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February 26, 2009
Economic Stimulus Is Expected to Spur Investment in Renewable Energy
    by Robert Kropp

The renewable energy industry and sustainable investors believe stimulus will provide significant investment in green energy infrastructure. Second in a two-part series.


The $790 billion American Recovery and Reinvestment Act of 2009 recently signed into law by President Obama contains substantial tax and spending provisions for the renewable energy industry, and has been met with enthusiasm by the industry and sustainable investors alike. As Joe Keefe, President and CEO of Pax World, a mutual funds company recognized as a leader in sustainable investing, told SocialFunds.com, "The stimulus package is the first significant investment in green energy infrastructure that has ever been attempted in the US."

Stu Dalheim, Director of Shareholder Advocacy at the Calvert Group, a fund company that includes a number of prominent SRI funds, said, "The investment and tax provisions, the commitment to government deployment of existing technologies, the plans to modernize the electricity grid, and the advanced research into alternative energy amount to a significant move toward a more sustainable energy system."

One of the companies in which Calvert invests is groSolar, a Vermont-based distributor, installer and integrator of solar energy systems for residential and commercial installations whose recent acquisition of the residential solar division of the El Cajon, CA-based Borrego Solar Systems makes groSolar the fourth-largest residential solar power installer in the US.

Jeff Wolfe, CEO of groSolar, noted that the stimulus removes all caps on renewable energy tax credits, which equal 30% of the cost of qualified solar energy systems, geothermal heat pumps, small wind turbines and fuel cell systems. The stimulus also eliminates a reduction in credits for installations that utilize subsidized financing.

"For residential solar business, Berkeley-style financing makes it easier for homeowners to receive a loan for solar installations and pay it off as part of their tax bills," Wolfe said.

The Berkeley FIRST financing initiative referred to by Wolfe is a solar financing program offered by the City of Berkeley, CA that allows homeowners an opportunity to borrow money to install solar photovoltaic electric systems and allow the cost to be repaid over 20 years through an annual special tax on their property tax bill.

The Solar Energy Industries Association estimates that solar energy provisions in the stimulus will help create 60,000 jobs in the solar industry in 2009 alone and a total of 110,000 over the next two years. The American Wind Energy Association (AWEA), noting that the US wind energy industry in 2008 installed about 42% of all the new electric generating capacity added that year and created 35,000 jobs, expects that the stimulus will encourage additional clean energy investment and job creation.

Michael Eckhart, founding President of the American Council on Renewable Energy (ACORE), spoke to SocialFunds.com from the floor of the Las Vegas Convention Center, where ACORE's RETECH 2009 Renewable Energy Technology Conference was held, and noted the significant effect on investment in green technologies of the extension of the Production Tax Credit (PTC) as well as the expansion of the Investment Tax Credit (ITC) on renewable facility expenditures.

The stimulus bill extends the PTC placed-in-service date for wind facilities to December 31, 2012. For other renewable technologies, such as biomass and geothermal facilities, the bill extends the placed-in-service date to December 31, 2013.

The stimulus also allows technologies that traditionally qualify for the PTC to instead receive an ITC. It provides renewable technology companies with an option to receive a 30% ITC on expenditures on renewable electricity facilities.

Wolfe of groSolar also noted, "For commercial solar, the stimulus also provides grants through 2010 that will replace the ITC and contains loan guarantees so that long-term projects have a better chance at receiving loans and at better terms."

The grant program reimburses a percentage of investments in renewable energy projects placed into service in 2009 and 2010 and projects for which construction began in 2009 or 2010. The grants consist of up to 30% of the basis of wind, biomass, geothermal and solar properties.

Dalheim of Calvert said, "The extension of the tax credits for renewable energy production will help promote the kind of investment that we believe make wind, solar, and geothermal companies strong long term investments. This support is particularly important now, given the credit crisis which is hampering investment across a range of sectors."

The stimulus package also includes $9.5 billion for weatherization and other energy-efficiency improvements, $11 billion for a modernization of the electric grid, $17.5 billion for investment in public transportation, and subsidies for buyers of plug-in cars.

In his speech before Congress on February 24, President Obama made it clear that his administration's commitment to investment in green technologies is unwavering, despite the economic crisis.

"We have known for decades that our survival depends on finding new sources of energy, yet we import more oil today than ever before," the President said. "We know the country that harnesses the power of clean, renewable energy will lead the 21st century. Thanks to our recovery plan, we will double this nation's supply of renewable energy in the next three years."

As Wolfe of groSolar noted, "Not once in the President's speech did he utter the word 'drill'."

Congress is also considering legislation to establish a federal renewable portfolio standard (RPS) that would require electric utilities to produce 25% of their electricity from wind, solar and other renewable energy sources by 2025.

Supporters of renewable energy development recognize, however, that without a cap-and-trade system to reduce greenhouse gas emissions, investment in green technologies will continue to lag behind its potential.

"To produce the major and necessary shift in the ways we source and use energy, government needs to put a price on carbon," said Dalheim of Calvert. "So, while we celebrate the forward looking provisions in the stimulus bill we will continue to call for comprehensive legislation to address climate change."

Keefe of Pax World added, "The upcoming efforts of the Environmental Protection Agency to regulate carbon dioxide and greenhouse gas emissions have the potential to create a real boom in sustainable investment."

 

 
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