Market News

 March 09, 2009
Stimulus Spending Will Help Renewable Energy

 GLOBE-Net - The American Recovery and Reinvestment Act of 2009 (Stimulus Act) signed into law on February 17, 2009, by President Obama will provide a major stimulus to all renewable energy sectors in the nation.

Political players call the Stimulus Act a product of bipartisan cooperation, and many special interest groups have claimed victory for their role in its passage. But from a business perspective, there are significant financial and tax incentives for the development of energy resources, including incentives for the further development of transmission facilities and wind, solar, and geothermal projects that will no doubt reshape the renewable energy landscape for years to come.

The Stimulus Act will make up to $4.5 billion available to help fund electricity delivery and energy reliability activities, including efforts to:

  • Modernize the 1960’s-era electric grid, and the deployment of demand-responsive equipment;
  • Enhance security and reliability of the nation’s energy infrastructure;
  • Foster energy storage research, development, demonstration and deployment;
  • Facilitate more rapid recovery from disruptions to the energy supply system; and to
  • Implement programs authorized under Title XIII of the Energy Independence and Security Act of 2007 (involving the development of smart grid technologies).

This represents an increase in federal funding for approved projects from 20 percent to 50 percent.

As well, recipients of the federal largess will be required to utilize open protocols and standards when available so that lessons learned during various demonstration projects will be available to help others to deploy smart grid infrastructure.

The authority of the Western Area and Bonneville Power Administrations (WAPA and BPA) to borrow funds from the U. S. Treasury will be increased to $6.5 billion under the Stimulus Act. For WAPA, such funds may be deployed as loans to support projects involving:

  • Construction, financing, facilitating, planning, operating, maintaining, or studying construction of new upgraded electric power transmission lines and related facilities with at least one terminus within the area served by the WAPA ( which includes most of the South Western and Rocky Mountain region of the  United States); and
  • Where such facilities will deliver or facilitate the delivery of power generated by renewable energy resources constructed or reasonably expected to be constructed after the enactment of the Stimulus Act.

Loans provided by the WAPA will be repaid by revenues derived from the use of the projects financed under the Stimulus Act.

BPA’s borrowing authority will be made available under similar terms to assist in financing the construction, acquisition, and replacement of transmission systems in the Pacific Northwest.

The loan guarantee provisions of the Energy Policy Act of 2005 (Energy Act) that were amended by the Stimulus Act  allow 50 percent participation in projects that commence construction no later than September 30, 2011, involving:

  • Renewable energy systems (including incremental hydropower) that generate electricity or thermal energy, and facilities that manufacture related components;
  • Electric power transmission systems, including upgrading and reconductoring projects; and
  • Leading edge biofuel projects.

Six billion dollars is being made available to better fund the projects contemplated by the Energy Act. In determining which projects to fund, the Secretary of Energy will consider (i) the viability of the project without guarantees, (ii) the availability of other Federal and State incentives, (iii) the importance of the project in meeting reliability needs, and (iv) the effect of the project in meeting a State or region’s environmental and energy goals.

Under the Stimulus Act, $3.4 billion will be made available for Fossil Energy Research and Development.

Various tax incentives related to renewable energy projects and systems are also included in the Stimulus Act. Such incentives --

  • Provide $20 billion in tax incentives for development of renewable energy and increased energy efficiency over the next 10 years;
  • Include a three-year extension of the production tax credit for electricity derived from wind (through 2012) and for electricity derived from biomass, geothermal, hydropower, landfill gas, waste-to-energy, and marine facilities (through 2013);
  • Provide grants of up to 30 percent of the cost of building a new renewable energy facility to address current renewable energy credit market concerns, where such facilities involve fuel cells, solar generation, small wind energy generation, geothermal heat pump or energy generation, micro-turbine energy generation, or the use of a combined heat and power system; and
  • Include clean renewable energy bonds for State and local governments.

Even before the ink was dry on the President’s Stimulus Bill, U.S. legislators were stepping up efforts to get energy companies to deliver minimum quantities of renewable power. A new Renewable Energy Standard bill would require utilities to generate six per cent of their energy from renewable sources by 2012, rising to a quarter by 2025.

President Obama’s election campaign energy platform called for a quarter of the U.S. energy to come from renewable sources by 2025,  but there has been no announcement on whether these targets will be formally adopted.

The Obama administration is also calling for a tough cap and trade system to control greenhouse gas emissions, and preliminary estimates of revenue from such a system could stimulate in excess of $150 billion in clean energy technology investments over the 10 years from 2012 through 2019.

Data for this article was drawn from several sources, including an article by Steven W. Snarr, of U.S. Law Firm Holland & Hart LLP.