Schott Solar banking on public investment in sunshine

Solar thermal receivers, photo courtesy of Schott Solar

ALBUQUERQUE — That Schott Solar is barreling ahead with plans to become New Mexico’s flagship solar manufacturing company, despite the current recession, makes sense considering where the company is coming from.

Dr. Gerald Fine, CEO of the North American branch of the German company, sees a dynamic in the U.S. now similar to what caused the solar energy industry to take off in Europe five years ago. Germany went on to become the largest consumer of solar energy products worldwide, and he predicts the same growth will happen here.

“Over the last five years in Europe it’s taken off,” he said. “The reason for that is really a combination of new and improved technology, more sensitivity worldwide about environmental issues, plus favorable government subsidies and regulations in Europe”

“Now, with the U.S. becoming more sensitive to clean-tech issues, and an administration that is willing to kick start the industry,” he continued, “we believe the solar industry is going to grow at 50 to 100 percent per year here in the next five years.”

Schott’s plans to get in on the ground floor are evident with its grand opening this week of its facility at Mesa del Sol in southern Albuquerque.

The plant will manufacture two types of solar products: large scale solar “concentrated solar receivers” used by power utilities and solar farms, and smaller units called “photovoltaic  modules” used on both commercial and residential buildings. With about 350 employees now, the company plans to have 1,500 workers at a 800,000-square-foot facility.

Solar energy’s rosy future is touted even by companies that have been stymied by the country’s recent economic crisis, like Advent Solar, a much smaller home-grown solar technology company next door to Schott at Mesa del Sol.

Advent made the news earlier this year when it announced 55 lay-offs, coming on the heels of 68 lay-offs in 2008 of  manufacturing employees. Now with about 40 employees, the company is purely research-focused.

While the first round of lay-offs were attributed to internal issues, Advent CEO Peter Green said the second round was directly related to the credit crisis.

“I was ready to scale up the company in January, but the banks were frozen,” Green said. “No one, in fact, was getting any credit during the last quarter of 2008.”

But Green is upbeat about the long term prospects for his industry, particularly in light of the new administration’s policies to encourage renewable energy production.

“The stimulus package hasn’t really kicked in yet, but it’s giving people [in the industry] a sense that the future will be better, that there’s a willingness to help,” he said. “If the U.S. gets its act together, we’ll surpass Germany as the number one solar consumer, given the size of the U.S. and the degree of sunshine here.”

Getting its act together

Government programs like the extension last year of the federal tax credit on residential solar installations and an economic stimulus package full of incentives for renewables are what Green means by “getting its act together.”

And the bill that passed the legislature this year to allow the financing of solar upgrades on homes through property tax assessments  is one example, Dr. Fine said, of how solar friendly New Mexico is. Another stand-out incentive, in general, said Fine, is the Job Training Incentive Program, or JTIP.

“The JTIP was the one program that really distinguished New Mexico [in the site selection process],” Fine said. “It enabled us to take 90 people hired in Albuquerque and train them in Europe.”

“JTIP is huge,” CEO of Albuquerque Economic Development CEO Gary Tonjes affirmed. ” It could be argued that more jobs have been created through the JTIP than any other incentive. … Unfortunately, it was underfunded by the legislature this year.”

On top of incentives, though, there are many other attributes that factor into a company’s location choice.

“So many of these companies are looking for the complete package, of which incentives are just one element,” Tonjes said. “It’s also about labor and the quality of the construction companies, industrial suppliers, machine shops, the pipeline of talent from universities or laboratories. They look at the various policies in place, plus the programs at the public school level.”

Gov. Bill Richardson and Schott Chairman Udo Ungeheuer sign solar thermal receiver at grand opening. (Photo by Marjorie Childress)

This was borne out by Dr. Fine, when he noted the reasons his company chose Albuquerque.

“We chose New Mexico because we could hire people in the state. We don’t want to spend a lot of money relocating, he said,  “… and our desire is to be part of a vibrant community. There are relatively experienced people in New Mexico.”

Fine also said Gov. Bill Richardson went to bat for government support of the project in a way a lot of governors don’t, which made the state stand out.

“In many states governors were involved, but Gov. Richardson has a way of engaging,” Fine said. “He’s a big guy who engages in a big way, was very helpful in the process.”

In the end, the state pitched about $130 million in public support to the company. Plus, its facility is located in a tax increment development district at Mesa del Sol with bonding authority of $500 million.

The company says it plans to invest at least $500 million in the state, and will continue to invest in the facility over time.

The cost/benefit question related to tax incentives for the private sector is an ongoing, sometimes contentious debate. But when it comes to public subsidies of the renewable energy sector, larger questions–like how to save the planet from global warming–have led to a broader consensus that the investments are worth it. Plus, solar in particular is expected to spawn a sector of good paying “green” jobs that require at best a community college diploma, so the pay-offs are more readily apparent to many than they might be for other industries.

In the case of Schott, one significant payoff for New Mexico may be other solar companies following Schott’s lead.

Tonjes said about 40 percent of Albuquerque Economic Development’s business-recruitment focus is on solar companies, with the city seeing its best first quarter ever in 2009 in terms of client visits.

And, Tonjes said, Schott’s choice of Albuquerque has a lot to do with that. In many respects, the company vetted the city for other companies.

“So many of our clients are asking about Albuquerque because Schott selected Albuquerque. They’re the real deal — a highly respected company with a long history. …When we’re out and about, everyone knows about Schott.”