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April 17, 2014

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Energy:

Building a green economy

Eclipsed by rival states in attracting renewable energy manufacturers, Nevada hopes new tax abatements will entice the growing industry. But will the state’s plans work?

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Beyond the Sun

It rains nearly half of the year in Hillsboro, Ore. So unlike, say, the broiling Nevada desert, that region doesn’t immediately spring to mind during discussions of solar energy.

Yet the Portland suburb appears set to become a high-profile hub for solar parts manufacturing, thanks to a decision by the German company SolarWorld AG to open a $500 million manufacturing plant there that will eventually employ 1,000 workers.

“We can manufacture whether the sun is shining or not,” SolarWorld spokeswoman Anne Schneider pointed out last week.

Schneider’s point may be an obvious one, but it could also be a telling fact for Nevada leaders in Carson City, who are finishing up long negotiations on a set of bills that will shape the state’s energy future.

Lawmakers delivered to the governor Friday one piece of that plan, Senate Bill 358. The other, contained in Assembly Bill 522, is held up in the Senate.

Those bills include incentives for large solar plants and smaller rooftop installations with the assumption that manufacturing facilities will naturally follow those generating facilities.

Discussions centered on finding a compromise that both spurs development and ensures the state reaps the economic benefits that have been touted as a salve for its high unemployment rate and weakened economy.

The Assembly bill, which faces the possibility of a veto by the governor if it passes the Senate, extends tax abatements for renewable energy generation plants that are set to expire by July, and raises the property tax abatements to 55 percent from 50 percent.

Under that bill, companies receiving tax abatements must hire 30 percent of their construction workers from Nevada, unless they’re granted an exemption. The abatements also require the companies to pay higher than average wages to permanent workers and provide health benefits, and pay at least 150 percent of the average statewide wage to construction workers. A commission will grant the benefits based on whether the financial benefits to the state from the jobs offered will be greater than the tax revenue lost to abatements.

Provisions aimed at spurring a manufacturing base, either by offering abatements for manufacturers of renewable energy components or by requiring power plant companies to buy 30 percent of their products from Nevada-based companies, were tossed out early.

“The undercurrent to what’s been discussed is the idea that if you have policies and incentives that will attract enough of the generators to come to the state, the manufacturing would follow that,” said Jim Baak, who has been closely following energy developments in Carson City for the nonprofit organization Vote Solar.

But some solar developers say the reality could be more complicated than the assumption that manufacturers will automatically follow the renewable energy generation projects lured to the state.

Executives base their decision on where to locate manufacturing plants on a variety of factors, including transportation costs, state incentives and tax abatements, and the workforce, they say.

Although Nevada could score high on transportation if the planned tax abatements for solar plants are signed into law and if the vast solar plants planned for the desert come to fruition, some in the state worry that it may lag behind in other areas, such as training and technical manufacturing experience.

SolarWorld’s Oregon plant makes silicon components for photovoltaic solar panels, which are often used on rooftop arrays. Photovoltaics are also used in some large generation plants, such as the 14-megawatt installment at Nellis Air Force Base and Sempra Energy’s 10-megawatt El Dorado plant.

Many other planned and existing large plants use a different technology — solar thermal — which uses mirrors to turn heat from the sun into steam to power a turbine rather than converting sun into electricity.

The decision to base the SolarWorld plant in Hillsboro hinged on a number of factors, said Bob Beisner, a vice president of the company.

The state offered generous tax abatements. Plus, the company was able to buy a 480,000-square-foot semiconductor facility at a steep discount.

The area is filled with Intel chip plants. Training a workforce with that experience to make cells for solar modules has been easy, he said.

“This area is known as the silicon forest,” Beisner said. “There are literally thousands of people who have silicon experience and the educational system supports the electronics. It has been able to modify very quickly to our needs.”

A location close to solar generation facilities isn’t necessary for that type of production, he said, because transportation costs are low.

A stack of 72 cells that make up a solar module is about 3 inches tall and weighs very little. The company sends the cells to a plant in Camarillo, Calif., not far from Ventura, where they’re assembled into modules.

That means that when the parts are assembled into solar panels in their larger and more cumbersome form, they are closer to markets in California and throughout the Southwest where they’re put into service, Beisner said.

In December 2007, former Ausra executive vice president John O’Donnell triumphantly announced that his company had chosen Las Vegas as its manufacturing base to make parts for solar thermal plants. A year later the city seemed poised to become a hub of manufacturing, “a leader in the clean energy revolution,” Sen. Harry Reid said when the plant opened.

Ausra, which at full production will employ 50 workers, chose Las Vegas, O’Donnell said, after Reid shared with the company his vision of the state as a bountiful solar producer.

The recession has since made financing tricky for solar plants, and the process of getting approvals from the Bureau of Land Management, which controls most of the state’s land, has been slow.

Ausra used the plant’s products to install a 5-megawatt plant in Bakersfield, Calif. But Ausra’s assembly lines are idle right now, a spokeswoman said.

Since Ausra’s arrival, no new solar energy manufacturing plants have come to the state.

Instead, Nevada has been eclipsed by other states — notably New Mexico — in attracting solar manufacturers that want to be close to the expected solar generation boom in the Southwest.

Two weeks ago Schott Solar opened a plant in Albuquerque that employs 300 workers and is expected to eventually employ 1,500.

New Mexico Gov. Bill Richardson wooed the company, which manufactures the tubes used in solar plants to carry the liquid that’s heated by the sun and turned into steam to power a turbine. It also manufactures photovoltaic equipment.

“We call them intangible factors — the support at all levels,” Schott spokesman Brian Lynch said of the state’s efforts to win over the company.

New Mexico used training money to pay for 90 employees to travel to Germany to learn about manufacturing, he said.

Like SolarWorld in Oregon, Schott liked that Albuquerque had a history of semiconductor production, which transferred smoothly into photovoltaic plants.

The Las Vegas workforce, of course, has no such expertise.

If Nevada becomes a generation hub, as expected, its proximity to New Mexico will serve the company well, Lynch said.

Mike Skaggs worked for the economic development organization in New Mexico that helped lure Schott to Albuquerque. Last year he became the executive director of the Nevada Commission on Economic Development.

Skaggs thinks manufacturing will follow generation to Nevada, but he says the state also has to be aggressive.

The place where Nevada really trails, Skaggs said, is in providing training funding, such as the $6,000 per employee allotment that New Mexico gave to Schott. He hopes to use federal stimulus money to provide similar funding in Nevada.

He is currently wooing 20 to 25 such companies. Of those, he says, he expects five to close on deals in the next 60 days.

“The two times we have done something for the economy it’s because we had things that made us unique — mining, which is an indigenous resource, and gaming, which we allowed through legislation,” Skaggs said. “Having this BLM property where we can work on developing solar and geothermal plants is unique.”

And as for New Mexico and other states? “I think it will be a very close race,” Skaggs said.

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