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Originally published Sunday, September 9, 2012 at 11:11 AM

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Republicans mock Inslee's vision of an energy 'revolution'

The GOP has taken Democratic gubernatorial candidate Jay Inslee to task for promoting the green energy industry as a way to bolster the state's economy, claiming many such companies are failing or teetering. But some of the companies the GOP cites are surviving in a difficult economy.

Seattle Times staff reporter

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Jay Inslee, the Democratic candidate for governor, has been touting a book he co-wrote on renewable energy as he makes a case for a jobs plan that he says will put Washingtonians back to work in the field of "clean energy."

The 2008 book, "Apollo's Fire," spells out Inslee's vision for an energy "revolution," offering examples of the kinds of companies and technologies that Inslee said could create jobs and help the U.S. produce more of its own energy.

The Washington State Republican Party has mocked the book, ridiculing its low ranking on Amazon's best-seller list, and spotlighting what it describes as the failure of some of the companies Inslee mentions.

"Throughout the book, Inslee highlights several different green-energy companies (each dependent on taxpayer subsidies) as evidence of how he believes green energy can 'work' for communities," the Republican Party's communications director, Meredith Kenny, wrote in one of a series of emails attacking the book. "Only problem is that each of these companies has since failed or is teetering on the brink."

Actually, there's another problem: Not all of the five companies Kenny calls into question are failing or teetering.

Imperium Renewables, a biodiesel manufacturer that Kenny described as "hurting," had its most profitable year ever last year, while Grays Harbor Paper, a paper-recycling mill that Kenny correctly notes was closed last year, was recently bought by another firm, and is poised to reopen next month with 175 jobs.

She also describes the solar-panel manufacturer SunPower as "failing," but in early August, the company announced it had cut costs, increased its residential market share, and would break even or better this year.

Kenny also describes wind-turbine manufacturer Gamesa as "failing," but experts say the company's struggles are due in large part to the impending expiration of a federal production-tax credit for wind energy — the kind of policies that Inslee is promoting to help "clean energy" industries get a foothold in the market.

That's not to say the energy industry — particularly renewables — isn't volatile. In fact, a good many companies have struggled or gone out of business, some taking taxpayer money with them. And, not all the predictions of company success contained in Inslee's book have come true.

Experts say the solar and wind industries are particularly vulnerable to market forces in raw materials, the comings and goings of tax credits, tariffs and the competition from more-established forms of energy such as natural gas.

The most stable sector seems to be energy efficiency, where companies such as McKinstry have grown dramatically by helping businesses become more efficient in their energy use.

Imperium rebound

Imperium Renewables had a rough start, and went through a particularly tough period in 2009, but has since rebounded, said John Plaza, president and CEO of the company, which has its headquarters in Seattle and a plant in Grays Harbor.

Plaza has donated $2,500 to Inslee's campaign.

At its peak in 2007, the company had 120 employees, many of them involved in planning the construction of two additional biodiesel plants, said spokesman John Williams. Imperium later canceled plans for the two other plants. It now has 46 employees, and is fully operational at the Grays Harbor facility, Williams said.

Last December, Plaza said the company had eight consecutive quarters of profitability, had a fourfold increase in biodiesel production over 2010, and had repaid $101 million in debt financing.

"We had the best year we ever had," he said in a recent interview.

Imperium has received federal tax credits for biodiesel production in years past, but no such credits are available this year. It does benefit from a federal quota, passed during the George W. Bush years, that requires 1 billion gallons of biodiesel to be produced this year. That compares to 59 billion gallons of petroleum diesel consumed annually in the U.S., Plaza said.

The company also enjoyed lower business-and-occupation tax rates from the state in years past, but that expired, he said.

Targeted tax breaks

The state has a long history of targeted tax breaks to industries, including Boeing and Microsoft. All told, the Legislature has enacted 640 tax exemptions on everything from sales taxes on food and prescription drugs to sales- and use-tax exemptions for turning wood waste into energy.

Kenny, of the Republican Party, said the businesses she included in her emails were brought to the party's attention by a free-market proponent who read Inslee's book and checked to see how some of the companies mentioned in the book were faring.

Given the recession, the failure rate among startups, and the inherent volatility of energy markets, experts say they would expect a fair number of renewable companies to fail, even those that received substantial taxpayer support.

In the book, published when he was a congressman representing Washington's 1st District, Inslee argues for greater federal spending and government policies to help build markets and accelerate private investments in renewable energy. Without it, he argues, renewable technologies will continue to struggle against older, more-polluting forms of energy that have received and continue to receive government subsidies.

The book, co-authored with a senior fellow at the Center for American Progress, a liberal think tank in Washington, D.C., mentions several dozen companies, some briefly, others more extensively. The authors acknowledge the rapid changes in the industry in the book's epilogue, noting: "Our chapters had to be rewritten several times in an effort to keep pace with the multiple geniuses we encountered."

Free-market argument

But some of them have flamed out.

In one section, Inslee waxes evangelically for three pages about billionaire investor Vinod Khosla's plans to mass-produce cellulosic ethanol, an alcohol derived from plant fibers that could be added to petroleum-based fuels.

Inslee recounts how he and five other congressmen were so excited about the potential for the fuel that they formed a group to "develop a suite of legislative proposals ... to accelerate both the production and use of cellulosic ethanol."

Khosla's company eventually received about $82 million in state and federal subsidies during the Bush administration to build a cellulosic ethanol plant in Georgia, The Atlanta Journal Constitution reported. But the plant never produced a drop of ethanol for commercial sale, and the company went bankrupt last year, the newspaper said.

"Jay has always said failure is to be expected," said his spokeswoman, Jaime Smith. "It's part of building a new industry. Not every company is going to be a success."

In his campaign for governor against Republican Rob McKenna, Inslee proposes to support clean-energy companies through tax incentives that he said "should be capped, finite in time, narrow in scope and subject to review for job creation performance."

Republicans, however, say the tax proposal means Inslee is "picking winners and losers."

"He will target ... tax relief for specific industries such as biotech and clean energy because he believes the success of the whole state depends on the success of these very few. But what about everyone else?" Kenny, the state GOP communications director, wrote in an email.

Todd Myers, who brought the companies to the GOP's attention, said Inslee should let the free market decide which businesses live or die.

"His definition of a level playing field is mainly a political definition of winners and losers," said Myers, director of the Washington Policy Center's Center for the Environment and a former communications director for the state Republican Party. Myers said he was speaking as a private citizen and not on behalf of the center.

"Who knows what companies are going to turn out? The more you narrow the industry and technology, the closer you get to that point," Myers said. "Some will work well, and some will never work well. He ends up doing more harm than good."

Scott Sklar, president of The Stella Group, a clean-energy marketing and policy firm, said such criticisms lack perspective.

"All industries go through up and down cycles as they evolve," Sklar said. "Over time, you'll see mergers. The weaker technology falls out, and you want that to happen."

He added, "Markets evolve in ways we can't anticipate. ... You don't pick winners. You create the environment that has depth and breadth that these companies can play out in the marketplace."

Susan Kelleher: 206-464-2508 or skelleher@seattletimes.com.

On Twitter @susankelleher.

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