Phoenix because the region not only boasts a sunny climate, but is losing comparable jobs in the semiconductor industry that could be replaced by solar-industry jobs, he said.

The number of Arizonans working for semiconductor and related device manufacturers has fallen from nearly 34,000 in 2001 to about 22,000 in 2007 amid layoffs, Broome said.

"That's only going to get worse," he said.

Arizona is planning at least two major solar-thermal power plants, and state utilities are required to get 15 percent of their electricity from renewable energy sources such as solar or wind power by 2025.

But those commitments alone aren't enough to convince companies to move manufacturing plants here when other states are offering cash incentives, Broome said, which he does not endorse.

Tax incentives proposed

Broome is proposing fast action at the state Legislature, which has about a week left in session. Broome said it is important to move quickly on incentives because the companies GPEC has spoken with about relocating to Arizona will make their decisions in the next 12 to 18 months.

His proposal includes a transferable income-tax credit and property-tax relief for solar companies relocating to Arizona that pay at least 150 percent of the median state wages and 80 percent or more of their employee health-coverage premiums.

The transferable income-tax credit would allow companies that are slow to generate significant cash flow a means of earning revenue by selling the credit to another company that could cash it in incrementally over five years, he said. It would be capped at 10 percent of the capital investment a company makes in Arizona. The property-tax provision also would be based on the amount of money invested and paid to employees.

Despite giving solar companies a break, the proposal wouldn't bankrupt the state, and would in fact create revenue within 15 years if it succeeds in attracting any large manufacturers here, Broome said.

Proposal has supporters

Rep. Robert Meza, D-Phoenix, is among the supporters.

"We have the sun, we have the semiconductor workforce talent that has been here a while, but people are moving elsewhere and we need to be able to capture that," Meza said.

"The budget is in deficit, but that is apples and oranges. What we are talking about here is a new business environment and infrastructure to bring long-term revenue to the state."

The idea for solar incentives was wrapped into a job-stimulus package unveiled this week.

Rep. Lucy Mason, R-Prescott, said she is asking to withdraw a bill of hers that is stalled and amend it to add the solar-incentive language and possibly pass it on its own.

Mason said she has been working with GPEC on the proposal since February.

"They were seeing this real opportunity for Arizona, but we kept losing these manufacturing companies," she said. "They keep going elsewhere because our tax policies just didn't allow a company to pencil out a successful operation here."

Mason said she instructed Broome to "chisel out" the most effective incentive possible without affecting the troubled state budget.

"With this whole proposal, I feel very confident this will create a revenue-positive situation in the future," Mason said Friday.

GPEC hired Elliott D. Pollack & Co. of Scottsdale, a noted economic consulting firm, to review the proposal. The agency concluded the tax incentives would generate revenue from the state within 15 years, but that under certain circumstances the state would be forgoing tax revenue in some of the interim years.

Salt River Project, which has been active at the Legislature this session because of other bills dealing with electricity generation, has followed the incentive package.

"We support it," SRP spokesman Scott Harelson said. "We would prefer it include incentives for other renewable products. But our only concern is that because this bill has been introduced somewhat late in the game, it might cause some confusion with other bills that we are working on."

Mason said she and other supporters of the incentives are working to inform other lawmakers of the proposal.

"As much as I like the idea and want to see a bill move forward, I'm concerned my colleagues are wary of last-minute or perceived last-minute introduction of a bill, even though this has been in the works a long time," Mason said.

Some big losses

Broome hopes the incentives will add to the state's solar pedigree.

Tempe boasts the headquarters of First Solar Inc., the top-performing U.S. stock last year. But the company's manufacturing and commensurate jobs are in Ohio, Germany and Malaysia.

Stirling Energy Systems Inc. has offices in Phoenix, but also keeps offices in California and conducts research at Sandia National Laboratory in Albuquerque.

Germany-based Schletter Inc. recently announced a 22,000-square-foot facility to make brackets for solar panels in Tucson, joining Global Solar Energy, Solon America Corp. and Prism Solar Technologies Inc. in that city.

But the missed opportunities have been big.

Among the more prominent companies to pass building facilities in Arizona in the last year was Palo Alto, Calif.-based Ausra Inc., which announced in December its first solar-thermal manufacturing plant in the U.S. would go to Las Vegas.

Solar-thermal power plants use mirrors to concentrate solar heat and make steam and electricity. The Ausra plant will make components for a power plant planned in California.

Then in January, Germany-based Schott Solar announced plans for a solar-thermal plant in Albuquerque, which also will make more traditional black solar panels.

The Schott facility will start with 350 employees and could expand to 1,500, according to the company.

Intel Corp., Arizona's 12th largest employer, announced earlier this week it would create a solar subsidiary in Oregon.

The economic benefit of the Intel's SpectraWatt division was announced too recently to be included in the missed-opportunity costs that Broome calculated for his proposal.

"We didn't even have a conversation with Intel," Broome said. "We were not even considered."

http://www.azcentral.com/business/articles...ves0621-ON.html