What are the implications of the defeat of key renewable energy provisions of the new Energy Bill?

Implications: The US renewable energy industry suffered a body blow on December 14 when the U.S. Senate passed an eviscerated bill after it was stripped of the investment tax credits, production tax credits and a national renewable electricity standard (RES).   The irony was this occurred just as the United Nations Conference on Global Warming was wrapping up, a final agreement on long-term measures to mitigate climate change. The American public continues to express broad support for renewable energy and the key will be what Congress does in 2008 - the key will be the impact this issue has on politicians up for reelection and on the Presidential debate.

Analysis: So what does the defeat mean for what has been a thriving industry that appeared to be coming into its own with wide public support.  

•    The current renewable energy tax credits are due to expire at the end of 2008, but planning for large-scale projects takes years and investors will not risk financing projects with such major uncertainties in their economics.  
•    Projects in the pipeline for financial closing in 2008 will continue and there is bound to be a push to move less mature projects to completion while the tax credits are assured.  
•    Without an investment tax credit, there will be much less electricity generated from solar energy.

It is worth noting the following:

•    The US lost its primacy in wind and solar energy decades ago and many point to the uncertain support renewable energy has received at the Federal level.  
•    The on again-off again history of tax credits has frustrated the development of the wind industry for decades and the significant growth of installations in the last several years can be directly traced to a stable production tax credit.  
•    The US represents only 8% of the world solar energy market.  Recent growth has been due largely to the investment tax credit and accelerated depreciation, coupled with a patch work of supportive measures at the state level, which have been most effective in California, but of growing importance across the country.
•    The original bill was defeated because it would have removed tax breaks for the oil and gas industry that some estimate amount to a reduction of net profits of 1%-2%.  

Since the oil and gas industry exerts such a strong influence on Congress, can support for renewable energy be separated from measures that adversely affect traditional energy giants?  The European Union has done it and solar and wind energy industries are enjoying strong and sustained growth with Germany, Spain, and Italy leading the way.  

Congressional Democrats have indicated their intention to resurrect the RES and tax credit issues in the next session, perhaps in a bill dedicated solely to renewable energy.  And lobbyists for renewable industries have vowed to keep up pressure on legislators from now until the November elections.

The American public continues to express broad support for renewable energy and it appears that certain politicians will have to catch up with the voice of the people before it catches up with them.  We have to watch what Congress does in its first 2008 session and the key will be the impact this issue will have on politicians up for reelection and on the Presidential debate.