March 15, 2010

It's an election year and the Obama administration's record is fair game.

A cornerstone of the president's agenda has been making investments in the latest energy technologies -- money that underscores the transformation to the green economy and the creation of jobs and cleaner air. Toward that end, the administration spearheaded a $787 billion stimulus plan that has allocated hundreds of billions of dollars into such things as the intelligent utility, green energy development -- and even subsidies for futuristic nuclear and coal facilities.

"Obama, generally, has the right priorities," says Mary Anne Sullivan, former general counsel for the U.S. Department of Energy in the Clinton administration and now a Washington lawyer. "Let's let a thousand flowers bloom on the technology development front. The market will then pick up and go with the ones that work best."

The nation, of course, is still reeling from nearly two years of economic recession. With a fearful private sector, the administration pushed through the recovery act of 2009 as a way to liquefy the economy and to settle nerves.

Critics, however, contend that the flood of new money will burden taxpayers with a tumultuous and unforgiving debt. They furthermore argue that some of the resulting environmental regulations will weigh down industry and hurt job formation.

According to Vice President Joe Biden, the stimulus plan has already invested $23 billion in renewable generation that will create 253,000 jobs. That, in turn, will pull billions more from the sidelines and produce thousands of additional jobs. The administration has also invested $4.5 billion in the smart grid. By 2015, it says that it expects that will lead to 40 million modern meters in this country that can are capable of providing two-way communication between utilities and their customers.

Through the recovery act and the existing loan guarantee program, the Obama administration is also investing more than $10 billion clean coal programs that include carbon capture and sequestration -- money that will be leveraged to secure an additional $4 billion from private industry. It has also increased the loan guarantees offered to developers of nuclear energy from $18.5 billion to $54.5 billion.

"If we are going to have a carbon-free atmosphere and reduce carbon intensity, the quickest way to do so is bring nuclear on line," says Glenn McCullough, the former chair of the Tennessee Valley Authority. "It's also smart to incentivize advanced coal technologies. It's a huge boost to our economy."

Heavy Hands

To be sure, critics abound. They note that the administration has misplaced priorities and that government's heavy hand will not just repress manufacturing enterprises but that it is now responsible for picking winners and losers. The best ideas, for instance, may give way to those that are the most agile and can put people immediately to work.

The skeptics are also particularly concerned about the vilification of the coal industry that supplies more than half of the nation's electric generation mix. And while the industry is receiving some federal subsidies, they say that any new U.S. Environmental Protection Agency regulations to regulate carbon dioxide as a pollutant under the Clean Air Act are ill-conceived. They also say that if a cap-and-trade provision is legislatively enacted, it would raise the price of energy and cost jobs.

The markets should be the ultimate arbiter of what technologies and fuels work best, says Robert Michaels, professor of economics at California State University, Fullerton. Any renewable energy mandates are unfounded, he says, noting that they cannot work and pointing to what he says as the California example. Likewise, he says that nuclear power and carbon capture and sequestration must prove themselves economically viable.

"Nuclear power is probably cheaper and safer, as well as more dependable than intermittent renewables, but its supporters are looking for the same handouts that renewables get, in the form of liability limits and loan guarantees," says Michaels.

Other complaints, though, are coming from the left. They center on getting the stimulus money into the market place sooner as well as creating a permanent extension of the tax breaks given to renewable energy developers. To that end, they are saying that federal legislation to reduce carbon emissions through a cap-and-trade program in combination with a national renewable portfolio standard would be effective.

Proponents of Obama's stimulus program acknowledge that the sheer largess of the program along with government's lack of dexterity is an issue. But they emphasize that it takes time to rebuild an economy.

"Before the stimulus bill passed in February 2008, we had lots of clients who were slowing down and mothballing projects until the financial markets cleared," says Bill Holmes, partner in the law firm of Stoel Rives. He specifically credits allowing green developers the choice of whether to take the production tax credit or cash grants.

Growing the renewable energy base, though, must also be accompanied by an expansion of the national grid, adds Holmes. A robust transmission grid that provides continuous data is better able to transport green electrons around the country. A constrained system that cannot communicate, by comparison, exposes the system to intermittency.

Backers of the greening of America say that it is about more than changing the country's energy traditions. It's also about rejuvenating the economy and creating wealth. While the Obama administration says that expanding the nation's green infrastructure will serve such a dual purpose, the people will have their voices heard this fall.

 

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Ken Silverstein EnergyBiz Insider Editor-in-Chief
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