A Funding Roadblock Ahead for Clean Energy

From the New York Times' Green Inc. blog:

A landmark climate bill that narrowly passed the U.S. House of Representatives on Friday would cap greenhouse gas emissions across the United States for the first time and also create a national target for renewable energy production.

Environmentalists and advocates of clean energy hailed the news in a flurry of statements. Frances Beinecke, president of the Natural Resources Defense Council, called it a “dramatic breakthrough for America’s future.” Denise Bode, executive director of the American Wind Energy Association, described the renewable energy target as “a key first step in balancing our electric generation mix.”

The legislation, however, remains far from becoming law. The House passed the bill only narrowly — and it has been weakened since being introduced months ago — and the fight in the Senate may be even tougher.

In the meantime, there is also the pressing matter of financing renewable energy projects. Since the economic crisis began last autumn, the once red-hot activity by wind and solar developers has slowed sharply. The U.S. government’s stimulus package is supposed to help (although some portions of its aid for renewable energy have not yet been disbursed).

But many advocates of renewable energy are thinking longer term. What happens when the stimulus funding runs out, as it is scheduled to do for the industry’s projects in the next year or two?

“One of my big fears is that we will fall off a cliff,” the director of climate change and energy initiatives at Google, Dan W. Reicher, said in an interview in New York last week.

Lowell Ungar, the policy director for the Alliance to Save Energy, an efficiency advocacy group, echoed the sentiment. “The concern is that you spend billions of dollars building up this industry, training people and creating new jobs and new companies, and it all disappears,” he said.

Perhaps because of its relative newness and small size, the renewable energy industry has been hobbled by a history of uncertain funding.

In the United States, a tax credit to aid wind energy has threatened to expire about every year or two over the past decade, causing the industry to complain that long-term planning is impossible. Congress has repeatedly extended the credit on a short-term basis, but manufacturers of wind turbines have hesitated to establish plants in the United States for fear that the demand for their product might evaporate. (The three-year extension provided in the stimulus package has given a measure of stability, although it arrived — as per the definition of stimulus — just as private investors had pulled back.)

Solar energy in Spain is another classic example of roller-coaster funding. There, the government provided a strong feed-in tariff — a high payment to producers of renewable energy — and solar companies rushed into the country. Last autumn, however, the government decided that the explosive growth was costing too much and capped the amount of solar power that could qualify for theincentive....MORE