Green Growth: How the Eco-Stimulus Can Generate Jobs

Part I, Picking the Winners

We are living in the Age of Uncertainty. Nobody knows how bad the economy really is or how long the pain will persist; nobody knows what type of stimulus package we need or whether a stimulus will actually work. And nobody knows where clean technology innovation is headed, given the current tumult in the capital markets.

Despite financing the future for hundreds of emerging growth companies over the past 25 years, I admit to not having all the answers today, at a time when that would be immensely helpful.

But I do know that the current stimulus package – with approximately $90 billion worth of energy-related spending and tax breaks – has the potential to boost certain sustainable industries and renewable energy sectors that have enormous job-producing potential, and that these good-paying and high-value positions will enhance economic growth both today and tomorrow.

An Extended Keynesian Injection

Unlike the New Deal stimulus, this 21st century eco-stimulus offers us an extended Keynesian injection because new green companies and new clean industries will be created from the ground up while existing – but still maturing – segments of the New Energy Economy will expand and extend their reach.

The businesses and sectors that stand to gain the most from Washington's legislative initiative will be the ones that can best harness public and private sector capital flows to generate a fairly quick payback. Every enterprise in the clean tech world is looking for stimulus money, but if you can't break even on a cash flow basis anytime soon, there's little sense in approaching lawmakers on Capitol Hill for financial aid.

Energy Expenditures

Congress is still not officially signed off on the size and composition of the stimulus. So, my informal, conservative and real-time dollar break out, which is subject to change as legislators crunch the numbers, currently looks like this:

• Energy Efficiency and Transmission – $50 billion
• Renewable Energy Tax Credit Extensions – $13 billion
• Tax Breaks for Large-Scale Renewable Projects – $11 billion
• Energy Efficiency Improvement – $9 billion
• Renewable Energy Manufacturing – $1.4 billion
• Department of Defense Energy Upgrades – $4 billion

Yet even as the legislation is hammered out before going to President Obama for signing, it's possible to identify three potential winners that will have a tremendous economic – and job-creation – impact on the post-petroleum era.

First, the solar and wind power industries. These sectors are struggling today because debt funding and critical tax equity take-out financing has dried up; but I believe they could experience a reversal of fortune if Congress includes a refundable tax credit in the stimulus package (See Part II, following this story).

Taxing Matters

Amending the tax code in this way makes sense because the refundable tax credit would be a financeable arrangement and go directly to the solar and wind developers, who created a combined 30,000 new jobs in 2007 and 2008.  With the right tax policies in place, the solar energy sector alone could create 440,000 permanent jobs and spur $325 billion in private investment by 2016, according to Navigant Consulting.