Renewable Energy Tax Credit Bill

The President and CEO of the Greater Phoenix Economic Council talks about a bill recently introduced by state lawmakers that offers economic incentives to renewable energy companies that move their headquarters or manufacturing facilities to Arizona.

Transcript:

Ted Simons:
State lawmakers have introduced a bill that offers economic incentives to renewable energy companies that move their headquarters or manufacturing facilities to Arizona. It's an effort to create high-paying jobs, stimulate the economy, and make Arizona a leader in renewable energy. That's something Arizona Corporation Commission Chair Kris Mayes fully supports. During a recent appearance on "Horizon," she mentioned higher renewable energy standards for utilities and more capacity for transmission.

Kris Mayes:
Probably folks don't know how important transmission is. You can have all the standards, 15%, 25%, but if you can't get the energy to the cities and the people who need it and who would use it, what's the point? A lot of the energy, for instance, we've got about 10,000 megawatt in the desert available for solar energy. But we need the -- solar energy but we need the power lines to get it into Phoenix and potentially Los Angeles and when do you that, you'll see 100 megawatt, 200 megawatt projects built out in the desert and start to see manufacturers of that solar equipment locate in the state of Arizona and that's what we want to see. We want to bring ourselves out of this situation we find ourselves in where we're totally dependent and tied to the housing industry. Why not diversify our economy with something that we have?

Ted Simons:
Here to talk about the renewable energy tax credit bill is Barry Broome, president and CEO of the greater Phoenix economic council. Good to have you on the program.

Barry Broome:
Thank you for having me.

Ted Simons:
This sounds like -- could this be described as a stimulus bill?

Barry Broome:
I wouldn't want to refer to it as a stimulus. Part of the business plan of Arizona is understanding how each of these industries we have a chance to compete on need to be effected through a state policy. So there's a lot of pent-up capitol and interest. I think it will have a run rate faster. From that standpoint, it will stimulate but I think it's a business plan for Arizona's future for the next 25, 30 years.

Ted Simons:
What kind of renewable energy firms are targeted?

Barry Broome:
It could be biomass or fuel cells. Wind technology and even wave technology. And a lot of these technologies are going to have very intensive engineering and manufacturer components so big materials connections. Obviously, there's one renewable that is part of the future of Arizona and that's solar. Due to the propensity for sun here in Arizona, solar is 40% more efficient in our state than typical states. Our proximity to California really gives Arizona a chance to be an export player in technology to a place like California, plus service our own energy needs.

Ted Simons:
What kind of jobs are we talking about? Manufacturer, headquarters jobs?

Barry Broome:
Both. Solar cells are a similar technology to semiconductor. So when you hear things like A.P.S. project, which is a concentrated solar power investment, a farm out in rural Arizona, the permanent job impact on a project like that might only be 85 jobs but the materials connected to the industry is similar to semiconductor. So Arizona is one of the number two markets in the US in providing semiconductor talent. So feeds to the strength of our workforce, as well as the obvious of having the sun.

Ted Simons:
Are you looking right now because of the nature of the beast at international firms?

Barry Broome:
The breakthrough in solar has occurred in Japan, Spain and Germany. and what makes it exciting to us is Japan, Germany are the number two investors year and year out and especially Japan solar has reached parity with traditional power costs and Germany is now from an industry standpoint to target the united states and target California as a place to do business and I think that puts Arizona in an excellent position. Plus, California, a place of great innovation, Silicon Valley is going to lead the United States in solar technology, California's cost of doing business really makes Arizona a natural for this industry to gestate. But there's competition. New Mexico, Texas, Colorado, Washington and Oregon have all made greater advances than Arizona.

Ted Simons:
And this bill in particular, how will this put us on a par or even ahead of the other states you mentioned? What does it do and compared to what has already been done?

Barry Broome:
I think it's important to understand what the role is of a state strategy or state incentive. It isn't to replace overall competitive positions. The reason Arizona is poised to succeed is because of the work of the Arizona corporation commission. The vision of Tucson electric power, our universities and a nice job by our legislators of keeping government small and keeping the cost of business competitive. What an incentive does is actually gives a company a chance to evaluate your state with other states that have similar capabilities. Arizona has almost an identical workforce to Oregon. New Mexico and Texas have similar sun patterns and we all have the ability to service California, so this would be a 10% tax investment on capital. Like the house bill that passed. For 10 years, it will put Arizona probably in a top three in the nation from an incentive perspective and I think it will guarantee Arizona is one of the states that solar clusters.

Ted Simons:
As far as salary and healthcare, talk to us about it.

Barry Broome:
One of the problems in Arizona's budget is we're home to a lot of working poor. A lot of people that work full time that cannot afford healthcare. This budget gets out of control because of things like AHCCCS. And if you look at Arizona's economy, we create a lot of jobs in the small business sector and healthcare is out of reach for small businesses to provide in their employees and AHCCCS as a backstop. In order to get an incentive, the company has to provide a traditional healthcare plan and 125% of the average of Arizona's median wage and in addition to the excitement around solar and renewable, this sets the standard for how all economic policy ought to be evaluated. Is this an industry we can compete in? Is it going to move us off of construction jobs? By the way, it's greater than Michigan's dependence on automotive. And industry, this strategy, fulfills all of those requirements.

Ted Simons:
I want to get to diversify the economy in a second and expand on what you're talking about. As far as this bill is concerned, how does it compare to previous legislative efforts?

