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Published: Sunday, 3/7/2010

State of Ohio fails to build on northwest Ohio solar success

BY JOE VARDON
BLADE PROJECTS EDITOR

First of three parts

Toledo and its northwest Ohio neighbors have missed out on coveted manufacturing jobs in the solar industry because of a failure by state officials to attract companies with tax incentives or create a viable market for solar panels in Ohio, a Blade investigation shows.

Since 2007, thousands of those jobs have gone to states where companies were enticed by a mixture of tax credits, grants, and additional incentives to make solar products there.

While northwest Ohio has gained its share of acclaim in the solar industry through the success of First Solar Inc. and University of Toledo spin-offs such as Xunlight Corp., thousands of laid-off factory workers have yet to find work from the gains made here in the research and development of thin-film photovoltaics.

That's because, according to solar industry analysts, consultants, and executives, Ohio is fighting both the perception and reality of noncompetitive tax structures and incentive packages compared with other states.

After reviewing state incentives nationwide for solar-based manufacturing, analyzing where solar companies have located in the United States, and interviewing dozens of politicians, business leaders, researchers, and academics tied to the solar industry, The Blade found:

•Ohio failed to capitalize on Toledo's early success in the solar industry beginning in 2000 because of business taxes such as the corporate franchise tax and tangible personal property tax that weren't completely phased out until this year.

•A public utilities property tax is still on the books and is a hindrance in luring solar companies to Ohio.

•The passage in 2008 of new energy standards that will require 12.5 percent of electricity sold in Ohio to be from renewable energy resources by 2025 has yet to produce many jobs or a large market for solar panels.

•Ohio continues to subsidize coal. Of the $150 million set aside to provide grants and loans that typically range between $50,000 and $2 million for advanced energy projects, $66 million was designated for "clean" coal technology. Per the Ohio Constitution, state funding for coal projects can be in the form of grants, but funding for other alternative energy projects, such as solar, must be in the form of loans.

•While Ohio does offer loans for solar projects, it doesn't offer tax credits specifically targeted toward solar equipment manufacturers like those offered in Oregon, Michigan, and elsewhere. Ohio does offer a job creation tax credit between 25 percent and 55 percent to a qualifying company from any business sector, a job-retention credit for any company maintaining 500 employees and committing $50 million in investment, and grants for companies to pay for employee training in renewable energy technology.

CTY solarleaders27p Ohio Gov. Ted Strickland. Gov. Ted Strickland with local solar company executives from Xunlight and Willard & Kelsey at the University of Toledo Scott Park Campus of Energy & Innovation in Toledo, Ohio on February 26, 2010.  Jetta Fraser/Toledo Blade CTY solarleaders27p Ohio Gov. Ted Strickland. Gov. Ted Strickland with local solar company executives from Xunlight and Willard & Kelsey at the University of Toledo Scott Park Campus of Energy & Innovation in Toledo, Ohio on February 26, 2010. Jetta Fraser/Toledo Blade
JETTA FRASER Enlarge

Ohio Gov. Ted Strickland said he is "always open to new ideas" when it comes to targeted tax credits, but he said his administration already has worked to greatly improve state policies that he said have kept more solar manufacturers from locating here.

Scott Sklar of Washington-based Stella Group Ltd., a strategic marketing and policy firm for renewable-energy companies, estimates that Ohio - and especially Toledo - has missed out on about 3,000 solar-based jobs in the last few years.

That's obviously disheartening news for a state that shed more than 200,000 jobs from 2000 through 2007, a region battling double-digit unemployment, and a city like Toledo that was dubbed a solar "hot spot" in 2007 because of success stories such as First Solar and Xunlight.

"In my mind, Ohio could have three to five times the amount of renewable-energy companies it has now if incentives were orchestrated in a way to attract those businesses," Mr. Sklar said. "Toledo would've definitely gotten some of those jobs."

Officials from the Ohio Department of Development said the state does not track its solar-based jobs, but the Toledo Regional Growth Partnership offers a soft estimate of about 6,000 people either working in or contributing to the solar industry in northwest Ohio. That's the same estimate the growth partnership offered in 2007.

Tom Cope, left, and Pat McCloy discuss a job at Uni-Solar in Auburn Hills, Mich., which produces photovoltaic roofi ng material. Michigan offers tax credits targeted toward solar-equipment manufacturers. Uni-Solar operates several plants in the state. Tom Cope, left, and Pat McCloy discuss a job at Uni-Solar in Auburn Hills, Mich., which produces photovoltaic roofi ng material. Michigan offers tax credits targeted toward solar-equipment manufacturers. Uni-Solar operates several plants in the state.
CLARENCE TABB, JR. / THE DETROIT NEWS Enlarge

Since that time, dozens of manufacturing plants have opened or are near completion in California, Oregon, Massachusetts, New York, Michigan, Arizona, New Mexico, Colorado, and elsewhere.

According to the Solar Energy Industries Association, Ohio has seven solar energy equipment manufacturers (the association's count doesn't include Toledo's Xunlight, which has about 120 employees and hopes to expand once it receives necessary certification of its products from Underwriters Laboratories this spring).

