Editor’s Letter: What Will The Future Hold?

Listening to a recent roundtable discussion among American utility executives, I was surprised to learn that most of them factor in the price of carbon when accounting for future energy costs. I thought that boat had passed in 2009 when the Cap and Trade bill was introduced in the House and then abandoned in favor of health care reform.

The utility executives maintained that they believe firmly the U.S. will eventually set a price on carbon. And because it is their business to look 20 years down the road, they are factoring it in. It’s a good sign for renewables for the long run, but it certainly won’t happen in 2012.

In this, our Annual Outlook Issue, we gaze just one year into the future and interview industry experts from all five renewable energy technologies to bring you what they think is going to happen in 2012. Executive voices in this issue herald from all over North America, representing the wind, solar, biomass and geothermal industries. The Energy Information Administration brings us its outlook for hydropower.

Sadly, most industry executives believe that the days of the 1603 Treasury Grant in Lieu of Tax Credit will indeed come to an end as 2011 closes. Just about everyone we interviewed spoke about how beneficial that program has been for the industry. The grant allowed for the development of community wind farms, a biomass power plant that is set to revive a New Hampshire city and solar installations where they never would have happened — to name a few.

The Solar Energy Industries Association has said that extending the grant would allow for the creation of some 37,000 jobs in 2012 and that’s just for solar power. It will be hard for the industry to see it go but in this fierce cost-cutting political climate, it seems the only plausible outcome, although one financial expert holds out hope.

With 2012 an election year in America, its likely that little will happen on the federal policy front at all next year. Focus in the U.S. will shift to the states as industry observers set their sights on local and state legislation that will be favorable to renewables.

While projects will continue to go forward at least into the first half of the year, many experts believe that the second half could see a downward trend as developers wait to see if the Production Tax Credit (PTC) will be extended for wind, biomass, hydro and geothermal. Through the current rules, the PTC will expire at the end of 2012 for wind power and at the end of 2013 for hydropower, biomass and geothermal energy. Solar energy is able to take advantage of the PTC until 2016.

A bill to extend the PTC until 2016 for all other forms of renewable energy — the American Renewable Energy Production Tax Credit Extension Act — has already been introduced in Congress. Time will tell if it goes anywhere.

And finally, you can be sure the year will be painful for some. Announcements that companies are consolidating, re-structuring or declaring bankruptcy will likely continue to play out into 2012. Most people I have spoken to expect to see much more “bloodshed” as the industry matures.

As our cover suggests, there are storm clouds in the forecast for 2012. Can renewables be the beacon of light that brings our ship safely to shore or will they stall out at sea and wait for calmer weather?

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