Barry Broome:
Well, it's the first bill ever introduced in Arizona that requires a company to pay higher than average wages in the state and provide healthcare to get it. It's a trendsetter in good public policy. The second piece we really like about this is before the company gets this incentive, it has to actually be up and operational. So you're not front-ending the incentive. And if the company doesn't stay operational in Arizona for 10 years, the company pays back the incentive in the event it leaves. If you look at Arizona's incentives right now, they're poorly constructed around poor wage jobs and lack discipline and don't require the companies to perform and there's no penalty for nonperformance. I don't think it's just an incentive on steroids. I think it's smart for how Arizona does economic development.

Ted Simons:
How is it affecting what Arizona is trying to do regarding solar in particular?

Barry Broome:
What we should be doing -- if you've read the book "Good to Great," they have something called a hedgehog philosophy. Arizona needs to be the dominant force in solar technology. And if you look at solar in the United States, it's spiking. By 2016 projecting 40,040 new jobs in solar. President Obama has appointed a Secretary of Energy from California who is a solar professional and the president is talking about renewables and his key expert is a solar leader, Arizona is a solar state. The chance to walk to the store right now and change the future of Arizona is in front of us right now. Yes, we have a budget crisis, but what is it? It's an indication that the economy is too dependent on short term economic models that don't provide long term success. You can't fix the budget without fixing the economy and solar renewables gives us the best platform going forward.

Ted Simons:
And as far as solar is concerned, some will argue you can't prop up an industry that doesn't seem ready to stand on its own.

Barry Broome:
In Japan, the price of solar is already below the price of traditional power and already -- this is not a static situation. The price of solar power is coming down and the price of traditional power is increasing dramatically. We expect by 2012 the price of solar power in California will be cheaper than the price of traditional power and that's just around the corner. If you think of Arizona as an exporter instead of a service economy, that means we're ripe to buy solar technology from Arizona. So I think all new technologies go through a period of correction and solar is one of those. But if you look at the achievements in the industry, the price is coming down and the price on traditional power is going up. The second piece on that, which has to be a factor, 70% of our energy we input from a hostile territory to the United States. We are importing from the Middle East and getting off that is an important national security issue. And if you talk to some experts, 30 years out, we're running out of energy. Solar is renewable and it's going to liberate us from foreign oil and gives us a chance to be a serious player since the invention of steel, automotive, computers. We have a chance to be a real winner.

Ted Simons:
Go team! Thank you for joining us. And finally tonight, Larry Lemmons shows us how one Arizona company is using the sun's energy to beat the heat.



Larry Lemmons:
Cold from hot, that's the basic principle behind solar thermal cooling. At the Arizona Department of Emergency and Military Affairs, SRP installed a demonstration solar absorption cooling system.

Joel Dickinson:
Right now, conventional air conditioning is a major load for SRP and if we can try to explore these solar cooling technologies and avoid the peak demand with the solar, we would be in a really nice position.

Larry Lemmons:
It might look complicated but it's a fairly straightforward process. It starts with a heat pipe.

Joel Dickinson:
Each of these vacuum pipes is an individual process and what they do is take the working fluid inside of this vacuum pipe, is in a puddle at the bottom, the sun beats down, and transfers the energy to the pipe and boils that water inside that vacuum tube. The vapor travels up the tube and on the manifold of hot water and this is the hot water we use to drive our solar chilling process. All of the hot water we harvest with the solar array gets stored in this tank and the cooler water from the bottom is piped out to the array, through this pump. And then it goes through the array, the water is heated, and then it comes back and it's dumped into the top of the tank. So the water is cooler at the bottom and hotter at the top and the hot water gets stored in this tank. Now we have a tankful of hot water created by the solar array and that hot water drives the absorption chiller and piped over here in this pipe and then the hot water is converted to cold water by the chiller and in a vacuum. The cold water is piped over to the building. So the chilled water being created by the absorption chiller is pumped up through these -- absorption. It's a conventional air handling unit that utilizes the cold water and hot air in the building. The hot air goes over the cold coil and we get cold air in the building.

Larry Lemmons:
This is a pilot program. SRP and the National Guard have teamed up to see how the system works. It is producing air conditioning for the Guard's Eco-Building.

Paul Aguirre:
It's a project that the Arizona National Guard did years ago. It's made out of recyclable materials. It's solar powered. And to add this solar chiller unit to that really underscores the eco-building intent, which is to be environmentally friendly and use renewable power sources more and more for the Arizona National Guard.

Joel Dickenson:
SRP has spent quite a bit of money putting a data acquisition system and this solar air conditioner so we can harvest information and from that, we're going to hire a third party and do an energy study and what are the true economics of this system? How much are we saving by using the solar hot water to drive the cooling process and then over time, I think we would like to get that information out to the public so that they understand what are the paybacks and return of investment for this type of technology.

Larry Lemmons:
SRP hopes the technology becomes smaller so the system will be more practical for home use.

Joel Dickenson:
Right now we're dealing with a 10-ton chiller. They came out with a 5-ton version. so that would be a nice evolution, I think, to see it move into the home.

Larry Lemmons:
Progress has been made here in the valley of the sun to employ solar technology. a challenge has always been the cost.

Joel Dickenson:
We have all of this free energy we can harvest with the sun. the trick is to figure out how to make this cost effective and I think we've been evolving over the last number of years to that goal and I think we're getting close.