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On paper it sounds good: provide taxes incentives for alternative energy companies to locate in Oregon and watch the companies — and the new jobs — roll in. Of course, tax-related issues are rarely that simple. We discovered that earlier this year when we did a show exploring the state's business energy tax credits — or more wonkily — BETCs ("Betsies"). So now the story's developed, and we figure it's time to take a second look.
The Oregonian recently reported that the Department of Energy and the Governor's Office purposely underestimated the cost of the BETC program:
Current and former energy staffers acknowledged a clear attempt to minimize the cost of the subsidies.
"I remember that discussion. Everyone was saying, yes, this is going to be a huge (budget) hit," recalled Charles Stephens, a former analyst for the Energy Department who left in 2006. "The governor's office was saying, 'No, we need a smaller number.'"
Dave Barker, an analyst who is still with the agency, told The Oregonian that the initial cost estimates started high but got lower after he was told by his superiors to plug in smaller figures.
"What I would hear pretty consistently was, 'We want to keep it conservative,'" Barker said.
The Governor's office denies that claim. (Kulongoski has ordered a review of the costs of the BETC program. The results of that review are due by the end of this month.) Meanwhile, The Oregon Department of Energy has come out with new temporary rules that tighten up the costs of the energy credits.
What does seem clear is that the cost of the BETC and other green financial incentives is rising — and many question if it's a price the cash-strapped state can afford to pay.
There is some evidence the BETC is working. Oregon has attracted more than its share of the renewable energy industry — mainly wind and solar companies— with possibly more to come. The Norweigian company Think says Oregon is still in the running to host its new electric car manufacturing plant. Regardless of Think's decision, industry watchers are still hopeful Oregon can become an electric car hub.
Has your company benefited from the BETC? How have green tax incentives affected your business? Do you work in the renewable energy industry? Do you consciously consume renewable wind or solar energy? Does it matter to you if Oregon is a leader in attracting and using alternative energy?
GUESTS:
Brian Shipley: Deputy chief of staff for Oregon Governor Ted Kulongoski
Mark Long: Acting director of the Oregon Department of Energy
Phil Barnhart: Democratic Oregon State Representative for District 11 and Chair of the House Revenue Committee
Tim Stearns: Senior energy policy specialist with the Washington Department of Commerce
Tagged as: economy · environment
Photo credit: jesse.millan / Creative Commons
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My firm is a small, Oregon-based electrical contracting firm concentrating on lighting efficiency solutions. All of our clients who have made lighting efficiency upgrades have been able to receive the benefit of the BETC. The primary benefit it supplies our clients is that it allows them to begin receiving the benefit of their energy effciency investment in a much shorter timeframe than if the credit did not exist.
Many of our clients could simply not afford to make the necessary investment without the added boost this program provides.
The sooner a ratepayer begins saving energy, the sooner they can use that savings to pay employee wages, ever-increasing healtcare benefit costs, and make other investments that ultimately protect and create jobs.
My greatest anxiety as I have followed these conversations (Harry Esteve, Steve Duin, the Oregonian editorial board, industry reports, etc.) is that the real value this program provides to small businesses (both my clients and mine) will go unnoticed when compared to the questionable value provided to wind farms, biomass plants, and other generating technology. (Remember, conservation is considered to be the quickest, most cost-effective source of generation!) The bottom line is that I am afraid this could easily become a case (like Ken H says) of the baby being thrown out with the bath water. For example, the DOE has recently revised some BETC program rules. One area of change has to do with overages on BETC-approved projects. Instead of modifying the rules regarding project overages (perhaps py applying a tiered structure), the whole concept was eliminated. How much more will be removed with a chainsaw instead of a scalpel?
I keep hearing about these multiple $10 million credits to out-of-state firms that have in turn sold the credits to WalMart (to name one oft cited example). For perspective, most of my clients have received benefits of under $10,000. And all of them are still in business providing jobs to Oregonians.
Zack A
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I think we might be forgetting what was attempted with the "renewable energy" portion of the BETC. Oregon has become a leader in GREEN renewable energy and in attracting new businesses to our state. Isn't that what we started the BETC for? Did it get bigger than any of us anticipated, yes it did. Who would have thought we would have a couple of Billion dollars invested in rural Oregon as a result? But we are competing with other states and we are setting the standard! This is good for our state, for the economy, the enviornment and our communities.
