The Solyndra collapse and its subsequent Washington investigation have re-ignited the national debate over whether the solar industry should be subsidized by the government, and some state legislators are calling for a re-examination of Arizona’s own solar incentives.
“I’ve never been a fan of it. The government just screws things up when it sticks its nose in things,” said Sen. Frank Antenori, R- Tucson. “The free market has always been the best determining factor.
The old quote, ‘necessity is the mother of invention,’ it’s the truth.”
In 2009, a bill sponsored by then-Sen. Barbara Leff, R-Paradise Valley, created a package of incentives for companies that produced or manufactured equipment for renewable energy.
The bill passed with nearly unanimous support from Democrats in both chambers, but some GOP lawmakers had reservations.
The bill authorized the state to award up to $70 million in income tax credits each year on a first-come, first-served basis to renewable- energy companies that met certain employment criteria, including a qualification that more than half of the company’s employees be paid at least 125 percent of the state’s median wage. It also allowed businesses’ real and personal property to be reclassified at a lower tax rate.
Since then, only Suntech Power Holdings has qualified for the incentives, receiving pre-approval for its plant in Goodyear that opened in October, according to Arizona Commerce Authority spokeswoman Kristen Hellmer.
One solar factory that received state incentives has also had to close. Solon Corp. announced in August that it would be closing its solar panel factory in Tucson, although it would be keeping its headquarters there. While the factory did not receive any of the renewable energy incentives, it did receive a refund under the Research and Development program the Arizona Commerce Authority administers.
The exact amount was not disclosed, as it’s considered private taxpayer information.
It likely didn’t receive near the
$535 million federal loan given to the California-based solar technology company Solyndra, which filed for bankruptcy this month.
But local conservatives have pointed to the Tucson plant closing and Solyndra’s bankruptcy filing as further evidence of what they have been saying all along: the demand for solar cannot sustain the industry without government subsidies.
“Essentially, you’re propping up an industry that can’t stand on its own legs,” said Sen. Ron Gould, R-Lake Havasu City. “The only reason you’re seeing the amount of growth you are now is because of government intervention.”
But supporters are holding firm.
Barry Broome, president and CEO of the Greater Phoenix Economic Council, was a staunch supporter of the 2009 bill and remains a believer in solar today.
Solyndra, he argues, was a unique situation that had more to do with political quid pro quo than the value of the technology — an ultra- thin panel that was revolutionary but not yet perfected.
“Solyndra was a bad technology,” Broome said. “No one in the industry felt like Solyndra could succeed. But well-connected people were able to convince Washington to give them that loan.”
Not the case for Arizona, he said. Companies like First Solar and Suntech are leading the industry and have positioned Arizona at the forefront of the industry’s growth.
As for the argument against solar subsidies, he points out that solar energy companies are hardly getting special treatment that other energy companies don’t receive.
“Here’s my question for everyone: what industry can survive without government subsidies?” Broome said. “Right now if you took the federal government out of the economy, there would be no economy. There would be no energy sources of any kind built without federal loan guarantees.”
The winds, however, seem to be changing. In addition to the shuttering of Solyndra and the Solon Corp. plant, a more conservative Legislature and budget crisis have some lawmakers pondering whether now would be the best time to revisit the incentive program.
“It’s certainly something which, during the budgeting process, we should look at,” said Rep. John Kavanagh, R-Fountain Hills. “The public is beginning to realize that it takes more than a good idea or a dream to make something work.”
Rep. Debbie Lesko, R-Glendale, points out that the lack of demand for solar energy sources mostly comes from the high price tag compared to traditional forms of energy. The question she said she and other legislators should consider is how soon the technology will become cost-effective, be in demand and be able to mostly stand on its own.
“The Legislature, with input from citizens, needs to determine if we want to subsidize it for much longer,” she said. “Right now, I don’t think it can survive on its own two feet.”
Senate Majority Leader Andy Biggs, R-Gilbert, said that even after Solyndra, there may not be the will to do away with or cut back the current program. However, the scandal may provide a push to take a closer look at all government incentive programs and make sure that the companies that have received subsidies from the state are upholding their end of the bargain.
“The federal government will get burned for this issue,” he said.
“That’s a lesson we should take, and I think we should at least go back and make sure that everything’s working the way the proponents said they would.”
Antenori suggested that it isn’t the idea of incentivizing solar that is flawed, but the way the state went about it.
In an emerging industry like renewable energy, it would be more beneficial to subsidize the research and development rather than the manufacturing, he said. That way, the U.S. would be developing its own technology rather than following the models that China has developed.
“If you’re going to do anything, incentivize the companies that develop the new technology, rather than just manufacturing truckloads of the cheap Chinese solar panels,” Antenori said.
At the least, some legislators say the story will send a message of caution whenever any other incentive packages were proposed.
“I think it will make people reluctant to pick new winners and losers, and make us look more closely at existing programs,” said Kavanagh.
“Hopefully legislators will look much more closely at these incentives before they throw the people’s money away on these industries.”