Ever since the energy crisis in the seventies the U.S. government has used policies to support the growth of the renewable energy sector. Neighbourhoods of the seventies and eighties very often display old rooftop solar thermal collectors which were installed at a time when people were taking advantage of the tax credit made available during the Carter presidency. Since Reagan took office, that number has gone down.
Production tax credit is not the perfect, nor only vehicle to encourage growth in the sector, but it’s deemed market-friendly. Another possibility is the implementation of higher feed-in tariffs, as it’s being done in Germany.
At the end of 2008 Congress was debating an extension of the expiring tax credit, as there was widespread worry that without it the U.S. wind and solar industry development could get in dire straits. Shortly before the credits would have expired, a short term extension was passed.
Not long afterwards financial crisis set in, and the credit market froze. The situation looked gloomy.
The first rescue strategy was to introduce the American Recovery and Reinvestment Act of 2009, which allows the treasury to make direct payments to companies, which they would then, in turn, invest into new projects. About 5000 solar, wind, geothermal energy companies benefit from the Act.
Now Energy Secretary Steven Chu and Treasury Secretary Tim Geithner said they were ready to dole out the cash.
This $3 billion, given away as grants, will prevent another renewable energy bust by encouraging new projects in a critical time, while the sector is threatened by crisis and recession. In addition, this measure will help reducing carbon, and make the U.S. less vulnerable to fluctuating oil prices. This temporary replacement of production tax credit will also create thousands of jobs in times of general slowdown. It should also accelerate fresh investments.
That the potential is sheer gigantic is also proved by several reputable studies.
The U.S. Department of Energy estimates that only 9% of the Nevada desert covered with solar panels could produce enough electricity for the whole of the country, while the Electrical Power Research Institute found wave energy along the U.S. coast could produce as much as 2100 TWh, which is half of America’s yearly demand.
President Obama links his country’s economic future and security closely with the energy issue. He has pledged to put some $150 billion into the sector over the next 10 years.
Industry groups regarded the move as positive and welcomed the incentive. ‘It’s the welcome boost we need just now. The economic conditions of the last few months have held us back, but now we will get our companies back on track and create more jobs.’ explained Denise Bode, CEO American Wind Energy Association.
And Rhone Resch, CEO of Solar Energy Industries Association adds:” This will free up various projects in the development phase. Once Treasury accepts applications, the solar industry will create jobs and spur investment.’
Treasury secretary Tim Geithner said: ‘This grant program will contribute to the economic development in many communities around the country. The partnership between Treasury and Energy enable both large companies and small businesses to invest into our long-term energy needs, protect our environment and revitalize the nation’s economy.’