Stimulus Package Only the Beginning: Renewable Energy Makes Strides in the US Political Arena

Graham Jesmer, Staff Writer
March 23, 2009 | 9 Comments

Cautious optimism. That was the term being used across all sectors of the renewable energy industry in the days and weeks following the passage of the American Recovery and Reinvestment Act (ARRA) as industry leaders tried to understand exactly what the package could do for their often struggling companies. Yet as the weeks have worn on, the American public's support for the measure has started to wane.

Members of the renewable energy industry appear to be a bit more bullish on the opportunities that the bill creates. The stimulus package authorized US $67 billion in spending for renewable energy and energy efficiency programs and incentives, $20 billion of which is likely to directly help put projects on the ground. This attitude was on full display last week in Las Vegas at the Renewable Energy World North America Conference and Expo where the ARRA was a hot topic both on the floor and during the conference's industry roundtable discussion.

Rhone Resch, president and CEO of the Solar Energy Industries Association (SEIA) talked about his group's involvement in the writing of the legislation that he views, in addition to last fall's investment tax credit extension (ITC), as a means of stabilizing the industry in tough economic times.

"We've seen tremendous improvements, building on what the 110^th Congress did and really setting the course for the Obama Administration to come in and advance renewable energy in a much more significant way," Resch said. "But I think the biggest thing to come out of stimulus is the green jobs concept, worker training and just educating electricians, plumbers, roofers, those skilled laborers, those tradesmen who've been let go by the housing industry in the last six months, here's your next opportunity. Go down to your community college, ask the right questions and start your own business. So we've seen a huge influx of new companies interested in being solar installers."

Possibly the most important provision in the ARRA is the one that gives renewable energy developers new options when it comes to taking tax credits. The measure authorizes developers whose projects would normally qualify for the production tax credit (PTC) to claim the ITC, or, if the the developer has no short-term tax liability, a grant, in effect a monetization of the tax credits, that will be distributed through the U.S. Department of the Treasury.

"This grant, the concept of being able to actually get a check from the treasury instead of running something through somebody else's tax return. What we've seen almost immediately is that the way that deals are going to be done — the way they are being done — is different," said Ed Feo a partner at Milbank, Tweed, Hadley & McCloy LLP.

Feo said that last year financing partnership arrangements were complicated vehicles that "kept the tax lawyers up all night trying to figure out how the allocations worked." The way that the tax laws are structured now is much more straight forward. "What do we see now: the proposals from sponsors are, 'I want to borrow senior debt for this amount. I'm going to get a grant for this amount. And the sliver in the middle, that's my money. It's very simple," he explained.

When companies will see this money and what level of impact it will have on installations in 2009 is still a matter of debate but there are some indications that checks may be cut as early as June. One thing is for certain though, renewable energy is on the radar of almost every politician in the nation's capitol. John McKinsey, a partner in the renewable energy practice at Stoel Rives said that the ARRA is a great focal point for the industry, but was only the first in a series of legislative measures, including a federal renewable portfolio standard (RPS) and a carbon cap and trade measure, which are likely to make renewable energy a more attractive option for utilities and developers alike.

"Collectively what that [federal RPS] means, is a larger market for all of the renewable energy assets, whether those are renewable energy credits or white credits or just renewable energy contracts. If there's a national program that means that there is a national market for those things, and that allows them all to find the best buyer and the best price," McKinsey said.

He said that the a federal RPS might work in conjunction with some form of carbon legislation. "And the renewable energy credits are likely to have to fold in carbon credits or they're going to have their own separate existence. And again a national program could really define that. There are a lot of carbon trading programs and a lot of carbon ideas and this year they're going to stand alone as their own separate path and entity, a stream of income for renewable energy, or they're going to get folded into renewable energy credits raising those prices a little higher."

RenewableEnergyWorld.com had a chance to speak with McKinsey; Chris Flannery, senior vice president at Piper Jaffray; Denise Bode, CEO of the American Wind Energy Association and Karl Gawell, executive director of the Geothermal Energy Association about the state of renewable energy finance, the ARRA and the other federal legislation that is on the horizon. To see highlights from these conversations, play the video below.

Check out our coverage from Renewable Energy World North America Conference & Expo Full Coverage.

9 Comments

michael taylor
March 28, 2009

first off i have worked in the past with the kind of people who just start buisnesses without the proper knowledge. implying that anyone with a community college degree and a logo on the side of a truck can st6art the buisnesses we need in renewable energy is not so smart.don't get me wrong, i am currently in a community college studying renewables but i am looking to get into a company who will take me under there wing and allow me to learn instead of people thinking that negative about renewables because i botched the job.

second. i don't pretend to understand all the proublems in the economy but what about the strugleing middle of the road banks? don,t they all try to invest for pfofit ?are they getting any federal money ? are they investing in buisnesses that want to create kilo watts instead of mega watts? sure bigger is better but the other cliche is every little bit counts.

Chuck Conover
March 25, 2009

Cost is not the only issue. Are you seriously still arguing the merits of renewable energy? We have 4 problems, all are solved by renewables. (1) war over oil, (2) sagging economy, (3) increasing pollution and the health problems this causes, (4) supply of oil diminishing. Number 3 should really be #1. We now have over 6B people and growing energy needs. We cannot continue to poison the planet to produce energy.

But, let's talk about cost because that's what is mentioned the most. Many will tell you that coal and oil are cheaper than wind and solar. But their figures don't include all the costs. Just use common sense. Coal is extremely efficient, but have you seen a coal mine? How much is the land? The equipment? How much gas do you think each of those immense trucks uses per day? You know, the ones with tires that cost thousands of dollars each? The hundreds of people working there every day? The transportation of the coal? The cost of the coal plant? Now look at solar and wind. Buy the equipment. Install the equipment. Done. Actually wind turbines take maintenance, but solar does not.

