Uni-Chem, the South Korean company that wants to start making solar cells in the Hynix plant in west Eugene, is just the latest in a string of foreign companies that are coming to Oregon to seek their solar fortune.
A half-dozen solar companies, including firms based in Germany and Japan, already have landed in Oregon, and more are circling the state.
These companies have caught the scent of a monumental market opportunity. Solar industry experts say the United States is poised to become the world’s largest market for photovoltaic panels. That prediction is backed up by a stack of federal, state and local incentives to encourage Americans to install solar panels on their rooftops, and by the growing list of states, including Oregon, requiring utilities to obtain a certain percentage of their power from renewable energy sources, such as solar.
Producers are following the market, said Shyam Mehta, senior analyst at GTM Research, an affiliate of Greentech Media, an online media company based in Cambridge, Mass.
“With stimulus funds and massive utility deployment expected to drive 1.6 gigawatts in U.S. demand by 2012, domestic, Chinese and European companies are making major investments in solar factories over the next five years, particularly in panel manufacturing,” he said.
“More (U.S.) plants were announced in the first half of 2009 than in the previous three years combined,” Mehta said.
With its skilled work force, network of suppliers, access to university researchers, and generous subsidies, Oregon exudes a powerful allure for these companies.
“As we look around the U.S. and ask the question, who has the best incentives for starting solar factories, Oregon always comes out at the top,” said Roger Little, CEO of Spire Solar, the Massachusetts company that is working with Uni-Chem to set up U.S. solar production. In February, his firm even launched a “Come to America” campaign, encouraging foreign companies to set up solar manufacturing on American shores.
“If you can maintain the benefit that you provide to these companies, then you’ll continue to grow in the solar field,” he said. “I think it’s a huge opportunity.”
But it remains to be seen how successful these Oregon newcomers will be, whether they’ll meet their production and employment projections, and ultimately, whether they’ll help Oregon become a center for clean-energy technology and manufacturing.
Oregon is well on its way to achieving that goal, according to a recent report by Mehta, the GTM Research analyst. U.S. solar module manufacturing capacity, as measured in megawatts, will rise 45 percent a year from 2008 to 2012, from 875 megawatts in 2008 to 3,880 megawatts in 2012, the report forecasts.
One megawatt installed typically powers 150 to 200 households, said Monique Hannis, spokeswoman for the Solar Energy Industries Association in Washington, D.C.
Mehta ranks Oregon as the No. 1 site for companies locating solar manufacturing plants in the United States. He predicts that Oregon and California will emerge as major solar manufacturing centers in the next few years, with Oregon accounting for 59 percent of the United State’s “producible (solar) wafers” in 2012.
Solar ingots are sliced into wafers, which are then cut into cells to make photovoltaic panels, or modules, which are installed to generate power from the sun.
Tax credits popular
Many of Oregon’s solar companies said they were drawn in by the state’s package of goodies, including reasonably priced vacant semiconductor plants and their skilled ex-workers; inexpensive, reliable electrical power; access to higher-education researchers and work force training; proximity to the massive California solar market; and incentives, including the state’s Business Energy Tax Credit (BETC) program, known as “Betsy.”
Under the program, a solar manufacturer may apply for a tax credit worth half of a project’s costs. The tax credit is capped at $20 million, to be claimed over five years.
Eligible projects include investments, such as improvements to plant and equipment. Recipients may sell their tax credits at two-thirds their face value for cash, which solar manufacturers are doing because they aren’t generating enough income to take full advantage of the credit themselves.
Solar manufacturers and state business development officials say the tax credit is just one of many compelling reasons for a solar company to settle in Oregon.
“It was really a matter of everything coming together at the right time in the right place for the right price,” said Ben Santarris, spokesman for SolarWorld, the German company with a solar cell plant in Hillsboro.
Some of those factors, he said, included a well-maintained facility on nearly 100 acres “at a fraction of the original price;” a regional work force “well-steeped in silicon and high-tech manufacturing”; a strong educational system to help develop the industry, from technical training to research; responsive state and local governments; and incentives “strong enough to level the playing field with those of other states.”
“Remember, we’re investing $500 million into U.S. manufacturing, which is pretty bold in this era,” Santarris said. “We were looking for the set of conditions under which this enterprise had the most going for it.”
