Washington: the new Sunshine State?
Robust global demand for solar energy has some of Washington’s major manufacturing companies considering big expansion plans. It remains to be seen, however, whether a pair of much-touted state laws is enough to attract new solar-electric companies from outside of Washington.
Key challenges facing the Evergreen State are a global scarcity of solar-grade silicon and stiff recruiting competition from other states and countries. So in the near term, industry experts say big companies with an existing manufacturing presence in Washington and start-ups appear poised to benefit from the laws the most.
In spring 2005, Gov. Christine Gregoire signed into law Senate Bills 5101 and 5111, aimed at helping the state capitalize on the booming global solar energy market by addressing supply and demand.
On the demand side, SB 5101 provides Washington businesses and homes with a base credit of 15 cents per kilowatt-hour of electricity generated from photovoltaic (PV) systems. If the systems’ components are manufactured in Washington, the credit is multiplied to as much as 54 cents, up to $2,000 annually.
On the supply side, SB 5111 provides a 40 percent reduction of the state’s business and occupation tax for manufacturers and wholesale marketers of solar PV modules or silicon components of those systems. Manufacturers that already reside in the state or choose to relocate there are eligible for the reduced tax rate.
Moses Lake-based Solar Grade Silicon LLC, which last year produced about 2,300 metric tons of polycrystalline silicon for solar applications, hopes to triple its manufacturing capacity to meet global industry demand growing by about 35 percent annually.
The company, a subsidiary of privately held Renewable Energy Corp., of Norway, has orders for its solar-grade silicon booked for the next two years, said Tor Hartmann, a senior vice president with Solar Grade Silicon. As the company grows, it will take advantage of the state’s new manufacturing tax break, Hartmann predicted.
Bellingham-based Alpha Energy Inc., a system integrator of solar PV components, also plans to capitalize on the legislation. In January, the company began widespread commercial sales of a 3.5-kilowatt PV inverter.
The grid-tied inverter’s electrical output would maximize the production incentive in SB 5101, said Shiba Bhowmik, Alpha Energy’s director of business development. Bhowmik said he is hopeful the legislation will enable Alpha Energy to hire more employees and grow the state’s modest market for grid-tied inverters.
Vancouver, B.C.-based Xantrex Technology Inc. could follow suit. During the next few months, Xantrex will look at the business case for making its own grid-tied PV inverter components in Arlington, Wash.
The Snohomish County plant, Xantrex’s lone manufacturing presence in Washington, already makes off-grid inverters and employs more than 80 workers, said Audey Korpus, Xantrex’s marketing manager for renewable energy.
“Because we’re manufacturing [grid-tied inverters] outside of Washington now, we’re looking at what it would take to build at least part of these in Washington and how many we would need to sell to make it work,� Korpus said.
Xantrex’s cautious look at Washington’s solar PV market highlights a substantial hurdle facing the state. Washington’s solar industry is a $150 million sector, with companies involved in silicon purification, crystal growth and inverter production, according to state statistics. On a global scale, however, the state’s solar PV industry pales in comparison to that of Japan, Germany and California — the world’s three largest solar energy markets, respectively.
Together, Japan and Germany account for roughly three-quarters of the world’s solar PV installed capacity and production, according to the Solar Electric Industries Association, a U.S. trade association for solar manufacturers, dealers and marketers. Historically, solar PV manufacturers have set up factories and sold the bulk of their products in areas that have offered the biggest solar manufacturing and the best consumer incentives.
California, with more than 100 megawatts (MW) of installed capacity, is raising the stakes higher. In January, the California Public Utilities Commission approved a more than $3 billion plan to impose electricity rate surcharges — about 25 cents a month per homeowner — to sustain a solar-rebate program for 10 years. The strategy, similar to one adopted by Japan in 1994, is considered critical to attracting investors and manufacturers.
In Washington, SB 5101’s so-called “feed-in� production incentives have the potential to grow the state’s installed capacity by 2 MW per year, said Mike Nelson, a solar energy specialist with Washington State University’s Energy Program.
This comparatively modest growth, coupled with a global solar-grade silicon shortage expected to last through at least 2007, makes some bearish on Washington.
“The Washington market doesn’t yet provide a big enough incentive to get new manufacturers to move up here,� said Alpha Energy’s Bhowmik. “That doesn’t mean there’s not room for small players.�
State Rep. Jeff Morris, a key Democratic backer of the new laws, agreed.
“If you have a high-margin, low-volume product, we’re a pretty good state to do manufacturing in,� said Morris, who is chairman of the House Technology, Energy and Communications Committee.
Continue reading this story from the sustainable Industries Journal:
Washington: the new Sunshine State?
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#18271 - Bev T.
I would love to hear from anyone who has implemented a PV/wind system since SB 5101 took effect. .54 per kwh sounds great, but I can't find any info anywhere!
#18278 - Dave Manelski
Hi Bev,
Let me preface my response by saying that I'm not an expert here by any stretch. It's my impression that the perfect storm for residential solar power is brewing, but not yet upon us. Solar photovoltaic systems are still quite expensive upfront, particularly in frequently cloudy regions like Western Washington, where more panels are required than a typically sunny region of the world. Over the lifetime of the solar power system, it will pay itself off and then some. In fact, solar power systems are actually a great investment over the long-term.
The good news is that incentive packages like SB5101 keep popping up around the country. While this legislation does provide a direct benefit for consumers, the primary goal is to create a friendly market for the solar power industry in Washington. In order to qualify for the full $0.54 tax credit, the entire photovoltaic system must be manufactured in Washington. I did a little digging and found these solar power manufacturer based out of Washington State - JX Crystals, Solar Grade Silicon, Shell Solar, Outback Power Systems, and Xantrex. I'm just not sure if you can build an entire solar power system from components manufactured in Washington but you've certainly piqued my interest.
SB5101 creates an outstanding incentive for solar power manufacturers to locate in Washington and we can expect good things in the future. Germany adopted a similar industry incentive program years ago and now is one of the world leaders in solar power manufacturing and capacity.
The perfect storm I mentioned is a combination of consumer incentive programs, falling manufacturing prices, and new, more efficient technology. In the not-too-distant future, a home equity loan will pay for a new photovoltaic system, and loan payments on that system will be completely offset by cost savings and incentive credits. This is the sweet spot for solar power adoption, when the industry moves from a niche market into the mainstream.