Industry Recruitment & Support

Description

State and local governments can use a variety of financial incentives to encourage clean-energy businesses to locate or expand within their jurisdictions as a way to spur economic development and create jobs, provide consumers with greater access to renewable-energy systems, and support climate change initiatives. These incentives, which typically take the form of tax incentives, loans and/or grants, can be designed not only to promote the establishment or expansion of manufacturing operations, but also to support research, development and commercialization efforts; to facilitate partnerships with private venture capital funds to invest in clean energy companies; and to support marketing and business development activities for distributors and installers.

Status & Trends

Around 20 U.S. states offer incentives targeting the recruitment and/or development of the renewable-energy industry. A decade ago, solar incentives consisted primarily of tax credits for new manufacturing facilities. They have since evolved to attract a wider range of industry players through grants, loans, property tax abatements, marketing support, corporate tax exemptions and tax credits, and even bonus incentives for consumers who purchase in-state manufactured solar systems and components. Many of these loan and grant programs are supported by state public benefits funds.

Solar Industry Recruitment/Support Incentives

Programs may offer as little as a modest grant to a small business with a promising pre-commercial technology, or as much as $25 million in tax credits to a company that builds a new manufacturing facility. Most grants and loans do not exceed $1 million, while tax credits for solar equipment manufacturers range from 5% to 50% of construction (and other eligible costs, in some cases). Some tax credits may be worth up to 100% of corporate taxes or new state tax revenues. Sometimes these tax credits are limited to the first few years of the facility's operations.

States incorporate various provisions into funding agreements or tax credit eligibility rules to encourage project success and to protect their investment in new or expanding business ventures. For example, programs may contain minimum thresholds for job creation, product output and investment. Or, incentives may be based on product sales from the manufacturing facility. Some programs disburse incentives in a phased approach based on milestones the company reaches. In addition, loan and grant programs typically require substantial cost share. In some cases, failure to meet project goals and terms may result in the partial or full repayment of the incentive, whereas achieving specific job creation or economic development targets may result in more favorable loan terms in others.

While states typically establish industry development programs for solar technologies, local governments may be authorized and motivated to do the same. Municipal and county governments without the financial resources to develop programs solely for the solar industry can include solar as one of the targeted sectors for economic development efforts. Miami-Dade County, Florida, for example, provides financial incentives for specific industries wishing to relocate or expand within the county, including solar companies.

Furthermore, committing to purchase a specified amount of solar equipment from manufacturers locating in a local government's jurisdiction can also serve as a recruitment tool. Municipalities that operate their own local electric utilities have additional options to draw solar businesses to the area. For example, Columbia, Missouri, established a solar portfolio goal, essentially a target to generate or procure a portion of the municipal utility’s electrical load with PV generation. Austin Energy, in Texas, and the Los Angeles Department of Water & Power offer higher incentives for installing locally-manufactured solar equipment as part of their solar incentive programs.

Examples

Washington State’s Tax Abatement for Solar Manufacturers and Renewable Energy Production Incentives are designed to draw equipment and component manufacturers to the state. The tax abatement allows for a 43% reduction in the business and occupation tax rate for in-state manufacturers and wholesale marketers of photovoltaic (PV) modules or silicon components of those systems. Businesses claiming the credit under this program are required to file annual reports with the Washington Department of Revenue detailing employment, wages, and health and retirement benefits. The state’s production incentive program, which offers a base rate of $0.15/kWh, or $0.30/kWh for community solar projects, favors in-state manufacturers by awarding PV system owners a higher incentive if the system's modules are manufactured in Washington or if the system uses an inverter manufactured in Washington. These bonus incentives can increase the incentive for PV production to as much as $0.54/kWh, or $1.08/kWh for community solar projects.
Oregon’s Tax Credit for Renewable Energy Equipment Manufacturers provides a tax credit of 50% of the construction costs of a new or expanded renewable energy manufacturing facility. The maximum credit amount is $20 million. The incentive is taken over five years, at 10% of eligible costs each year. Established in 2007, this program has been successful in attracting several large manufacturers to Oregon, and it complements the long-standing business and residential energy tax credits available to those who install solar and other clean-energy projects.

Resources

DSIRE: Summary of Industry Recruitment and Support Incentives in the U.S. DSIRE, 2012.

National Solar Jobs Census 2012. The Solar Foundation, November 2012.

U.S. Metro Economies: Green Jobs in U.S. Metro Area. Prepared by Global Insight for the U.S. Conference of Mayors and the Mayors Climate Protection Center, October 2008.

Putting Renewables to Work: How Many Jobs can the Clean Energy Industry Generate? Renewable and Appropriate Energy Laboratories, University of California - Berkeley, April 2004.

Disclaimer: The information presented on the DSIRE web site provides an unofficial overview of financial incentives and other policies. It does not constitute professional tax advice or other professional financial guidance, and it should not be used as the only source of information when making purchasing decisions, investment decisions or tax decisions, or when executing other binding agreements. Please refer to the individual contact provided below each summary to verify that a specific financial incentive or other policy applies to your project.

While the DSIRE staff strives to provide the best information possible, the DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. make no representations or warranties, either express or implied, concerning the accuracy, completeness, reliability or suitability of the information. The DSIRE staff, the N.C. Solar Center, N.C. State University and the Interstate Renewable Energy Council, Inc. disclaim all liability of any kind arising out of your use or misuse of the information contained or referenced on DSIRE Web pages.

Copyright 2012 - 2013 North Carolina State University, under NREL Subcontract No. XEU-0-99515-01. Permission granted only for personal or educational use, or for use by or on behalf of the U.S. government. North Carolina State University prohibits the unauthorized display, reproduction, sale, and/or distribution of all or portions of the content of the Database of State Incentives for Renewables and Efficiency (DSIRE) without prior, written consent.