California gives $71.5 million in tax breaks to clean energy companies

Twelve companies have received a total of $71.5 million in sales and use tax exemptions for clean energy projects in California. These are the first tax breaks from SB 71, which passed in March.

It authorizes the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA – which is certainly an example of YAHA, Yet Another Hideous Acronym) to give the breaks to companies engaged in the “design, manufacture, production, or assembly” of clean energy or advanced transportation technology.

CAEATFA estimates the tax breaks will directly create 471 new jobs as well as $48 million in environmental benefits to the state and $55 million in fiscal benefits. It’s not clear how these benefit numbers were calculated, and the nebulous category of environmental benefits seems a bit curious. They also say that nearly 5,000 jobs will be created as a result of the twelve projects including 3,189 permanent positions. While this is certainly good, given the behemoth size of the California budget, $71 million is a rounding error. Put another zero or two after that number and then we could see massive, and much-needed job creation.

While these are presumably just the first of many tax breaks to be granted, the San Jose / South Bay area certainly did well, as did solar. Eight out of the twelve companies are located in that area. Seven of them are building photovoltaic manufacturing facilities while the other manufactures fuel cell systems. The solar companies are Calisolar, First Solar, Nanosolar, NuvoSun, Solaria, Solyndra, and Stion Corp, with Bloom Energy being the fuel cell company. Most of California certainly has ample sunshine, and perhaps one day, in addition to vast solar arrays in deserts powering our cities, we will also have solar installed on a mass scale in buildings in cities too, cutting transmission costs and waste, and generating power locally.

The other four projects are for bio- and landfill-gas capture and production. The companies are ABEC Bidart Stockdale (two projects), Bowerman Power, and Gallo Cattle, with the gas coming from landfills and cow manure. This is an especially promising area, using what was once looked at as trash and refuse, which costs money to bury or burn, and instead turning it into an energy source. This is a double win, as companies, instead of paying to dump waste in a landfill, get a revenue stream and energy from it. This is recycling on an industrial scale. More, please.

Hopefully there will soon be tax breaks for the thriving algae biofuel industry in the San Diego area as well as for wind power, wave power, smart grids, electric vehicle recharging networks, and more. California has thousands of companies of all sizes working on clean energy and alternative transportation. Some of them have already achieved breakthroughs. Others certainly will too.

Should, for example, one of those algae biofuel companies figure out how to do it on a commercial scale at a competitive cost, not only will the energy industry be transformed, the California economy would be jump-started too. That’s why giving modest, well-thought-out tax breaks to deserving clean energy companies is important. A small investment now could pay off enormously later on.