Utilities have already invested in many of the capital costs, which is why they don't want a sudden change. But all utility companies are investing in renewables as they expand or their plants need replacing. They just don't want to switch immediately. This is why we need to subsidize the switchover.

Mary Saunders
March 25, 2009

Under current conditions, we have big industrial users bidding for shut-down at peak privileges, for a break in using power at sag time. This is consensual, and win-win for the rate payers, who don't have to finance new generation, and for the voluntary shut-down winner, who can drastically reduce costs in hard times.

Having this capacity undercuts the arguments of those who want enough capacity to ramp up to whenever. To me, assuming we always need this is akin to assuming that U.S. people aren't capable of changing with changing times.

I would also like to point out that FITs, or renewable energy payments (REP's) (I prefer this title as do some other RE producers) do not have to be set by government. A provider could set them at a rate that serves ratepayers, then greenwash themselves in PR against competitors who are late to the party.

We are in paradigm-changing times. Not getting with what advanced adopters are advocating is going to leave some players behind and vulnerable to whacking when the local pilot projects under the surface on the internet finally break out into mass attention.

Distributed energy, smart grid, micro-grids--these things are trickling up. They make sense from so many angles, not least from emergency-preparedness perspectives, on a local level. Katrina taught some of us some interesting lessons.

If the Obama regime decides to bust Too Big To Fail entities, this will speed it along. He is on record against TBTF, and there are going to be some grassroots trying to make him deliver on this one. He was a community organizer, after all, and controlling their own power is good for communities.

If he delivers on transparency promises, this would be another area boding well for new initiatives where the producers are willing and able to be transparent about production and use patterns.

We need good information to get good policy. Maybe it's coming soon.

stephen kelly
March 25, 2009

What ever happened to Life Cycle costing analysis ? Will this "renewable" reduce the capital investment in Power Plant Construction ? If not, that relegates the Utility into a position of providing "stand-by" capacity for peaking purposes. The Capital Construction of a power plant is recovered by Energy Sales. Building a Power Plant of any kind - and not having associated Energy Sales to go along with that investment ----- will only drive up the cost per unit of energy. The Electric Utilities should be proceeding with this --- if it is cost effective and beneficial to its customers.....Life Cycle costing theory should be enough of an incentive without any government "give away" program. Why should the people pay for something that is not cost effective over its life. The investment must be recovered somehow - or the project is a loser - long term. The wind must be reliable enough to be there when the utility peaks ......... or else storage concepts must be in place. Wind Power will result in less energy used....however, if it does not reduce the demand on the power plants at peaking times ........ it dilutes the sales ...... Yes, it is "emission free".......so are more reliable alternatives. A "happy combination" is needed. One would think if the systems are reliable and cost effective, the utilities would already be doing it on their own properties and interface it with their own existing grid. Windmills have been used in many places.....where there is no power system availability........ and where the wind blows.....look at western Kansas ..... they have been used since dirt ...... to provide pumping energy for water pumps........

Mike Holly
March 24, 2009

Sorry, friend of the utilities. But you can't tell me the abuses don't occur because they occur more often than they don't. Like you, regulators are most often friends with the utilities, often getting jobs in the industry later. If you haven't seen the corruption you are either not looking or not the sharpest tool in the shed.

Mike Holly
March 24, 2009

@ Jeffrey Anthony. I have personally witnessed the implementation of your so-called RFP's in Minnesota and also Wisconsin. The RFPs were rigged by the utilities and with no oversight from regulators. The lowest-cost generators were not selected. You are from the American Wind Energy Association, a group that has gone to bed with the utility monopolies, with several among its members.

Mike Holly
March 24, 2009

@Jeffrey Anthony. Of course, feed-in tariffs have impacted electricity rates more then renewable portfoilio standards since feed-in tariffs have been far more successful at adding renewable generation. Renewable portfolio standards have nothing to do with market forces, especially since there is no competition in either regulated or deregulated US markets to force utility monopolies to purchase the lowest-cost generation. You are just sprouting utility propaganda.

Ann McGoldrick
March 24, 2009

Here is a great move by a state:

"The Massachusetts legislature passed a resolution to Repower America with 100% clean electricity within ten years. Leading the effort was the Massachusetts Power Shift, a student-led environmental group. "

I believe it's now up to the individual states and people to push for a green energy America, circumventing the federal government if necessary.

Like many people I had high hopes for the Obama administration and the promises of investment in a new, green economy. I do not see the kind of funding or legislation needed for it, however, emerging from this administration when I look at the facts, though there are spots of light. The carbon tax plan is a major question mark in my view.

But should the green energy industry be determined by what the federal government does? Absolutely not!

States and counties, towns and communities can spearhead America's transformation into a clean energy, environmentally sound, healthy economy.

The green industry now needs to switch its lobbying and other growth efforts to states and the general public.

Mike Holly
March 23, 2009

The unholy alliance of the utilities, wind energy industry and environmentalists are forcing renewable portfolio standards down the throats of companies with other renewable energy technologies, which need feed-in tariffs. Renewable portfolio standards allow the utility to negotiate prices with suppliers on a discriminatory basis. That invariably results in higher prices for their own renewable energy generators and that of their affiliates and friends, particularly those in the wind industry. In comparison, feed-in tariffs, like those in Germany, are paid to all renewable energy producers at the same fair price. For example, all renewable energy producers would get say 7 cents per kWh for all power they generate.

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Graham Jesmer

I am currently a third year Law Student at Vermont Law School where I work as a Research Associate at the Institute for Energy and the Environment writing and researching energy law and policy issues. I also hold a position as a Staff Editor...