… Might as well try and tax the wind

Apologies to Dylan, but while pondering recent taxation maneuvers around the globe in renewable energy, the lyrics to his song Catch the Wind were blowing through my head. Investment Tax Credits (ITC) appear to be holding up in most countries, to the benefit of wind and solar power industry players; even as governments map out new taxation of output. So, what’s given to these pioneer entrepreneurs up front in the form of ITCs will be partially recouped, starting when the first turbine spins. That is where taxing the wind comes in… expect to see generators forking over to their local taxing districts a direct payment based on the electricity production from the wind turbines. Is it fair to tax the wind? Sure – petroleum exploration and refinery companies and providers of hydroelectricity have been subjected to the same tax obligation, while converting the natural elements into vital power output.

My expectation, though, is that renewable energy ITC policies should in fact render more after-tax revenue for providers than those policies that benefit petroleum-based energy providers. A nascent industry needs a boost, for a pre-defined period of time. Healthier after-tax margins will serve as a sign that these amazing new ventures around the globe are open for business and here to stay, which will attract ever-ready venture capitalists and mutual fund portfolios. There is already in play a multi-tier global industry: from land developers to manufacturers of specialty control equipment. The industry has drawn the most unexpected players, too, such as Knight-Carver, who’s made the delightful transition from design and construction of racing yachts to specialty wind blades. Their operations can be found today on both the San Diego bay front and on the South Dakota prairies.

Renewable energy programs are also becoming a local asset touted by regional economic development offices around the world, signaling a stable, diversified base for companies in search of a home. It’s the availability of, and the ability to generate, renewable energy that’s attracting companies in manufacturing, distribution and transmission of renewable energy and its components. A truly global industry is arising, with both mighty and emerging countries competing equitably. And it allows even perennially rainy spots like Portland, Oregon to tout themselves as a Solar City USA.

All governments will of course tax the wind — that’s a given. But they must keep their eye on the global competitive roadmap, mindful that companies can choose to locate most anywhere on the globe and easily reach customers everywhere.

Renewable Energy’s Tipping Point

Earlier, I pointed to legislation that signals broad acceptance of the renewable energy sector across all continents. Various countries are taking the initiative to invite capture and conversion of solar, wind, and thermal energy. (see 3 Aug blog) Heretofore not thought of as energy titans — i.e., no formidable oil or gas reserves — these countries now play a global role in renewable energy acceptance, as supplier/exporter and consumer/import.

Cause and effect is in play here — backed by government funds and tax savings, our utility companies prod subscribers to go green and use less of their output, not more. They co-fund valuable community information campaigns, trade fairs, and education centers that contribute to reduced power consumption and top-of-mind pursuit of alternative energy. Commendable, though not altogether altruistic, since state public utility commissions mandate that they meet rollout targets in order to receive public funds that in turn subsidize said information campaigns and programs. Key industrial power consumers dictate renewable set-asides when negotiating annual rates, too. Earning reports from the power supplier in my region were smashingly good last quarter, so taking the lead role as concerned corporate partner polishes their public image while forestalling grumbling from cash-strapped rate payers.

Atop this growing swell of acceptance sits the enlightened power consumer, who is nudging the renewable energy industry toward tipping point, one block at a time. It’s hard to argue against the viability and long-term cost savings offered by alternative energy in transportation, manufacturing, and residential power grids. When legislation and utility companies support its acceptance, and with progressive, optimistic consumers taking the lead as influencers, then suppliers of goods and services can foresee solid revenue growth in every region of the world.

Watch the renewable energy industry sector blossom for providers of goods and services, with companies like these located on every continent:

  • Adhesives and film technologies for windows that save energy by reading the time of day and amount of sunlight, and auto-tinting. See more at 3M.
  • Daylighting zero-energy lighting systems for home, commercial and institutional settings. Tubes and skylights that transform a plain old roof into an economic asset. Check out Daylight Inside and Solatube.
  • Retrocommissioning (“RCx”) a consultation service that audits building operations and unites owners with their local utility for technical and financial assistance to eliminate waste. The enterprising team at Portland Energy Conservation, Inc. has packaged their solutions as a “private label”, value-added service for multiple utility companies. In San Diego, for instance, you’ll find them identified as San Diego RCx, teamed with San Diego Gas & Electric Company.
  • Iowa Thin Film Technologies is among a global group of innovators, and rubs elbows with the likes of Kyocera, Sharp, and Sanyo. A quick peek at their website confirms the limitless growth potential in military, industrial, commercial, and residential sectors for developers and manufacturers of thin, flexible solar panels.

    Perfect Storm? Critical Mass? Choose your metaphor…The end result, though, is that entrepreneurs, property owners, and utility companies all win with more renewable energy choices.

  • Renewable Energy Laws Spur Global Investment

    I’ve noticed that momentous changes to the rules by which we all live and work often start out on the frontiers, then flow back inward. New ways of doing old business, new industries, even shifts in societal and family rules are often hatched out of necessity by out-there, pragmatic pioneers who seek a better way, compared to that which they left behind on the old turf.

    Energy exploration and distribution is but one example: in the last century, risk-takers and speculators followed their noses Out West to oil fields and, working unfettered and unregulated, yielded oil and funneled it out to refineries and Back East to gas meters, street lamps, and fuel pumps. At homes, in factories, and on street corners, the lights came on, and nothing was ever the same. “I Drink Your Milkshake” was next tamed by regulation and legislation, only upon proof of profits.

    Today, we see a new rush worldwide to claim, harness, and disperse power derived from renewable energy. Countries with no influence in today’s fossil fuel-centric energy sector are starting out by crafting legislation that boosts their place in the global renewable energy arena. Iceland’s thermal geysers. Egypt’s desert wind. Chile’s sun.

    The great difference? These power sources – wind and sun – aren’t land-locked, owned, or claimed, avoiding much of the low-brow attempts to wrest control and access from unsuspecting or underfunded landowners. Human nature being what it is, I imagine it’s harder to quicken the pulse of pioneer speculators and profiteers. That being said…

    Here’s legislative news to watch, and what its enactment will mean to refiners, conveyors, and consumers of renewable energy; and to manufacturers and service providers with a stake in renewable energy growth such as Photovoltaic Solar Panel Manufacturers from Iowa to Korea:

  • The Philippine government signed a new Renewable Energy Law, offering specific incentives (mainly tax breaks) for renewable generation — a first for Southeast Asia.
  • Chile’s Renewable Energy Legislation requires electricity generators of more than 200MW to source 10% of their energy mix from renewables.
  • Japan unveiled a new $9 billion subsidy package for solar roofs, granting JPY 70,000 ($785)/kW for rooftop PV installation.
  • Next up, I’ll discuss bright spots in renewables investments and manufacturing and service sectors that signal our collective intent to accept and adapt alternative energy in transportation, manufacturing, and utilities.

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