New solar incentives advance Arizona’s growing industry

Representative Tom Boone, R-Dist. 4

Senator Ed Bunch, R-Dist. 7

Senator John Huppenthal, R-Dist. 20

Senate President Pro Tempore Barbara Leff, R-Dist. 11

Representative Warde V. Nichols, R-Dist. 21

The Arizona Legislature approved solar incentives in the final days of the 2010 session that solar companies say will dovetail the state’s landmark Renewable Energy Tax Incentive Program.

Economic development officials say the four bills will strengthen Arizona’s burgeoning solar industry by enabling the installation of more devices and the production of more energy here.

Most of the growth in the solar industry has occurred in the last 18 months as the cost of panels has decreased by about 30 percent, said Tom Alston, American Solar Electric director of policy and business development.

In addition, Arizona’s Renewable Energy Tax Incentive Program that took effective in January provides up to a 10 percent refundable income tax credit and up to a 75 percent reduction on real and personal property taxes.

The program has been credited with drawing solar manufacturers to Arizona including Suntech’s North American manufacturing headquarters to Goodyear.

Arizona ranked fifth for cumulative capacity among the top 10 states for new grid-tied solar electric installations in 2009, according to a recent Solar Energy Industries Association report.

Arizona also ranked fourth, and second in the West, for capacity installed in 2009, according to the same report. The figures include all grid-tied photovoltaic and concentrating solar power technologies.

“Arizona needed this additional solar legislation to help our competitive industry continue to grow,” said Barry Broome, Greater Phoenix Economic Council president and CEO. “Solar companies want to move to Arizona to take advantage of our never-ending sunshine, strong customer base and attractive incentives.”

Sen. Ed Bunch, a Republican of Scottsdale, supported several of the solar bills.

“My intent in voting for the bills was to give an incentive to the solar industry so that they can better compete and help to create jobs in Arizona,” Bunch said.

The legislature should focus on creating jobs, he said.

“When you build products in Arizona and sell them out of state, you have a net inflow to our state of money. This creates jobs in the primary industry and jobs in secondary industries as well,” Bunch said.

Solar energy installation

House Bill 2700, sponsored by Republican Rep. Tom Boone of Peoria, extends income tax and transaction privilege tax incentives for solar installation for six years.

“I felt it was important to get those extended so there is more certainty in the market,” said Boone, adding that he wanted the industry’s “momentum” to continue.

Boone supports the solar industry for the environmental and economic benefits, he said.

House Bill 2700 was the Solar Alliance’s main legislative priority for 2010, said Alston who is also the alliance’s state lead.

The Renewable Energy Tax Incentive Program, focused on headquarters and manufacturers, and House Bill 2700, focused on installers, are “complementary” to help continue the solar market in Arizona, said Lee Feliciano, executive vice president of CarbonFree Technology who also serves as Arizona Solar Energy Industries Association’s commercial solar chair.

House Bill 2700 will extend the individual and corporate income tax credits for installing commercial and industrial solar energy devices from 2012 to 2018.

The credit, passed into law in 2006, is equal to 10 percent of the installation cost of the device. The credit is limited to $25,000 per building or $50,000 in total credits per taxpayer each year. Unused portions of the credit can be used in the future for up to five years.

The Arizona Department of Commerce is limited to allocating $1 million per tax year for the credits.

House Bill 2700 also will extend the timeframe in which contracts for solar energy installations are exempt from the transaction privilege tax from 2010 to 2016.

Solar energy production

The Legislature also passed a bill focused on research and development and energy production.

Senate Bill 1254, sponsored by Republican Sen. Barbara Leff of Paradise Valley, modifies the individual and corporate income tax credit for research and development to provide a taxpayer, who employs less than 150 full-time employees, to receive a refund for the credit. Total refunds are limited to $5 million a year.

“SB1254 will be a tremendous help to small companies engaged in R&D (research and development). Having a refundable tax credit will allow companies to have that money up front to reinvest in their research,” Leff said.

Previously, research and development tax credits were based on tax liability, Leff said.

“It takes years for a technology start-up company to have enough tax liability for the credit to be of help,” Leff said. “Solar companies will now be able to get a check from the Department of Revenue for the credit amount.”

Senate Bill 1254 also provides a tax credit for a taxpayer who holds title to a “qualified energy generator” that produces power after Jan. 31 but before 2021.

The credits are limited to $2 million for each qualified generator and each year the total amount cannot exceed $20 million.

The bill will take effect on Dec. 31.

House Bill 2370, sponsored by Republican Rep. Warde Nichols of Gilbert, establishes a new individual and corporate income tax credit for research and development, production, and delivery costs for solar liquid fuel for 2011 to 2026.

Arizona State University and University of Arizona are pursuing $122 million in funding from the Department of Energy to conduct solar liquid research. The bill will make the universities’ bid for the grant more appealing to the federal agency, according to ASU testimony before the legislature.

The bill also will help attract more solid liquid companies to Arizona, Nichols said.

“This could spawn so many other businesses in Arizona,” Nichols said. “This could be ground zero for this kind of technology.”

Nichols said he wants to ensure that Arizona is business friendly to the solar industry.

Republican Sen. John Huppenthal of Chandler said he voted for the bill because it will help ASU’s efforts to earn the grant money. He supports renewable energy when it is cost-effective and reliable, he said.