NoCo firms land $52.1 million in tax credits
Firms in Northern Colorado nabbed a lion’s share of the renewable energy manufacturing tax credits doled out in the state, but whether the incentives will have a direct, near-term impact on employment remains to be seen.
In early January the Departments of Treasury and Energy awarded $2.3 billion in tax credits for expansion or creation of manufacturing facilities in the advanced energy sector. The credits can be taken on tax liability for up to 30 percent of the total value of the project. In Colorado, companies netted $75.2 million in credits. Of that total, $52.1 million were awarded for projects in Northern Colorado.
The credits were lauded as a job-creating incentive at the federal and state level. However, the projects in Northern Colorado were already planned, under way or in some cases complete when the credits were awarded.
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Fort Collins-based Advanced Energy Industries Inc. received a tax credit worth $1.2 million for a new manufacturing line for the company’s Solaron solar inverters. The company built the line in a facility it already owned, and it will serve as the only Solaron manufacturing facility for now.
The Solaron inverter product was launched in 2007 and up until mid-July the order capacity was handled at AE’s main facility. However, order volume was increasing at a rate that quickly out-grew the capacity there. The new line opened during the fourth quarter and as of early January had not resulted in any new jobs.
Vestas Blades America was awarded $30.2 million in tax credits for the facilities it’s constructing in Brighton — one for blades and the other for nacelles, which house the electrical components of the turbine. The company also received $21.6 million in credits for a facility in Pueblo that will manufacture turbine towers.
In its application, the company projected 500 jobs in Pueblo, 650 for the Brighton blade factory and 700 for the nacelle assembly plant. The Brighton facilities were announced in August 2008 with ground broken in March 2009.
The Vestas site in Windsor, which employs 500, was ineligible for the credits. Only qualified expenses after Feb. 17, 2009 are eligible. The Windsor site is currently not turning out any blades. A company spokesman said manufacturing lines have been shut down and the site is in a retooling and retraining phase.
The Brighton and Pueblo facilities are still under construction, although the Pueblo site already employs about 100. According to Doug Macdonald, senior vice president of government relations at Vestas Americas, the credits do not impact the timeline of the Brighton and Pueblo facilities. Instead, the timelines are market-driven.
“We’re not ramping those up as quickly as we first thought,´ said Andrew Longeteig, communications specialist for Vestas. He added that the company anticipates all factories will be operating at full capacity in 2011 and all will be operating to some extent this year.
Stamford, Conn.-based Hexcel landed $8.1 million in tax credits. Hexcel opened a facility in Windsor in 2009.
“A portion of those credits we’ll take in the first quarter of 2010,´ said Michael Bacal, spokesman for Hexcel.
That amount is related to the building and equipping of the Windsor facility. Hexcel has one line installed now. The company does not disclose its capacity levels. The tax credit will also be used for future expansion.
“The remainder of it will go towards new equipment that will go in during 2011 or 2012,” Bacal said. “I think the prospect of the credit did impact the timing of our considering the expansion.”
Job projections
In its application for the tax credit, Hexcel estimated a net job creation of 150. Of those, 60 were related to the construction of the facility and 90 will be operating positions. The company would not disclose how many people are currently employed at the site; however, the manufacturing hiatus of its largest customer came soon after Hexcel’s Windsor site started delivering product.
“We started delivering at the end of the fourth quarter, Bacal said. “Vestas is our primary customer. The activity is at a much more reduced level than we anticipated.”
Abound Solar also started delivering its product — cadmium telluride photovoltaic panels — during the fourth quarter. Abound received $12.6 million in tax credits.
The company currently employs around 250 full-time employees and another 100 part-time employees. The credit will apply to the company’s second production line, which will probably be finished by the end of the year, according to Mark Chen, Abound’s director of marketing. The tax credit award isn’t likely to have much of an impact on when Abound will construct the line.
“It accelerates it a bit but not significantly,” Chen said, adding that it might be operable one quarter sooner than originally planned. Chen also pointed out that, as a start-up, the company is not likely to have a tax liability to draw from this year.
Abound is still waiting to hear about the loan guarantee program that could bring the company around $100 million. That money would allow the company to build out its second and third manufacturing lines and potentially build another manufacturing site. The company applied for the credit more than a year ago.
“We’re told it’s on the fast track,” Chen said. The companies that have received the loan guarantee so far applied back in 2005.
Even if the credits don’t create an immediate or direct impact on jobs in Northern Colorado, they are likely to have a more long-term affect.
“Regulation is going to be a driver — long-term — in this sector,´ said Rex O’Neal, attorney and co-chair of Faegre & Benson’s emerging companies practice and new energy, clean technology and climate initiative.
In general, the tax credits reduce the expense of production. O’Neal said the DOE is likely attempting to fill in missing elements of the nation’s clean energy infrastructure. The tax credit, in a way, creates a long-term incentive for the overall industry.
“It’s an ‘if we build it, they will come’ mentality,” he said. “I think the idea was to subsidize short-term expenses to drive down production costs.”
O’Neal points out that, in the short-run, the true beneficiaries of the tax credits are the company owners. In that case, the credit is an incentive for investors in these companies who might bring more capital to the table. He added that one-time credits and incentives set to expire in the near future aren’t necessarily the most effective way to drive the market to equilibrium. Some suggest there should be a tax incentive program that is indexed to the price of oil with the idea of eliminating any artificial price controls.
“We’re in a time period when, if we want these technologies to exist 20 years from now, the government is going to have to have a continuing role in development,” he said.
Firms in Northern Colorado nabbed a lion’s share of the renewable energy manufacturing tax credits doled out in the state, but whether the incentives will have a direct, near-term impact on employment remains to be seen.
In early January the Departments of Treasury and Energy awarded $2.3 billion in tax credits for expansion or creation of manufacturing facilities in the advanced energy sector. The credits can be taken on tax liability for up to 30 percent of the total value of the project. In Colorado, companies netted $75.2 million in credits. Of that total, $52.1 million were awarded…
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