How many jobs from Oregon's green energy incentives? No one knowsBy Harry Esteve,
Labor leader Tom Chamberlain decided some basic research was in order before the Oregon AFL-CIO could lend its support to the state's increasingly expensive subsidies for green energy projects.
"We wanted to know what we were getting for the money," he says. "How many jobs? What do they pay? Like any tax incentive program, you want to make sure you're getting bang for your buck."
Instead of numbers, Chamberlain says, he got the equivalent of a blank stare from the Department of Energy, which administers and approves the subsidies.
That was two years ago.
Today, little has changed. Despite claims by supporters that the subsidies have led to "thousands" of jobs, no one can say with any certainty what impact the Business Energy Tax Credit, or BETC, has had on the state's stubbornly high unemployment rate.
To get a better handle on the link between the incentives and jobs, The Oregonian examined Energy Department records, talked to economists and looked at individual projects that received the incentives. Among the conclusions:
With the exception of solar equipment manufacturing companies, such as SolarWorld and Sanyo, the state has no firm data on the number of jobs that can be attributed to the subsidies.
The subsidized cost of each job varies dramatically. For example, Horizon Wind Energy received $11 million in tax credits for an eastern Oregon wind farm that, after construction, created 36 full-time maintenance and operation jobs. Solaicx, a Portland solar manufacturer, got $9 million in tax credits and employs 127 full-time staff.
In some cases, the state has spent millions of tax dollars and gotten only a handful -- or no -- jobs in return because the companies didn't perform as billed, were sold and shut down, or went bankrupt and folded. Examples include Cascade Grains, a biofuel start-up that received $12 million in state subsidies before going bankrupt and out of business, and Reklaim Technologies, which got $3.4 million in state subsidies to recycle tires into oil. After two years, the recycling plant employs eight people, according to the Port of Morrow, and has yet to deliver a marketable product.
The examples above include only state incentives. Green energy projects often qualify for much bigger federal grants and tax breaks as well, vastly increasing the subsidized cost per job.
Scrutiny of Oregon's tax credits intensified in recent years because their cost to the state has skyrocketed. Since 2007, state spending on the incentives has gone from about $30 million a year to nearly $150 million a year.
Much of the increase results from an aggressive expansion of the incentives four years ago. In 2007, at the urging of then-Gov. Ted Kulongoski, the Legislature allowed wind and solar companies to claim credits for half their project costs, a tax break of up to $20 million for manufacturing plants and $10 million for wind projects. The rules were written loosely enough that many companies qualified for multiple tax credits.
What was once a small conservation program became one of Kulongoski's top economic development strategies. He and other supporters of the expansion said it would lead to a new wave of industry and jobs in Oregon, helping the state pull itself out of its economic tailspin.
Yet until two years ago, the state kept no records on jobs associated with the subsidies. In 2009, the Energy Department began asking for job information on the application forms. But few applicants included the information, causing the department to rewrite the forms with more explicit directions on how to calculate job numbers, says Diana Enright, spokeswoman for the department.
"It's something new to think of this as a jobs program," Enright says. "We're learning as we go along what questions to ask."
The exception has been solar manufacturing plants. Business Oregon, the state's economic development agency, has closely tracked those jobs since 2009, says agency director Tim McCabe.
A spreadsheet provided by McCabe lists 1,482 jobs at three plants -- 1,140 at SolarWorld and the remainder at Solaicx and Sanyo. Another 500 jobs are expected when SoloPower opens its flexible solar panel factory in Wilsonville, and another 94 when Solexent opens a promised plant in Gresham. Combined, the five companies are on track to receive about $180 million in state tax subsidies and even more in federal subsidies.
McCabe says the benefits to Oregon should extend well beyond those direct jobs. Factory employees spend their paychecks at local stores and restaurants, and when the plants buy equipment and supplies, the money ripples through the economy.
McCabe's office produced a study for the Legislature that estimates the spinoff effect of the new solar plants at 7,000 additional jobs in the state. It used a modeling tool called "Implan" to assess the full impact of the incentives. Implan is widely used to calculate the multiplier effect of new jobs in the economy.
"Certain industries bring in more money than others and spend more money than others," McCabe says. "Manufacturing has a substantial multiplier effect."
Tying the tax incentives to job creation becomes more problematic, however, in other parts of the green economy. Oregon gives incentives based on how much it costs to build a solar factory or a wind farm -- not on how many people get jobs as a result.
Wind farms are massively expensive facilities to build, but they employ few people once they're up and running. They also have a smaller indirect economic impact than manufacturing plants. They buy few supplies, produce a smaller pool of wages to wash through the economy, and generate less personal income tax revenue for the state.
Consider the giant Shepherds Flat wind farm in eastern Oregon. The project's developer has applied for and been pre-certified by the Department of Energy for three business energy tax credits totaling $30 million. But it is only projected to create 35 permanent jobs.
Contrast that with SoloPower's projection of 500 jobs for its $20 million tax credit.
The goal of Oregon's green energy incentives has become somewhat nebulous, says Tim Duy, an economist at the University of Oregon. There is a kind of blind faith among policy makers, he says, that if Oregon develops the green energy cluster, and develops a brand as the green energy state, that untold riches will flow in the future.
That may or may not pay off, Duy says. Green jobs are mobile, easily poached by other states or countries dangling richer incentives or cheaper labor costs. Technology and markets change, bankrupting some companies that Oregon has heavily subsidized.
Every dollar that Oregon taxpayers spend on the energy subsidies is a dollar they don't have to spend elsewhere, Duy notes. That forgone spending would have its own economic impact, creating jobs, wages and taxes.
"We're not asking the questions about the economic efficiency of the tax credits," Duy says. "Those questions are being swept under the rug or ignored. My sense is that we'll do anything for green energy in this state and we're not doing a cost benefit analysis of what we're getting out of it."
McCabe, the state economic development director, says it might be time to take a new look at the incentives and link them more closely to companies that would have a bigger impact on the state economy.
Don't tie the tax breaks to a specific industry, he says. Among the companies he suggests that might move here with the right incentives would be clothing manufacturers and food processors.
"I would change it," he says. "Make it a broader-based incentive that's tied to wages and to jobs."
-- Harry Esteve