Clean Energy Spurs Investment in Ohio

Policy uncertainty clouds industry’s future

Ohio has built upon its manufacturing legacy to become a leader in the production of clean energy technologies, ranking first in the nation for the number of facilities manufacturing wind components and second for the number of solar equipment providers as of 2013. That year, the Buckeye State had 692 megawatts of clean energy capacity—62 percent (426 MW) from wind power and 15 percent each from hydro and solar power (101 and 100 MW, respectively).

Research by The Pew Charitable Trusts, released during a briefing with clean energy executives in Columbus, demonstrates how Ohio established a foundation for clean energy technologies in 2008 with the passage of its alternative energy portfolio standard and energy efficiency portfolio standard. Since that time, the state has leveraged other state and federal financing such as tax exemptions, rebates, and loans to build on that groundwork. Ohio attracted $1.3 billion in private clean energy investment from 2009 to 2013 and is expected to generate an additional $3.3 billion over the next decade, according to Navigant Research. However, installations and revenue in some sectors, particularly wind, are expected to stall because the state enacted a two-year freeze of the portfolio standards in June 2014. This action has affected many projects and contracts already underway, creating uncertainty for investors and businesses.

“Ohio’s experience demonstrates the importance of long-term policy to foster growth in the clean energy industry,” said Tom Swanson, manager for The Pew Charitable Trusts’ clean energy initiative. “The state’s alternative energy portfolio standard, along with the federal production tax credit, boosted Ohio’s strong manufacturing base, which at one point supported 62 facilities producing wind energy components—more than any other state. But now, many manufacturers are directing their investments elsewhere because policy uncertainty is tightening the local market for their products.”

Wind sector falters with policy barriers

Before the 2014 changes to the standards, Ohio was becoming a major destination for wind energy projects. According to Navigant Research, wind power installations in the state totaled 420 MW and attracted $755 million from 2009 to 2013.

But the freeze of the alternative energy portfolio standard, coupled with another law that requires wind projects to maintain wider setbacks from property lines, has led some industry experts to warn that this could be the end of new wind development in the state. Ohio has sufficient wind resources to support 55 gigawatts of capacity—enough to meet nearly all of the state’s current electricity demand—which could be more fully developed if the policy landscape became more stable.

Solar offers a significant opportunity

Eighty-six solar technology manufacturers are located in Ohio, which ranked 16th in the nation for total capacity at 100 MW as of 2013, according to Navigant Research. The state’s legacy in glass manufacturing, particularly in Toledo, contributed to this burgeoning industry and led to the formation of companies innovating solar technologies.

Until recently, this growth was also fueled by a requirement that 50 percent of the clean electricity needed to fulfill the renewable portfolio standard be generated in-state and that 0.5 percent come from solar. However, the law that froze the standards also eliminated the in-state rule, threatening much of the growth.

Ohio attracted $187.4 million in private investment for solar power in 2012, ranking 12th nationally, but fell to 20th place in 2013 ($75.3 million) because of uncertainty over the future of the standard. Solar installations are expected to total 30 MW and 32 MW in 2014 and 2015, respectively, compared with the 2012 high of 48.3 MW, according to Navigant Research.

Industrial energy efficiency powers manufacturers

Ohio’s manufacturing sector accounts for 12.6 percent of the state’s employment and one-third of its total energy consumption. The state ranks sixth in the nation for industrial energy consumption. Ohio manufacturers can save money and reduce their energy use with industrial efficiency technologies such as combined heat and power, which simultaneously generates electricity and heat from a single fuel source. Another cost-saving technology is waste heat to power, which captures heat from industrial processes that would otherwise be vented and uses it to generate electricity.

The state has 514 megawatts of installed capacity from these two technologies and has the potential to reach 6 GW—more than any other state in the Midwest. Both combined heat and power and waste heat to power are eligible for a state sales tax exemption. They also qualified for incentives under the alternative energy portfolio standard, but the state eliminated those credits in 2014. 

“Manufacturers consume significant amounts of energy and represent an untapped potential for efficiency,” said Chris Nelson, CEO of WHE Generation Corp. in Lancaster, Ohio, a manufacturer of waste heat to power systems. "Ohio has the largest potential for industrial energy efficiency in the Midwest and needs stable, long-term policies—such as state efficiency standards and federal tax incentives—to seize this opportunity.”

Ohio is a prime example of why policy matters. Just as the state’s energy policies once encouraged the development of a clean energy industry, recent uncertainty surrounding the renewable and efficiency portfolio standards has stunted investment and growth. Policy decisions in the coming years will affect the state’s continued ability to compete in the growing global clean energy economy.

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