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July 26, 2014

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energy development:

State giving up $500,000 per job in renewables

Cost has some lawmakers questioning value of tax incentives for energy development

Nevada has handed out tax incentives worth an estimated $45 million to lure solar and geothermal projects to Nevada over the past four years.

So far, the state has received in return promises that the projects’ developers will create 89 permanent jobs.

It’s a number so small that some lawmakers are questioning whether taxpayers are getting a good return on their investment in the incentives.

As lawmakers debate renewing a 2005 law that provided the renewable energy tax abatements, they are grappling with how to measure success in fostering the growth of a nascent renewable energy industry. Should it be gauged by the number of renewable projects that are built in the state and megawatts produced? The economic impact on construction, manufacturing and other industries as projects are built? Or simply the number of Nevadans who end up directly employed once plants begin operating?

Sen. Randolph Townsend, R-Reno, who has worked on renewable energy issues for decades, said that although solar and geothermal projects create “wonderful construction jobs in the short term, these projects don’t leave a lot of full-time jobs.”

“We could do better,” Assemblywoman Marilyn Kirkpatrick, D-North Las Vegas, said of the effect of the incentives to date. “We need to base policy going forward on long-term jobs.”

The companies that received the tax incentives and the Nevada Commission on Economic Development, which helped lure the companies to the state, argue that full-time job creation is a poor measure of projects’ worth to the state.

Dan Kabel, president and chief executive of Acciona Solar Power, which built a solar thermal plant in Boulder City, said such projects help stabilize energy prices, foster research at state universities and make the nation less reliant on foreign energy sources.

They also create a significant number of temporary jobs, proponents note.

El Dorado Energy, a 10-megawatt facility in Boulder City estimated to get about $3 million in abatements, has just one full-time employee. But 111 workers, including 20 union electricians, helped construct the facility, said Art Larson, spokesman for Sempra Energy, the company behind the project.

“While the federal government is talking about stimulating the economy with green energy jobs, some individuals in Nevada are talking about killing these incentives that make these projects viable,” Larson said.

The state has approved tax incentives for three solar energy projects in Southern Nevada and four geothermal projects in rural Nevada. The tax abatements include refunding all but 2 percent of sales tax on initial capital equipment, half of property taxes for 10 years and a portion of payroll tax for four years.

According to the Commission on Economic Development, the Southern Nevada projects are:

• Nevada Solar One, a solar thermal plant in Boulder City. The company promised 28 permanent jobs with an average wage of $19.61 an hour. On its $106 million investment, the project got $15.4 million in tax abatements over 10 years.

• El Dorado Energy, the Boulder City project that promised to hire one person at an average wage of $21.63 an hour. Its tax abatements on a $97.5 million investment are $3 million.

• Powerlight Corp./SunPower, which built a photovoltaic project at Nellis Air Force Base. They promised one permanent employee at $21.15 an hour. On their $98 million investment, they will receive a $9.3 million rebate.

There is no provision in the law that requires project money to be spent in the state. Indeed, because there is little manufacturing of solar panels or other renewable energy equipment in Nevada, much of it is purchased elsewhere and shipped here.

In addition, the figures provided by the Commission on Economic Development are only estimates and state law doesn’t require the actual amounts of the rebates to be publicly disclosed.

The Nevada Taxation Department is required to audit companies after two years and again after five years. If auditors find there is not “substantial compliance” with the agreement, the state can claim what it believes it is owed.

The judgment on whether a company has complied with its end of the bargain is “more subjective than objective,” according to Taxation Department Director Dino DiCianno. And audits won’t be released to the public unless the company appeals to the Tax Commission, he said.

Based on their effect so far, Townsend said the incentives should be “dialed back.”

“We can’t keep giving it away here,” he said. Instead, the state should focus on attracting companies that manufacture solar panels and would work with the higher education system on research and development of new technologies.

But Mike Skaggs, the commission’s executive director, said state leaders need to remember that Nevada is in competition with other states for renewable energy projects. “As incentives stand today, we’re average, maybe slightly above average,” he said.

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