California has 140 solar manufacturers, and Arizona (37), Florida (26), New York (23), New Jersey (21), Massachusetts (21), Colorado (20), Texas (19), New Mexico (18), Illinois (15), Michigan (15), Pennsylvania (14), and Oregon (11) all exceed Ohio's count.

Rhone Resch, a lobbyist for the Solar Energy Industries Association in Washington, said Toledo's solar future remains bright because of its history in making glass, which is used to make solar panels, its access to major highways, waterways, railroads, and an airport, and because of ongoing research at the University of Toledo.

But Mr. Resch said Toledo and other Ohio cities would benefit if the state were more aggressive in attracting new investment.

"There hasn't been a market for solar energy in Ohio," he said. "The state bends over backwards to protect coal jobs. It needs to put more money in the next generation of energy and technology."

Although Mr. Strickland defends and promotes his record for supporting all advanced energy projects in Ohio - of which coal is included - he agrees that past state policy prevented northwest Ohio from benefiting further from its early success in the solar industry.

"Look at what happened with First Solar, with much of its production taking place offshore," said Mr. Strickland, who took office in 2007 and spearheaded passage of Ohio's renewable energy portfolio standards the following year.

First Solar, now the world's leader in thin-film solar modules, opened its first plant in 2000 in Perrysburg Township. The firm is an outgrowth of a marriage of Toledo glass manufacturing pioneer Harold McMaster's research and the wealth of retailing heir John Walton.

Since perfecting its product locally, First Solar has grown into a $2 billion-a-year manufacturer and expanded its Perrysburg Township operation to at least 840 employees. Yet, the company's headquarters is in Tempe, Ariz., and most of its production takes place in Kulim, Malaysia - where labor is much cheaper - and Frankfurt/Oder, Germany - where massive government subsidies have created the world's largest market for solar panels.

Of First Solar's global annual production capacity of 1.2 gigawatts of electricity, about 212 megawatts - or about one-sixth of its global output - will be produced in Perrysburg Township when the plant's latest expansion is complete. The factory is First Solar's only U.S. manufacturing plant.

Although Ohio and other states have for years lost manufacturing plants to lower labor costs overseas, Mr. Strickland views what's happened with First Solar as just one of several opportunities missed because of substandard state policies toward manufacturing.

"I think in a lot of ways Ohio has sort of been a passive state for quite a while, and this is just one of them," Mr. Strickland said. "There was just no real [effort] pursuing alternative-energy companies."

The first state that industry analysts mention when they talk about solar manufacturing incentives is California, which makes up about 70 percent of the U.S. solar market and has pledged $3.2 billion in tax rebates and incentives for projects that will cover the state with 3,000 megawatts of solar electrical capacity by 2016.

That's the capacity of three nuclear power stations the size of Davis-Besse near Port Clinton, Ohio.

In the state of Oregon, solar manufacturers get tax credits of up to 50 percent of construction costs. At least four solar companies have moved or placed manufacturing operations there since 2007 totaling about 2,000 permanent jobs.

Michigan offers alternative energy companies credits from the state's business and payroll taxes and in 2008 enacted an incentive up to 25 percent - or $15 million - of the capital investment made specifically for companies that build photovoltaics facilities.

In the last four years, Uni-Solar, a rooftop panel manufacturer headquartered in Rochester Hills, Mich., has opened two plants in Greenville, Mich., and a second of two plants in Auburn Hills. It is building another in Battle Creek.

"These are some of the states that are leveraging government money for the solar industry," said Ken Zweibel, a 30-year veteran of the National Renewable Energy Laboratory in Golden, Colo., and founder of the George Washington University Solar Institute. "States who can do that are the states solar companies are going to in the U.S."

Sanyo North America Corp., which already had a production facility in California, built an $80 million, 70-megawatt facility in Salem, Ore., that is expected to be at full capacity this spring. The project brought with it 200 full-time jobs.

"The tax credit program was very attractive and was definitely the clincher in the deal," said Aaron Fowles, a company spokesman.

Julie Blunden, vice president of public policy and corporate communications for solar cell and solar panel maker SunPower, said her multinational corporation will establish a U.S. manufacturing operation within a year in either California or Arizona.

Ms. Blunden, who is originally from the Cleveland suburb Shaker Heights, said her home state was never a serious contender for SunPower's business because "there is no long-term demand established today in the Ohio market."

"Ohio has a supportive governor and is making strides," Ms. Blunden said, "but there are hurdles to implementing the state's new standards, and it's just not a good time for manufacturing there."

Mr. Strickland said he never had a conversation with SunPower to convince its executives otherwise. He said the work his administration has done to improve Ohio's tax structure and other incentives for manufacturing will result in the announcements of new jobs in the coming months.

"Do I wish that had happened five or 10 years ago? Absolutely, but I live in reality," Mr. Strickland said.

Contact Joe Vardon at:

jvardon@theblade.com

or 419-724-6559.



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