Washington Acts While Wall Street Waits

While in New York late last month for the annual Renewable Energy Finance Forum-Wall Street (REFF) conference, I had the chance to catch the brilliant Broadway production of Samuel Beckett’s classic Waiting for Godot, starring Nathan Lane and Bill Irwin. Which seemed appropriate, considering that the major theme of the conference – and of most clean-tech financing and investing these days – was Waiting on Washington, and its stimulus dollars for clean energy and energy efficiency.

What a difference a year makes. At the same conference in June 2008, the main discussions were about how much clean-energy investing would grow for the year, whether U.S. federal production and tax credits would be renewed, and the consensus that even a potential John McCain presidency would be better for the industry than George W. Bush’s had been.

We all know what’s happened since. Sarah Palin, “drill baby drill,” financial meltdown, Barack Obama’s historic election, and the disappearance of capital from the capital markets. “Even if [clean energy] loan guarantees come tomorrow, capital formation is very tough right now,” says Neil Auerbach, managing partner of Hudson Clean Energy Partners. “The development process has come to a halt. That whole process has to get reignited.”

A record 700 people turned out for REFF at its customary and grandiose Waldorf-Astoria Hotel venue, but in terms of the private sector, it was a communal exercise in pessimism. Perhaps the most telling moment came when audience members were asked to predict the total of worldwide third-party clean-energy investments for all of 2009, compared to New Energy Finance’s figure of $155 billion for last year. The top two choices were $90 billion (which would be a 42 percent drop) and $110 billion (a 29 percent decline), with ‘third place’ going to a prediction of a mere 16 percent drop, at $130 billion. Not a very bright outlook for the industry that many, myself included, believe will be the key engine of this century’s economic growth.

But the good news, and still in the ‘what a difference a year makes’ category, is that we now have a presidential administration and Department of Energy that believes that, too. Thus, stimulus money and new federal policies. But how much, how soon, and how effective?

“Stimulus” implies something that will work quickly, but political and bureaucratic reality is far different. Congress passed the $787 stimulus package in February; most energy dollars won’t go out the door to fund projects until August and September at best. That’s pretty quick for government speed, but a long time for clean-tech developers and entrepreneurs used to a faster business pace. Like it or not, however, that’s the waiting game that Wall Street is playing in 2009.

Unlike the fictional Godot who never shows up, Washington is in action. DOE has some 250 people reviewing stimulus grant and loan applications, according to Matt Rogers, senior advisor to Secretary of Energy Stephen Chu for stimulus spending. “We want to fund the best projects, not just the first projects in the door,” he says. And some money is starting to flow, including $8 billion in loans to Ford, Nissan, and Tesla for electric vehicle, fuel efficiency and battery technology development.

The federal government should be an important source of capital for the clean-tech industry, but it should not be the primary source. And Rogers, formerly a senior partner at McKinsey, agrees. “We may be giving mouth-to-mouth resuscitation to the capital markets now,” he says, “but we’re targeting projects that the private sector can take over in the long term. We’ll take a broader role over the next 24 months, but the federal government should not be the long-term solution.”

That’s good to hear, but at present we have the somewhat surreal dance of Washington acts while Wall Street waits. Talk about a role reversal. And Washington acted in a big way just before its Fourth of July recess, when the House passed the watered-down but still significant and historic American Clean Energy and Security Act. For the first time, the bill mandates a carbon cap and a national renewable energy standard — important steps to help move the clean-tech industry forward.

Now the bill heads for the Senate in the fall, with more debates, probably more compromises, and especially more time passing. But the reduction of carbon emissions can’t wait, and clean-tech investors shouldn’t either. Near the end of the REFF conference, American Council on Renewable Energy president Mike Eckhart asked (somewhat incredulously), “Are we really waiting for the federal government as the gatekeeper to Wall Street?” Let’s hope not. Because as Beckett’s characters Vladimir and Estragon know all too well, the waiting game can get pretty old.

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