Uncle Sam Singles Out Cleantech


We’ve known for a while now that the stimulus was going to be delivered with a heavy green hue.

Obama has talked for months–even during the campaign–about creating green jobs, promoting energy efficiency, and updating our embarrassing energy infrastructure.

So it’s no surprise that this massive piece of legislation, the first of his presidency, makes those and several other campaign promises a reality. But as with all federal stimuli, the taxpayer ultimately foots the bill.

Since you and hundreds of millions of other Americans are the loaners here, it’s probably prudent to see where billions of your borrowed dollars are going.

You can start by taking a peek at your new $37.5 billion energy bar tab.

Green Begets Green

Of course, you’re on the hook for much more than the $37.5 billion energy portion; the total comes in at about $787 billion. (Apparently Congress wanted to use a jumbo jet-esque number to convey its enormity.)

At eight inches thick, with over 1,000 pages, you’d have to be an expert in everything from public health to school construction–with an Ivy M.B.A.–to understand it all fully. I’ll do my best to get you started on the “green” section.

Think of it like a value meal–the McGreen, if you will. This bill takes some of the most sought after aspects of renewable energy and clean technology, and puts them all together with one price tag. But instead of a greasy sandwich, fries, and Coke, for the $37.5 billion you get:

  • $4.5 billion to boost the energy efficiency of federal buildings
  • $6.3 billion for energy efficiency and conservation grants
  • $5 billion to weatherize old buildings
  • $2.5 billion for energy efficiency and renewable-energy research
  • $6 billion for new loan guarantees for wind and solar
  • $6 billion for cleaning up toxins on former military sites
  • $1.2 billion to fund the Environmental Protection Agency’s environmental cleanup programs
  • $6 billion for improvements to drinking water systems

And that doesn’t include the $17 billion slated for public transport like added bus routes and high-speed rail.

It seems like a lot, I know, but it’s really just a drop in the bucket when you consider how much dough is needed to bring all of our sagging energy and water infrastructure up to par. $37.5 billion is only a tiny carrot. At that price, we still need several more carrots and a good mix of sticks to ensure enough clean energy and water to meet rising demand.

$2.16 Trillion To Go

That’s right. Even with the billions slated to come cleantech’s way via the stimulus, required funding still falls about $2 trillion short, according to an early draft of an American Society of Civil Engineers (ASCE) report that graded each of the country’s infrastructure systems.

The last time the ASCE issued its infrastructure report card, the nation was issued an overall grade of “D”.

This time, the grade was also a “D”, but according to report chairman Andrew Herrmann, it’s slipping from a “high D” to a “low D”.

By nearly all measures, American infrastructure systems of all types are barely above failing.

The report looks at the same 15 areas it did four years ago-three of them got worse, only one got better, and the rest remained in the same poor condition. The price tag to fix the problems has also changed, growing $500 billion, from $1.7 trillion to $2.2 trillion.

That means the $37.5 billion provided in the stimulus isn’t even enough to cover the incremental rise in infrastructure investment needs since 2005.

Put another way, the infrastructure measures in the soon-to-be-signed stimulus only reduce the shortfall to $2.16 trillion. Just keep that in mind when you hear the talking heads bemoaning egregious or overspending.

Stimulus Increases Attractiveness

Perhaps what’s most exciting about this bill isn’t the spending included, but the spending it will incite.

That’s because the solar and wind industries have been hit hard by tightening credit markets. Customers reliant on financing have been forced to delay or cancel orders, which has led to a slowdown in the erection of solar and wind farms.

The stimulus does much to remedy that situation without explicitly mandating or funding new projects.

By extending the placed-in-service date until December 2012 for wind farms eligible for tax credits, those now shying away from plunging into the wind market will be attracted once again, and private capital will once again come to the cleantech sector.

What’s more, the stimulus also allows the direct monetization of tax credits via federal grants. So investors that once had to wait until tax time to get a 30% credit on their cleantech investment can now get cash at the time of installation. This is very attractive for investors and will aid in bringing increased volumes of cleantech projects to market.

In addition, the legislation also creates a new 30% tax credit for manufacturers in the wind, solar, energy storage, efficiency, and transmission sectors, which are available upon certification by the Secretary of the Treasury in conjunction with the Secretary of Energy.

Caps on tax credits for solar hot water, geothermal heat, small wind turbines have been removed, enticing homeowners to install these clean green systems.

And all that is without mentioning:

  • $1.6 billion in renewable energy bonds to finance clean generation facilities
  • An extension of the tax credit for alternative refueling properties
  • An extension of the tax credit for energy efficient homes
  • Increases the tax credit for electric vehicle purchases

So you see, this bill does as much indirectly as it does directly.

For anyone that wants to see cleantech succeed, it’s hard to find something to complain about. The bill even went as far as removing $50 billion in federal loan guarantees for nuclear energy.

But the White House has cautioned about being overly optimistic about the stimulus’ immediate impact. According to senior advisor David Axelrod, “There will be signs of activity very quickly. But it’s going to take time for that to show up in the statistics. The president has said it’s likely to get worse before it gets better.”

Even so, top infrastructure stocks have been rising on The Street in anticipation for months. And the signing of the package tomorrow should serve to extend those gains.

It seems to me that, since taxpayers–both present and future–are footing the bill for this thing, we should be taking advantage of any dividends offered to us in the stock market. Understanding which market sectors will benefit is the first step in making this a doubly-effective stimulus.

I think it’s fair to say that green energy and infrastructure are perfectly primed for that purpose.

Nick Hodge is a regular contributor to Green Chip Review and Energy & Capital. One of the bright young minds in today's cleantech industry, Nick is putting his knowledge of nascent green markets to use in several ways. . . He's the Managing Editor of Alternative Energy Speculator, an investment advisory service focused on taking advantage of every aspect of cleaner energy, from the stop-gap companies that are making a fortune lowering carbon emissions to makers of more fuel efficient engines and other technologies that will help the U.S. successfully build a bridge from current fuel to the energy of the future. Nick also runs Green Chip International, which is dedicated to giving you the sharpest insight, not just into clean technology trends but also the geopolitical context that makes markets move. A featured guest on Canada's Business News Network and Yahoo!'s Tech Ticker, Nick is also very interested in uncovering the massive profit opportunities associated with a growing lack of freshwater and the maturation of the global carbon markets. Nick is also the co-author of the bestselling book, Investing in Renewable Energy: Making Money on Green Chip Stocks.

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