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States Use Incentives to Attract Renewable Energy Business

As the economy recovers, one particularly bright spot will be manufacturing for the renewable energy industry, which is already enjoying healthy popular and government support.

  • Richard K. Greene, Senior Associate, Investment Consulting Associates
Nov 09
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Augmenting With Traditional Incentive Programs
Most states, counties, and locales have programs that, though not specifically targeting renewable energy company attraction, can be applied to any incoming mobile investment. Where they exist, renewable energy-specific programs may be combined with and augment traditional incentives including:

• Empowerment Zones

• Work Opportunity Tax Credits

• Community Development Block Grants and loans

• Sales tax abatements

• R&D programs

• Employee search assistance

• Property search assistance

• Infrastructure preparation

These can all be helpful when establishing a new facility, whether it be headquarters, manufacturing plant, or research and development facility in the renewable industry. A careful review of a state's full incentives program mix will uncover the opportunities for programs that can work together.

Incentives in Perspective
Needless to say, companies must put incentives in their proper perspective among other site selection criteria specific to the industry. A company must carefully weigh the incentive opportunity with that of sound business infrastructure that will feed the company's growth over years. Site selection criteria specific to the renewables industry include:

• Market opportunity including cost of electricity and capacity shortfall;

• Infrastructure programs - federal and state governments' commitment to new grid distribution infrastructure;

• Availability of industry-specific work force, e.g., engineers, scientists, system integrators, etc.;

• Job training programs customizable to manufacturing process and management needs;

• Government policy for purchase of renewable energy and conservation programs;

• Presence of competition;

• Presence of system integrators;

• Renewable energy installation and generation incentives, which assist market growth;

• Utility programs for distributing "green" energy.

These criteria are in addition to the usual suspects that should always be a part of a balanced location search and include:

• Demographic growth trends;

• Availability and cost of labor;

• Availability and cost of land and property;

• Supplier logistics;

• Communications infrastructure;

• Quality-of-life issues.

All criteria should be customized to the company and its specific activity, prioritizing appropriately, since one size does not fit all. A variety of techniques including company and investment assessments, comparative location modeling, and cost analyses and cash flows are very useful in narrowing the field and determining the best fit of finalist locations in order to ensure they meet company requirements.

Incentives are part of the mix, and the analyses provide for successful negotiation and application.

Gearing Up for Recovery
With the stock market reviving and an economic recovery under foot, companies are preparing to initiate expansion strategy once again - very welcome news. With government stimulus and growing popular support, the renewables industry will be a bright spot of mobile investment. States will continue to position themselves to capture their fair share of projects and create jobs as they optimize programs and extend expiration dates. The competition can only benefit the industry as well as the served populace.  

Richard Greene advises on renewable energy strategy and programs for corporate entities as part of location strategy, and with governments and developers on opportunities for green urban renewal. He has worked domestically and internationally with renewable energy companies on location strategy and funding since 2000.

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