Michael J. Zimmer is Of Counsel with Thompson Hine LLP in Washington DC. He serves on the American Bar Association’s Renewable Energy and Carbon Trading Committee and the Environmental Finance Committee. He is also vice chair of the American Council On Renewable Energy (ACORE) biomass coordinating council and also serves as executive in Residence at Ohio University’s Voinovich School.
After a tough 2009 when cleantech investments all but dried up, the first quarter of this year saw a significant pickup, in part thanks to the government’s unprecedented financial commitment to the sector. Of the $865 billion in stimulus funds, some $90 billion has been allocated to cleantech companies. A little more than a year since the stimulus was signed into law, investors have come to depend on the government as an investor of first and last resort, at least up until 2012. But at best, this funding is only a band-aid solution. What’s still missing is a long-term policy that over the next decade could help uncap new investments that would make our country’s renewable energy industry even more competitive with countries like China.
While Congress endlessly debates Senators Kerry – Lieberman – Graham energy and climate change legislation, the U.S.’s window of opportunity to lead the cleantech revolution narrows. I submit that renewable energy industry players have no more than a decade to prove that they have moved beyond the cutting edge to be viable businesses that develop reliable sources of energy. Getting there will require significant government support and the implementation of a comprehensive, long-term energy policy. The Kerry – Leiberman – Grahm bill is a start when unveiled this coming week.
What should a better policy look like? Many in the renewable industry point to a European model with its combination of strong-government subsidy programs such as feed-in tariffs in addition to the market friendly cap-and-trade system.
A U.S. energy policy should definitely include a pricing system for carbon and a nationwide feed-in tariffs. Listed below are 10 additional items that I feel should be included in a comprehensive clean energy policy. Some of the measures already exist but need to be extended for at least another decade, while others are being debated in Congress. Others aren’t, but should be.
10 Ideas For a US clean Energy policy
1. Make Treasury direct cash grants (Section 1603) available to pension funds, foundations and non-profits and extend the grants until 2020. This would grow the cleantech investment pool by including capital that largely remains untapped.
2. Extend the production tax credit until 2020, supporting renewables (wind, solar, biomass, hydropower, waste heat, biofuels and waste to energy) and nuclear generation power projects.
3. Establish a national Renewable Portfolio Standard (RPS) mandating all states to generate 25 percent of their electricity from renewables.
4. Ease access to capital by establishing a federally-funded clean energy bank, as provided under the Senate model with sufficient appropriations to leverage government into private sector.
5. Make permanent the 20 percent tax credit supporting cleantech research and development, and extend the manufacturing tax credit for clean tech investments to 2020.
6. To ensure a smooth and inevitable transition to an economy where carbon is priced, starting in 2012, internalize the price of carbon at $15 ton with a market phase-in where by 2025 carbon reaches $30 a ton.
7. Extend biofuels tax incentives to 2020.
8. To open the sector to more investors, expand master-limited partnership taxation benefits to investments supporting renewable energy infrastructure projects, including transmission projects.
9. Implement a five-year tax holiday for energy storage, transmission and distribution companies and developers of electric vehicles. Lower corporate, capital gains and payroll taxes of cleantech companies with a capex of $100 million or less.
10. Extend cleantech patents’ life from 18 to 28 years in recognition of the long term capital cost horizon associated with the investments required to commercialize the technologies they represent.
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