2010 US Election Preview for Cleantech

Programs with the most election exposure include:

• Proposed cap and trade & RPS
• Proposed natural gas vehicle incentives
• $5b of proposed clean energy Manufacturer’s Tax Credit (MTC)
• $60b in DOE loan guarantee lending authority ($35b already rescinded)
• Tax credits extension for biodesiel (expired in 2010), biomass (expired in 2010), and ethanol (expires in 2011) 
• Investment Tax Credit (ITC) cash grant program (expires in 2011) and the Production Tax Credit (PTC) (expires in 2013) which are critical for wind and geothermal.

Programs with the least election exposure include:

• 29 State Level RPSs
• $25b of unspent DOE stimulus funding
• Renewable Fuel Standard (RFS) biofuel mandates through 2022
• ITC guaranteed at 30% through 2016 which is critical for solar and fuel cells

Passing cap and trade appears impossible; RPS and subsidy extensions depend on election results and willingness of Democrats to embrace nuclear and natural gas. An energy debate is likely in 2011 because Congress needs a response to the Gulf oil spill and prospects for lame duck legislation are very poor. However, given that the Senate was unable to swallow cap and trade in 2010 with a 59 seat majority, we believe it may be impossible to do so after the election. In our view, RPS may be achievable if Democrats maintain a slim majority in both chambers and are willing to include a role for nuclear energy. Extending other cleantech subsidies will require further compromises with Republicans on natural gas and offshore drilling. We note that such cooperation would be a radical shift from the present environment. 

We look for the Administration to rely heavily on federal agencies in 2011.

• Department of Energy still has $25b of unspent stimulus funding favoring smartgrid and advanced batteries, plus another $25b in loan guarantees.
• Environmental Protection Agency continues to assert its right to regulate emissions including CO2, SOX, NOX, methane, mercury. We anticipate heavy resistance from states and industries, but the cumulative impact is still a likely growth driver for clean technologies.
• Department of the Interior’s Bureau of Land Management (BLM) permitted its first solar projects on 10/5/10, and its backlog implies over 10GW could be approved in the next year. The projects are all located in southwest states and favor concentrated solar over photovoltaics. Offshore wind suffered a setback when the agency drafting its future role was broken up over the Gulf oil spill, but it remains a high priority of the Administration.

Despite the negative outlook for new legislative support, we expect continued growth in the US renewable energy and energy efficiency market fueled by decreasing costs, public awareness, existing government incentives, and strong natural resources.

[Editor's note: to hear Robert explain this and other potential clean energy legislative developments, play the video below.]

Robert Lahey is a Vice President in the Investment Banking division of Ardour Capital Investments, LLC , and can be reached at rlahey@ardourcapital.com. Founded in 2002, Ardour Capital is the leading research and investment-banking firm exclusively focused on energy technology, alternative energy and power, and clean & renewable technologies. Ardour Capital publishes in-depth company coverage and industry specific research, and offers a full range of corporate finance, investment banking and capital market services. Robert holds a BBA from George Washington University, a JD from New York Law School, and an MBA from Fordham University.