RENEWABLES SCORE LANDMARK VICTORY IN US STIMULUS BILL

RENEWABLES SCORE LANDMARK VICTORY IN US STIMULUS BILL

Amid what feels like a torrent of downbeat global economic news, the US offered a brief ray of sunshine last week with its massive new stimulus legislation. The much haggled-over final bill represented a major victory for US renewables, with the industry receiving nearly everything it wanted and more.

The legislation also represented a critical first test for the President. Critics noted that Obama failed to secure significant bipartisan support despite inviting rival Republicans for cocktails and to a Super Bowl party. Still, there was no denying that pushing the largest federal spending bill in US history through Congress was an important achievement for Obama. The bill is due to be signed today.

Among many other things, the bill includes billions of federal dollars for energy efficiency improvements to homes and government buildings, for battery technology R&D, and for CCS research. Laboratory R&D of new energy technologies in the US has for the first time been sufficiently funded. Most importantly for wind, solar, and other renewables projects, the bill extends key subsidies and creates a temporary “fix” intended to address the current ineffectiveness of tax credits as a subsidy mechanism.

For wind project developers and PV system installers who have seen their access to capital all but disappear over the past six months, the victory was particularly sweet. Thanks to direct access to federal funds, many will see opportunities grow in coming months – as long as the global economy does not lurch towards complete ruin.

Despite clear public support for renewables and President Obama’s commitment to the sector, there were a few big bumps on the road towards a satisfactory final bill. In fact, it was not until the 11th hour that it became clear that a tax equity fix had made the final cut. The tax credit work-around allows project developers to take the benefits instead in the form of cash grants via a programme to be run by the Treasury Department. In a number of cases, the need for third-party tax equity capital would disappear.

How effectively such a programme will be administered by the Treasury remains an open question, however. Needless to say, the agency has a few other tasks on its plate, namely the USD 700bn Troubled Asset Relief Program that aims to save the entire financial services sector from ruin. To date, the Obama Administration has named just one top appointee to run the agency – Secretary Timothy Geithner. Another concern: rules for administering the grants programme will need to be written and then implemented at light speed by Washington standards for the grants to become available even by the end of this year.

Still, Obama has invested no small share of his political capital in clean energy’s growth. During last year’s campaign, he promised the industry could eventually create 5m new US jobs. He later revised that down a bit (the stimulus promises 500,000 positions in the sector), but the administration has every reason to lean on the Treasury to make sure the grant programme is a smashing success.

Next on the agenda of the clean energy industry: a national renewable portfolio or electricity standard that will mandate clean energy consumption levels year on year. Already, drafts have begun circulating on Capitol Hill. Watch this space.