Oregon Looks to Clean Tech for Revival

By RYAN KNUTSON

HILLSBORO, Ore. -- Oregon, facing the fourth-highest unemployment rate in the nation, has stepped up its campaign to lure clean-technology companies in an effort to pull itself out of the recession.

The Oregon Business Development Department's network of about 45 economic-development officials has more than doubled the time spent reaching out to clean-tech companies since 2008, said Bruce Laird, clean-tech recruitment officer in the department. In February, Oregon Gov. Ted Kulongoski assembled a group of industry leaders to help the state compete for federal stimulus dollars for clean-tech projects. And this month, he vetoed legislation that would have reduced tax breaks for clean-energy companies.

The endeavors come as Oregon tries to repair its battered economy. With declines in its key computer-manufacturing and timber industries, the state's 11.9% unemployment rate in July trailed only Michigan, Nevada and Rhode Island. In June, the state slashed its 2009-11 budget by $3.2 billion, or nearly 20%. Capturing clean tech is "viewed as essential for Oregon's economic recovery," Mr. Laird said.

While acknowledging a "greater sense of urgency" currently, Mark Brady, the sustainable development liaison in the Business Development Department, pointed out that the state's efforts date to at least 2005.

As a result, Oregon's incentives for attracting clean-tech firms -- those that make alternative energy or energy-efficient products -- are among the most aggressive in the nation. The state's business energy tax credit funds 50% of a renewable-energy manufacturing facility's cost, up to a total credit of $20 million per project. That dwarfs similar incentives in states such as Hawaii, which caps credits at $2 million, according to the Database of State Incentives for Renewables and Efficiency. From 2006 to mid-2009, Oregon spent $386 million on tax credits for clean-tech companies, according to the state Energy Department.

"Oregon is one of the top three states in the country in terms of growing its clean-energy economy" along with Colorado and Tennessee, said Phyllis Cuttino, director of the Pew Environment Group's U.S. Global Warming campaign, a nonprofit that is part of the Pew Charitable Trusts.

According to a recent Pew study, Oregon had 19,000 clean-tech jobs in 2007, up 50% from 1998. About one of every 100 workers in Oregon works in the clean-tech industry, the largest percentage in the nation.

Oregon is particularly playing up its roots in computer manufacturing to attract clean-tech companies. That is because many skills used to make solar cells are akin to those used in computer manufacturing, said Desari Strader, executive director of the Oregon Solar Energies Industry Association, a trade group. Workers that have lost computer-manufacturing jobs need little training to begin in solar manufacturing, she said.

These days, such workers abound: As of June, employment in Oregon's computer and electronic manufacturing industry was down 6,000 workers from 2007 to 34,600, according to the state Labor Department.

Tony Caywood's career symbolizes that shift. In 1998, the technician was laid off by Japanese chip maker Komatsu Ltd., which shut its manufacturing site here in this Portland suburb that year. Oregon later offered $40 million in tax incentives to German solar-cell maker SolarWorld AG, which bought Komatsu's vacant plant in 2006.

Today, Mr. Caywood is back to work in the same building -- this time, making parts for SolarWorld's solar panels. "I never thought I'd be right back here," said Mr. Caywood, 51 years old, adding that he uses similar techniques to make solar cells as he did for chips.

Still, Oregon faces challenges as other states compete to expand their clean-tech industries. Oregon particularly lags in receiving venture-capital investment for clean tech, garnering $70 million in clean-tech venture funding between 2006 and 2008. That is in contrast to California, which led the nation with $6.5 billion, or Texas, No. 3 in the nation at $716 million, according to the Pew study. Overall, Oregon has 1,600 clean-tech businesses, fewer than Florida's 3,800 and New York's 3,300, according to the study.

Oregon's incentives weren't enough to secure Schott AG subsidiary Schott Solar Inc. The solar company last year chose to put a solar-component-making plant in New Mexico instead of Oregon. Chief Executive Gerald Fine said New Mexico gave the company a $14 million cash outlay and other financial incentives that he declined to detail. "We clearly thought the state of Oregon had a number of advantages," but "a financial analysis made the decision for us," Mr. Fine said.

SolarWorld, however, said Oregon's $40 million in tax credits, its trained work force and environmentally friendly policies helped it choose the state over Washington and California in 2006. Today, the company has about 500 workers in the old Komatsu plant and expects to double that work force by 2011.

"Oregon up to this point has been great," said Gordon Brinser, vice president of operations at SolarWorld Industries America.

Write to Ryan Knutson at ryan.knutson@wsj.com

Printed in The Wall Street Journal, page A5, August 28, 2009