Oregon competes for California's solar firms; Offers tax credits, trained workers to entice business across state lines

California's northern neighbor is seeking a piece of the solar energy market.

Oregon has started aggressively recruiting manufacturers that serve the growing demand for solar products.

The effort has already secured three commitments this year that will create photovoltaic plants with a capacity of 648 megawatts by 2009 -- commitments coming from companies that previously located manufacturing plants in California.

"We have three so far -- three that would amount to the largest (photovoltaic) cluster in the U.S. at this point," said Jon Miller, executive director of the Oregon Solar Energy Industries Association. "We want to become a powerhouse in manufacturing."

Some solar companies say they're looking at Oregon as the location for their next facility because of the tax incentives that make the state competitive with overseas markets and financially advantageous over California. Others cite the low cost of energy. Oregon also has a work force trained in the semiconductor industry.

And Oregon's solar energy proponents cite proximity to California as one of the major selling points: Products are easily delivered to California, which has the third-highest demand for solar energy in the world, after Germany and Japan.

"We have very good tax credits and very good business energy tax credits," Miller said. "We're not recruiting from California; we're recruiting internationally."



No sales tax

Manufacturing jobs are a big part of the economic impact of the solar industry. Each megawatt of solar photovoltaics installed creates 20 manufacturing and 13 installation or maintenance job-years, which means a single person employed full-time for a year, according to a 2004 University of California Berkeley study.

Many of the industry's manufacturing jobs are headed to other countries. Global production of photovoltaic cells increased by 45 percent in 2005, while the American market share of production fell to 9 percent, from 11 percent a year earlier.

Dave Pearce, chairman of Santa Clara-based Miasolé, said he's been approached by Oregon representatives about building the company's next facility there.

"I wouldn't say we've got to the point where we're considering anything," he said, "but basically the state of California does not make it very attractive from the view of manufacturing companies."

For Pearce, the decision is pressing but not immediate. Miasolé could need another facility by 2009 at the cost of $100 million to $200 million to supplement its existing 111,000 square feet, Pearce said.

Oregon has no state sales or business tax, while California levies an 8.25 percent tax on sales and on manufacturing assets. Places such as Oregon, Nevada, Ohio, Germany and Malaysia are offering incentives, sometimes as generous as 15-year tax holidays, Pearce said.

States offer the incentives because of the drawbacks of doing business there, said Erik Strasser, whose firm Mohr Davidow Ventures is an investor in Nanosolar Inc., which is building a photoelectric cell facility in south San Jose.

"The question for the company is: Is it important to be close to customers, to be close to suppliers, is this where the best talent is available, or is it more important to save money with the incentives?" he said.

Manufacturing progresses faster when a research-and-development staff is nearby to solve problems, he said. Any tax savings in other states could be offset by transportation costs and wasted time, he said.

But companies adding a third or fourth facility are more susceptible to incentives because manufacturing is about replicating, not trouble-shooting, Strasser said.

Pearce agreed there are advantages for new firms to build in California, but established companies have less reason to stay.

"There's a tremendous pool of engineering talent. There's all the infrastructure to support a startup," he said. "There's a lot of reasons to locate high-tech companies here and for companies to build their first factory here, but beyond that..."



Competing for companies

Oregon has been recruiting solar companies for about five years. In addition to the three facilities in progress, three or four more companies are looking seriously at the state, Miller said.

The low cost of labor in Asia is the biggest threat to manufacturing jobs in the U.S., Miller said, so Oregon's tax incentives make it financially feasible for companies to stay here. Oregon offers a tax credit of up to 50 percent on renewable-energy project costs up to $20 million.

The incentives and the available work force were reasons Santa Clara-based Solaicx, a manufacturer of mono-crystalline silicon ingots and wafers, announced in June it will build a 48 megawatt facility in Portland, Ore., said John Sedgwick, the company's co-founder and vice president of sales and marketing.

But Oregon isn't the only state going after California's solar manufacturers.

Incentives in Nevada give tax credits up to 50 percent for as many as 10 years for businesses that manufacture or store energy. Lawmakers also offer sales and use tax abatements.

"We primarily look at California companies and overseas companies," said Jason Geddes of the Nevada Renewable Energy & Energy Conservation Task Force. "The Nevada economic development agencies have been working on California businesses for a while. We don't have the worker's comp issues that California has. We have a more stable business climate than California has."