How stimulus saved renewable energy

first_wind3.top.jpgWind towers go up in northern Maine thanks to stimulus.By Steve Hargreaves, staff writer


NEW YORK (CNNMoney.com) -- On a mountain top 80 miles northeast of Bangor, Maine, in country where houses and gravel pits are mere pinpricks on a map green with forest, Paul Gaynor is making stimulus work.

Gaynor, chief executive of First Wind, is using $40 million in federal funds to help build a wind farm that will produce enough power for 13,000 homes and has created 200 construction jobs.

Without stimulus, First Wind's project -- and most renewable energy projects across the country -- may not have happened.

"To us, it's been essential to get through the nuclear winter of financing ability," Gaynor said, referring to the dark days of early 2009 right after the financial collapse. "The recovery act was the bridge that got us from a broken market to one where projects actually get done."

Because of the way tax incentives worked prior to stimulus, few industries were more dependent on Wall Street profits than renewable energy.

Pre-stimulus, renewable energy developments were funded largely by big banks. As an incentive to expand clean, homegrown power, the government offered generous tax credits.

The credit wasn't limited to just big banks, said Ethan Zindler, head of North American research at Bloomberg New Energy Finance, a firm that tracks renewable energy investments. But the banks had the money and understood the rules, so they were by far the biggest financiers.

But tax credits only work when you're paying taxes. When Wall Street profits dried up and their tax bill fell, almost all funding for new renewable energy froze up.

"The market for financing large-scale power projects collapsed," said Zindler. "Stimulus fixed that."

Stimulus fixed it by changing the tax credit to an outright government grant worth roughly the same amount.

There is no limit to the amount that can be spent under the grant program, although it is set to expire at the end of this year. The government originally estimated it would cost taxpayers $5 billion.

The Energy Department said that from the start of the program in July though September, the last month for which data is available, over $1 billion has been paid to finance 32 projects nationwide.

It's hard to say for sure how many projects stimulus saved or what the renewable energy industry would look like without it, said Zindler.

In 2009, some 9,000 megawatts of renewable energy was built in this country, he said. The vast majority of that was wind power.

That's just slightly less than 2008, although without stimulus he estimated that maybe only half the 2009 projects would have been built.

Numbers from the American Wind Energy Association suggest that even fewer projects could have gotten built.

In years when Congress let a previous tax credit lapse, investments in wind energy fell by 75%.

That wouldn't bode well for President Obama's stated goal of doubling the country's renewable energy capacity by 2012.

And it wouldn't bode well for companies like First Wind, or anyone hoping to get a job in renewable energy.

The company's Maine project is actually an expansion of an existing $160-million facility right across the street that was completed last year.

First Wind took that tax credit and rolled it right over into the current expansion. Even on a frigid day in January, Gaynor said more than a hundred people are busy on the mountain constructing the new facility.

"It's a beehive of activity up there," he said.

Before 2010 is out, First Wind hopes to construct another 4 to 6 projects -- all partially paid for with stimulus money. To top of page

Just the hot list include
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Sponsors

Sections

Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More

Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.