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.
More information can be found in these announcements from the Solar Energy Industries Association and the American Wind Energy Association.
Update:
Renewable energy industries got very favorable treatment in the stimulus legislation that came out of the Conference Committee. The following is a press release from the Solar Energy Industries Association:
Solar Energy Industries Association (SEIA) President & CEO Rhone Resch today issued the following statement upon hearing that a bipartisan agreement was reached by Congressional Conferees on the American Recovery and Reinvestment Act of 2009:
“We applaud Congressional leaders for working swiftly to find a compromise economic recovery bill that can quickly stimulate our failing economy. President Obama has issued bold challenges to America: create jobs immediately and invest in our future. This bill appears to meet both goals.
“The solar provisions in the bill will allow us to begin hiring, create growth opportunities for small businesses throughout the country and keep the economic engine going. We expect to create 67,000 jobs in 2009 alone and a total of 119,000 jobs over the next two years, putting Americans back to work installing solar panels, manufacturing components and constructing solar power plants.
“Three provisions in the bill are critical for solar:
Renewable Energy Grant Program: Offers Dept. of Energy grants equal to 30 percent of the cost of solar projects started in the next two years, including large-scale utility projects. This is a critical alternative to solar tax credits that are not functioning as Congress intended in the current economic climate.
Loan Guarantee Program: Creates a new, streamlined loan guarantee program to support financing of renewable energy systems, including solar energy technology.
Manufacturing Investment Credit: Creates a 30-percent investment tax credit for facilities engaged in the manufacture of renewable energy property or equipment.”
Thanks for the update, Fred. Let’s hope these provisions get all the way through the sausage machine and make it into law.
This is helpful information. It’s great to have it summarized, as those of us in the solar business are frequently asked our opinions on the stimulus package. Thank you for clarifying.
Does this stimulus bill give the consumer more tax breaks for solar energy and geothermal heating and cooling?
Larry,
A bit more detail can be found at this article from Renewable Energy World:
http://www.renewableenergyworld.com/rea/news/article/2009/02/update-conferenced-stimulus-bill-retains-renewable-energy-provisions.
Some details:
* A three-year extension of the production tax credit (PTC) for electricity derived from wind (through 2012) and for electricity derived from biomass, geothermal, hydropower, landfill gas, waste-to-energy and marine facilities (through 2013).
* Grants of up to 30 percent of the cost of building a new renewable energy facility to address current renewable energy credit market concerns. The grant money was originally slated to go through DOE, but RenewableEnergyWorld.com is now hearing that the money will be distributed through the Treasury Department.
* Establishment of a new manufacturing investment tax credit (ITC) for investment in advanced energy facilities, such as facilities that manufacture components for the production of renewable energy, advanced battery technology and other innovative next-generation green technologies.
* Clean renewable energy bonds for state and local governments.
* Extensions for tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors or insulation.
* A tax credit for families that purchase plug-in hybrid vehicles of up to $7,500 to spur the next generation of American cars.
Wikipedia is getting a good summary up here: http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009
The Solar Energy Industries Association has good summary of the law as it relates to Solar here: http://seia.org/cs/american_recovery_and_reinvestment_act
Thanks for the info. Larry
Hello,
I act as a career counselor at a college in MA, and I’ve been researching “green economy” issues as it affects career counselors. Me and some other colleagues will be presenting our findings in St. Louis, MO this summer, but if there is anything that you would recommend to us career counselors of resources, associations, websites, advocacy, etc. that would help us become better career counselors in this area, and if any of you have any data/resources on projected trends (I know, projections these days is a shaky concept in our field), in the area of renewable energies and “green/sustainble careers” that would be helpful for us. Thanks.
I look forward to the continued discussion on this blog ( I must confess, I not that savvy with blogs so I apologies for any blog breach of protocol here!).
Regards,
Marcia
Marcia,
I would offer you and your students the same advice I do to everyone. Go to the Building Energy Conference March 10-12. I don’t know how to project job statistics into the future, but the solar and wind industries have been growing at 30-40% annually worldwide for a decade. Energy conservation is an even bigger opportunity in many ways. There are opportunities in all the construction trades. There is a serious need for qualified electrical, structural, mechanical and other types of engineers. This is a great field for your students to enter.
Fred
Many of you will be getting this directly, but for others, here is a Feb. 18 message from the American Solar Energy Society (ASES) Executive Director Brad Collins (fyi NESEA is a chapter of ASES):
=======
Friends of ASES,
With the stroke of a pen President Obama has rewritten the future of solar energy.
Now signed into law, the American Recovery and Reinvestment Act provides billions
in investments to increase the use of solar energy, promote energy efficiency, improve
financing options and remove market barriers.
This legislation provides powerful investments to accelerate the U.S. towards a
sustainable energy economy.
Key provisions of this legislation include:
* Solar and energy efficient improvements for federal buildings
* Solar water heating incentives, removing the $2000 cap on the 30% personal tax
credit (excludes pools and hot tubs)
* Green-collar job training programs
* Ending the state and municipal ‘subsidized financing penalty’
* Smart grid investments
* Expanding research and development programs for renewable energy and energy
efficiency
This legislation also funds solar and energy efficient upgrades for schools, solar
grant alternatives to the investment tax credit, solar manufacturer incentives,
and other historic investments.
You can read or search the text of this legislation (HR 1)
[http://rs6.net/tn.jsp?et=1102465556025&e=001W1bT_UqL3yFEreFltXtwzSok7H3iUtuSSt0dbxZoxDLEjJOmvfaHqhFZ_WoLnMHaHeGNRkSEs_oAjq6vh655KJgS38Qm1en-muVbEXNzVco=]
here.
We applaud the incredible efforts of our colleagues at SEIA, Solar Nation, and the
many passionate individuals throughout the solar community who added their voices
of support in the weeks leading up to the signing of this legislation.
There’s still a long way to go, but this legislation provides a tremendous step
forward that will help generate green jobs, reduce energy costs, tackle climate
change and power the new energy economy for years to come.
With sincere thanks,
Brad Collins,
Executive Director,
American Solar Energy Society
=============
So the question for Fred Unger to answer might be why do these measures need so much stimulus?
Bill,
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 complicating 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.
Nice job, Fred, on getting all this information out to folks as there has been a jungle of versions that have come earlier that have made it difficult to know what was actually signed into effect. This blog has brought this out.
“Brother Bill” [Stillinger] does bring up a point asked by innumerable folks out there and your response was not only on target but elegant in its brevity. You said
“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.”
I totally agree with that and would only add:
1) There have been market imperfections as you note but additional ones that include imperfect information for the consumer still exist as well as really staying on a sustained orderly “deployment” path as PV/DG Guru Carl Weinberg has renamed it; and
2) Many renewables (and even fossil-fueled distributed generation) are truly what Harvard Business School professor and author Clayton Christensen has termed “disruptive technologies” which has a very specific meaning but generally have a difficult time competing early on and making market entry before they take over and sweep the market.
One up side on all this too is that the federal government is being more equitable technology-wise as too many of the state funds have skewed subsidization to PV and this has led to a demise of the solar thermal companies which has products at lower cost and higher efficiency. Each technology is important and has its place but when I see individual residences, particularly new ones, which have huge PV systems and don’t employ efficiency first and then some degree of passive solar and solar thermal we are still slanting the funding to something far short of sustainability”. Keep up the good work, Fred.
See you all at the NESEA Conference.
Best,
Joel N. Gordes