Dan Morain

Dan Morain: Tie this subsidy to keeping jobs here

Who doesn't like Delaware? It's so cute, 96 miles from one end to the other. It produced our vice president and has 900,000 residents, maybe.

And now it will be the East Coast manufacturing hub for Bloom Energy, the Silicon Valley-based startup that collected more than $200 million in subsidies from California ratepayers for its fuel cell technology last year.

"We're going to show people from California the Delaware way," Delaware House Speaker Robert Gilligan, D-Sherwood Park, crowed to reporters earlier this month as he fast-tracked a package of incentives that helped persuade Bloom to establish an East Coast manufacturing presence.

Delaware has a reputation for being friendly to corporations, though what could be friendlier than $200 million? Then again, Mr. Speaker, we Californians are happy to have helped pay for the development of fuel cells that will be assembled in your fine state.

And a fine state it is.

Ask Fisker Automotive, the Southern California hybrid plug-in automaker that gave its debut model the oh-so-California name of Karma. It will be assembling vehicles in Delaware, hiring 2,500 workers and receiving about $20 million in subsidies.

Delaware's people need jobs, though its 8 percent unemployment rate is way below California's brutally high 12 percent rate.

There are many reasons why California's unemployment rate is high, and Delaware's lower. But perhaps certain policies have something to do with it.

The $200 million that Bloom received from California last year – vastly more than any similar alternative energy firm – cut the cost of its highly touted fuel cell technology and helped it sell it to high-profile firms such as Google, eBay and Wal-Mart.

Bloom's remarkable success at tapping into the once–moribund fund known as the Self-Generation Incentive Program prompted the California Public Utilities Commission to suspend the subsidy earlier this year, and reassess how it should hand out future money.

The Legislature, meanwhile, is deciding whether to end the program or approve legislation that would extend it at a cost of $83 million a year, borne by customers of PG&E and the state's other private utilities.

As Bloom's lobbyists work to keep the California program operating, Bloom won accolades last week for its plan to take control of an abandoned 200,000-square-foot auto plant factory in Delaware.

Delaware's arrangement with Bloom dates to April 2010 when Gov. John Markell and one of his aides, Collin O'Mara, paid a visit to Silicon Valley.

O'Mara, a Silicon Valley transplant who had worked for San Jose Mayor Chuck Reed, knew where to hunt: the Sand Hill Road headquarters of venture capital heavyweight Kleiner, Perkins, Caufield & Byers. Kleiner Perkins had provided funding for Fisker and for Bloom.

"We're don't view ourselves as stealing jobs," O'Mara told me on Thursday, the day the Delaware Legislature granted final approval to the incentive package.

Bloom had been seeking an East Coast presence to produce its fuel cells. Delaware was there to accommodate. Bloom promises to produce enough Bloom Boxes to provide 30 megawatts of power in Delaware, about the total of all the fuel cell power produced in California.

In exchange, Delaware committed factory space and subsidies worth about $16 million. Additionally, Delaware ratepayers will be charged an extra $1 a month or so for the next 20 years to cover the added costs of fuel cells.

As O'Mara sees it, California has successfully created demand for alternative energy with its various pro-environment laws. California is cutting greenhouse gas emissions, requiring that a third of all electricity come from renewable sources, and has given rich subsidies for the installation of fuel cells, solar power and other nontraditional sources of electricity.

Delaware, O'Mara notes, focuses on the supply side, tying incentives to actual hiring by giving some money up front and some later.

"As much as possible, our preference is for the jobs to be in-state, particularly if there are taxpayer subsidies," O'Mara said.

Bloom is not ignoring California. Its headquarters remains here, and in April, Bloom declared it is adding 1,000 jobs at its Sunnyvale facility. That's excellent.

But there is no requirement in the Self-Generation Incentive Program that recipients commit to hiring Californians.

Odds are the subsidy program will be reinstated, with some changes. Gov. Jerry Brown has called for 12,000 megawatts of alternative energy not tied to traditional power plants and the electricity grid. Fuel cells are one such type of so-called distributed generation.

The Public Utilities Commission likely will reinstate the program next month. The Legislature will take up legislation to extend the program for a few more years.

Despite questions about past management, the program should be extended. It has "been critically important in establishing the fuel cell market in California," said professor Scott Samuelsen, director of the National Fuel Cell Research Center at UC Irvine.

Bloom's fuel cells in particular are "working as advertised," he said.

Fuel cells remain more expensive than traditional sources of electricity. But they are a source of clean electricity, independent of the grid. Although they cannot compete without subsidies yet, they could become commercially viable in the next few years, Samuelsen said.

But as California legislators decide whether to extend the subsidy, they should take the lead of the smart people of Delaware and insist that recipients of California ratepayers' money provide jobs. In California.