Although they aren’t the sole draw, the subsidies do matter, solar company officials say.
John Sedgwick, co-founder of Solaicx, which is based in Santa Clara, Calif., and opened a plant in Portland two years ago to produce ingots and wafers, said the large base of trained employees was the area’s biggest attraction.
“That was far and away the No. 1 criteria,” he said.
“The Betsy (tax credit) was quite important,” Sedgwick added. “It wasn’t the primary reason for locating in Portland, but it certainly was a nice sweetener.”
The tax credit and property tax waivers had even more pull for Sanyo Solar, which last month opened its wafer and ingot facility in Salem.
“The real deal maker for us was, of course, the incentives program,” Sanyo Solar spokesman Aaron Fowles said.
Combined, the Business Energy Tax Credit, enterprise zone property tax waiver, and other incentives are estimated to cover half of Sanyo’s $80 million costs to set up its Salem plant.
The Business Energy Tax Credit is “a very, very rich subsidy,” said Sen. Ginny Burdick, D-Portland, who chairs the Senate Revenue Committee. “It’s by far richer than any other state has, so it’s going to make us very attractive to solar companies.”
The main reasons why Uni-Chem wants to set up in the Hynix plant are “incentives, the closeness to the market (California is the largest solar market in the United States) and the appeal of the facility itself,” Uni-Chem spokesman Yoon Ho Kim told The Register-Guard in late September.
Uni-Chem “will be applying for everything that’s offered to us,” he said.
That’s likely to include the Business Energy Tax Credit, as well as the enterprise zone tax break, which would waive three years — and possibly two additional years — of property taxes on improvements Uni-Chem makes to the Hynix complex.
Uni-Chem has said that it will spend $100 million to $150 million to convert the third-floor of the Hynix plant to solar cell manufacturing. Assuming a $100 million investment, Uni-Chem could qualify for a $20 million Business Energy Tax Credit, which it could sell for about $13 million cash, plus three years of enterprise zone property tax waivers, valued at roughly $1.85 million a year.
Federal policy helps, too
A variety of recent policy moves in the United States are giving solar producers confidence in the U.S. market’s potential, Mehta and other analysts say.
Last year, a 30 percent federal tax credit for residential and commercial solar installations was extended for eight years, sending a message that the United States is serious about solar, said Hannis, the Solar Energy Industries Association spokeswoman.
That extension “was a very important signal that here’s a stable policy that’s going to support demand here in the U.S.,” she said.
In addition to federal, state and local incentives encouraging U.S. residents to install solar panels, the federal stimulus bill and some states — including Oregon — offer subsidies directly to solar manufacturers.
The Advanced Energy Tax Credit, which was part of the federal stimulus, offers manufacturers a 30 percent tax credit on the cost of equipment. That is set to be converted to a direct cash payment.
“A lot of (solar) companies have expected the U.S. market to be the No. 1 market, but we haven’t had the policies in place to sort of let the market take off,” Hannis said.
Some of the federal stimulus subsidies contain “Made in America” requirements, providing a further incentive for foreign companies to establish U.S. manufacturing.
“A logical place to locate American facilities in order to have American content is in Oregon,” said Sedgwick, of Solaicx.
Some Oregonians may think they’ve seen this all before — chasing the semiconductor industry with incentives, only to see most of them pack up and go home when the market sank.
Solar isn’t as cyclical as the semiconductor industry, Sedgwick said. Solar behaves more like the energy industry, which is marked by steady demand, he said.
And the move away from fossil fuels to renewable energy is expected to take decades. Currently, only 1 percent of electricity used in the United States is solar-generated, Hannis said.
“The big (solar) boom is going to last a while because it’s going to take a while to outfit every single house,” she said.
“We believe that (solar) is a really solid long play,” said Bruce Laird, clean-tech recruitment officer with the state business development department.
As each state reaches “grid parity” — the point at which solar-generated power costs the same per watt as power generated by other means — “the pull-through demand for solar products is pretty straight up for the next 20, 30, 40 years,” he said.
“At a certain point you hit grid parity, and look out, because one thing that everybody likes is a good deal,” Laird said. “And if you can do the environmental right thing and get a good deal, that is like virtue on the cheap.”
Sherri Buri McDonald, Register-Guard – http://www.registerguard.com/csp/cms/sites/web/news/cityregion/22174413-41/story.csp