Stimulating Renewable Energy

Buried in the massive “stimulus bill” working its way through Congress this week are details that could significantly alter the markets for solar and wind energy. And the details matter.

After a decade of remarkable growth, both the solar and wind industries have been significantly impacted by the recession and credit crash in financial markets. So 2009 is starting out as a more challenging year for renewable energy industries. There are fewer parties with appropriate tax appetite to invest equity in large projects under current tax laws. And renewable projects have not been immune to the problems in credit markets.

Whatever your views may be on the stimulus bill, it passed. Energy sections in the bill will have important implications for renewables. The Senate and House versions are very different though.

Probably of most significance, the House version has provisions to monetize the value of renewable energy tax credits through DOE grants in lieu of the current tax advantages. That provision is not included in the Senate version that still relies exclusively on manipulations of the tax code.

It’s past time to have transparency in the way governments intervene in energy markets. Incumbent energy sources benefit from decades of huge and continuing complex subsidies that skew markets in their favor. But the vast majority of citizens favor renewables. So lets encourage renewable energy development in a direct and sensible way as proposed by the House. Reliance on crazy manipulations of the tax code ends up providing hidden subsidies to financial institutions while complicating the development of clean energy projects. If the government is going to intervene in energy markets as much as it does, let’s make those interventions transparent and effective.

This week, the Conference Committee is going to hash out the details of the massive “stimulus package”. For anyone who cares about renewable energy, there has rarely been a better time to call your Senators and Congressional Representatives. Encourage them to support the House provision for a simple direct solution for reviving the remarkable growth and job creation of renewable energy industries. Its clearly better than the Senate alternative.


1 Comment

Filed under Energy Policy

One response to “Stimulating Renewable Energy

  1. fredunger

    Over at the NESEA Blog where this post is also shown, my friend Bill Stillinger suggests:

    “So the question for Fred Unger to answer might be why do these measures need so much stimulus?”

    A better answer than the current stimulus package is suggested below in “Actually Mr. President, There Is A Solution: The Freedom Tax”. But at least this is a step in leveling the playing field. My answer to Bill follows:


    There could be many books written regarding your question. And you are likely more expert on these matters than I am.

    Bottom line: Incumbent energy industries like oil, coal, gas and nuclear have had decades of massive complex and often hidden subsidies. My personal preference actually would be for the government to not intervene at such a fine tuned level, but rather to fairly price energy to include the “economic externalities” of our current energy system through rational taxing. Such externalities include such details as the feds covering the vast majority of the truly extraordinary liability associated with nuclear power along with all their enormous waste disposal and security costs, the pollution and social impacts of the coal industry in places like Appalachia, the cost of the ongoing war for oil in Iraq, pollution impacts of burning fossil fuels……. As you know, this could get to be a very long list.

    Bottom line, the current efforts help to level the economic playing field for clean energy.

    Actually, the most important thing the bill does is to simplify the subsidy process and makes it both more transparent and more effective. Instead of tax incentives that ended up going primarily to tax equity investors like large banks, which massively complicate the financial transactions around large scale solar and wind projects, the new streamlined grant process eliminates the need for those huge unnecessary transaction costs and instead puts the money directly to productive development of renewable energy projects.

    The really good news is that pretty soon these kinds of incentives actually won’t be necessary. The cost of solar is dropping dramatically. The economics of wind power is getting very competitive with conventional resources. As our industries grow and technologies continue to improve, efficiencies of scale will also continue to reduce costs.

    As the cost of renewables is coming down, the inevitable increase in cost of traditional fuels will quite soon create a crossing of those price lines on economic graphs. That magic point of “grid parity” is going to explode the growth of our industries, making our economy far greener, healthier and more economically secure.

    Its coming soon. Leveling the playing field for energy economics will accelerate the development of green energy industries and help build the base to enable a the massive transformation of our energy systems that is inevitable, necessary and clearly desired by the vast majority of Americans.

    You can see all comments on this post here:

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