One of the two parts of the BETC not being told is well described by the first two comments on this blog. The second piece is the return we will be seeing throughout the state. The first project in Harney County is expected to return a like amount (equal to the BETC) in property taxes during the first 15 years. Additionally NEW income taxes will be coming in from the construction jobs (immediately) from the long term workforce, from the wind energy company and from the landowner lease payments. The return could easily double the state's investment in that time period.
The return IS there, the benefit to our rural communities is there, the gain to the economy is there and our enviornment benefits through the development of a carbon free energy source. So if we need to put some sideboards on the use of the credit lets do it. If we need to tighten up some rules lets do that but lets not give up the most succesful job creating and investment driving tool this state has today.
Steve Grasty, Harney County Judge
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3-23-07
Governor Ted Kulongoski
Mike McArthur, Chair: Renewable Energy Working Group
RE: Progress Report from the Renewable Energy Working Group
You charged the Renewable Energy Working Group (REWG) with developing implementation strategies for Oregon’s Renewable Energy Action Plan. The Plan’s ultimate goal is to encourage and accelerate the sustainable production of energy from renewable resources, stimulate economic development, particularly in rural parts of the state, and improve the environmental future of the state.
The REWG began meeting in February 2006, with a membership comprised of 31 stakeholders.
o The economic incentives subcommittee met to discuss the Business Energy Tax Credit (BETC) and Residential Energy Tax Credit (RETC) programs and how your legislative proposals to improve these programs could be further enhanced. Their efforts helped to build a general consensus among REWG members that led to their endorsement of both of these proposals.
The REWG spent months discussing elements of an RPS for Oregon and working on an outline of a renewable portfolio standard (RPS). The REWG’s work and deliberations on an RPS has formed the basis of your RPS legislation that is currently being brought before the Legislature. (The point missed in the BETC debate is that the RPS was a package deal and one of the tools was the BETC. Change the BETC and you make it harder to reach the standards.)
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A recent letter in the Oregonian about Oregon's Business Energy Tax Credit (BETC) asked, "Where's my subsidy?"
The answer is your subsidy is everywhere. Every form of energy we use is heavily subsidized. The tax subsidies, accounting loopholes and public policy support for electricity, natural gas, coal and oil are massive and deeply entrenched. Without the existing subsidies our energy bills would be much greater than they are now.
As a society we must choose how to spend our scarce resources. In the energy economy, we can decide to transition from fossil and nuclear sources to an economy built on renewable energy sources and energy efficiency. It's a choice that makes sense for many reasons -- jobs, local economic development, energy supply reliability, energy price stability, environmental protection, national and regional security, peace.
Here in the Northwest we have an abundance of renewable energy resources and the capacity and experience to greatly improve energy efficiency. The BETC program helped to build that capacity over its decades long history, with bipartisan support every step of the way. While revisions may be warranted, lets keep what works well and only fix what needs to be fixed.
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We manufacture energy efficient lighting in Eugene save our Oregon customers over 40,000,000 kilowatt hours per year, out of the state another 60,000,000. We provide jobs for our workers, sales people, installers, pay taxes and contribute our fair share to helping to make Oregon the place we all love to call home. I have worked with the BETC program and utility programs around the country for years. There are areas that could be improved, the rule changes that were recently imposed are part of that. A continuing effort to improve the program is being well handled by the new director. There isn't a program in the public or the private sector that is perfect. If we were all perfect, we would be working 1 day a week, exercising enough, eating correctly and the economy would be great.
Our customers use the pass thru program constantly, there are many small and large business's that need the money upfront than wait 1 to 5 years to get back. We have over 4,000 of our fixtures in school gyms from Tillamook to Burns to OSU. Our customers have gotten somewhere around $3.5 million back in BETC credits over the years. They are also saving about $1,800,000 a year in energy costs. Those costs are every year for decades. That is money that is staying in Oregon, helping those business's schools, factories... run more efficiently.
