Undoing the Wasteful Incentives of the Energy World, Giving Innovators a Shot: A Talk With State Energy Secretary Ian Bowles

11/24/09Follow @wroush

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by the end of next year we’ll be at 54 megawatts, partly because we’ve got overwhelming demand for solar, and partly because we’ve quadrupled the number of solar installers in the state in the last two years, and new federal incentives have come along. That’s all an example of the usefulness of utility regulation. We can help create markets that wouldn’t be possible in less regulated industries.

Biofuels is another case. We are the only state with a tax incentive for cellulosic ethanol—the state has waived the state gas tax, which is 21 cents per gallon, on cellulosic ethanol fuel. It’s quite significant, if you are an advanced biofuels maker, to have that kind of cost advantage coming into the market.

X: But to cite an argument often used by free-market conservatives, isn’t it important that these energy technologies eventually become competitive on their own, without government subsidies or regulatory mandates?

IB: I see them as durable, long-term policies that are more stable than any grant program would be. Essentially, we are baking into our economy the idea that by 2020, 30 percent of our electrical demand will be met through efficiency investments. Today it’s 8 percent, so we are going to triple that. That is a permanent change in the market. If I’m an energy efficiency vendor or technologist, i know that the demand is going to be there. With solar, I think we are within a couple of years of not needing subsidies, because the prices are coming down dramatically. That’s part of what Evergreen Solar is feeling, but for the consumer, it is very good news that panel prices have come down by 30 to 40 percent. I think that having mechanisms like requirements to the utilities that they buy solar power are a very strong bridge to the point where they are not going to need any subsidy at all.

X: A question about Evergreen Solar, since you brought it up. Last month the Boston Globe ran a piece questioning the wisdom of the $72 million in grants and tax incentives that the state extended to Evergreen, given that their revenue shortfalls are now forcing them to shift some solar panel manufacturing to China. In a lot of cases, grants and incentives do amount to a bet on an innovative new technology—and new technologies are, by definition, risky, meaning not all the bets are going to pay off. Nobody could have predicted what would happen to market prices for solar panels. So how did you feel about the criticism over Evergreen?

IB: A couple of days after that story, the Globe editorial page came out with a full-throated endorsement of what we’ve done. What the reader would miss from the original story is that Evergreen originally promised to maintain staffing of 350 jobs in Massachusetts. Currently they are at 925—225 temporary and 700 permanent—which is almost three times what they committed to the state. That’s a pretty good dividend. While they are going to trim back the panel assembly part of their local operation, the company has made it clear that they expect to maintain staffing at a level beyond what their original commitment was. Another thing that didn’t come through in the story is that when you look at the $72 million in incentives, and you really peel back the onion, the direct grants were $20 million, and included in that was $7.5 million from Citizens Bank for a loan that Evergreen didn’t take. The Renewable Energy Trust made a $2 million investment in Evergreen that yielded $8.3 million in proceeds—so the net grant investment was about $13.6 million, with several hundred jobs created.

X: What about criticism that Massachusetts hasn’t been doing enough to make sure that local companies like A123Systems or Boston-Power build their manufacturing facilities here? Michigan is luring A123 away with some big tax incentives of their own, and Boston-Power failed to get the federal funding they said they needed to build a factory here.

IB: The coverage about companies going to Michigan is also a little bit unfair. Governor Patrick visited A123 and met with the employees to congratulate them on their tremendous IPO, and to thank them for their investment in the state. For us to see another couple hundred jobs created here by A123 is really great news. If I were developing a battery for an American automobile manufacturer, I might put my plant in Michigan too—it’s not a crazy … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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