Stimulus package clears the path for renewable energy

President Obama’s Stimulus Package gave a boost to the renewable-energy sector.

02/20/2009


President Obama’s Stimulus Package gave a boost to the renewable-energy sector. The package addressed a crucial tax issue that had previously stalled projects nationwide. The American Recovery and Reinvestment Act will invest nearly $79 billion in renewable energy, energy efficiency, and green transportation. Although it could take several months for the legislation to get portions of the industry moving again, solar and wind companies are preparing themselves.

Renewable energy companies praise a piece of the legislation that allows developers of renewable-energy projects to swap their existing tax credits for cash grants from the DOE. The legislation will remove a major financing obstacle that has continued to stall the sector. Although meaning little to taxpayers, the impact for these companies looms large, since the success of solar and wind projects is driven by tax policy. Relying on tax credits to generate competitive returns and attract investors during an economic meltdown has proven increasingly difficult over the recent months.

Since the tax breaks are used to offset tax liability, a project developer needs to be making a big profit in order to take full advantage. However, many renewable-energy companies do not have a tax bill that large, so they inevitably end up partnering with financial institutions. The system worked until the nation’s banking system was devastated by the subprime mortgage crisis.

Some notable provisions of the recovery act include:





Left out of the legislation was a renewable portfolio standard. Sought by environmentalists, this type of standard would force utilities nationwide to boost their use of clean energy. California has already adopted such a policy. The standard was opposed by legislators from states that are heavily dependant on low-cost coal.

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."





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