/* Google Analytics */

Wednesday, November 5, 2008

A Sunny New Day

It’s a sunny new day here in Silicon Valley. The weekend rain is gone, replaced with nearly blue skies. And our local renewable energy companies are waking up to a new presidential regime that will be very different than the current one. Although both candidates emphasized renewable energy more than the incumbent, this is clearly the best possible outcome for the industry.

Doyle McManus, Washington bureau chief for the LA Times, asked the question that is on the minds of many business executives: “Which Barack Obama will govern?” As with many politicians, there is the tension between pragmatism and ideology, and between primary and general election positions.

Even if Obama the president is more cautious than Obama the candidate, spending on infrastructure and renewable energy seem a sure thing:
"We'll create 2 million new jobs by rebuilding our crumbling roads and bridges and schools," Obama said in his "closing argument" campaign speech last week. "And I will invest $15 billion a year in renewable sources of energy to create 5 million new energy jobs over the next decade -- jobs that pay well and can't be outsourced."

All that spending will create a budget problem for a president who has promised to reduce the ballooning federal deficit, and it will mean a debate in Congress between big spenders and deficit hawks, including in the Democratic Party.
McManus speculated that spending on renewable energy seemed the most likely part of his energy agenda:
The president-elect's ambitious energy proposals may also be tackled piecemeal, advisors said. Some elements, such as the job-creating investments in alternative energy that Obama emphasized last week, are broadly popular.

But proposals for tough limits on greenhouse gas emissions from energy-generating plants and other facilities, a program known as "cap and trade," will be harder to pass because they impose new costs on energy producers.

"This is going to be a tremendously heavy lift to get passed," acknowledged Heather Higginbottom, Obama's chief domestic policy advisor in the campaign.
Every indication is that national and state voters were concerned with the economy above all other issues — which will make certain forms of fiscal stimulus popular, but higher taxes and other spending more risky.

In California, Obama won with 61% of the vote, and voters approved $10 billion in bonds as the down payment on a planned $45 billion high speed rail system. However, two ballot measures (nominally) promoting renewable energy were soundly defeated.

The less surprising was Proposition 7, which would have mandated (to simplify greatly) state electric utilities increasing their use of renewable power from about 13% to 20% by the end of 2010. However, the measure was highly controversial in that it only counted large plants — those of 30 MW or more — which would have wiped out the small providers that today provide the majority of the state’s solar power.

Eliminating the incentive to use small suppliers of electricity would have also hurt those who install such small systems. Gary Gerber, president of Sun Light and Power — and 2008 president of the — became the face of these small contractors. Thanks to TV advertising money from the two big electric utilities, Gerber’s face became a familiar one to California voters. The controversial approach to a popular end won widespread criticism, including from leading newspapers such as the LA Times.

Update 10pm: The LA Times breakdown shows that Prop 7 won in only one county — Imperial County — where such large-scale solar farms would be located.

More surprising was the failure of Proposition 10, a $5 billion bond measure to fund various hybrid or natural gas vehicles, as well as incentives for RE production and R&D. There were lots of TV ads promoting the measure and (AFAIK) not a penny to oppose it.

Why did it fail? Was it the cost? (Beyond high speed rail, the only other spending measure to pass was a $1 billion veterans’ bond). Was it the ballot argument that emphasized the role of T. Boone Pickens in paying the cost of putting it on the ballot? The PickensPlan assumes that heavy trucks will switch to natural gas, which is slightly cleaner than gasoline, and Pickens provided most of the $22 million to promote the measure.

Given these voter reservations, I think the new administration will have to pick and choose its battles. Since solar is only a few years (a decade at most) away from grid parity, the Feds may be able to provide a short-term stimulus and then declare victory when, grid parity achieved, the industry meets explosive demand without further subsidy.

No comments: