California’s renewable-energy plans may hinge on presidential race
SACRAMENTO — On 7,300 isolated acres in eastern Kern County, a plan for dozens of wind turbines 20 stories high to generate enough electricity for tens of thousands of homes may hinge on who is elected president.
Millions of dollars have been spent laying the groundwork. Permits are in order, contractors are lined up, government planners are on board. But like many other green energy efforts in California, the Avalon Wind Project awaits the fate of key federal subsidies.
For Republican presidential nominee Mitt Romney, such aid represents government run amok, allowing bureaucrats to pick winners and losers in renewable energy rather than letting the free market sort them out. Romney has not offered many specifics about what he would cut, but his opposition in general to aid for alternative energy production has been a pillar of his campaign. The candidate punctuated his point with a news conference at the vacant former headquarters of bankrupt solar company Solyndra, which lost $527 million in government money.
Mark Tholke, a vice president at EDF Renewable Energy, the company behind Avalon, is troubled by Romney’s talk of jettisoning incentives like the 20-year-old tax credit that would enable his firm to put shovel to ground. About a third of Avalon’s construction costs would be covered by the credit, amounting to many millions of dollars.
“The impact would be devastating,” he said. “The number of wind projects we would build would just plummet.”
The prospect of a Romney victory in November is a source of consternation among players large and small in California’s rapidly growing renewable-energy industry. Experts differ on whether subsidies are the most sensible way to move toward cleaner energy and whether they are a good deal for taxpayers.
But there is wide agreement that no state has used federal help more aggressively than California and that a sudden shift in direction by the White House would stymie the state’s progress.
“The election will have a huge effect on California energy policy,” said Severin Borenstein, co-director of the Energy Institute at the UC Berkeley Haas School of Business. “If the federal support dries up, a lot of this will come to a halt. It is critical to the cost-competitiveness of a lot of renewable energy here.”
Nearly 170,000 Californians have jobs tied to the green economy, which includes alternative energy production, conservation and pollution reduction, according to a study by the Bay Area think tank Next 10.
California companies filed 41% of all patents for renewable-energy innovations nationwide from 2008 to 2010, solar panels are being installed on rooftops at an aggressive pace, and the state’s consumption of renewable energy is eclipsing other parts of the country. A quarter of all the venture capital spent in California is now tied to clean energy, the study found.
California’s policies are fueling the movement toward cleaner electricity, but many experts say the state can’t go it alone. Federal subsidies are the backbone of these efforts and have helped draw private investment.
The credits are worth hundreds of millions of dollars at each of several dozen large renewable projects in the works. Topaz Solar Farm in San Luis Obispo County, owned by one of Warren Buffett’s companies, would qualify for a tax break of more than $600 million, for example.
In addition, tens of thousands of California homeowners and businesses use the credits to cut thousands of dollars from the hefty cost of moving to solar or geothermal energy.
Those in the wind industry are particularly anxious: Their two-decade-old production credit, which costs taxpayers about $1 billion annually, expires at year’s end. The next president will have to decide whether to try to work with Congress to extend it.
Most solar projects are not economically feasible without a similar federal incentive, known as the investment tax credit, that covers about a third of their development costs. That tax break does not expire until 2016.
But industrial-scale solar projects such as Topaz and the Ivanpah Solar Electric Generating System, between Barstow and Las Vegas, are typically in the planning stages for years.
Investors are wary of jumping in if they aren’t confident the federal government will still be offering financial assistance when construction starts.
“To get large-scale projects off the ground requires a safe-looking investment environment,” said Daniel M. Kammen, director of the Renewable and Appropriate Energy Laboratory at UC Berkeley. “If it is clear credits are ending … it dramatically drives investor interest away.”
Romney’s energy plan, released as a white paper in August, would de-emphasize wind and solar development in favor of more aggressive pursuit of fossil fuels.
It proposes opening up millions of acres of federal land and offshore areas to oil drilling and fracking for natural gas, and approving the controversial 2,000-mile Keystone XL pipeline to transport oil from the tar sands of Canada to the Gulf Coast.
The plan accuses the Obama administration of sending “billions of taxpayer dollars to green energy projects run by political cronies.”
The tax breaks predate President Obama, but he supplemented them with more than $13 billion in grants to renewable-energy developers as part of the 2009 economic stimulus package. Now he wants the wind credit extended and is lobbying big investors to take advantage of the solar incentives.
On the stump, he raises the issue to drive a wedge between Romney and voters in swing states with big alternative-energy projects. One is Iowa, where thousands of jobs could disappear along with the tax breaks.
The president favors a national standard for clean energy that would require 80% of the electricity generated nationwide to come from cleaner-burning sources, including natural gas and nuclear energy, by 2035. And his push to move federal agencies toward wind, solar and geothermal power has resulted in scores of lucrative contracts for California clean-energy firms.
The Navy, for example, is likely to engage California firms as it endeavors to generate hundreds of megawatts of solar power for itself.
“The U.S. government is the largest consumer of power in the country,” said Dan Shugar, chief executive of Fremont company Solaria, which manufactures components for solar installations. “There is great opportunity there.”
Back in Kern County, local officials eager to see more renewable-energy projects are torn. The burgeoning wind sector is now generating about $60 million in annual tax revenue for the county and has created hundreds of jobs. Planners are pushing for new transmission lines and a simpler state-permitting process so more projects can get off the ground faster.
The Avalon project would generate nine months’ work for about 300 employees and add millions of dollars to annual tax rolls. But Kern County produces 75% of the oil in California, so a president who favors that industry might provide at least an equally helpful boost.
Lorelei Oviatt, the county’s director of planning and community development, said she hoped that a Romney administration would bring federal incentives for wind back to the table once campaigning gave way to governing.
“I am nonpartisan,” she said. “What I am interested in are jobs and a robust economy. I really think that any administration is going to be interested in these things.”
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