Arizona's solar aspirations in peril

The state aims to tap its 325 sunny days a year, but loss of an energy tax credit threatens its big plans.

By Faye Bowers | Correspondent of The Christian Science Monitor

from the May 6, 2008 edition

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Phoenix - The sun shines 325 days a year in Arizona, on average, and some here see that as the state's biggest energy asset.

But fledgling efforts to turn Arizona into the solar capital of the world depend on making the initial investment in new energy plants affordable – something that could become much more difficult, perhaps even impossible, if a federal tax credit for solar projects expires at the end of the year as scheduled.

Arizona is by no means the leader in developing renewable energies, but it has made progress. The latest achievement is at the Phoenix Convention Center, where workers are nearly finished installing 732 peel-and-stick photovoltaic solar panels on the two-acre roof of the center's West Building. The $850,000 project is the largest solar application in downtown Phoenix and is expected to generate 150 kilowatts of power yearly.

"We have a tremendous solar energy resource, up to seven or eight solar productive hours a day," says Ardeth Barnhart, associate director of the Arizona Research Institute for Solar Energy (AzRISE) at the University of Arizona in Tucson. "Other states like New Jersey have very progressive policies, but we've got more sun. We could theoretically power the US with a very large stretch of land – about 100 square miles – in Arizona."

But plans for a project that could put Arizona on the map as a solar powerhouse – a huge $1 billion solar energy plant to be built near Gila Bend, Ariz., by 2011 – are likely to be scrapped if the tax credit is allowed to lapse. That's because solar power is still more expensive to produce than is electricity derived from fossil fuel, though some experts expect the gap to close in the next seven to 10 years.

The subsidy in question is the federal Investment Tax Credit. The US government boosted the ITC from 10 percent to 30 percent for solar systems in 2006, meaning that 30 percent of the cost of building and installing a system is returned to the investor in the form of a tax credit. But that rate is set to expire at the end of 2008. That scenario worries many political, business, and academic leaders here, who see their dreams of a solar-energy hub evaporating.

"The extension of the tax credit is critical," says US Rep. Gabrielle Giffords (D) of Arizona in a phone interview. "I've introduced legislation to extend it to 2016."

Representative Giffords is urging that the government pay for the extension by reducing tax credits to oil and gas companies. During "the next five years, [oil and gas companies] are slated to receive about $17 billion. That money instead should be going toward renewable energy," she says. "It is critical, and I believe Democrats and Republicans acknowledge it."

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