Governor needs to reTHINK his veto threat
Chuck Sheketoff
In April Governor Kulongoski wooed the CEO of Think North America to Portland as part of efforts to land the Norwegian car maker’s new North American manufacturing and technical center. Kulongoski test drove a Think electric car and touted his efforts to pass legislation that would make electric vehicle manufacturing facilities eligible for the Business Energy Tax Credit (BETC) subsidy program.
Think’s planned manufacturing facility would initially employ about 290 workers and have a starting capacity of 16,000 cars per year, according to a news release from the Governor’s office. The technical center would provide jobs for another 70 engineers and electric drive specialists. Think’s plans ultimately call for up to 900 employees and a capacity of 60,000 electric vehicles per year.
The 2009 Legislature came through for the Governor, enacting HB 2472 (bill in PDF and bill summary in PDF). The legislation makes electric car manufacturing eligible for BETC tax subsidies.
Yet, the Governor has threatened to veto HB 2472.
Why? He apparently doesn't like how HB 2472 also reined in BETC’s runaway costs.
Here's the deal. The Oregon Department of Energy has been approving 10 percent cost overruns for virtually every large project that receives a BETC subsidy. Because the agency has been unable to be judicious in approving cost overruns – and industry has proven to be too good at seeking them for every project – the legislature took away the agency’s cost-overrun approval authority.
HB 2472 also sought to limit yet another form of gaming of the BETC tax subsidy, whereby wind farms and manufacturers split up what is essentially one project to qualify for multiple tax credits. Now the legislature has given greater authority to the Department of Energy to treat multiple applications as a single application if the facilities are in such close proximity, or so closely related, that they constitute a single project.
Last, the bill reduces the cost cap from $20 million to $10 million and the subsidy percentage from 50 percent to 35 percent for renewable projects with installed capacity greater than 10 megawatts. This recognizes that the tax subsidy for large wind projects has been overly generous.
Some would argue that the program is still too generous in subsidizing wind development that sells power to Californians, making Oregon no more self-reliant or energy efficient.
A recent US Department of Energy report on wind power (PDF) notes that federal policy is very generous to wind power, with provisions in the stimulus legislation (the American Recovery and Reinvestment Act of 2009, or ARRA) and an extension of the Production Tax Credit. The USDOE report also notes that state renewable portfolio standards make a big difference.
State tax subsidies, however, are not the key to wind energy development. Heck, we’ve had the most generous tax subsidies in the nation and the USDOE report notes we don’t lead the nation in wind development. A variety of factors influence wind development, and state tax subsidies are not the key. Our renewable portfolio standard is far more important.
Yet, Governor Kulongoski may veto HB 2472. Doing so would not only undermine efforts to land the potential Think manufacturing jobs, but also would be tantamount to approval of a tax subsidy program run wild.
The Governor should reTHINK his veto threat and sign HB 2472 into law.
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Aug 3, '09
Many good points made here, but one real clunker -- waving the "Californicators coming up here and buying all our windpower" flag is absurd.
Electricity is not like natural gas that would be imported in Oregon but transhipped to California for their use.
Rather, electricity is managed on a grid that includes all the western states and BC. Renewable energy put into the grid anywhere helps supply all demand on the grid. The electrons are indistinguishable.
What actually happens is that wind-generated electrons (which there are very few of this time of year, alas) provide power here in Oregon the same as all the other power sources managed through the BPA and when we're selling power, they're sold along with all the other power we have; when we're buying power, we buy whatever is on the grid.
When those evil Californians buy "our" wind power, they pay extra for the attributes of wind and then they get whatever they get (which is made up of 40/40/20 coal/hydro/other). Which is how wind works everywhere that it's grid-tied --- you don't actually get many wind generated electrons when you buy "wind power" ... what your money does is make wind attractive to investors so they'll build more of it (and, ideally, we'll shut down the coal pigs that are destroying the earth). Plenty of us pay PGE for "wind power" that PGE doesn't have right now -- it's instead a paper transaction where the premium we pay atop our power bill is used to buy so many kWh of wind RECs from utilities that are generating some wind.
