Impact of Clean Energy Manufacturing Tax Incentives

Summary

As noted in this template article, if any area is serious about developing and benefitting from new industries, state corporate tax incentives are critical for attracting companies. Thereafter, supply chains typically emerge to support a technological infrastructure and that is why most electronic materials-related companies are located in clusters across the country.

Analysis

As stated in this core source article, President Barack Obama announced last week that Recovery Act funding would be used to offer clean energy manufacturing companies tax incentives for job creation. The federal tax credits are worth 30 percent of the investment in new or expanded factories, and collectively, $2.3 billion will be available for 183 alternative-energy equipment factories, proposed for 43 states, which were approved for these tax credits. Other factors besides job creation will be considered for award-winning applicants such as: commercial viability, technological innovation, speed to project completion, and potential for reducing air pollution and greenhouse gas emissions. Additional details are noted at this reference site. It is anticipated that 17,000 jobs will be created by the act, which indicates how much capital the government needs to invest in job creation in order to substantially reduce the unemployment rate. Many programs of this nature will be needed to compensate for the seven million plus jobs lost during the recession since December 2007. One can recognize the desperate unemployment situation nationally by the mere simple fact that large companies are cited for creating as few as nine jobs, for example, as has been done in various media outlets. However, one solar panel manufacturer, who was already enticed to build a facility in the Phoenix, Arizona-area due to state renewable energy manufacturing tax credits for job creation, will also be eligible for the federal tax breaks as well. Chinese company Suntech Power Holding Co. has already committed to building a Phoenix-area factory that will employ about 75 people in its first phase, is eligible for $2.1 million in federal tax credits based on the President’s announcement. In addition, Steve Chadima, Vice President of External Relations for Suntech, will be giving the keynote speech at the Arizona Solar Manufacturing Symposium on January 27 in Phoenix. Moreover, Yingli Green Energy Holding Co., a major Chinese competitor for Suntech, is considering constructing a factory in Phoenix too and would receive a $4.5 million tax break, if it comes to fruition. Based on the tax credit amount, the plans call for a plant more than twice the size of the Suntech facility. Both companies hold a significant solar cell market share, sitting in the top 10 globally. In order to qualify for the tax credit, the projects must be finished by 2014, although roughly one-third could be finished this year, according to the Department of Energy guidelines.  Arizona Governor Jan Brewer emphasized the importance of related measures in her State of the State address on Monday. She also revealed that another company, Tower Automotive, has expanded its business to include the production of solar equipment and has agreed to invest more than $50 million in an Arizona plant, also induced by state tax incentives geared towards renewable energy manufacturing, which will generate nearly 200 new jobs by the time it is operational in late 2010. Tower Automotive is broadening its product portfolio to manufacture parts for Stirling Energy Systems’ SunCatcher dish concentrated solar power (CSP) technology. Approximately 40-mirror arrays have been designed for each solar dish to direct sunlight onto a non-combustion Stirling engine to run a 25-kilowatt electric generator via heating and cooling hydrogen to drive a piston. A Tower Automotive company spokesman, Frank Buscemi, stated that producing metal frameworks for a solar power unit is simply an extension of producing metal ribs for the hood of an automobile.  However, even before the recession when bank credit was readily available, many companies with overlapping technology with the renewable energy space, having the potential for developing synergistic new product lines, did not take advantage of the opportunity, even when some of their competitors did. In specific, many semiconductor and microchip-oriented companies deal with overlapping technology in comparison to solar products; however, only ones, who foresaw the future market opportunities and were willing to undergo the risk such as Applied Materials, executed early enough to position themselves as a competitive entrant. Furthermore, most microchip companies, many of which were particularly hard-hit even leading into the recession, causing numerous eventual bankruptcies, mergers and acquisitions, are not eligible for green energy stimulus funding, as compared to solar or solid state lighting chip companies, all of which fall under the grand umbrella of the electronic materials sector. According to the Arizona Republic, three other solar technology related factories are being proposed for metro Phoenix, which if built, could germinate a new local industry, diversifying its economy and at a minimum create higher-paying manufacturing jobs and make it the Valley of the Sun- in more ways than one. These companies, including St. Gobain (CSP mirrors), Amonix Inc. (utility-scale solar power systems), and Rioglass Solar Inc. (mirrors for solar thermal power systems), are eligible candidates to receive millions in federal tax breaks, and the sum adds up to $30 million, when combined with the three other aforementioned companies. However, many of the projects, as well as their locations, appear to be tentative at this time.  In any case, this momentum should progress if Arizona approves its new business incentive package for job creation, which proposes lowering its corporate tax rate.If any area is serious about developing and benefitting from new industries, state corporate tax incentives are critical for attracting companies. Thereafter, supply chains typically emerge to support a technological infrastructure and that is why most electronic materials-related companies are located in clusters across the country in metro areas such as: Silicon Valley, California; Portland, Oregon; Boston, Massachusetts; New Brunswick, New Jersey and Albany, New York, where the economies have endured the recession better than most. For more info: In order to anonymously receive FREE email alerts on future green technology and business articles, please subscribe on my homepage and/or follow me on Twitter.

Analyses are solely the work of the authors and have not been edited or endorsed by GLG. This author consults with leading institutions through GLG