MARTIN LAMONICA, CNET, November 5, 2008
Energy and environmental policy is poised for dramatic change under an Obama administration even with a slumping economy.
With the incoming administration and Congress, renewable energy advocates and environmentalists said they anticipate a comprehensive national energy plan focused on fostering clean-energy technologies.
“The election is over. Now the hard work begins,” wrote Dan Farber, a professor of law at the University of California at Berkeley and a member of the lobbying group Cleantech & Green Business for Obama. “Change is on the way.”
Obama’s energy plan, detailed fully earlier this year, is ambitious. It calls for a $150 billion investment in clean technologies over 10 years, aggressive targets for greenhouse emission reductions, and programs to promote energy efficiency, low-carbon biofuels, and renewable energies.
But a troubled economy–among other barriers–means that bold, new energy legislation, notably caps on greenhouse gas emissions, is unlikely to pass in the first years of an Obama administration, according to experts.
Instead, the Obama presidency is expected to first push for smaller yet significant measures, such as efficiency and renewable energy mandates, and then lay the groundwork for far-reaching climate initiatives, they said.
“One of the biggest setbacks is trying to find the money to pay for all of this. This isn’t free,” said David Kurzman, managing director of Kurzman CleanTech Research. “Reality will set in and trying to find money…is really going to temper the possibilities over the next 12 months.”
Winners and losers
Cleantech company executives note that during the campaign, Obama articulated his belief that environmental protection and economic development can be closely related. During Obama’s acceptance speech Tuesday night, his reference to “new energy to harness and new jobs to be created” could be read in two ways–a call for political involvement or for alternative-energy sources.
In an interview with Time magazine in October 2008, he said, “From a purely economic perspective, finding the new driver of our economy is going to be critical. There is no better potential driver that pervades all aspects of our economy than a new energy economy.”
Cleantech professionals expect that energy and the environment, which were hot-button issues during the campaign, to continue to command the attention of politicians and the electorate. And the combination of a Democratic-controlled Congress and Obama administration means that government stimulus spending targeted at the energy business is a strong possibility.
“There’s a growing sense that investing in infrastructure, even if it means more deficit spending, is a good thing because it will help economic growth in the short and long term,” said Ethan Zindler of research firm New Energy Finance. “And green energy has come to be regarded as a 21st-century infrastructure play.”
Some technologies stand to benefit more than others if Obama’s administration is successful in implementing its proposals.
Renewable energies. Obama has called for a national renewable portfolio standard to mandate that utilities get 10% of electricity from renewable sources–wind, solar, and geothermal–by 2012, and 25% by 2025. “That’s the backbone the country needs to invest in,” said Rhone Resch, president of the Solar Energy Industry Association.
Although more than half the states already have renewable portfolio standards, many southern states have balked at national standards because they say they do not have sufficient renewable energy resources.
In this case, having an activist federal government, as Obama’s proposals suggest, may meet resistance from the states because electric utilities are regulated by a mix state and federal agencies. “It’s not just a question of money. It’s also a question of governance and public policy,” said Jim Owen, a representative for the Edison Electrical Institute.
In the recently passed financial bailout package, solar energy received an eight-year extension of federal tax credits, while wind received only a one-year extension. The election increases the chances that wind energy will be extended further.
Efficiency and smart grid technology. Obama’s plan calls for a power grid modernization program and stricter building efficiency codes in federal buildings. That means efficiency products such as demand response, advanced metering and sensors to monitor usage should further benefit from government incentives, said Kurzman.
A federal initiative to establish interconnection standards and bulk up interstate transmission lines would make power generation of all kinds more efficient and allow utilities to use more renewable sources. “A 50-state role to transmission just doesn’t get the job done. You need a federal planning and facilitation,” said Rob Church, vice president of research and industry analysis at the American Council on Renewable Energy (ACORE).
Biofuels. Hailing from the corn-producing state of Illinois, Obama is expected to continue supporting ethanol. However, Brooke Coleman, executive director of the New Fuels Alliance, noted that Obama appears to understand that the biofuels industry needs to transition to nonfood feedstocks, such as wood chips or algae, in order to be sustainable.
Coleman said that strong federal policies are required for biofuels to crack into the fossil fuel industry.
“There is not a free market in the fuel sector. There’s no real competition in the wholesale supply chain–it’s completely owned by oil,” Coleman said. “You have to be pretty heavy-handed to fundamentally correct this market.”
Auto. Obama has called for increasing fuel efficiency, tax credits for plug-in hybrid cars, and loan guarantees so that automakers can “retool.”
But struggling auto makers–said to be running dangerously low on cash–will need government aid in the coming months to prevent larger harm to the economy, argued David Cole, the chairman for the Center for Automotive Research. For that reason, he expects government leaders of all kinds to be supportive.
“Politically, the issue here is pretty stark and cost of keeping the auto industry in game is whole lot less than of a major failure,” Cole said.
Fossil fuels and nuclear. During the campaign, Obama said he would allow increased domestic oil and gas drilling as well as investments in so-called clean coal technology where carbon emissions are stored underground. Companies that have coal gasification technologies stand to benefit because they are cleaner source of electricity, said Kurzman.
In the campaign, Obama voiced caution on storing nuclear waste. But during the second presidential debate, Obama said he backs nuclear power “as one component of our overall energy mix.”
Skip Bowman, president of the Nuclear Energy Institute, said Tuesday he expects the new Congress and administration to continue its support of nuclear because it addresses energy and climate change.
Longer term, the broadest policy change on energy and environment will be climate-change regulations. Obama has called for an 80 percent reduction of greenhouse gas emissions from 1990 levels by 2050 through a federal cap and trade system. Pollution rights would be auctioned, at least partially, which would create a fund for clean technology programs.
Large polluters, like chemical companies and utilities that rely heavily on coal, are the ones that will be most affected. But given that there is stronger political will to tackle energy security than climate change, policies to promote domestic energy production and efficiency are likely to take precedence over cap and trade, said New Energy Finance’s Zindler.
Still, the new administration can accomplish a great deal on renewable energy without having to pass multibillion-dollar legislation, said Scott Sklar, a renewable energy lobbyist and president of the Stella Group. Using only the federal government’s purchasing power to integrate green building technologies and addressing grid interconnection issues, for example, can be done without passing laws.
“Existing programs can be tweaked to accommodate the new vision,” Sklar said. “Depending on how you structure things, you could have a quick and profound impact on new technologies.”
New Fuel Alliance’s Coleman said that the biggest danger to the Obama administration and new Congress is not “overplaying their hand” and pushing more extreme environmental policies.
“I firmly believe that the linchpin to this entire game is allowing agriculture to play a role in diversifying our energy, whether it be wind, solar, using rural areas for geothermal or wind corridors,” he said. “More extreme positions like trying to end coal result in failure and missed opportunities.”