Manufacturing economy

One of the hopes among Arizona leaders has been that in addition to putting solar on homes and building plants in the desert that sell power to utilities, the industry would open factories here that would provide long-term employment. So far, manufacturing jobs are limited to several small companies, with the large companies that the governor and Greater Phoenix Economic Council had worked to bring here faltering.

In 2009, GPEC lobbied aggressively in favor of a solar tax-incentive measure, Senate Bill 1403, which the Legislature passed and Brewer signed.

The bill provided a 10 percent investment tax credit and as much as an 80 percent property-tax cut for renewable-energy factories and headquarters. Arizona was competing with Oregon, New Mexico, Texas and other states offering similar incentives to the industry when the bill was approved.

What happened next was confounding. So many companies jumped into the market to manufacture panels that supply far outran demand and prices fell swiftly. The U.S. imposed tariffs on Chinese imports, hurting Suntech even more.

The prices for solar panels began dropping so rapidly that some of the weaker players in the industry were shaken out of the market and others scaled back. Global demand for solar systems also shifted from European countries that were building most of the world’s solar to less surefire markets such as the U.S., India and the Middle East. European markets such as Spain and Germany, having built out far more solar capacity than the U.S., began to cut the subsidies that helped solar compete with less-expensive power sources.

However, Arizona public officials such as Brewer continue to believe in the industry’s potential.

She recently applauded a Scottsdale solar startup called Monarch Power, and attended a ceremony at the Arlington Valley Solar II plant in May when it began delivering power to California.

“These are the jobs that get Arizonans back to work,” she said.

Leisa Brug, director of the Governor’s Office of Energy Policy, said the recent industry failures have not shaken Brewer’s belief that one day the industry will be more significant in Arizona.

“We are very encouraged,” Brug said. “These things are to be expected from any emerging market.”

She said the governor anticipated that some companies would stumble. “We didn’t know which things would happen or how,” Brug said. “There are growing pains that go on.”

She said Brewer sees promise in making Arizona’s universities a research and development center for solar in addition to manufacturing and power-plant construction.

“For us to be the solar capital of the world in real tangible terms, we have to be the innovators of it,” Brug said. “Where it is happening. Where it is discovered. Where the more efficient panels are created. That is the reason we are encouraged we can secure that title for the state.”

Those in the industry are adapting as well.

First Solar Chief Executive Jim Hughes, realizing that bringing more factories online isn’t the key to market leadership, told analysts earlier this year that First Solar was going to invest more in research to try to boost the amount of sunlight that its solar panels can convert into electricity.

Monarch Power was one of three companies that approached Goodyear about purchasing the Suntech facility, leasing equipment or hiring the workers, city officials said.