Wise use of incentives can be a smart investment for our economy

Solar Array at Knoxville's 1 Megawatt Generating Facility.

Solar installations like this array in Knoxville are just one piece of Tennessee's robust solar supply chain.

While the failure of Solyndra is unfortunate, it does not, as some have claimed, represent the dimming of the solar industry’s bright future or make the case that using public funds to attract private investment is a bad idea. Especially here in Tennessee.

Tennessee has seen dramatic growth all along the states solar supply chain (from manufacturing to installation) largely due to strategic investments by local, state and federal entities. Offering incentives to companies is common practice across all sectors, and it’s one of the key tools that state and local governments have to distinguish themselves as the right place for private investments. (For a good rundown of how these incentives work and the incentives being used by Southeastern and Midwestern states, see An Examination of Incentives to Attract and Retain Businesses in Kentucky by the UK Center for Business and Economic Research.)

Through the use of targeted investments and incentives, Tennessee has positioned itself to be at the forefront of both technology innovation and solar equipment production, and Solyndra’s failure does nothing to change that. Any industry is going to have companies that succeed and those that fail. The key is for state and local officials to do their due diligence to make sure we are attracting high quality companies and using public funds as effectively as possible. 

Former Gov. Phil Bredesen speaksin 2009 about the funding being approved for the Volunteer State Solar Initiative in 2009.

Former Gov. Phil Bredesen speaks in 2009 about funding the Volunteer State Solar Initiative.

Under Governor Bredesen, investment of both state funds and stimulus dollars leveraged private investment in the state’s solar industry that has made the industry one of the leaders in job creation across the region. The creation of the Volunteer State Solar Initiative and the Tennessee Solar Institute, which has partnered with Oak Ridge National Laboratory and the University of Tennessee, has been instrumental in the development of the solar industry in our state through its Workforce Development Program and the highly popular Solar Installation Grant Program. The grant program has invested over $10 million into our state economy, but more importantly, has attracted private investments more than twice that amount.

To help promote sustainable growth Tennessee has spent its money wisely to attract companies with proven track records. Several companies have or are in the process of relocating to our state and these companies continue to stay competitive despite market fluctuations. For example, the price of Polysilicon, which is the raw material used in solar power cells, has fallen from around $400 per kilogram in 2008 to about $40-45 per kilogram today. This price drop has helped secure Polysilicon as the main element in solar panel production for years to come. Before the price fell, two companies, Wacker Chemie and Hemlock Semiconductor committed to building plants in Tennessee to produce the Polysilicon needed for the solar power cells.

One might have thought the price drop would have had disastrous effects for these companies. However, that has not been the case. Wacker Chemie and Hemlock Semiconductor are in the top five companies in terms of Polysilicon production in the world and they continue to provide investments and jobs in Tennessee. Because of their size and age, these companies are better prepared to successfully maneuver in rapidly changing markets, and attracting these companies to Tennessee is proving to be a wise move for the state’s economy.

Publicly funded incentives are a critical tool for state and local governments to attract new companies to set up shop and hire workers. Tennessee even has its own website listing the different kinds of incentives that it offers. Most come in the form of tax breaks, but they can also be pledges from the state or local governments to train workers, build transit connections, and update utilities on the site where the company wants to locate.

Several companies have been lured to the state by those incentives including: Volkswagen, General Motors, Nissan, Amazon, and Electrolux. Regarding recent solar investments, a $141.8 million tax incentive to Hemlock led to the $1 billion investment we see in Clarksville today. The same can be said for Wacker Chemie’s plant in Bradley County, they received around $100 million in incentives for their $1 billion investment. in 2009 alone, investments from companies, including Wacker and Hemlock, totaled over $2.5 billion and had created over 1,000 jobs.

A new solar array provides the energy needed to charge electric vehicles including the Nissan LEAF. One Tennessee industry supporting another.

Solar panels providing the energy needed to charge the Nissan LEAF.

Attracting companies like Sharp and Nissan can also lead to more investments and more jobs down the road. For example, Nissan recently began building their all electric LEAF vehicle at its’ Smyrna,TN plant showing that incentives given to Nissan years ago have had an unexpected benefit of producing green jobs for our state.

Yes, federal, state and local governments spend public funds to attract and retain private companies. But if done correctly, these incentives are a smart investment in our economy, leveraging private capital to create jobs and strengthen regional economies. As a state, Tennessee has begun to make wise and successful investments in the solar industry and should continue to do so just like it would for any other industry to help build a strong and robust state economy.

Tags: , , ,


rssComments RSS

Interesting look at this. I think the most responsible thing to do is make the community better, but stay within the budget. Shocking to me to see how much we’re willing to spend to make our cities and states better with the anticipation that we will make a ton of money off the changes.

Comment by George on October 16, 2011 7:49 pm

I don’t necessarily disagree with the budget assertion; we should certainly keep aware of the amount we’re spending. However, I think we need to be willing to make the larger investments in our future and commit to them. The change that need to be made to our energy portfolio are not going to happen without a significant amount of dedication and time…and, as our society dictates, a significant amount of financial commitment as well.

Good points, Nick; I hope Tennessee will continue to show us and the rest of the nation a real commitment to solar in the future.

Comment by Jeannie McKinney on October 17, 2011 9:49 am

If we don’t go for renewables then we will need more of Mr Putin’s gas, though there are others like Norway who have not squandered gas like we have and so can supply some.

The price of fuel for many renewables, for example wind, waves and tidal currents, will not go up any time soon. The more renewables we have the less we are reliant on others and the steadier electricity prices will be.

It is our own stupid fault that we don’t have more of a renewables industry. Government failed to support the first modern wind turbine, operated in Shetland by (if memory serves me correctly) BP. Government got the Atomic Energy Authority to evaluate Salter’s Duck, no surprise that they recommended not developing it to production status. We are still just about holding our own in tidal current and more recent wave machines, though government hasn’t done a huge amount of money or take loans in UK to make it a vibrant industry. Government still seems only interested in pissing vast amounts of our money into the nuclear black hole.

Comment by Jannyfer Smith on December 8, 2011 9:05 am

Sorry, the comment form is closed at this time.