After the Stimulus Package Is Empty … Then What?

Photo credit: Sky Power

Reality check: What happens when federal stimulus funds for solar projects run out? The as-yet unrelenting economic crisis has slowed the renewable energy industry, and while things move on at a relatively decent pace, industry advocates are nevertheless a wee stressed about the long term.

A big part of the stimulus package was renewable energy, especially solar power. And the solar industry has been enjoying the resultant funds — with even more set to come. On top of that, the American Clean Energy and Security Act (ACES) just squeaked through the House of Representatives and now awaits its turn in the Senate. That bill, as it stands now, would give the nation its first renewable electricity standard and a cap-and-trade system to cut greenhouse gas emissions, as well as a number of other green-tech-green-job provisions.

So what’s the big deal?

The big deal, it seems, is the threat of a lag in funding for the solar industry. According to a New York Times article, the stimulus funding is set to run out in the next year or two, and solar advocates fear that is too short a time for the industry to gain solid, independent footing. In other words, they will need a Stimulus-Part-2.

That second boost could come from ACES, or the climate change bill, that is currently working through Congress. Although that bill already nearly doubled in size and was greatly weakened as it narrowly traversed the House. How it will come out of the Senate is up in the air. Regardless, it will likely have a cap-and-trade provision to set a cap on polluters’ GHG emissions but allow them to buy, sell, and trade in “carbon offsets.”

That could produce money for the renewable energy industry, depending on how the final cap-and-trade system works out of Congress. The general idea at least is that monies made off of noncompliance penalties and purchased offsets could be funneled into a bank account and subsequently used to fund solar and other renewable projects.

Now to the issue of tomorrow for today’s stressed-out solar advocates. For one, the cap-and-trade provision is already weaker than many environmentalists had hoped — it sets up a seemingly unregulated “carbon market” for claiming, buying, selling, and trading of offsets. So how exactly the industry can be ensured that money will flow to them remains foggy.

Secondly, the cap on emissions, steadily decreasing over time (17% of 2005 levels by 2050 is the current goal) should make oil, coal, and gas more expensive, thus aiding solar, wind, and other renewables in reaching grid parity. However, the cap-and-trade provision wouldn’t take effect until 2012 and there would be limited or no offsets required in the early years of the program.

Therefore we get a lag in major federal solar industry support, and subsequently some sweaty brows among solar advocates. That gap between stimulus funds and cap-and-trade incentives could be a dangerous one for many solar firms, who are afraid to “fall off a cliff,” as Dan W. Reicher of Google put it.

Sure everyone involved would like to see the solar industry gain its own independent footing, without the need for state or federal help. Although provisions and huge subsidies for “clean coal” in ACES is not going to help anything. But in the meantime, the grandstands are full and all eyes are on Obama and Congress — all mouths yelling “Encore!”

Posted on July 10th in Solar Politics by Dan.