Summary
Each U.S. state has its own separate policies in the rules and limits for clean energy, thus, the new proposed federal standard would provide the country with a common goal. On a positive note for alternative energy, it is also worth remembering that the forecast investment figures for 2009 are still above the figures for 2006.
Analysis
In the U.S., approximately 27 states and Washington D.C. have renewable energy portfolios and mandates; however, the federal government has not developed one. In response, legislation entitled “The American Clean Energy and Security Act of 2009 (ACES) " is being debated in the U.S. House of Representatives, which is anticipated to deal with this issue and expand renewable energy support nationwide. In comparison, countries like Germany, Spain, and Japan lead the world in solar energy capacity. Interestingly enough, Germany, a world leader in solar installations, has a solar intensity profile similar to Alaska, but it has 5× the solar installations of the U.S. Furthermore, the world leader in solar capacity, Spain, has a solar intensity profile analogous to a more sunny state such as Idaho but still has 30× the solar installations of the U.S. Thus, being in a sunny area is not a requirement for solar power, but rather other factors such as government subsidies and commitments to alternative energy technology are critical.
Policy initiatives have actually elevated New Jersey into 2nd place in the U.S. in terms of grid connected solar installations on a MW basis, behind only California, which has been the historical leader in technology innovation and state support. NJ possesses a mandate for 22% renewable energy to be generated by utility companies by 2022, while PA is mandating 18% by 2020, with 0.5% of its electricity from solar, but this amount is still being determined and may lead to as much as 7077 MW of power annually. Arizona has a state mandate of only 15% by 2025, as noted in a previous article.
Gov. Edward G. Rendell of PA stated that his state’s tax credit may offer up to $0.30/kWh for solar. In addition, the recent economic stimulus bill now has provided a $650M energy fund to PA, and $180M of that will directed towards solar, including $100M to homeowners and small businesses plus $80M to foster solar industries. To foster innovation in this state, grants from the Pennsylvania Energy Development Authority (PEDA) are offered, with $20M available in the latest round of funding; $10M of that from the federal American Recovery and Reinvestment Act and more than 300 applications have been received. States with significantly greater solar potential such as Arizona are in desperate need for large, standard programs of this nature.
In general, each U.S. state has its own separate policies in the rules and limits for alternative energy, thus, the new proposed federal standard would provide the country with a common goal. Moreover, most proponents of renewable energy believe federal tax credits for renewable energy need to be made permanent so companies have increased confidence concerning returns on investment in the future.
Rhone Resch, president/CEO of the Solar Energy Industries Association (SEIA) has suggested some important points that should be included in future federal alternative energy legislation. First, he has proposed renewable energy grants for up to 30% of the installation cost of a renewable energy residential or commercial business system, for those who do not qualify for tax credits. Second, is a loan guarantee program that applies to both manufacturers and installers. Third, he has also urged Congress for a 30% tax credit to support new manufacturing investment, similar to what has fueled the German and Japanese markets in recent years.
Another program being considered by renewable energy advocacy groups is a federal clean energy bank that would provide lines of credit, low-interest loans, loan guarantees, and other benefits for renewable energy and energy efficiency programs. Lower interest rates are a critical financial tool that would accelerate the country’s transition to alternative energy, overcoming the current higher cost of this power source due to needed technology enhancement, supply chain, and economy of scale issues.
The availability of alternative energy in various states and the cost of capital are two factors that could delay the solar transition, even if cost competitiveness with other energy sources, also known as grid parity, is reached. This has already been evidenced in the shortage of bank credit for this burgeoning industry, which has led to a disastrous first quarter of 2009, which saw investment down 44% from the fourth quarter of 2008, and down 53% from the peak in the first quarter of 2008, according to a report by analysts at New Energy Finance. Several industry proponents have even requested a tax-exempt bond process be established for clean energy, analogous to ones offered in the early 1900s for the mass development of the nation’s transportation system and housing. In comparison, federal subsidies in the early 1900s were responsible for the growth of the nation's fossil fuel sector and subsequent dependence on these sources, and this industry still receives significant federal support in this regard.
On a positive note for renewable energy, it is also worth remembering that the forecast investment figures for 2009 are still above the figures for 2006. There are plenty of other industrial and infrastructure sectors that would be thrilled to be at the same level of financial performance this year as in 2006.