So call for sanity in the BETC program all you like, but don't confuse the issue with this idea that there's any distinction between Oregon's electricity and California's.
Aug 3, '09
GAS failed to understand why California is brought up in this discussion. BETC was developed to spark new development in the Renewable Energy Industry. California has a Renewable Energy Portfolio Standard which means they are going to demand the Green Energy created in Oregon regardless. This demand coupled with strong transmission capabilities between Oregon and California is what qualifies Wind Power as a mature industry in Oregon. If BETC is not a major factor in choosing to develop here, then we should stop giving them corporate handouts. Funding can then be diverted to other renewable energy sectors to get them jump started or cease taking money from our General Fund that could be used for education.
Aug 3, '09
Amazing, all the give aways to big corporations!
How truly progressive.
3:36 p.m.
Aug 3, '09
I like and approve the adjustments that HB 2472 makes in the Business Energy Tax Credits. They make sense to me. So I’m for the bill, and against a veto.
No wait, maybe I’m also against HB 2472 because I’m also against making electric car manufacturing eligible for the same tax credits. I’d like to have such manufacturing locate in Oregon, but I’m not for subsidizing it. And there is a better policy option for reducing the use of gasoline for transportation in Oregon: pass a substantial, revenue neutral gas tax.
As the global economic downturn turns around and economies start to grow again (China is at 8%, for example), global demand for gasoline is going to go up, and up, and up. Gasoline prices will rise again to $4 or $5 per gallon, and then keep going up. This will give incentives for electric cars and other alternative forms of transportation. The market will give the signals (high gas prices) to reduce carbon emission in transportation. But higher gasoline prices will also revive funding to many of the petrostates that are our enemies abroad. It would be better, with a preemptive gas tax, to make the transitions to non gas modes of transportation without funding the petrostates and keeping those funds in the USA.
I note that there is a new book out, “$20 Per Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better” (discussed here, for example) that discusses what rising gas prices might mean, chapter by chapter in rising increments.
On balance, I’d probably sign the bill.
Aug 3, '09
wind power ha? is those the the huge fans in California i seen year ago? if so how do you they power other locations? is it by wire under ground?
7:38 p.m.
Aug 3, '09
George Anonymuncule Seldes -- at risk that the comment string will take a turn away from the veto question, I'll note that I am well aware of the grid -- the issue, of course, is whether the Legislature would fund a direct appropriation to build a power plant (aka wind farm) to sell renewable power to Californians. I don't think they would put state dollars into such a proposal. The tax subsidy scheme, however, does an end run around that decision.
7:38 p.m.
Aug 3, '09
George Anonymuncule Seldes -- at risk that the comment string will take a turn away from the veto question, I'll note that I am well aware of the grid -- the issue, of course, is whether the Legislature would fund a direct appropriation to build a power plant (aka wind farm) to sell renewable power to Californians. I don't think they would put state dollars into such a proposal. The tax subsidy scheme, however, does an end run around that decision.
Aug 3, '09
If you favor wind power -- and our own renewable portfolio standard says that we do -- then why do we care who buys the RECs? If people want to locate turbines here (lease payments to Oregon farmers), erect them here (payments for builders) and run them here (jobs for technicians here), then what is the problem if California outbids us for the RECs (since the actual power enters the grid here)?
What is the difference between subsidizing the things and having the RECS go to Oregon utilities vs. RECs to California utilities? None. If there aren't enough turbines here to provide us with the RECs we need for our own RPS, then we have to build more --- and isn't that what the subsidies were supposed to accomplish (promote more wind development in Oregon)?
Are you saying you would prefer that wind turbines be erected in suboptimal locations in CA rather than where the average windspeed is greatest (in OR and WA)?
P.S. The Californians aren't going to demand "our" renewable energy "regardless" -- they're going to demand it by PAYING MORE FOR IT, which is what we want, right? More people see opportunity for gain by building wind in Oregon = more wind in Oregon = more renewable energy = less need for dirty coal. What's not to like?
Aug 4, '09