Introduction. My name is Gerry Braun. I am Director of Market Development for BP Solarex, and I am here today on behalf of both BP Solarex and the MD-DC-VA Solar Energy Industries Association (MDV-SEIA). I appreciate the opportunity to talk with you about the importance of establishing policies and programs addressing renewable energy resources during the transition to a competitive electricity market.
In October of last year I came before you representing Solarex. Today I will expand my previous input to reflect the goals and vision of BP Solarex.
As a result of the creation of BP Amoco last year, two leading solar companies have combined their resources and operations as BP Solarex. BP Solarex will build on the current business activities of Solarex and BP Solar, claiming 20 per cent share of the global market for solar electricity products and projects. BP Solarex's Toano, Virginia solar electric module factory, TFI, is scaling up to full production, using cutting edge thin film manufacturing technology, serving a global market that is expected grow to $10 billion per year by 2010.
Basic Recommendation. BP Solarex and MDV-SEIA both strongly support the development of a funding mechanism (e.g., a Public Benefits Fund (PBF)) to pay for key transitional programs.
At a minimum, the funding mechanism should be used to continue and expand highly successful existing programs like the Solar Manufacturing Incentive Grant Program and the Virginia Alliance for Solar Electricity (VASE). It can also be used to support education and outreach programs bringing information about solar electricity to such key audiences as teachers, public school students, home-buyers and the home-building industry.
There are two basic reasons to provide funding, both of a very practical nature.
First, Virginia has much to gain. Renewable sources like solar not only mitigate the effect of power generation on the environment but will save Virginia consumers money in the future as well. However, creating Virginia private sector infrastructure to deliver these cost savings requires significant investments. Virginia's neighbors and other key states across the country are using public funding to stimulate and capture such investments. They expect to be rewarded by the jobs, tax revenues, and new technology. A vibrant and growing renewable energy industry can and will deliver these rewards. Public benefits greatly outweigh the public costs where funds are carefully managed.
Second, in one specific aspect of renewables, i.e., solar equipment manufacturing, Virginia has not only much to gain but much to lose as well. Virginia's programs have placed it in an enviable position. Virginia is home to units of two global leaders in key emerging solar markets and technologies. For example, our thin film factory and R&D center in Toano, Virginia is making great strides. We are in the lead, but our major competitors in Japan and Europe are also turning to thin film. And Virginia's programs are set to expire in the next year or two. Meanwhile, other states and countries have launched aggressive programs to attract operations like ours. The prize we and they are striving for is leadership of a high growth multi-billion dollar market. Whether Virginia chooses to build on the success of its solar programs will, in my opinion, determine its share of the prize.
As I conclude this overview, I would like to introduce key members of the BP Solarex team who are present today. They and I are ready to answer any questions you may have.
Virginia Leadership in Solar Energy. Each state in the US approaches renewable energy differently. For example, Virginia has carved out a position of leadership in manufacturing the next generation of solar electricity products. Virginia has two programs that have helped it surpass other states in this regard:
1. Solar Manufacturing Incentive Grant (SMIG). This program provides a rebate to solar equipment manufacturers in proportion to the amount of product shipped each year of a five year period.
2. Virginia Alliance for Solar Electricity (VASE). This program uses the SMIG rebate and Federal cost sharing to "buy down" the initial cost of projects using Virginia-made solar products. It is available in five states in the mid-Atlantic region, including, of course, Virginia.
Restructuring and Renewables. Each state involved in restructuring has specific issues to consider. For example, Virginia took the opportunity to move toward establishing statewide net metering as the standard for grid-tied solar electricity systems. We applaud this timely decision to give Virginia consumers fair value for solar electricity from their roofs once the relevant tariffs are in place. With net metering standards in place, programs like VASE can deliver more cost-effective projects.
State restructuring efforts are proceeding on different timetables. States like New York and California combine net metering with significant economic incentives that encourage consumers to choose solar. Other states are following their lead. As a result, the VASE. program has received and approved applications from enough innovative and significant solar electricity projects in Maryland, North Carolina, Pennsylvania and New Jersey to fully account for the available federal cost share.
States encouraging solar projects and installations are also eager for the jobs that our industry can provide. They are targeting high quality jobs in manufacturing, as well as in the distribution and installation of solar electricity Systems. State economic development goals are reflected in the various transitional programs established via restructuring legislation.
Carrying Virginia Solar Leadership Forward. Except for its solar manufacturers, Virginia's renewable energy industry is in an embryonic stage. Its solar electric product manufacturers, BP Solarex and Solar Building Systems, are global leaders. In the context of electricity market restructuring, there is a whole menu of policy options Virginia can consider that would encourage development of cost-efficient and sustainable energy supplies for future generations of Virginians. BP Solarex encourages careful consideration of all options and especially the options proving most effective in other states.
More specifically and immediately, we recommend that Virginia take timely action to build on its strength, i.e., solar electricity technologies and products being manufactured and developed in Virginia. Virginia's programs supporting these technologies have been highly successful but are due to expire soon. Specifically, Virginia's solar manufacturing incentive expires in 2001, and VASE buydown funds are already fully committed, mostly to projects in other states. Other states are bringing new programs on stream just as Virginia's programs expire. We see this as a threat to the outstanding competitive position Virginia has gained via its programs. We recommend a Public Benefits Fund or equivalent mechanism that could be used to:
1. Extend the Virginia solar manufacturing incentive grant program, making it available for five-year periods to products made with specific new production capacity and/or specific newly developed products made with existing capacity. Open the extended program to products manufactured by current Virginia manufacturers as well as products made by other solar companies choosing to manufacture in Virginia. Although program outlays to date have been much less, the current program is capped at $4.5 million per year. This is a prudent and effective level.
2. Provide funding for a new phase of VASE that will be applicable only to projects located in Virginia. We recommend that funding for this new program phase be comparable to the Federal funding of the initial phase. Specifically, a buydown fund of $3 million per year would carry VASE forward developing a Virginia solar electricity distribution and installation infrastructure. The extended program could be open to products manufactured by current Virginia manufacturers as well as to products made by other solar companies choosing to manufacture in Virginia.
3. Public benefit funding could also be applied to the public education and outreach programs like a Solar Schools Program, and/or to a home-builders program that would provide rooftop solar systems in model homes in new housing developments. The builder's program would allow builders to reduce their risk as a small business while becoming familiar with an exciting new technology that will be increasingly in demand. These initiatives could be either embraced within the expanded VASE program or implemented separately.
In the broad context of the Virginia electricity market, these are modest proposals. We expect, however, that public funds supporting them will be returned ten to one hundred-fold over the next two decades in the form of expanded tax revenues, energy cost savings and job creation. We will be pleased to provide analysis in support of this expectation.