Obama signs stimulus plan, touts clean energy

President signs massive government stimulus package, saying it's a start to a cleaner energy infrastructure. But analysts still see real hurdles to transforming the energy business.

President Obama signed into law a government stimulus package Tuesday and said the energy provisions will pave the path for doubling the amount of renewable energy in the next three years.

Energy is a major piece of the massive $787 billion package, totaling about $38 billion in government spending and about $20 billion in tax incentives over the next 10 years, according to estimates.

President Barack Obama signs the American Recovery and Reinvestment Act in Denver. Screen capture by Martin LaMonica/CNET Networks

Obama signed the bill, called the American Recovery and Reinvestment Act, into law at the Denver Museum of Nature & Science where he later took a tour of the museum's solar-panel installation.

The energy portions of the law are intended to promote rapid development of renewable energy sources and increase energy efficiency in buildings, appliances, and other sectors of the economy.

The president said he hoped that the clean-energy-related portions of the bill will inspire Americans the same way that President Kennedy's goal to put a man on the moon did in the 1960s.

"I hope this investment will ignite our imagination once more in science, medicine, energy and make our economy stronger, our nation more secure, and our planet safer for our children," Obama said before signing the bill.

The major energy-related portions of the law were largely left intact after Congressional debate. Overall, the plan will more than triple the amount of spending on clean-energy programs, said Daniel Weiss, a fellow at the Center for American Progress.

Major energy portions include:

  • A three-year extension to the tax credit for wind, which would have expired at the end of this year, and an extension until the end of 2013 for geothermal and biomass renewable-energy projects. The credit has been increased to 30 percent of the investment.

  • $4.5 billion in direct spending to modernize the electricity grid with smart-grid technologies.

  • $6.3 billion in state energy-efficient and clean-energy grants and $4.5 billion to make federal buildings more energy efficient.

  • $6 billion in loan guarantees for renewable energy systems, biofuel projects, and electric-power transmission facilities.

  • $2 billion in loans to manufacture advanced batteries and components for applications such as plug-in electric cars.

  • $5 billion to weatherize homes of up to 1 million low-income people.

  • $3.4 billion appropriated to the Department of Energy for fossil energy research and development, such as storing carbon dioxide underground at coal power plants.

  • A tax credit of between $2,500 and $5,000 for purchase of plug-in electric vehicles, available for the first 200,000 placed into service.

(Click here for full summary from the American Council on Renewable Energy (ACORE) and from law firm Dewey & LeBoeuf.)

Measuring the impact
In general, companies in the green-technology field have welcomed the focus on energy efficiency and renewable energy production in the law.

The law gives renewable-energy project developers an alternative to the existing federal subsidy. Many renewable-energy projects have been stalled, or scrapped, because many investors don't have enough income to take advantage of a 30 percent federal tax credit. The bill now allows renewable-energy project developers to effectively get the same credit by applying for a loan from the Department of Energy for 30 percent of the project, explained Rhone Resch, the president of the Solar Energy Industry Association (SEIA).

The loan guarantees are designed to help companies to commercialize new energy technologies, by providing money for a manufacturing facility, for example. A number of green-tech companies, including flywheel storage company Beacon Power, electric-car company Tesla Motors, and battery maker A123 Systems have applied

More generally, investors and analysts said that the significance of the law is that it's a step toward crafting a more comprehensive energy policy, based on sustained commitment to renewable energy and efficiency.

"For years, U.S. policymakers' support for clean energy has been uneven," said Michael Liebreich, the CEO of research firm New Energy Finance, in a statement. "No longer...the U.S. will have a great chance to be the growth engine for our industry over the next several years.

The spending on the bill on things like smart grid technologies and energy efficiency should have a rapid impact, said Dennis Costello, a venture capitalist at Braemar Energy Ventures. But he said that even with the economic stimulus of the government spending, the conditions for energy technology firms remains very difficult.

Specifically, he said the drop in the cost of oil over the past year makes it harder for a firm that is seeking to develop a replacement, such as biofuels. Also, the overall recession continues to dampen demand for products and financing remains challenging.

"It's kind of refreshing to see at least beginnings of a real energy policy, some sort of unified approach to our energy problems," Costello said. "But it isn't going to solve our energy problems. There are a lot of countervailing factors to give pause to being overexuberant on the future of energy sector and clean tech."

Analysts noted there are other challenges to a rapid change in the slow-moving energy sector.

The stimulus act gives the Department of Energy control over billions of dollars in loans and spending on research and development projects--more than the department's annual budget. But the Energy Department has not dispersed money in the past few years because of its slow approval process, which Secretary Steven Chu said he intends to speed up .

Also, a sharp increase in renewable energy from wind and solar power requires building new power lines to bring electricity from windy and sunny areas to more populated regions.

Bramaer's Costello said an industry association estimated that the stimulus act spending could lead to 3,000 new miles of transmission lines. However, siting these new lines is a contentious process and likely to meet local and state opposition.

"Siting of transmission lines is this going to be the Achilles' heel of renewables," said Elgie Holstein, a senior energy policy adviser in the Obama administration.

 

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