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Solar Power is Big Here Because Arizona is Sunny. Is That a Bad Thing?

I really love it when one of my blog posts generates a discussion - my aim here is, after all, to foster a dialogue about issues that are important to me, to the AIC, and to Arizonans.  So I've been happy to read a robust discussion in the comments on last week's post, Phoenix-Area Exports: Falling Behind in the Race.

ecn101 first pointed out that a strong export-oriented economy is a table that everyone wants to dine at.  To secure Arizona's place at the table, we must offer something that other states don't.

Cchase26 pointed to a report from Business Facilities ranking Arizona the No. 1 Alternative Energy Industry Leader.  So perhaps there is something unique about Arizona that makes the state more conducive than others to develop alternative energy industries.  To that ecn101 responded that Arizona's success in alternative energy may be driven primarily by the state's status as "the sunniest state in the country. Arizona's vast desert areas offer the highest solar power potential in the nation."

ecn101 goes on to suggest that in addition to the state's climate, tax policy and a Renewable Energy Standard that was the nation's most aggressive when it was enacted create a "false/enforced" demand for solar energy systems here.

I agree with both Cchase26 and ecn101. It's clear that Arizona enjoys large advantages when it comes to solar energy - advantages that are not easily replicable.  For one, the state had a sort of first-mover advantage from its relatively early passage of relatively aggressive renewable energy standards (the RES requires Arizona's utilities to get 15 percent of their energy from renewable sources by 2025).  And it's true that Arizona cities enjoy among the highest levels of solar insolation (simply, sun hours per day).

But is any of that a bad thing?  I mean, who looks a gift horse in the mouth?  In fact, America became the economic powerhouse it is in large part because of factors we don't control - a wealth of natural resources, the devastation of much of Europe and Japan after the two world wars.  Plus, it can make a lot of sense to make policies - like the Renewable Energy Standard - that "force" economies of scale in certain industries.

Yet at the same time, I do think it's important to ask: Is a sunny climate enough?  Arizona must offer more, I think.  As I said in my reply to ecn101, I wouldn't suggest eliminating tax incentives, but I've always advocated for a more well-rounded approach to increasing the state's competitiveness.  Best-of-breed infrastructure that can foster any kind of business, education that develops a high-quality workforce, and general quality-of-life factors that make Phoenix and Arizona the kind of place that the best companies' employees want to live are all critical.

That's important for two reasons: 1) because Arizona should be competitive in industries besides solar energy (we should have learned our lesson about a diversified economy when the real estate market collapsed); and 2) because if Arizona's economy isn't competitive, Californian, Chinese, German, Spanish (you pick) solar companies will locate here to exploit our sunny climate.  Yes, those companies will create jobs - like Suntech, which GPEC CEO Barry Broome expects to become the state's largest employer in 15 years - but they won't create the kind of sustainable wealth that you see in places like California's Silicon Valley or North Carolina's Research Triangle, with their truly homegrown industries.

Arizona's ranking as the No. 1 Alternative Energy Industry Leader is an excellent first step for the state.  But we need more companies like First Solar, Schletter, Inc., Global Solar Energy, and SOLON.  We need them to locate their headquarters, their R&D, and their manufacturing plants here.  And if they're not interested?  We need to ask them why, and then act to respond to the needs Arizona isn't yet meeting.

What's your take?  Write a comment below - no registration required.


Written on Wednesday, 04 August 2010 16:36 by Gary Yaquinto

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