Solar project won't qualify for last of Oregon's $10 million energy tax credits

The sun may have finally set on a $10 million state tax credit that was repeatedly resurrected by developers and state regulators to support an on-again-off-again solar project in south-central Oregon.

Stone House Solar was to have been the largest solar installation in the state, a 7-megawatt array spread over a 160-acre plot of sagebrush outside the high-desert town of Christmas Valley, southeast of Bend.

But developers told the Oregon Department of Energy this week that due to construction delays and an inability to close permanent financing, they will not be able to finish in time to meet the final July 1 sunset date for the state's controversial business energy tax credit program.

Pacific Power also said Friday that it had canceled a power purchase agreement for the project's output because of non-performance and would be looking for other options to meet solar procurement mandates.

Cycle Power's Peter Blood did not return calls and an email Friday. But he and his partner in the venture, Joseph Lerner, told ODOE in a letter dated April 25 that "the BETC was a helpful program but it proved to add additional complexities to the project and the sunset of the program created a flight of capital and limited financing options.

Indeed, the tax credit was critical for the solar project's economics, covering half the cost. But it would have resulted in little return to taxpayers in the form of jobs, incremental green energy or tax revenue.

An investigation by The Oregonian last fall found that the Department of Energy had repeatedly kept the project's eligibility for the subsidy alive despite evidence that its backers didn't meet the program's administrative rules.

Legislators originally established a 2012 sunset for the business energy tax credit, alarmed at the program's ballooning liability and applicants' abuses of its loose administrative rules. But lawmakers subsequently provided a two-year eligibility extension for projects that were under construction before April 2011 and still making progress. That meant projects needed to be completed, and their tax credits finalized, before July 1, 2014.

Cycle Power is the latest of three developers that have tried to swing the project.

Alfred Fairbanks, a dentist from Pullman, Wash., with no solar experience, originally proposed building the project in 2009 and was approved for a business energy tax credit of up to $10 million if he completed it within two years. In 2010, however, Fairbanks dismantled and abandoned construction of a tiny array he installed outside Christmas Valley.

The project has sat idle ever since, but its tax credit was repeatedly resurrected after Fairbanks' lawyer and subsequent backers convinced the ODOE that the original project was still making headway.

ODOE officials never visited the site, but they approved the transfer of the tax credit to a succession of new owners, all of whom detailed plans to start their solar array from scratch on the site.  Meanwhile, Lake County officials approved property tax exemptions for the new owners, which required a determination that the original project had been abandoned.

Cycle Power said in its letter to ODOE that if it relieved Cycle and Stone House of the sunset deadline "we will be in a position to complete the project." ODOE officials did not return calls Friday, but such an extension would require the Legislature to intercede.

Cycle's agreement to sell the output to Pacific Power came after a competitive procurement process the utility concluded last fall. Pacific Power is still required to buy an additional 6.7 megawatts of solar under a state solar procurement standard passed in 2009. It gets double the credit under Oregon's renewable energy mandates if it does so by 2016, so the utility may move quickly to secure a different deal.

"We have now requested bid updates from previous bidders," said Pacific Power spokesman Paul Vogel. "From the responses we receive, if we feel we may still be able to obtain a lower cost proposal and potential contract, we will issue a new (request for proposals) for solar projects."

-- Ted Sickinger

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