Stimulus plan gives a boost to clean energy
The renewable-energy sector got a lift from the economic stimulus package signed Tuesday, with a fix to a crucial tax issue that had stalled projects nationwide.
Solar and wind companies said it could take several months for the legislation to get portions of the industry moving again. But some players are already gearing up for growth.
SolarCity, a Foster City, Calif., company that’s one of the nation’s largest residential solar firms, will end a hiring freeze in place since December and begin seeking more installers immediately, said Chief Executive Lyndon Rive.
“We should be adding 16 or so crews over the next few months,” Rive said. “This is a great step toward resolving our challenges.”
The American Recovery and Reinvestment Act will invest nearly $79 billion in renewable energy, energy efficiency and green transportation, according to a final tally of the legislation by the nonprofit Environment California.
Rive and others are hailing a piece of the recovery legislation that allows developers of renewable-energy projects to swap their existing tax credits for cash grants from the Department of Energy. The switch means little to taxpayers, because the cost to the government is about the same. But it removes a huge financing obstacle that has stymied the sector.
That’s because solar and wind projects are driven as much by tax policy as they are by the weather.
Renewable-energy companies historically have relied on tax credits to help them generate competitive returns and attract investors, a process that has been short-circuited by the U.S. financial meltdown.
The workings of these tax breaks are complicated. But in essence, because they’re used to offset tax liability, a project developer needs to be making a big profit to take full advantage. Many clean-energy firms don’t have a tax bill that large, so they partner with financial institutions or other investors that do.
This tax-driven financing system worked well until the nation’s banking system got slammed by the subprime mortgage crisis. Large commercial banks and investment houses that had bankrolled billions in wind and solar deals suddenly were bleeding red ink. Major financiers no longer had a so-called tax appetite for renewable-energy deals.
“It affects everyone from the investor all the way to the guy installing panels on the roof,” said Ron Kenedi, vice president of the U.S. solar operations of Sharp Corp., a major manufacturer of solar photovoltaic cells. “It has really hurt us.”
Kenedi said that it would take some time for the revamped incentive system to get up and running, but that it would “open the floodgates” to new investment.
Notable provisions of the recovery act include $5 billion for weatherization of more than 1 million homes, $8 billion for new high-speed rail systems, $4.5 billion for energy upgrades to federal buildings and $4.5 billion in federal matching funds to upgrade the nation’s rickety energy grid.
The legislation did not include a national “renewable portfolio standard” sought by many environmentalists, which would have forced utilities nationwide to boost their use of clean energy. California is one of several states to adopt such measures. But the mandates are opposed by legislators from states that are heavily dependent on low-cost coal.
“There are a lot of roadblocks,” said Stuart Bush, managing director of alternative-energy research at RBC Capital Markets. “The question is how much momentum [President] Obama has left after the stimulus” to keep pushing for such a change.
Though the stimulus package fell short of what some green advocates wanted, others were heartened. Speaking Monday in Los Angeles, former President Bill Clinton said it represented a breakthrough in U.S. energy policy.
“We’ve never had a jobs program before in American history where the heart and soul of it was a commitment to clean energy,” Clinton said. “Am I excited by what’s in it? I am.”