NEWS Lessons From 2009 for a Green Stimulus Today

Lessons From 2009 for a Green Stimulus Today

For the orig­i­nal: https://​www​.green​tech​me​dia​.com/​a​r​t​i​c​l​e​s​/​r​e​a​d​/​w​h​a​t​-​a​-​n​e​w​-​g​r​e​e​n​-​s​t​i​m​u​l​u​s​-​c​a​n​-​l​e​a​r​n​-​f​r​o​m​-​2​009

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A clean-ener­gy com­pa­ny fund­ed through a Depart­ment of Ener­gy loan recent­ly filed for bankruptcy.

Tonopah Solar Ener­gy, the builder of a 110-megawatt con­cen­trat­ed solar pow­er site, joined the ranks of bank­rupt Solyn­dra and Abound Solar. Those com­pa­nies all received mon­ey through the 2009 Amer­i­can Recov­ery and Rein­vest­ment Act (ARRA), which set out $90 bil­lion for clean ener­gy at the depth of that recession.

Despite such fail­ures, DOE loan guar­an­tee pro­grams for new ener­gy tech­nolo­gies — enact­ed dur­ing the George W. Bush admin­is­tra­tion — have been a suc­cess over­all. The DOE has dis­bursed near­ly $30 bil­lion to new and emerg­ing tech­nolo­gies, with over­all port­fo­lio loss­es around just 2.7 per­cent, which is bet­ter than that achieved by most major banks. So far, the gov­ern­ment has already received $3.15 bil­lion in inter­est pay­ments, with less than $1 bil­lion in actu­al and esti­mat­ed losses.

Along­side the pro­gram’s fail­ures have come sig­nif­i­cant suc­cess­es, such as Tes­la and the once largest-in-the-world Desert Sun­light solar project, devel­oped by First Solar. In the decade since ARRA’s pas­sage, the solar PV space has trans­formed from a nascent mar­ket to an ener­gy-indus­try pow­er­house as instal­la­tion costs fell about 70 percent.

ARRA is a huge suc­cess,” said Daniel Kam­men, a pro­fes­sor at the Uni­ver­si­ty of Cal­i­for­nia, Berke­ley who has advised DOE. “A few bank­rupt­cies don’t dimin­ish that fact. You’d be shocked if there weren’t some bankruptcies.”

As the U.S. faces the prospect of anoth­er cat­a­stroph­ic reces­sion, many are now look­ing to ARRA as a tem­plate for a “green stim­u­lus” pack­age. The land­scape for clean ener­gy is dif­fer­ent today: Solar PV and onshore wind are mature tech­nolo­gies, and the threat from cli­mate change is much more pro­nounced. But there are lessons to be drawn from 2009, experts say, start­ing with set­ting the right expectations.

The Tonopah bankruptcy

Cres­cent Dunes, a con­cen­trat­ed solar pow­er (CSP) project sit­ed in the Neva­da desert run by Tonopah Solar Ener­gy and devel­oped by the now-defunct Solar­Reserve, had been imper­iled for some time.

At the time Cres­cent Dunes received its $737 mil­lion loan guar­an­tee from the DOE, CSP was viewed as a promis­ing tech­nol­o­gy in part because it could incor­po­rate ther­mal stor­age. But numer­ous snags at the site, such as an extend­ed shut­down relat­ed to a leak at Cres­cent Dunes’ molten salt ther­mal stor­age tank and off­tak­er NV Ener­gy’s move to ter­mi­nate its con­tract with the project last year, mired the project in uncer­tain­ty. When Solar­Reserve, of which Tonopah is an affil­i­ate, ceased oper­a­tions last year, there were warn­ings that a Tonopah bank­rupt­cy was in the offing.

Mean­while, com­par­a­tive­ly huge cost declines in solar PV have large­ly rel­e­gat­ed Cres­cent Dunes and oth­er Amer­i­can CSP projects to a novelty.

The Chap­ter 11 process is designed to allow Tonopah, a project com­pa­ny, to reor­ga­nize its debt and pay back the fed­er­al gov­ern­ment hun­dreds of mil­lions of dol­lars. Under the arrange­ment, Spain’s ACS Cobra, which pro­vid­ed engi­neer­ing, pro­cure­ment and con­struc­tion ser­vices on the project, would own the entire­ty of Cres­cent Dunes when it exits bankruptcy.

The Tonopah project is at risk of join­ing the now-infa­mous solar man­u­fac­tur­er Solyn­dra as a high-pro­file fail­ure of the loan pro­gram. But that asso­ci­a­tion — and an overem­pha­sis on any loan pro­gram bank­rupt­cy — “miss­es the for­est for the trees,” said Dan Reich­er, exec­u­tive direc­tor of the Stan­ford Uni­ver­si­ty Stey­er-Tay­lor Cen­ter for Ener­gy Pol­i­cy & Finance. Reich­er served as Assis­tant Sec­re­tary of Ener­gy for Ener­gy Effi­cien­cy and Renew­able Ener­gy for the Clin­ton admin­is­tra­tion and on the Oba­ma tran­si­tion team that worked on the clean ener­gy stim­u­lus package.

