Clean tech faces muddy future
Firms say federal energy policy key to long-term stability
Sunday, August 22, 2010
Southwest Washington’s emerging clean-technology industry could face long-term setbacks if the U.S. Congress fails to pass a comprehensive energy policy this year, state and local leaders say.
Both the House and Senate this session have debated energy bills that seek to regulate greenhouse gas emissions in some form, whether by establishing a carbon cap-and-trade system or a national renewable energy standard. But the proposals have so far failed to move forward.
The federal inaction has few immediate consequences to the clean technology industry in Washington, which has its own renewable energy and efficiency standards and has benefitted from large federal recovery act grants for energy projects, said Rogers Weed, director of the Washington Department of Commerce. But many companies are looking toward federal energy legislation as a signal that their investments will yield growth long term, he said.
“It’s an important market signal that would trigger a lot of activity,” Weed said.
Room to grow
Vancouver-based NCS Power, which makes high-efficiency LED street lamps and replacement tubes for fluorescent commercial fixtures, recently landed its first large international order for 5,000 LED tubes, a deal worth several hundred thousand dollars. And it has hired several new employees in the past few months, bringing its total employment to 12, said Chief Executive Officer Bart Adams.
But instituting a carbon tax or cap-and-trade system would help the company sell more of its products, Adams said.
Clients make decisions based on how long it takes for energy savings to equal the cost of installing all new fixtures.
Historically, most companies have looked for a return on investment within three years. But many cash-strapped businesses have lowered their return-on-investment threshold to 18 months, Adams said.
Without a price on carbon emissions, few companies see carbon reduction as adding to their bottom lines.
But the carbon reduction is just one of about 10 metrics NCS Power uses to calculate the financial return on its lighting systems, and so the federal delays aren’t slowing NCS down. NCS is just not growing as fast as it could.
“It’s not costing us business,” Adams said, “but it all helps.”
Similarly, Oregon Iron Works has increased its work force in Vancouver to handle a string of energy-related projects, including a prototype wave-energy buoy, eight new 1,000-ton lift gates for the John Day hydroelectric dam and a nuclear shield door for the Hanford power plant. Company managers expect energy-related projects, which comprise about 10 percent of its business, to rise in coming years as the country increasingly turns to renewable sources of energy, said David Gibson, renewable energy program manager at Oregon Iron Works.
But its clients would likely be placing many more orders for renewable projects if a national energy standard was in place, he said.
“There’s a considerable amount of risk (in these projects),” Gibson said. “So anything to mitigate that risk would help us.”
Both companies belong to a growing clean-energy sector in Southwest Washington that includes solar industry giants such as Sharp and SEH America, as well as longtime manufacturers, such as Christensen Shipyards and Columbia Machine, that are retooling to compete for renewable energy contracts. The potential for further growth — a proposed SEH expansion could create as many as 1,000 jobs —has gained the attention of state and local officials.
Gov. Chris Gregoire has pegged the clean energy sector as one of a handful of industries with substantial job growth and economic development potential in coming years. And the Commerce Department has set a goal to increase clean-tech manufacturing in the state and boost exports to Asia.
Southwest Washington, with its proximity to the Columbia River Gorge and two major rail lines, is well situated to capitalize on that growth. The Port of Vancouver has already boosted its wind turbine imports, which accounted for 220 jobs and 56,000 Longshoreman hours in 2009.
The Columbia River Economic Development Council is working with the state’s clean energy leadership council to build the clean-tech sector in this region and across the state, said Bart Phillips, CEO of the CREDC. A preliminary report will be available in September.
In the absence of federal legislation, the state strategy will focus on upping state mandates and purchases to meet its goals for the sector, Weed said.
Some argue that the state’s renewable energy standard has provided enough incentive to Washington businesses, however. What the state’s clean-tech industry needs now is a more favorable business climate in general, including lower taxes, said Gary Chandler, a lobbyist for the Association of Washington Business.
“Competition has made it cheaper to import (wind turbines) than to make them,” Chandler said. “The state needs to look at policy here to make it a better environment for manufacturing. We’d have a lot more people employed in Vancouver right now if we made the technology here.”
Lack of incentives
Regardless of the state’s economic development plans, the exact effects of a national comprehensive energy plan on the state’s clean-tech sector is unclear. The likelihood that carbon regulations will pass this year among a slowing economic recovery is increasingly slim. Supporters have so far failed to garner votes from states that still meet most of their energy needs with coal and natural gas-fired plants, which are among the largest carbon emitters. Leaders from these states argue charging extra for carbon emissions is too costly for utilities and businesses to implement.
“At one level, a national cap and trade will have some increased costs to our businesses,” Phillips said. “It will (also) level the playing field, and without it, it’s going to be difficult to stimulate the clean-energy market for us to sell goods and services to.”
Most state and local officials agree, however, that putting a price on carbon would spur more demand for clean technologies and help the industry grow. This would happen, in part, by offsetting federal subsidies that make it hard for renewables to compete with oil and gas. It would also lower the risk that companies face in investing in new manufacturing facilities and new technologies.
“If there’s no federal legislation, the incentives go away,” said Rep. Brian Baird, D-Wash., during a recent visit to Vancouver. “It sets us back economically. It’s costing us jobs.”