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



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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