September 20, 2010

Two steps forward, one step back

In July, President Obama announced loan guarantees for two solar companies; one for a 280-megawatt power plant in Arizona and the other for manufacturing facilities in Colorado and Indiana. If completed, these projects could create clean energy, reduce the nation’s dependence on imported oil, create hundreds of jobs, and produce enough energy for thousands of households per year.

But, despite statements from the Obama administration heralding the renewable energy as a high priority issue, USD$1.5 billion was recently pulled from the loan guarantee program on August 11 and used for other government initiatives.

This was not the first time that the administration siphoned funds from the DOE’s Renewable Energy Loan Guarantee Program to sponsor other interests. A year ago, USD$2 billion was “borrowed” from the renewable energy loan guarantee program to pay for the Cash for Clunkers program. This money has not yet been repaid, and there is little reason to believe the recently diverted funds will return to the DOE’s program.

Renewable energy industry supporters and politicians (such as House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid) are urging for an expeditious return of the funds to the loan guarantee program. Their constant nudging could make the difference between launching America’s renewable energy sector as a global leader, or being left behind by countless other nations that have truly made clean energy a priority.

The Solar Energy Industry Association’s (SEIA) president and CEO, Rhone Resch, echoes those concerns and warns of the threat the Obama administration’s actions could have to the continued growth the renewable energy industry has been seeing recently. They caution that a number of solar projects that were recently announced in Arizona, Colorado, and Indiana may have been denied funding, and therefore not reached completion if they were proposed under the current funding restrictions.

Any reduction to the incentive programs seems ill advised considering the American Wind Energy Association’s (AWEA) recent announcement that wind power installations in the second quarter of 2010 dropped 71 percent from 2009 levels.

Considering all of the environmental and economic benefits that clean energy offers, it would seem that the administration would be doing everything in its power to encourage the continued growth of the industry by reinforcing the loan guarantee program and drafting new legislation that encourages the use and development of clean technologies. In fact, most experts agree that such legislation is what propelled Germany to its prominent position as the leader of the world’s solar energy market, and the impetus for a rise in solar technology investments from USD$7 billion in 1995 to USD$37 billion in 2005.

It would seem that the administration should be reinforcing the DOE’s loan guarantee program, rather than reducing it, and taking other efforts to grow the industry. For example, a strong feed-in tariff (FIT) law, like the one enacted in Germany, could ensure a fair market price for renewable energy and thereby help nurture the industry out of its infancy and toward a sustainable future.

Impatient with bureaucratic gridlock in Washington, some forward-looking states are taking matters into their own hands and are working now to enact such laws. Currently, Washington, Oregon and Vermont are leading the way in state implementation of FIT programs. A recent ruling by FERC in California provided a vague framework for the development of FIT programs, but more clear and concise legislation is needed to pave the way for other states to follow.

The renewable energy loan guarantee program and FIT laws are the best chances the U.S. has right now at becoming a world leader in the renewable energy industry. By draining the funds of one program and dragging their feet on the other important projects, like those recently awarded loan guarantees, could be at risk of failing. The result would be lost jobs, increased emissions from non-renewable sources of energy, and reduced economic growth.

But despite attacks on a number of fronts, the future of the renewable energy industry as a whole still seems remarkably bright. For example, growth in offshore wind development is booming, and DOE estimates that most of the country’s electricity that could be generated by wind power by 2030 could come from offshore wind power.

While the administration’s announcement that it will reduce the funding for the loan guarantee program seems like a giant leap backwards, it will certainly not stop the motion that is underway across the country. Even though government may be lagging, private investors will continue to fund the development of renewable energy projects, and cleantech entrepreneurs will continue to find innovative cleantech solutions, which will, sooner or later, make coal and oil based energy completely obsolete. Even with a deflated loan guarantee and lack of adequate policies or legislation, clean energy is on its way. It’s just a matter of time.

Source: Jack Jacobs as published at PV-Magazine

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