Looming BETC reform causes confusion in renewables

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Alan Hickenbottom

By Erik Siemers

Uncertainty over the future of Oregon’s most popular tax credit for green businesses has forced several renewable energy developers to hold off on new projects.

“I honestly feel you’d be doing your customer a disservice to take a contract between now and March 1,” said Alan Hickenbottom, principal of Tanner Creek Energy, a Portland-based developer of commercial solar energy systems.

State legislators next month are expected to debate potential reforms to the Business Energy Tax Program, commonly referred to as the BETC program.

The program is designed to promote the growth of renewable energy in Oregon by offering tax credits worth up to 50 percent of the cost of a project spread across five years.

The program is both vilified and vaunted. Proponents laud it for making Oregon a leader in clean energy development while opponents say its uncontrollable growth has put a strain on a state already facing financial constraints.

State Sen. Ginny Burdick, a Portland Democrat, said the program is expected to cost Oregon more than $167 million in lost revenue during the current biennium — a “ten-fold” increase of initial expectations.

Further clouding the debate is a Jan. 26 vote on two tax hikes. If voters reject both measures, the state will face a $733 million budget shortfall.

BETC supporters fear the tax measures, should they fail, will be the death knell for the tax credits.

“I hate to say it, but yes, I’m pretty sure if these ballot measures fail it will be the death of a lot of great things in Oregon,” said Jamie Hogue, a field representative in Oregon with Climate Solutions, an Olympia, Wash.-based environmental nonprofit group.

Developers say they’re eager to work with legislators and the state Department of Energy to find a resolution.

In the mean time, the uncertainty over the tax credits — a key tool in reducing a project’s cost — makes it difficult to find outside financing.

Adding more uncertainty are new rules introduced in November by the Department of Energy that give the department the authority to rescind a tax credit if a project doesn’t live up to its billing.

Andrea Simmons, the assistant director of energy policy development at the Department of Energy, said the rules are designed to hold developers accountable by putting “performance standards and criteria in the pre-certification phase that may have to continue to be met after final certification.”

But developers argue that having the overhanging threat of losing the tax credit post-development adds a new layer of risk to their projects, making it difficult to find outside investors.

“It makes Oregon look like a banana republic,” said Chris Taylor, the chief development officer at Element Power, a global renewable energy developer with its North American headquarters in Portland. “Anything that Oregon were to do in the future around renewables or any other incentive, once you establish a reputation for changing a story after the fact, nobody will trust you.”

Sandra Walden, managing member of Portland-based commercial solar developer Real Energy Solutions, said she’s advised potential customers — including a large business and a school — to hold off on investing in solar projects.

“This whole change and uncertainty of the BETC has put the brakes on every project,” she said.

The new Department of Energy rules are also designed to prevent a single project from being carved into smaller parcels to receive more tax credits. Upon final certification, each project will have to meet the designation of being separate and distinct from other projects.

That leaves several developers in an unusual gray area, with projects pre-certified under one set of standards but now facing new and more stringent guidelines.

Tigard-based Obsidian Renewables, for example, has received BETC pre-certification for three roughly five-megawatt solar energy projects in Lake County.

Now Obsidian is moving forward with just one project. While the projects are more than a mile apart, the company is uncertain as to whether the new BETC regulations would classify them as a single entity.

“Before I bought the land for the second and third projects I got clearance from the people then at the DOE that they weren’t too close together, but separate projects,” said David Brown, the senior principal at Obsidian. “Now, those rules are changing.”

Burdick understands those concerns, but said it’s equally important that taxpayers are protected from the hazards of a runaway program.

“I do understand how important certainty is and we want to be good partners,” Burdick said. “But we need to have a program that is solid and makes sense for the taxpayer. Then everybody can have certainty.”

esiemers@bizjournals.com | 503-219-3418