Don’t throw the BETC out with the bath water

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The sinking economy and this year’s shortened legislative session have cast the Business Energy Tax Credit (BETC) in an unfavorable light. It is, however, important to note what the BETC was, is, and can be for a successful and sustainable Oregon.

Many in Oregon do not recognize that the BETC dates to 1980, when the program allowing taxpayers to take a tax credit for a wide range of energy improvements kicked in. For more than a quarter of a century, the BETC was a workmanlike program, promoting Oregon’s growth as a sustainability center, providing opportunities for engineers and innovators to improve the energy efficiency of Oregon business.

Further, the BETC provided homeowners and small businesses with opportunities to benefit from small investments (such as a new dishwasher or energy-efficient furnace) by providing direct incentives through Oregon’s electric utilities and other non-governmental entities dedicated to energy efficiency.

In 2001, the Oregon Legislature provided additional forward thinking language to the BETC, encouraging the construction of sustainable buildings and the application of the now ubiquitous LEED architectural standards. Through all of this, the BETC continued to encourage innovation and provided economic incentives for Oregon business.

In this incarnation, the BETC is not a direct economic stimulus. BETC detractors who try to compare it to programs that provide direct hires or cash payments are confusing the issue. The BETC’s energy efficiency provisions promote long-term investment, modernization, and — in the long run — the retention of jobs in Oregon.

The legislature’s ill-advised and bipartisan changes to the BETC through HB3201 in 2007 followed a drumbeat of “Green Oregon” supporters who pressed for significant state investments in renewable energy. These investments included the state’s ill-fated investment of $20 million in Cascade Grain Ethanol — it received an $11 million BETC, after the passage of HB3201 — which was sold in bankruptcy after 7 months of operation in 2009.

The post-2007 BETC became the Frankenstein’s monster of tax credit bills, providing millions of dollars for so-called “renewable energy projects,” a euphemism for power generation projects using renewable sources. Such projects provide a significant impact to certain Oregonians, but truly a limited few. The number of permanent (non-construction) living-wage jobs created in rural Oregon by the installation of a wind power or solar power facility is limited to a few repair technicians and other operators.

The revised BETC rules allowed for speculation in the development of renewable energy projects and invited the involvement of a wide range of players, including one prominent firm with a senior member whose resume states he “brings expertise in transaction structures, creative ideas in tax and finance, and resolving or liquidating distressed companies and assets.”

In short, the BETC has morphed away an innovation incentive program that provided real jobs for architects, engineers, and contractors and needed dollars for capital improvement in traditional Oregon industries.

Oregon’s Legislature needs to bring the BETC back to its beginnings. Existing regulation, such as Renewable Portfolio Standards and the potential for greenhouse gas restrictions will effectively drive the development of renewable energy without the need for extraordinary tax credits.

Dave Einolf is managing director of environmental consultancy Endeavour EHS.