Tall Hurdles for Renewable Energy Policy in 2012

Budget cutting and gridlock cited

Jim Pierobon | Dec 07, 2011

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The signs are very difficult to ignore. On Wall Street; in Washington, DC; in states with Renewable Portfolio Standards; and just about every region of the U.S. where renewable sources of electricity and fuels have made significant inroads since 2006.

The next year, and possibly the several years after, renewable energy industries face a combination of fiscal austerity and partisan gridlock that is clamping down on successful clean energy deployment. Companies in the solar, wind, geothermal, energy storage, biofuels and biomass industries are girding for perhaps the toughest fight of their corporate lives. And investors are taking note, further complicating the hunt for capital the U.S. economy which, one would think, is uniquely equipped to provide.

At the annual “Phase II” enewable energy policy conference and related events organized by the American Council On Renewable Energy (ACORE) this week in Washington, DC, there was a palpable decline in the aspirations and adrenaline of clean energy professionals. It’s no wonder.

As Dan Reicher, ACORE’s conference co-chair and Executive Director of Stanford University’s Steyer-Taylor Center for Energy Policy and Finance, put it, the combination of policies poised to dramatically scale up renewable either haven’t materialized, are declining or they are expiring within the next three years.

To name a few:  federal research and development funds, federal cap and trade legislation, a proposed carbon tax, a national Clean Energy Standard, a national Renewable Portfolio Standard (RPS), new state RPS’, Department of Energy loan guarantees, the Section 1603 Treasury cash grant and other ARRA grants, the wind Production Tax Credit and yes, even a proposal for a Clean Energy Development Administration (remember that?).

Together these incentives have served as a potent formula for scaling up some renewables in certain parts of the country to grid parity. Many professionals gathering at ACORE’s events and in Washington this week now dismiss that as out of reach, especially if the “Section 1603” Treasury cash grant for solar expires after this year and the Production Tax Credit for wind expires after 2012.

“Our belief was that state RPS’ would catch on like wildfire. We’re beginning to see a tapering off of that demand,” said Arno Harris, Chief Executive Officer of Recurrent Energy. “We’re looking at a slow period of renewable development and deployment,” Harris wrote in an appeal to Congress with this op-ed in The Hill, which serves lawmakers and lobbyists on Capitol Hill.

Harris opined that developers or financiers may pull the plug on as many as 30 gigawatts of solar projects throughout the U.S., especially if the Section 1603 cash grant goes away. Privately, most ACORE conference attendees privately predicted it will.

Patrick Eilers, Managing Director of Madison Dearborn Partners, asserted this broad retrenchment puts the entire renewable energy supply chain at risk. And that stretches out the time-horizon for wind and solar to reach grid parity.

“People (in these industries) are going to be suffering badly through the austerity,” said Jason Grumet, President, Bipartisan Policy Center. “I know it’s as hard as heck to get a broad-based coalition to move forward. But I sure hope somebody’s got a Plan B.”

One might think if any country on the face of the earth could sustain the clean energy push in the U.S., it is the investment community, the capital markets and U.S. utilities and corporations in need of tax write offs against income, e.g. “tax equity”. But before you get your hopes up, take stock of the following from Michel Di Capua, chief of U.S. Analysis for Bloomberg Energy New Energy Finance.

To keep pace with the current deployment, renewable energy industries need $8 billion of tax equity to plug the gap left by expiring incentives in 2012 alone. But established players have only about $3.6 billion to spend, Di Capua said. How will that gap be filled? The answer may well determine how renewable energy fairs in the coming new year, and beyond.

Jim Pierobon is a career long advocate of, and marketing consultant for, sustainable energy policies. their markets, companies and trade associations. He blogs at TheEnergyFix.com.

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Comments

Tall Hurdles

The fact is that if you removed all the tax subsidies for nuclear power, oil&gas and all other business as usual supports, there would already be parity and therefore an incentive for the business as usual comoanies to support renewables. Biomass power would be a very profitable venture if the public service commissions of the country would make utilities include nuclear power costs in their avoided cost formulas. 

It seems outrageous to me that Southern Company has gotten a $3.7 BILLION loan guarantee for some of the most expensive to build electricity on the planet and then they complain that renewables are too expensive. For just one example, the new nuclear power plants are projected, by the utilities building them, to have an all in cost to build of ~$8,000-12,000 per kW to build compared to a buimass plant at the $3,500-5,000 range.

Tall Hurdles

The fact is that if you removed all the tax subsidies for nuclear power, oil&gas and all other business as usual supports, there would already be parity and therefore an incentive for the business as usual comoanies to support renewables. Biomass power would be a very profitable venture if the public service commissions of the country would make utilities include nuclear power costs in their avoided cost formulas. 

It seems outrageous to me that Southern Company has gotten a $3.7 BILLION loan guarantee for some of the most expensive to build electricity on the planet and then they complain that renewables are too expensive. For just one example, the new nuclear power plants are projected, by the utilities building them, to have an all in cost to build of ~$8,000-12,000 per kW to build compared to a buimass plant at the $3,500-5,000 range.

Use a Breather Wisely

If the cost of renewables is closing on parity with grid power, then perhaps a hiatus in government support will give developers and equipment manufacturers some time to examine their costs and develop a roadmap for reaching parity without subsidies.  In an era of tight budgets and resistance to raising taxes, renewables (and all other technologies) have to learn to survive without public assistance.

Jack Ellis, Tahoe City, CA

Tall Hurdles for Renewable Energy

And don't forget to mention that this renewable energy revolution has already cost significant amounts of money too. The question to be answered is: What happens when the renwables such as solar and wind run out of subsidies?  These two forms of energy have been subsidized way out of proportion to their overall value. They are as generated and as such will never be able to provide base load power at least until an efficaceous way to store energy is developed. Besides, both of these energies are expensive beyone belief.