Renewable energy industry advocates want the federal government to make direct payments to investors in renewable projects instead of offering tax credits, plus they want $30 billion in federal incentives for their industry – and they want it as soon as possible.
Without those changes, the booming renewable energy sector could see its growth cut short by the ongoing economic slowdown, which has driven Wall Street banks and other major investors in green energy to post huge losses and thus lose their appetite for tax credits.
That was the message from the heads of America'ssolar wind, geothermal and hydropower industry trade groups in a press conference Thursday. The groups called for president-elect Barack Obama and Congress to enact a five-point policy agenda that included as a key point major changes to the tax credit policies that now fuel investment in renewable energy projects.
Chief among those changes would be making the current investment tax credits for renewable energy investors refundable, said Rhone Resch, president of the Solar Energy Industries Association trade group.
"That means, essentially, instead of a credit, you're receiving a payment from the federal government," Resch said. "The investment tax credits available for solar are a very effective tool when you have the tax credit appetite. When that tax credit appetite starts to decrease, which we've seen literally over the last 60 days or so, they become less useful."
Randall Swisher, executive director of the American Wind Energy Association, said that major tax equity investors in renewable energy, such as Lehman Brothers, Wachovia, AIG and others, have posted huge losses or, in the case of Lehman, declared bankruptcy amidst the ongoing financial crisis. (See JA Solar Posts Losses, Blames Lehman and Evergreen Sues Barclays, Lehman for Shares.)
That means, "There simply aren't enough companies that are financially healthy in the banking sector to provide the tax equity our industries need to move forward," he said.
Resch painted a worst-case scenario picture, based on a study his group did last year that showed the renewable energy sector could have lost 119,000 jobs and $19 billion dollars in investment if Congress hadn't renewed the industry's tax credits, which it did last month (see Lawmakers Approve Energy Tax Credits, Bailout).
The bill contained about $18 billion in energy tax credits, extended the investment tax credits for solar power projects for eight years and extended production tax credits for renewable-energy plants now producing power by one year for wind power projects and by two years for biomass and hydropower projects.
But Karl Gawell, executive director of the Geothermal Energy Association, said that the companies he represents are reporting that the appetite for these tax credits has "gone south" from investors, and that lining up alternative financing is in some cases doubling the cost of projects.
"If we don't have much more flexibility you will see some of these new projects start to falter," he warned.
Resch said that renewable energy investors could also be helped by making tax credits transferable to a wider range of potential investors, such as pension funds and nonprofit organizations, now barred from using them.
The bill Congress passed in October gave utilities the ability to claim tax credits for investments in solar power for the first time (see Utilities to Hit Solar Scene and Renewable Tax-Credit Investment Heading Up or Down?). Even so, Resch said that utilities aren't likely to step in to mitigate the slowdown he predicts for next year if federal tax credit policies aren't altered in the way he described.
"Obviously utilities in the long run will be a very important customer of solar energy," he said. But "utilities tend to build projects over the long run, and are not really expanding the use of solar energy in 2009 in a meaningful way."
Beyond the tax credit issues, the incoming Obama administration and Congress should dedicate $30 billion in 2009 for incentives in renewable energy, said Linda Church Ciocci, executive director of the National Hydropower Association. The Obama energy platform calls for $150 billion to be invested in renewable energy over 10 years.
Extending tax credits for renewable energy technologies other than solar power, as well as increasing investment in the country's transmission grid to allow renewable energy plants in remote areas to get their power to urban centers will be critical, Swisher said.
The incoming Obama administration should push forward with its proposal for a nationwide renewable portfolio standard, which would increase the share of power required to come from renewable sources to 10 percent by 2012 and 20 percent by 2025, he said.
Obama could also help the renewable energy industry by issuing an executive order calling for federal agencies, which collectively spend $5.8 billion per year on electricity, to increase their procurement of renewable power, Resch said.
Venture capitalists are keeping an eye on Washington. In a breakfast roundtable with Greentech Media analysts Wednesday, several expressed skepticism about Obama's announced plans to have a federal VC fund (see Obama Omelete: Greentech Media's Breakfast at Buck's).
Historically, government-funded VC funds haven't worked that well because government bureaucrats aren't in a position, and often don't have the experience, to pick winners from losers or to shepherd companies toward growth, said many. Instead, these billions should be put into basic research. From there, entrepreneurs and VCs can spin out companies.
Some also said that incentives will likely precede a carbon tax. Obama has said he will fund his $150 billion energy plan with carbon credits. However, carbon regulations are exceedingly complex and will be resisted by industry. The U.S. may not get one on the books until a second Obama term. Spending on energy projects will likely occur first.
Given the depth of the current economic crisis and the constraints it might place on the incoming administration (see Waiting for Obama), it may be difficult for the renewable energy industry to get everything it called for Thursday, said Gawell of the Geothermal Energy Association.
"What we're hoping is that these can be done in this coming congress," he said.
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