"Commercial solar is Oregon's BETC casualty"
Oregon’s commercial solar business took off after state Legislators in 2007 increased the value of the state’s Business Energy Tax Credit from up to 35 percent of the cost of a renewable energy project to 50 percent. But faced with a crippling deficit, Legislators this year were forced to cut from non revenue-generating programs. The BETC program, which made available $300 million in tax incentives during the two year period that ended June 30, was turned into a grant program with just $3 million to split among all renewable energy technologies.
By Erik Siemers
Sustainable Business Oregon
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It wasn’t long ago that solar energy installers found a seemingly endless pool of businesses eager to take advantage of state tax incentives for installing solar energy systems.
But now, with those incentives largely gone, many of those same installers are being forced to shift their strategies for the Oregon market, if not look for business elsewhere.
“My pipeline is drying up pretty quickly,” said Brent Gunderson, president of Portland-based solar installer Gen-Con Inc. “It’s getting worrisome.”
Oregon’s commercial solar business took off after state Legislators in 2007 increased the value of the state’s Business Energy Tax Credit from up to 35 percent of the cost of a renewable energy project to 50 percent.
But faced with a crippling deficit, Legislators this year were forced to cut from non revenue-generating programs.
The BETC program, which made available $300 million in tax incentives during the two year period that ended June 30, was turned into a grant program with just $3 million to split among all renewable energy technologies.
The commercial solar market — which accounted for 4 megawatts of the 7 megawatts of new solar energy capacity installed in Oregon last year — is widely viewed as the biggest casualty.
Legislators retained tax incentives for energy conservation and manufacturing, and though the Residential Energy Tax Credit program was reformed, the portion of the program aimed at solar energy was left largely untouched.
The residential market also has the feed-in tariff, a pilot program focused largely on smaller solar energy systems that allows the system owners to sell energy back to the power grid.
The saving grace for solar industry leaders is that the framework of the BETC program remained intact, and some in the industry hold out hope Legislators will allocate capital to the program when they reconvene next January.
But if the economy doesn’t improve, this could be the start of a long dry spell for Oregon’s commercial solar market.
“By cutting the funding down substantially, it’s almost like it will be on hold for the next year or couple of years,” said Matt Ziskin, senior director of marketing for Kingston, N.Y.-based Sunwize Technologies Inc., which has operated a regional office in Philomath since 2004. “What we’re anticipating is there just won’t be many commercial installations happening.”
That leaves a big revenue gap for SunWize’s Oregon operations.
Commercial solar projects represented about 40 percent of the company’s business in the state, with the majority of the work coming from residential systems.
Ziskin said the company’s plan is shift all of its focus now on the residential market.
It’s a similar story at Portland-based Sustainable Solutions Unlimited LLC.
President Steve McGrath said until now the company’s business was split evenly between residential and commercial solar installations.
And while he’s still got a healthy backlog of projects that received BETC pre-certifications, McGrath has nothing else in the pipeline.
“Without anything on the horizon, it’s hard to retain the commercial side of our business,” he said. “It’s going to be an interesting challenge.”
Alan Hickenbottom, principal of Portland-based Tanner Creek Energy, began planning more than a year ago for an eventual gutting of the BETC program.
A business that was built principally for the purpose of developing commercial solar energy systems now generates most of its business from energy efficiency projects, a shift that has been bolstered by Tanner Creek’s acquisition earlier this year by electrical contractor Christensen Electric.
“For anybody who was paying attention, none of this is a surprise,” Hickenbottom said. “We’ll continue to be busy, but it most likely won’t be a commercial-based business in Oregon for solar.”
Such dismal forecasts come at a time when commercial solar market is poised to explode nationally.
A report released earlier this month by Mountain View, Calif.-based research firm Frost & Sullivan said the North American market for non-residential solar energy is expected to grow from 1,514 MW of capacity to 20,728 MW by 2017.
Much of that is due to the decreasing cost of solar panels.
Hickenbottom said four years ago he was paying a wholesale price of around $4 per watt for modules. “I can get a decent Chinese module now for about $1.50 a watt,” he said.
But even with costs going down, industry leaders say the Oregon solar market still needs some form of incentives to make solar cost-competitive with traditional electricity.
Solar energy can more easily compete in markets such as the Northeast or California, where power costs continue to rise. But in Oregon, which still benefits from relatively cheap power from hydroelectric resources, the incentives are still necessary.
“We’re heading toward the point where small incentives are necessary,” said Sustainable Solutions' McGrath. “But we’re still quite a ways from the point where no incentives are necessary.”
While some installers are looking for new avenues of business, REC Solar Inc. is taking a completely different approach.
The San Luis Obispo, Calif.-based company is increasing its investment in Oregon, building its Portland-based division from 10 to 30 employees and growing.
Coming off a strong year, REC is working to build out a large commercial solar-focused construction team based in Oregon “regardless of how active Oregon is in the commercial space in 2012,” said Andy Noel, REC’s director of northwest business development.
The idea is that if the Oregon market sinks as expected, that crew can serve as a roaming commercial unit, working on REC projects in other states.
But it will also be in place for the eventuality that the commercial market in Oregon returns.
“We’ve never done it in any other state before. If a state typically ramps down, we usually don’t stick around,” Noel said.
But the industry has grown to a point in the state to amass an strong talent pool, he said.
Plus, he said, the BETC isn’t gone. It’s just unfunded.
“Part of the reason we’re sticking around is we have confidence in the long-term viability of the market in Oregon,” Noel said.