While many renewable energy projects throughout the United States are on hold as a result of the economic downturn, Schott Solar recently opened a $100 million solar energy facility in Albuquerque, N.M. How has the economy of the surrounding community been affected? What are Schott's expectations for how stimulus money will affect future development? During today's OnPoint, James Stein, vice president for government affairs at Schott Solar, discusses his company's progress in the renewable energy field and gives his take on the future of the green jobs market.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is James Stein, vice president for government affairs at Schott Solar. Jim, it's great to have you on the show.
James Stein: Monica, thanks for having me on.
Monica Trauzzi: Jim, Schott recently opened its flagship North American manufacturing facility in Albuquerque, New Mexico, and we've heard so much about the renewable industry sort of having to pare back on its projects because of the economic downturn. How has Schott managed to pull off this $100 million project?
James Stein: Well, Monica, Schott's been around for 125 years and we've been in the solar business for over 50 years and we're privately held. And so Schott's leadership takes a long view of a lot of different technologies, solar being one of them. And they committed about eight years ago to entering the U.S. market because of the potential of the U.S. market. And so through internal funding, being privately held we could use internal funding, we committed to the United States and then through a competitive process wound up with Albuquerque as our chosen site. It was a great partnership with the state of New Mexico, the federal government, you know, Senator Bingaman, Senator Domenici, Senator Udall, the local reps, you know, Congressman Heinrich, Congressman Lujan, all the way to the state legislature or the County of Bernalillo, and the city of Albuquerque were all great partners in bringing Schott to Albuquerque.
Monica Trauzzi: So, now the next step would be stimulus cash. What are your expectations for how far stimulus tax credits may actually take the industry and take your operations specifically?
James Stein: Well, Schott's participation in the stimulus is mostly the demand it creates in the market. Schott is a manufacturer of systems. We're not a developer or an installer per se. So the market demand is what's going to drive Schott's success. And so as much as the stimulus can do to increase demand, that's what we're interested in. There are certain provisions in the stimulus that will help Schott in particular on the manufacturing side, like the manufacturing tax credit and some of the loan guarantees which would help us expand the Albuquerque facility. But in toto anything that drives solar demand up would certainly be advantageous for Schott.
Monica Trauzzi: And what indications have you seen about when you might start seeing this money, when it might start flowing?
James Stein: Right, so it's all about the law of unintended consequence. Everyone is kind of waiting for the stimulus money now to hit the system and I don't think you're going to see any of that money for a considerable amount of time. It may be 12 months, because there's 180 days within the legislation itself that gives the executive branch time to put together those programs. There's a lot of money, $60 billion comes into the system. The executive branch has to figure out the programs and the challenges to make those systems work. And so we would expect to see some programs in place in August and then the application process, the certification process is probably going to take a couple of more months. So hopefully the money will start flowing here sooner rather than later. But I would expect probably 10 to 12 months. And once that money hits the system, then we hope to see the demand spike. But people right now are holding back and that's the unintended consequence. They want to wait to see what these programs finally are before they commit to projects.
Monica Trauzzi: And one of the goals of the stimulus is to create millions of green jobs.
James Stein: Right.
Monica Trauzzi: What does this plant in New Mexico mean for the community surrounding it and the number of jobs being created?
James Stein: Right, so Schott went into this project with a phased approach where we expect ultimately to have about 1500 jobs. We're starting with phase 1, which will be 350 jobs. It's already almost 350 jobs and that's a 200,000 square-foot manufacturing facility, expandable to 800,000 square feet ultimately and that's where the stimulus package could pay dividends. If the market conditions work out such that we have the ability and the desire to expand, we can leverage some of those stimulus funds. But for Albuquerque and for New Mexico, you know, that equates to about $700 million in payroll over 20 years and it equates to about a billion dollars of positive economic impact over 20 years. So there really is some solid evidence that green jobs create good economic situations.
