SunTech recently announced that they plan to construct a manufacturing facility for modules in Arizona is that will begin production in the third quarter of 2010.  This decision comes after an 18 month search selection process.  SunTech’s decision is further evidence of a domestic location for the solar manufacturing.   This may be driven by the projected growth in demand and pending regulatory support for solar in the US. 

SunTech’s decision was driven by strategic location and incentives.  Arizona has been working to try to pass legislation to recruit and retain solar firms for many years, after falling short in recent years.  The ability to deliver meaningful incentives in the current environment is key to attracting solar manufacturing.

Arizona recently passed the Arizona Renewable Energy Tax Incentive that allows for a refundable income tax component and reduced property taxes.  Fifty-one percent of the new jobs must pay 125% of the state-wide median wage and there are additional requirements for health coverage for created jobs.  If a qualifying firm creates a minimum of jobs per capital investment and is a manufacturing or headquarters facility in the renewable segment, the firm can receive a 10% income tax credit (10% of the total investment in facilities, land and infrastructure) as a state income tax credit.  It is unclear if the rebate is funded purely through the income tax or if other taxes are monetized to make up the 10% credit that is taken in equal installments over 5 years.  Hopefully SunTech will have enough income tax liability to take advantage of the program. 

In addition, Arizona offers property tax reclassification, effectively reducing property taxes by approximately 75%.  The property tax benefit can extend 10 or 15 years, depending on the wage rate of the created jobs.  Firms interested in looking further at Arizona’s program need to watch out for clawback provisions.  If stated job creation levels fall below what the company agrees to, all future benefits cease.  Also, if the environment changes and the factory ceases operation within 5-years, the firm will owe the state the cash value of the benefit plus interest. 

What types of incentive programs does your state offer?  Do you think these programs drive new development in your state or region?