Jeff Navin, a co-founder and part­ner at con­sul­tan­cy Bound­ary Stone Part­ners, who worked at both the Labor Depart­ment and the Depart­ment of Ener­gy dur­ing the Oba­ma admin­is­tra­tion, said fail­ures should be expect­ed in any port­fo­lio, espe­cial­ly when that port­fo­lio is geared toward fund­ing new technologies.

The biggest mis­take we made with the loan guar­an­tee process through the Recov­ery Act was fail­ing to set the right expec­ta­tions,” Navin said in an email. “Every loan port­fo­lio at every bank in Amer­i­ca has some por­tion of the port­fo­lio that doesn’t perform.”

Lessons for a new green stimulus

With the coro­n­avirus pan­dem­ic and U.S. gov­ern­ment response depress­ing the econ­o­my, Navin, Kam­men and Reich­er told Green­tech Media the U.S. has an oppor­tu­ni­ty to trans­late the suc­cess­ful parts of ARRA to a mod­ern stimulus.

The chal­lenges are a lot high­er right now, because we have not only a seri­ous reces­sion but also a glob­al pan­dem­ic and a cli­mate prob­lem worse than a decade ago,” said Reich­er. “It’s real­ly a triple wham­my that’s more sub­stan­tial than the chal­lenge we had a decade ago.”

Many ear­ly-stage and bur­geon­ing tech­nolo­gies — such as car­bon cap­ture and stor­age, float­ing off­shore wind and ener­gy stor­age — need the same type of sup­port that ARRA pro­vid­ed to util­i­ty-scale solar, Reich­er said, espe­cial­ly in a land­scape where inter­na­tion­al com­pe­ti­tion on clean-ener­gy tech­nolo­gies has grown significantly.

Reich­er favors the cre­ation of a Clean Ener­gy Deploy­ment Admin­is­tra­tion, an idea intro­duced in Con­gress years ago, which would allow an inde­pen­dent fed­er­al financ­ing agency to hold the purse strings on dis­burs­ing funds to renew­ables and lever­ag­ing pri­vate invest­ment to boost deployment.

A stim­u­lus pack­age may be a log­i­cal vehi­cle to include clean-ener­gy incen­tives — though law­mak­ers are cur­rent­ly embroiled in argu­ments on any type of pub­lic health and finan­cial sup­port — but Reich­er said the gov­ern­ment has sev­er­al oth­er options beyond stim­u­lus legislation.

Pol­i­cy­mak­ers could insert clean-ener­gy incen­tives into a poten­tial infra­struc­ture pack­age (a House infra­struc­ture pack­age passed in June includ­ed some clean-ener­gy wins). They could also expand tax cred­its for renew­ables, or open the ben­e­fits of mas­ter-lim­it­ed part­ner­ships, which do not pay fed­er­al income tax­es, to clean energy.

Dollars and sense

There’s also the ques­tion of how much sup­port to give. Onshore wind and util­i­ty-scale solar are now large­ly com­pet­i­tive on their own and are the cheap­est forms of new gen­er­a­tion in many parts of the coun­try. But scal­ing a renew­ables-based ener­gy sys­tem quick­ly enough to meet the cli­mate chal­lenge would require sub­stan­tial gov­ern­ment sup­port and intervention.

A green stim­u­lus pro­pos­al pub­lished by a group of ener­gy, social and envi­ron­men­tal pol­i­cy experts in March, which Kam­men co-authored, called for sig­nif­i­cant­ly more invest­ment than what was includ­ed in ARRA. That pro­pos­al, which, like the Green New Deal, pri­or­i­tized envi­ron­men­tal and ener­gy jus­tice, sug­gest­ed at least $2 tril­lion in ini­tial invest­ment with a renew­al of at least 4 per­cent of GDP each year until the U.S. ful­ly decar­bonizes its economy.

Pre­sump­tive Demo­c­ra­t­ic pres­i­den­tial nom­i­nee Joe Biden bor­rowed that $2 tril­lion sum for an updat­ed clean ener­gy plan that his cam­paign released in July which empha­sizes job cre­ation and 100 per­cent car­bon-free elec­tric­i­ty nation­wide by 2035.

Any such plan will face the real­i­ty that a grow­ing num­ber of con­gres­sion­al Repub­li­cans are rais­ing alarms over the expand­ing fed­er­al bud­get deficit, hav­ing large­ly remained silent on the issue as the deficit bal­looned under Pres­i­dent Trump.

Kam­men said any stim­u­lus — whether post-elec­tion or in response to the coro­n­avirus pan­dem­ic — would be wise to con­sid­er the sig­nif­i­cant employ­ment poten­tial that comes along with sig­nif­i­cant renew­ables investments.

[For] green stim­u­lus plans, there’s a real­ly good ener­gy-and-jobs com­bi­na­tion,” said Kam­men. “That’s the com­pelling high-lev­el message.”

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