Monica Trauzzi: Beyond the stimulus, what are you looking for Congress to accomplish in an energy bill that would help push the renewables industry along?
James Stein: You know, we would like to see kind of a broad, balanced portfolio of renewables. There are so many regional strengths and weaknesses. You know, wind or geothermal or biomass or solar all have their strengths and weaknesses and so we would just like to see a balanced approach to rewarding all technologies on their strengths and weaknesses and whether you do that through REC multipliers or alternative compliance payments or however you can stimulate the market to balance out the portfolio, I think that's in the best interest of the entire renewable industry.
Monica Trauzzi: So, for example, the renewable electricity standard that's sitting in the Waxman-Markey bill right now, what are your thoughts on that? The targets are slightly pared back from what they originally were.
James Stein: Right, the targets are pared back and also there's not necessarily provisions that are advantageous to say utility scale solar, which utility scale is a proven cost effective way of generating electricity. And that, I don't think, has been fully recognized, especially its capability in the Southwest and to produce peak power. So, I think those are all kind of things that need to be worked out, hopefully, on the floor as the bill moves through all its different committees jurisdictionally and then ultimately to the floor.
Monica Trauzzi: What are the biggest challenges you see facing your industry right now?
James Stein: Oh, for sure financing. You know, previously before the economic crisis you had the ITC extension that people were waiting to see if the ITC got extended and when it did get extended, that stimulated some of the debt equity investors to participate in the financing. And now that the financial situation has gone south if you will, those equity investors, those debt equity investors have departed the scene and so there's no one left to take up the financing, which is where, again, we hope the stimulus package and things like a green bank can come and provide a more stable platform for funding. And I think that's why entering the market now you see large corporations like Lockheed Martin with their investment group Starward Energy Group are now entering the solar market. They just announced a project in Arizona where you have these system integrators that are looking for other places to expand into and I think that's why you see those kinds of companies entering the market as opposed to some of these smaller companies that weren't necessarily as well capitalized.
Monica Trauzzi: Is it fair to other industries for the government to be impacting the market so heavily with incentives? I mean at what point do we decide that the market should be deciding which technologies win out, which renewables win out?
James Stein: Well, I think that's a fair question, but there's another question there and that is what the other markets, what the other energy sources had to get their feet on the ground to start out with. And so you look at say the nuclear industry was subsidized by the nuclear Navy and you look at oil and gas and the coal industries and things like that. So, I think that the solar industry and the renewables industry, you know, it's important to have a broad portfolio and so I think it makes sense that the investment that the government makes in an assured energy supply that is environmentally friendly and that creates positive economic conditions, I think that's advantageous and it's a reason for the government to be involved.
Monica Trauzzi: Final question here, Schott is a German company, what are the main differences you see between the European renewables market and the U.S. market?
James Stein: If I could make one correction, Schott, we consider Schott a global company. We're 17,000 employees in 42 countries and we have 10 manufacturing sites in the United States. And so, as a matter of fact, right down the street, Schott glass protects the U.S. Constitution and the Bill of Rights and the Declaration of Independence. But from the German standpoint they embrace subsidies in a very substantive way. They have a much more cohesive political will about renewables. When you think about the solar radiation in Germany is equal to Alaska, so their market shouldn't be what it is, but it's one of the largest markets in the world and that's why Germany embraced be feed-in tariff and some of these other subsidy regimes that have been very successful. On the flipside of that, the order of magnitude of the U.S. market is a much bigger challenge. You know, you have $330 billion in the U.S. electricity sector, which is one of the largest industrial sectors in the world. And in the German example you have four German utilities that supply 80 percent of the electricity in Germany. In the U.S. you have 239 utilities that provide only 75 percent at the electricity in the U.S. So you can see that order of magnitude is a much greater challenge for the U.S. to try and capture the market and there's many more stakeholders, so it's a much greater challenge in the U.S.
Monica Trauzzi: OK, we'll end it right there. Thanks for coming on the show.
James Stein: Thanks for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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