Solar Manufacturing the Texas Way

If you want to stimulate solar manufacturing, you have to actually do something. Andrew Liveris, Chairman and CEO of the Dow Chemical Company, wrote a book with an entire book–”Make it in America“–on reinventing the American economy through manufacturing, especially of new energy technologies like solar. His prescription, in a nutshell, is to identify national priority industries, drive demand, and create incentives to make it easier (and cheaper) for manufacturers (sidenote: WSJ, predictably, likes his suggestions for lowering taxes, other elements not so much. )

This is basically the plan followed by Arizona, and it is is paying off in spades. The state has established a strong local market, with a requirement that 15 percent of the state’s energy comes from renewable energy. And the state legislature took a leadership role in creating a welcome environment for manufacturing. The Arizona Renewable Energy Tax Incentive Program offers a refundable credit equal to up a maximum 10 percent of investment. These new companies have a 75 percent reduction in property taxes for up to 15 years. As a result, dozens of manufacturing companies have set up shop in the state — creating about 6,000 jobs and $1.8 billion in local investment, according to the Greater Phoenix Economic Council.

CPS, the municipal utility in San Antonio, is pursuing a variation on the theme. They’ve come to the strategy iteratively–essentially had to redo their launch once they figured it out–so it will take awhile to see the results. But the idea is essentially to buy massive amounts of solar, but require the seller to set up a local manufacturing plant to supply it.

This gives all parties what they need. The utility gets solar at a low price, because of the scale (400 MW in this case). The city gets installation jobs–where most of the jobs are in the solar value chain–as well as the manufacturing plant. And prospective manufacturers get a guaranteed off-take agreement, which is the kind of market certainty that gives them what they need to make the investment.

Some states have experimented with renewable policies with local content requirements. Such an approach can run afoul of trade agreements, and from the perspective of a prospective manufacturer, doesn’t necessarily give them the kind of security necessary to make a major investment decision. If it is vulnerable to roll-back, or doesn’t offer the depth of investment recovery, it’s not going to be sufficient to drive manufacturing incentive decisions.

That’s why we are encouraged by CPS’s approach. According to this recent article, it’s starting to bear fruit. Stay tuned.

Vote Solar is a non-profit grassroots organization working to fight climate change and foster economic opportunity by bringing solar energy into the mainstream.

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