About 80% of electric customers in Oregon are served by PP&L and PGE. Even though we think hydro in Oregon, PP&L gets about 80% of their power from coal plants.
The BETC program is helping to save money thru projects with a reasonable payback, save a little bit of the planet, keep some local jobs and provide a better work environment, which is helping to make Oregon the 6th highest rated state in the country for efficiency.
Its a national pastime to put down our government and many times so do I. After getting to know a few very good people in the legislature, state agencies, it is easy to say, they are doing a fine job and working to make the program better and more efficient.
If you haven't used the BETC or the RETC program, or the Energy Trust programs or any of the other utility programs in the state to help make our state more efficient, your home more comfortable or your business save half of its lighting energy use, its time to.
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The goal behind any incentive is to get someone or society at large to do something that they would maybe not otherwise do on their own without some sort of encouragement. The idea is to make some desired direction or behavior more beneficial and/or profitable, so that when people make a decision they say, wow, look at this option over here and make their decision accordingly.
The BETC is one of the few, if not only incentive programs that actually functions as an incentive.
Yes, the BETC program costs money, because it is working. People are investing in development of wind farms and solar arrays because the BETC for the first time makes it profitable to do so.
What is wrong with the state putting its money where its legislative mouth is?
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Whenever there is a 'goldrush' with massive infusion of capital, we are setting up the foundations for the NEXT ECONOMIC BUBBLE BURST. IS there a GREEN BUBBLE? ----Will we end up with a vicious backlash against green technology and sour taste in our mouth.
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"IS there a GREEN BUBBLE?"
Too much green energy chasing Fossil Fuels out of the market? Isn't that the problem we want to have, that we welcome?
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I think it is important to remember development is development--even if it is called "green." Why is money going to developers and not conservation and mitigation around projects? Can BETC be reshaped to provide tax breaks for development that actually is "green" and when developers are good stewards to the places they develop?
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I work for a renewable energy company that opened offices in Oregon in 2007 in order to take advantage of the BETC program. We have hired six new employees in the last 11 months and have yet to cost the program.
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CHANGES!!!
I think the BETC has proven to be an incentive for developers to essentially game the system by subdividing projects which also allows them to avoid EFSC and the state regulatory processes.
I think BETC needs to make sure developers do not improperly subdivide projects thus creating accumulating effects to our natural resources and bypass state regulatory process and regulations (such as the 3 mile buffer zone ODFW requires around sage-grouse leks.)
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Is there a sunsetting clause to the tax credit?
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With the big push for Electric Vehicles in 2010, what incentives are we willing to provide for this new industry cluster? Many players in the eletric vehicle industry are looking to the state of Oregon to see how this plays out. If the people of the Pacific Northwest aren't able to change the way we transport goods, services and our selves, we may never be able to overcome man made climate change / global warming. This is our opportunity to change the world and we need every tool possiable in our toolbox. This is an investment in Oregon and our future.
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The BETC is accomplishing its goals. Check out the return on investment (ROI) report here: http://bit.ly/or-etc-roi-rpt
If anything, the program should be substantially increased in scope to bring as much renewable energy online as quickly as possible. Every dollar we spend on BETC (and RETC) represents 3 to 4 dollars of benefit to our local economy.
Along the way the energy tax credits are also creating local jobs.
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The Federal tax credits far outweigh the state credits and most of the large wind project subsidized by BETC would have happened reagardless (eventually if not in the big rush right now). Slowing down construction of some of these projects for more careful examination would be a good thing. Sadly, most of the jobs created by these projects go to out of state manufacturing and construction companies. Also much of the power produced by the large wind farms will go to California - does it makes sense for Oregon to spend our public money on California power???
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Comments are now closed.
The BETC program isn't just about renewable-energy options like wind farms and bio-fuels. It's also about encouraging existing businesses to conserve energy. Many Oregon businesses (both for-profit and not-for-profit) have benefited from the excellent BETC conservation programs, to the betterment of Oregon. I hope that any excesses or abuses in the "renewable energy" part of the BETC don't cause cutbacks to the very successful and well-run "conservation" side of the BETC program. {read: Don't throw out the baby with the bathwater}
Ken H