August 20, 2011

Debt debate leaves geothermal industry concerned

The lack of a firm national policy on renewable energy and the politically charged budget debate in Washington has many in the green energy industry uncertain about their future.

Industry leaders attending the National Geothermal Summit in Reno are expressing concerns that the debt debate to cut $1.2 trillion from the federal budget could affect federal tax credits and incentives for renewable projects.

These include temporary tax credits and loan guarantees that developers consider essential in kick-starting expensive and oftentimes high-risk projects.

"The debt ceiling and debt reduction issue in Washington, D.C., really sucked the oxygen out of many firms," Jonathan Weisgall, vice president of legislative and regulatory affairs for MidAmerican Energy Holdings Co, told the newspaper.

"It is really the overriding issue that will trickle to all parts of the economy, including renewables."

That concern was echoed by Keith Martin, a partner with Chadbourne and Park, LLC, an international law firm.

"Think about what was going on just a year ago — there was incredible euphoria about renewables," Martin said. Now, renewable interests are trying to keep a low profile until they figure out how Congress will cut the federal budget.

"They're hoping to come out into the daylight next year and push an extension for these incentives," he said.

The lack of a strong bipartisan commitment to renewable energy policy is casting uncertainty on the industry as a whole.

The biggest drivers of transmission development in California, for example, are the state's renewable policies and air quality restrictions. But national climate change and carbon tax legislation, which would be huge drivers for renewable development, virtually have "no prayer" of passing in the near term, Weisgall said.

Federal incentives and subsidies also remain heavily geared toward fossil fuels, which have enjoyed such perks for about a century. Removing fossil fuel incentives and subsidies would go a long way in developing a clean energy economy. But that's a move that is easier said than done.

"The long-term subsidies for fossil fuels are so deeply ingrained and have been so politically powerful that despite the fact that there is bipartisan support for renewables, it's not as politically strong to actually overpower fossil interests," said Carol Werner, executive director of the nonpartisan Environmental and Energy Study Institute.

The recent decimation of the ethanol industry tax credit in favor of debt reduction also raised concerns about the appetite of federal lawmakers to extend incentives for renewables, which will start expiring in the next couple of years.


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