A boom in the oil industry does not exclude New Mexico from establishing itself as a solar power — two New Mexico politicians on opposite sides of the aisle in Congress can at least agree on that.
Sen. Martin Heinrich, a Democrat, and Rep. Steve Pearce, a Republican, said New Mexico can be a leader in both oil and solar. Statewide, New Mexico has an unemployment rate of 5.8 percent. A surge in oil and a rebound in solar could be key for the state closing the gap with the national unemployment rate of 4.1 percent.
The amount of oil that’s believed to lie in New Mexico has caused some of the country’s largest energy companies to invest billions of dollars just to get a piece of the oil-ripe Land of Enchantment. As gas plants and rigs sprout up, jobs are expected to be created, which could bring additional economic impact.
A report from the Solar Energy Industries Association, a nonprofit trade association of the solar-energy industry, expects New Mexico’s jobs in the field to continue to power down after a drop in 2017, but a rebound could be around the corner.
As the Solar Investment Tax Credit was set to expire in late 2015, businesses rushed to take advantage of claiming 30 percent of solar equipment and installation costs on federal taxes. As a result, the solar industry saw a record-breaking 2016 in annual solar photovoltaic installations, with 15,128. Alex Hobson, a spokeswoman for the SEIA, said the industry’s dropoff to 10,608 in 2017 was expected as a result.
Jim Peach, an economist out of New Mexico State University, said New Mexico being home to the Delaware Basin — which Peach called “the hottest area in the world” for oil — won’t have any effect on whether solar companies choose to invest their money in New Mexico.
“[Solar companies] will invest if the the economics of solar make sense,” Peach said.
Other than home installations and construction, he said, solar generates “almost zero employment.”
The investment from oil companies will cause some temporary job creation with construction and full-time employment with drilling, he said. Cities around heavy oil investment might feel positive ripple effects from the investment.
Carlsbad, near the Delaware Basin, is experiencing some of the benefits of the billions of dollars of investments from energy giants like ExxonMobil. In January, ExxonMobil announced it was going to invest $2 billion in an effort to triple production around the Permian Basin.
John Waters, Carlsbad’s executive director of its development department, said Carlsbad is the new regional headquarters for the new Delaware Basin.
Waters said the boom in his city is caused by more than the billions invested by oil giants.
“We have growing manufacturing and the Carlsbad Caverns, which brings in 500,000 people per year. We have more acres of parkland per capita, four lakes, and multiple state and national parks in the area,” Waters said in a statement. “We are now getting not only the transient drilling activity, we are now seeing the permanent jobs associated with permanent processing facilities and regional offices that are bringing in management.”
An ocean of oil has long been believed to exist there, but new technology has allowed for more efficient ways to drill and frack. The efficiency has led to an uptick in oil and gas revenue that is affecting more than just the surrounding towns on the oil hotbeds.
The Albuquerque Journal reported in November that the additional revenue will help the state rebuild its reserves to more than 8 percent by the end of the fiscal year. In January, during Gov. Susana Martinez’s final State of the State address, she announced a $330 million surplus, with around 40 percent of that bump from oil.
During an interview with Business First in February, Jeff Mitchell, director of the Bureau of Business and Economic Research at the University of New Mexico, said the state’s economy was too dependent on the oil boom.
“Everybody feels all happy now because oil prices are high, compared to two years ago, or even a year ago. But the only thing that has changed is the price of oil,” Mitchell said. “Do you really want to be dependent on things you don’t have any control over?”
A report from the American Jobs Project found alternatives the state can explore to avoid having to rely on the “volatility in state revenue from the oil and gas industry.”
“Economic growth has been stifled by New Mexico’s overreliance on revenue from the oil and gas industry and on employment by the federal government,” the report read. “Efforts to diversify the state economy and foster good-paying manufacturing jobs could expand workforce opportunities for New Mexicans and stimulate economic growth.”
While the price of oil can fluctuate, Peach and Pearce don’t anticipate the investment to slow down, given the commitment companies like Exxon have already made.
A 75-mile tract up U.S. 285 from the oil hub in Carlsbad is one of New Mexico’s largest solar installation projects — Chaves Solar, which is located in Roswell. The project has enough electric capacity to power more than 17,404 homes.
New Mexico homes may need that power.
A report from the SEIA is projecting annual solar installations in residential homes to gradually climb over the next four years despite a 14 percent jobs decline in 2017.
Pearce said he sees no reason why New Mexico can’t pass North Dakota in oil production for second on the list behind Texas and anticipates inching closer to the top of the board for solar production.
“New Mexico will continue to be a key player in meeting our nation’s energy needs. Our state has long been one of the nation’s top sources of oil and gas and is now uniquely poised to be a major producer and exporter of clean power,” Heinrich said in a statement to Business First.
Should New Mexico figure out how to capitalize on the oil boom while creating more renewable energy, it could inch closer to closing its jobs gap — the gap between the jobs New Mexico’s employers have to offer and the skills its workforce has.
The status of solar incentives
The Solar Investment Tax Credit was established by the Energy Policy Act of 2005 to incentivize solar for both residential and commercial use. After the ITC originally was set to expire in 2007, a series of extensions bumped the expiration date to 2016.
Before the 2016 deadline, a number of businesses jumped at the chance to take advantage of claiming 30 percent of solar equipment and installation costs on federal taxes. The ITC was maintained through Congress’ Tax Cuts and Jobs Act of 2017 and has since been extended through 2023.
After 2019, businesses and residents will see a dip in the amount of solar they can claim. In 2020, only 26 percent of solar equipment and installation can be claimed on federal taxes. By 2022, the residents’ claim powers off to 0 percent, while businesses can still claim 10 percent.
On the state level, New Mexico’s solar tax credit, similar to the ITC, expired in 2016. The bill to restore the credit made it through the House and the Senate during the recent state Legislature session, but Gov. Susana Martinez declined to act on the bill.
By: Ron Davis (ABQ Business First)
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