September 24, 2008
How has the Financial Crisis Affected the Clean Energy Industry?
On October 4th, when Congress passed the bailout, they also passed the clean energy production tax credit and investment tax credit (known collectively as the PTC/ITC) as a sweetener to secure the necessary votes for the bailout. This was a boon for the clean energy industry and its advocates, as the credits had been left for dead just weeks previously.
Keith, a Breakthrough Generation intern, wrote about the importance of these tax credits when the bailout passed:
The PTC, by the estimates of a 2005 Energy Information Report, will alone hextuple the growth of American renewable energy production in the next ten years, barring any other changes in energy policy. Yeah, and I mean hextuple. A study from Navigant Consulting, commissioned by the AWEA and the SEIA earlier this year, claimed that 116,000 energy jobs would be lost in 2009 by a failure to pass the credits.
So the PTC/ITC means good things for clean energy in America. Yet, as Friedman said today in his column, the financial crisis and frozen credit is affecting clean tech start-ups:
"But with little credit available today for new energy start-ups, and lower oil prices making it harder for existing renewables like wind and solar to scale...what will become of our budding clean-tech revolution?"
This is an urgent question. With a lurching American economy and a serious credit crunch, it is hard to imagine the clean energy industry, already struggling, expanding to control a sizable market share of the energy sector.
Already stories are beginning to surface about firms having to put the brakes on clean energy projects. From a story called "Noble Puts New York State Wind Project on Hold":
"Russell went on to say that in a recent meeting he attended with his deputy supervisor and Noble CEO Walter Howard, town officials were told that the decision to put a hold on construction in Bellmont was due to a combination of conditions, including the credit crunch [and] the bankruptcy of the lead broker of its proposed IPO, Lehman Brothers."
Signs of a slow down in the industry can be seen elsewhere, as well. Cleanedge.com, a research and publishing firm that works with the clean energy sector, has an index "designed to track the performance of companies that are primarily manufacturers, developers, distributors, or installers of clean-energy technologies." In other words, Clean Edge maintains an index showing how clean energy businesses are performing in the stock market. Scrolling down the list of companies pulled from the NASDAQ, nearly every one is showing losses.
So, like many sectors of the economy, the fledgling clean energy industry in America has been hit hard. However, it's more than possible that the clean energy industry will not be able to take hits that a full grown sector of the economy can weather.
In order for the clean energy industry to continue to grow, the government must act. If clean technology investors and businesses can't access credit, the government must provide the credit. These businesses need access to capital. Power plants and other energy related projects require huge capital outlays for returns that are not realized immediately, meaning it hard to raise funds from investors who are want to see profit in on or two quarters, not one or two or even four or five years. Strategic investments and continued extension of tax credits could help the clean energy sector in America grow, providing jobs and prosperity and spurring economic growth. The potential is enormous.