Clean energy industry keeps eye on funds that sustain it

By Juliet Eilperin and Steven Mufson
Washington Post Staff Writers
Saturday, October 23, 2010; 6:31 PM

The billions in federal stimulus dollars spent on expanding "green energy" industries and creating "green jobs" have provided a lifeline for U.S. wind and solar companies, but renewable-energy executives are worried that the future will not be as promising.

President Obama frequently points to these wave-of-the-future jobs as one of the substantial achievements of his administration, and wind and solar executives say that the economic stimulus bill turned 2009 into a banner year instead of a catastrophic one for their businesses.

But limited funding in one area, a slow ramp-up in another, prolonged negotiations over loan guarantees and the continuing economic slump have made it difficult for the industry to make the kind of progress Obama and many others had hoped for and imagined. As a result, the president does not appear to have gotten much political credit for new green jobs, despite his many visits to battery, solar and wind facilities aided by the stimulus package.

Adding to the uncertainty, industry officials say their businesses could contract sharply unless a key tax subsidy, set to expire at the end of the year, is extended.

"In the short term, did this recovery program make new jobs in the clean energy sector? I think the answer is yes," said Joshua Freed, director of the clean energy program at the think tank Third Way. "What does that mean when we look back in two or three years? It takes awhile to figure out the conclusion of this story."

The White House, however, has already declared the program an unqualified success. The Council of Economic Advisers issued a report in July that found the American Recovery and Reinvestment Act's more than $90 billion in total spending and future tax breaks produced 190,000 "clean energy" jobs in the first quarter of 2010. A recent Lawrence Berkeley National Laboratory study found that the act's $5.4 billion in investment tax credits have created or saved 50,000 jobs in the renewable sector.

Critics say that the same money could have been used to create more jobs or to produce them faster, but Obama administration officials say the clean energy positions are not the same as other jobs such as road work.

"The recovery act was a diversified portfolio of actions. Some items were designed to be faster but didn't have as much bang for the buck," said Jason Furman, deputy director of the National Economic Council. "These are the types of jobs where they tend to be higher paying. They tend to be longer lasting."

The effectiveness of the stimulus money for energy has varied widely from one basket of money to another.

One highly touted program in the Energy Department's portfolio - a loan guarantee program for renewable energy projects - has shrunk from $6 billion to $2.4 billion. The White House directed 60 percent of the funding to unrelated areas, such as an education measure and the "Cash for Clunkers" incentive for people to replace old vehicles.

The Energy Department also needed time to gear up; the $32.7 billion it was charged with handing out is substantially more than its previous annual budgets. With spending deadlines approaching, the department has picked up its pace of grant- and loan-making, shoveling $8.2 billion out the door in September, according to department officials, much of it to state and local governments for energy efficiency programs.

Before the recovery act, the Energy Department did not have a loan guarantee office. It has hired 200 employees and contractors. But Rhone A. Resch, president of the Solar Energy Industries Association, said that many companies have waited 19 months for decisions.

By contrast, a program that provides wind and solar projects with cash instead of tax credits has been a huge success. Before the economic slump in late 2008, financial institutions provided most of the capital for those projects and used the tax credits worth 30 percent of costs. Now wind farm developers, who often don't have the earnings to offset the tax credits, have been turning to the Treasury for grants of equal value as allowed under the recovery act.

Large and small firms have benefited. The program steered $975 million to Spain-based Iberdrola Renewables for 13 wind projects operating in nine states. It also funneled $15,964 to the Grumpy Troll Brewery, Restaurant and Pizzeria in Mount Horeb, Wis., so the brewpub could install 38 solar panels on its roof.

Don Furman, Iberdrola's senior vice president, said the decision to offer companies the option of a cash payment rather than a tax credit kept it from shutting down several operations in the United States.

"This literally saved the industry," Furman said, adding that wind producers could no longer sell their tax credits on Wall Street as they had in the past.

NextEra Energy, the nation's largest wind developer, used the grant program, or convertible investment tax credit, for 93 percent of the 985 megawatts of wind power it built in 2009.

"It's difficult to put an exact number on how many more megawatts we built as a result as a result," said company spokesman Randolph Clerihue, "but we definitely put more steel in the ground than we would have without it."

The program helped wind projects continue apace in 2009, and has led to a significant increase in solar installations over the next two years. But the U.S. wind industry is contracting this year and is expected to be slow in 2011, Furman said, "partly because nobody knows what's going to happen when this program expires."

Without legislation mandating a national renewable energy standard for utilities or limits on greenhouse gases, experts say, it remains unclear whether wind and solar energy - still small compared with fossil fuels - will make meaningful inroads into the nation's energy market.

Nonetheless, as Obama has campaigned in recent weeks, he has touted these programs as one of the main ways he is helping Americans get back to work. When asked in Des Moines what his policies will do in the next year to help an unemployed church congregant "secure a job and have that American dream again," the president cited a wind turbine maker in Fort Madison, Iowa, that had received stimulus funds. Noting that the business had converted a shuttered factory, Obama said it had "just hired several hundred people and were looking at hiring several hundred more because they are seeing some certainty in the renewable energy industry."

Last week he told a Seattle resident during one of his backyard chats that because of the recovery act's investment in advanced car battery technology, the U.S. global share of this high-tech market should rise from 2 percent to 40 percent by 2015.

"That shows you how fast we can turn things around if we're making good, smart, strategic investments," Obama said.

The list of recipients varies. One official compared it to planting seeds without knowing which ones will flourish. Cree of Durham, N.C., the leading U.S. manufacturer of solid state lighting, received $39 million under the advanced energy manufacturing tax credit to expand capacity and lower production costs for LED chips use in lights. The Massachusetts Clean Energy Center received $24.7 million from the Energy Department to construct a facility capable of testing wind blades up to 90 meters in length; blades that long can only be tested overseas now. Several large companies, including Florida's NextEra and CenterPoint Energy of Houston, have received $200 million each to install smart meters.

Critics of the stimulus, however, question whether the money was the most effective way to create jobs. Andrew Morris, a University of Alabama law professor and senior fellow at the Montana-based Property and Environment Research Center, said neither side of the debate has proved whether this sort of federal spending does or does not sustain long-term employment.

"We don't have any studies, they don't have any studies, so I'd say we don't spend a hundred billion before we have any studies," Morris said, adding that it's not a surprise that stimulus funds had created jobs. "The question is, what else would have happened to the money, how many jobs would have been created otherwise?"

But the administration sees it differently. "What it's proving is clean-energy investments are ready for prime time," said Cathy Zoi, assistant secretary for the Energy Department's Office of Energy Efficiency and Renewable Energy. "This is the single largest investment in clean energy this country's ever had. It is a critical downpayment on a transition to a clean energy economy." Staff researcher Lucy Shackleford contributed to this report.

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