'Green' energy a tiny share of stimulus plan

Supporters see the plan's $24 billion on renewables as a first step toward a new energy economy.

By , Staff writer of The Christian Science Monitor

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    Workers install solar panels on a home in Santa Ana, Calif.
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For all the hope and hoopla surrounding the largest public works program since the Interstate Highway System in the 1950s, the share spent on long-term “green” investments is surprisingly small.

Most of the stimulus package goes to temporary measures, such as tax cuts, emergency aid to the states, and the extension of unemployment benefits.

Nearly a third of the $550 billion Congress is set to allocate in direct spending is called "green," including money to modernize electricity transmission and experiment with a "smart grid." But just $8 billion is destined for renewable power and electricity-related spending, according to an analysis by FBR Capital Markets. Another $16 billion in tax credits – of $275 billion of overall tax credits – is devoted directly to green-energy development.

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Is that green investment of $24 billion enough to meet President Obama’s goals of creating tens of thousands of new jobs and doubling renewable-energy capacity in three years?

No, say renewable-energy advocates. They see the stimulus as only a down payment on green-energy development that will be fulfilled in a separate energy bill not yet formulated. Even the success of the stimulus’s “down payment” will depend crucially on how details of the plan are implemented, especially renewable energy tax credits, they add.

“In order to achieve President Obama’s goal of doubling energy in three years, we will have to triple utilization of these tax credits,” says Rhone Resch, president of the Solar Energy Industries Association. That’s tricky, unless the industry can find a way to let companies trade credits for cash. “Without the tax-credit market, it’s going to be difficult to achieve that.”

Renewables now at 7 percent

As of 2007, renewable energy sources supplied only a tiny sliver of US energy supplies, about 7 percent. (Petroleum supplied 40 percent, coal 22 percent.) Of that renewable sliver, energy from biomass (such as corn ethanol) accounted for 53 percent, hydroelectric 36 percent, geothermal 5 percent, wind power 5 percent, and solar energy 1 percent.

The Obama administration has set ambitious goals for the energy portion of the stimulus plan. Of the 3.7 million jobs that the plan is supposed to create or save, about 460,000 would come from energy-related expenditures. A large but undetermined portion of those jobs would be in the renewable-energy sector.

“A new energy economy is going to be part of what creates the millions of new jobs that we need,” Mr. Obama told reporters last month. “That’s why my economic recovery plan is going to be focused on how can we make a series of down payments on things we should have done 10, 20, 30 years ago.”

The money would represent a big boost to alternative-energy industries. For OptiSolar, a manufacturer of solar panels in Hayward, Calif., the stimulus package cannot come soon enough. With credit hard to get and customer demand falling, the company laid off 300 workers this month, about half its staff.

The problems extend to the wind industry. On the heels of banner growth in 2008, turbine-tower manufacturer D.M.I. Industries this month laid off 20 percent of its factory work force in Oklahoma and North Dakota, as well as Ontario, Canada. Without aid, 25 to 50 percent of planned wind-power capacity won’t be built this year, the American Wind Energy Association warns.

Convert credits to cash?

The most crucial piece involves tax credits. In the past, investment banks and other deep-pocketed investors could spend huge amounts on wind farms and other renewable-energy projects and then reap production tax credits, which they could use to offset taxes on profits elsewhere. But the severe economic downturn has reduced profits and the number of major renewable-energy investors from 20 to about five. Thus, the tax credits are far less valuable than they were.

So, wind and solar industries want essentially to convert those tax credits into grants from the US Department of Energy. In legislation last week, the House version of the stimulus bill allowed the switch; the Senate version did not.

“A couple of things in the House measure are going to alarm fiscal conservatives – and one of those is loan guarantees being replaced by explicit payments,” says Kevin Book, vice president for energy policy, oil, and alternative energy with FBR Capital Markets. “If Congress approves this, it absolutely will have investors looking at this as a green light” to invest in green-energy projects, he says.

In other areas, the House and Senate are in lock step. Both would provide $13 billion to extend the important “production tax credit” for wind power for another three years. Without it, credits would be unavailable for projects not completed by the end of this year.

Another provision in both bills is a 30 percent investment tax credit that had been given only to solar and will now be extended to wind, biomass, geothermal, hydropower, and landfill gas. That would enable the latter projects to get a tax credit in just one year rather than a production tax credit over 10 years.

Some $8 billion from the Department of Energy would also be available for loan guarantees for clean-power projects. But it’s not yet clear if those projects must be “advanced” and “innovative.” If not, this could give a boost to wind and solar.

Such a boost would be key to achieving the president’s goal of doubling renewable-energy capacity nationwide within three years. Much of that plan is yet to come in an expected energy bill. And there is reason to believe the jobs Obama wants to see can indeed be created, experts say.

“The stimulus package would turbocharge our efforts to use energy more efficiently and build more renewable electricity facilities,” says Daniel Weiss, director of climate strategy at the Center for American Progress, who has analyzed the stimulus provisions.

Wind, solar employ 80,000

Together the wind and solar industries employed about 80,000 workers last year, barely a blip in a US labor force of 154 million. Sales of renewable-energy equipment reached $25 billion – tiny in terms of the overall economy, but more than double renewable energy’s level four years ago.

A big part of the growth was the wind industry. It added the equivalent of eight coal-fired power plants and 65 new manufacturing facilities nationwide – along with 10,000 jobs in the past two years.

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