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Green Energy Outlook

Realizing the benefits of a modernized system requires an integrated strategy.

Fortnightly Magazine - January 2010

the appropriate set of incentives. While the cash grants provided by the American Recovery and Reinvestment Act of 2009 (ARRA) have produced some of the right incentives, these generally represent near-term solutions to a longer-term requirement; to encourage sustainable renewable generation growth—and in general, the sustained reinvestment in the energy infrastructure—a long-term solution is needed.

The Department of Energy (DOE) loan guarantee program, 5 also established under ARRA, is a step in the right direction, albeit also more focused on the near-term. 6 For commercially-proven technologies, the program guarantees 80 percent of a project’s debt, so long as the debt is less than 80 percent of the project’s total cost. In addition, the program is designed to expedite the loan-approval process by partnering renewable developers with lending institutions prior to filing the loan application. According to DOE, the $750 million in funding available under the program could support $4 billion to $8 billion in renewable generation. Depending on the borrowing rate, others have suggested the level of support could be closer to $15 billion.

A complementary and longer-term solution is the proposed federal green bank, or Clean Energy Deployment Administration (CEDA). CEDA is currently part of the Waxman-Markey Bill and has been approved by the Senate Energy and Natural Resources Committee. 7 As currently proposed, CEDA would operate as an independent, government-owned, non-profit investment bank, with an initial charter of 20 years and $7.5 to $10 billion in funding. 8 CEDA would provide access to capital and offer lower financing rates through loans and loan guarantees. With $10 billion in funding, CEDA is estimated to be able to support more than $100 billion in debt to finance elements of the integrated solution, including the renewable generation and associated T&D and other technologies that can reduce CO 2 emissions.

The recent significant economic recession has presented a challenging environment for all aspects of the U.S. economy, and the power industry is no exception. Despite the lingering effects of the downturn and continued economic uncertainty, a unique opportunity exists to fundamentally change the future of the U.S. power industry through the successful execution of an integrated reinvestment plan that explicitly recognizes the interrelated nature of renewable generation development, CO emissions abatement, modernized T&D, and more flexible energy production capability. Importantly, the levels of innovation in creating the right incentives for sustained financing and investment must match the levels of innovation around renewable energy production and delivery, development of smart-grid technologies, and efforts to significantly reduce emissions.



1. For utilities with sales greater than 4 million MWh with adjustments allowed for existing hydro generation, new nuclear generation, and new carbon sequestration units. Additionally, 25-40 percent of the targets will be allowed to be met by energy efficiency measures.

2. Chairman’s Mark of the Clean Energy Jobs and American Power Act (S. 1733) Oct. 23, 2009.

3. President Obama’s Weekly Address, Jan. 24th, 2009.

4. Source: PA Consulting Group’s merchant capacity database.

5. Section 1705.

5. Projects funded through this program will need to show that it is likely they will be able to