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August 30, 2016

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Deadlines may shelve renewable energy projects

Image

Leila Navidi

Copper Mountain Solar One, a thin film photovoltaic solar facility off U.S. 95 in Boulder City seen Thursday, February 10, 2011.

Steven Chu

Steven Chu

Harry Reid

Harry Reid

The Energy Department has been teaming up with Nevada lawmakers on an almost monthly basis to announce loan guarantees for renewable energy projects across the Silver State, each of which is expected to create a few hundred jobs.

It’s been a pretty good ride, congressional staffers (Democrats, really) remark; but it’s one that soon could come to an end.

It’s not because Republicans are threatening to strip money out of a program born of the stimulus: It’s because the program is approaching its expiration date, and it isn’t clear if there’s a politically palatable way to extend it.

Renewable energy project managers have known, since the $30 billion in loan guarantees created by Section 1705 of the stimulus became available, that they’d have to break ground on or before Sept. 30 to keep the funding.

The program was supposed to boost a fledgling industry, and buoy private investor confidence so that by the time the program expired, the markets would have warmed to such ventures. But that’s not exactly how the recession progressed.

Recovery has been slower than anticipated, especially in terms of liquidity in the financial markets. And that has the builders telling the government: Keep these programs, or their equivalent, around for the next few years, or we’re going to have to go elsewhere.

“The financial markets haven’t recovered yet, so you’re going to see a downturn in the renewable energy industry no question, when these projects expire,” said Kevin Smith, CEO of SolarReserve, which is building the Crescent Dunes 110-megawatt solar-powered storage plant in Tonopah. That project, he said, won’t be threatened — but they’re not sure if they’ll be able to break ground by the deadline on a similar plant in California, and there are others in jeopardy as well, Smith said.

The problem with setting these developers to the open market is one of price comparison. Wind energy and geothermal — another big market for Nevada — can compete with more conventional forms of power generation, such as coal-fired plants and natural gas. But solar’s not quite there.

Energy Secretary Steven Chu has said that he believes the price of solar will be competitive with carbon sources of energy in the next 10 years — a figure developers say is a conservative estimate: They plan to be players in the open market much sooner. But they point out that it’s not a fair fight right now.

“The incumbents have been favored for many years,” said Ian Rogoff, executive chairman of HelioPower, an integrated energy development company. “Oil and gas tax benefits have been renewed, which means government support for those industries has been renewed ... for the most part, these incentives are just in place to allow these new technologies and new industries to compete effectively, and compete against incumbents.”

Rogoff’s company puts equal store in the renewable energy-focused research and development tax credits — known as Section 1603 credits, which fall off the table in December — as equally necessary to shore up if Nevada wants to remain, as Senate Majority Leader Harry Reid puts it, “well on its way to becoming a global leader in clean energy job creation.”

“We’re trying to develop technologies in the U.S., and we’re struggling to compete against the Germans and the Chinese and the French and others that have strong government programs,” Smith said, pointing out that the 5 percent interest rate he pays on his government loans is higher than what he pays on some commercial loans; but the government will lend to renewable energy projects where others won’t.

At this juncture, preserving the government lifeline for these projects is probably going to be up to Reid.

Government budget negotiations imploded this week, after Republican participants House Majority Leader Eric Cantor and Senate Minority Whip Jon Kyl, withdrew from the group of six lawmakers that had been meeting regularly with Vice President Joe Biden to hash out a way to cut the budget and raise the debt ceiling before August. Cantor and Kyl said they could see no way forward with the Democrats in the group insisting on raising taxes they felt could never pass the Congress.

It’s the second deal-making group to have faltered — the first being the “Gang of Six”, which is still meeting as a Gang of Five but fizzled after conservative Republican Sen. Tom Coburn pulled out.

“It’s past time for gangs of five or six,” Reid told reporters this week. “With what Kyl and Cantor have done, I think it’s (the budget) in the hands of the speaker and president, and sadly, probably me.”

It’s a role Reid has to have gotten used to over the past few months, after haggling through a tax compromise in December and barely circumventing a government shutdown in April. But then he was mainly trying to preserve programs that exist, not drum up new ones.

Stimulus programs are not popular fare among Republicans. As Nevada’s Republican Sen. Dean Heller has explained, it’s not necessarily the government’s role to buoy every industry, and although one stimulus project may create a few hundred jobs, the number of jobs the economy has lost during the recession is in the tens of thousands.

Democrats point out that the job losses would have been far worse without the stimulus program.

But even the Obama administration appears to be shifting a bit from the stimulus plan. President Barack Obama requested about $200 million to back up to $2 billion in Section 1705 loan guarantees in the budget he submitted to Congress, but that’s a steep drop from the $2.5 billion that was slated to $30 billion in loans two years ago. Although that may be easier for Obama, and it appears, Reid, to preserve politically, it also means there will be a lot less to go around.

What replaces them might not look the same. The Obama administration is seeking far more money to back a green jobs innovation fund, a national infrastructure bank, and other initiatives to award money to research projects and development initiatives where sustainability is a big factor.

But requests for new funding aren’t the most palatable proposals in an era when Congress seems fixated on government cuts to avoid runaway debt.

Lawmakers are talking about changes to Medicare, the future of Social Security, scaling down military spending, and increasing government revenue.

In the midst of all that, developers don’t care where their government assistance comes from, just so long as it comes — if they’re to deliver these projects.

“We have another five or six projects in late stage developments that will be going to commercial markets in 2012 and 2013,” Smith said. “But if the U.S. market doesn’t step up and put in place programs so we can build these projects, then we’ll take our business internationally.”

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