The Oregon House voted Wednesday to significantly scale back a tax credit that has been used to expand renewable energy in the state.
Lawmakers voted to eliminate the Business Energy Tax Credit program and replace it with new schemes, shifting the focus to smaller, community-based renewable energy projects instead of large, commercial-scale wind and solar facilities.
Renewables advocates say the new tax credits create a structure that could someday be used to lure jobs building and operating renewable energy facilities, but the proposed funding level is too low to make much of a difference.
"It's going to be hard on the renewable energy industry," said John Audley, deputy director of the Renewable Northwest Project, an advocacy group. "Those incentives have been an important part of decisions for businesses to invest in Oregon over other states."
The House voted 57-2 to approve HB 3672 and send it to the Senate.
With a projected price-tag of up to $290 million in the next two-year budget, the Business Energy Tax Credit is by far Oregon's most expensive tax incentive in terms of the cost to the state in lost revenue. The credit is known by the acronym BETC, which is pronounced "Betsy."
The changes approved Wednesday would reduce that cost significantly.
The existing BETC program allows a business to receive a tax discount worth up to 50 percent of the cost of renewable energy projects like wind and solar farms. The tax savings are spread out over five years and generally are capped at $10 million, although some manufacturing projects can earn up to $40 million in tax savings.
It's been mired in controversy as the costs skyrocketed and some lawmakers complained that incentives had become giveaways to companies that would invest in Oregon-based projects even without tax incentives. Because the expenses for the state are incurred primarily as projects mature in future years, it's tough for lawmakers to get a handle on BETC's true price tag.
Under the new BETC, the state would provide just $3 million for projects like wind and solar farms designed to generate renewable energy and give it upfront as a grant instead of a discount on a future tax bill. Each project would be capped at 35 megawatts -- a relatively small, community-scale project -- and couldn't receive more than $250,000 from the state for any single project.
It's tough to peg the precise impact of the changes on Oregon's efforts to recruit green businesses because so much of a company's decision to locate in a particular state is driven by what other states are offering, Audley said. But as the economy rebounds, renewables developers will ask the state to raise the caps on the sizes of projects and incentives to support bigger projects.
Creating a new policy for renewable energy generators with very little funding sends a mixed message to companies looking at building in Oregon, said Glenn Montgomery, executive director of the Oregon Solar Energy Industries Association, an industry group.
"We basically put the engine on idle," Montgomery said. "We have a policy in place, we have no money to fund the policy."
Advocates for renewables say a state investment in large-scale projects is critical because those are the projects that create the most jobs and have the largest impact on greenhouse gas emissions. The state's money helps bridge the between the price of a new renewable resource and that of a cheaper, more-established technology, they argue.
Rep. Jules Bailey, a Portland Democrat who helped negotiate the new renewable tax credits, said lawmakers made a conscious choice to end tax incentives for those large projects, saying $10 million from the state isn't going to make much of a different on a project costing $300 million. While renewable energy advocates would like to see the 35 megawatt cap lifted in the future, Bailey said that's unlikely.
"It's hard for me to see a place where we're going to give general fund tax credits to utility-scale wind projects," Bailey said. "There are other policies we can use that will drive us toward a clean energy future."
Better incentives for large-scale renewable projects include renewable portfolio standards, which require that a certain percentage of a utility's power come from renewable sources, Bailey said. A 2007 state law requires that Oregon's largest utilities provide at least 25 percent of their retail electricity from renewable resources.
The bill also reduced or eliminated more than a dozen other tax credits.