Clean-Energy Advocates Urge Overhaul as Aid Shrinks 75% by 2014

The U.S. needs new methods to support clean-energy development as federal spending is set to plummet in six years to $11 billion from $44.3 billion in 2009, according to a report.

Analysts from three public-policy groups, including the Brookings Institution, recommend the U.S. develop a system that rewards technological advances and stresses research and development to maximize diminishing resources.

President Barack Obama’s 2009 stimulus program accounted for one-third of the record $150 billion in tax breaks, grants and loans or guarantees available to clean-energy companies in the six years covered by the report. As Congress focuses on deficit reduction, the report’s authors say policymakers need to consider how the aid is disbursed within existing financial constraints or risk a clean-energy industry crash.

“It’s a very difficult budget environment,” said Letha Tawney, a senior associate at the World Resources Institute, a Washington-based group that promotes environmental protection. “You need to make a very strong argument for how you are using taxpayer money well.”

Abandoning U.S. aid for clean energy means ceding a multi- trillion-dollar market to other countries, she said.

Analysts from Washington-based Brookings, the World Resources Institute and the Breakthrough Institute in Oakland, California, wrote the report. They plan to brief congressional staff and Energy Department officials next week on their recommendations.

Threefold Rise

The $150 billion projected to be spent on clean-energy programs from 2009-2014 is more than triple the amount for the previous six years, according to the report. While the report doesn’t recommend a spending amount, the authors say the recent financial support is unsustainable.

A 2.2-cent-per kilowatt hour production tax credit for wind energy shows the importance of the aid. The credit brings the “levelized” cost of electricity -- a combination of construction and operating costs -- for wind to $35 to $65 per megawatt-hour, depending on the region. That makes the resource competitive with natural gas, with costs of as low as $52 a megawatt-hour, according to the report.

Take away the credit, which is set to expire at the end of this year, and wind costs rise to more than $90 a megawatt-hour from $60.

Wind power increased 60 percent and solar power 120 percent from 2008 to 2010, aided by subsidies, according to the report.

Extension Sought

The American Wind Energy Association, whose members include Fairfield, Connecticut-based General Electric Co., is lobbying to extend the break for four years. The report assumes the credit expires at the end of 2012.

As stimulus projects end and other subsidies expire, the U.S. clean-energy industry risks a collapse without some overhaul of the federal system that backs it, the report said.

Jesse Jenkins, director of energy and climate policy for the Breakthrough Institute, said in an interview the U.S. should reward the most competitive technologies through programs such as a reverse auction in California, where renewable-power providers bid to win service contracts.

The U.S. should “harness competition and reward market leaders,” he said.

The report recommends tripling the $4.7 billion spent a year on energy research, development and demonstration, and replacing the Energy Department’s loan guarantee program that backed failed solar-panel maker Solyndra LLC with a Clean Energy Deployment Administration independent of the department.

Senator Jeff Bingaman, a New Mexico Democrat and chairman of the Energy and Natural Resources Committee, has introduced legislation to create a so-called green bank. Senators have been unable to agree about how to pay for the organization.

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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