Warning Signs for Renewable Energy

Warning Signs for Renewable Energy
By Oregon Tax News

Signs of renewable energy storm clouds…

– 86% of new Congress Freshmen oppose climate change legislation
– 17 Senators signed a letter calling ethanol indefensible and unwise
– Both Al Gore and Obama’s Energy Secretary Steven Chu blasted ethanol in the past few weeks
– The IEA is predicting the global gas glut to last a decade

With the 2010 elections behind us, environmental experts worry that the political shift in the U.S. House of Representatives may reduce federal spending on renewable energy projects. President Obama recently conceded that his push for comprehensive energy legislation was not likely to gain much traction until after the 2012 elections. Other issues of contention could lead to debate in Congress over the deepwater drilling moratorium and restrictions on protected western lands.

Change in Congress

The new Congress is expected to place a greater emphasis on balancing the budget and cutting taxes. This will threaten new policies supporting green innovation and efforts to cut back on carbon emissions. Think Progress, a website run by the Center for American Progress on the new Congress, reported that half of the freshmen Republicans are climate-change skeptics and 86% oppose any climate change legislation that would cost the government money. Green-tech entrepreneurs say that without a unified national policy, investors and businesses will increasingly leave the United States for Germany and Asia, where many governments have comprehensive energy legislation.

Costs rising, companies failing

Congress is not the only threat to green energy. The cost of green technology presents a significant problem during this sluggish economy. The recent stimulus package injected the largest amount of government funds into green technology in U.S. history. Despite all the investments in green technology they have a high risk of failure. Recent reports on the stimulus funding exposed those failures. For example, Solyndra, a thin film solar company raised nearly a billion dollars in private equity, and received a $535 million loan guarantee from the Department of Energy. Solyndra announced that it will close its first factory and will not expand its second factory. Failures like this will contribute to the decrease in support for green energy, something proponents fear could devastate the environment.

Ethanol critics flare

Ethanol has severely criticized in the past few moths from every political viewpoint. First, 17 U.S. Senators signed a letter detailing that ethanol is “fiscally indefensible” and “environmentally unwise”. Obama Energy Secretary Steven Chu criticized ethanol at the National Press Club saying that “ethanol is not an ideal transportation fuel” and we need to look “on ways we can actually go beyond ethanol.” Al Gore said to a energy conference in Greece “It is not a good policy to have these massive subsidies for first-generation ethanol,” and “It’s hard once such a program is put in place to deal with the lobbies that keep it going.”

Global gas surplus

The global gas surplus is another challenge for renewable energy enthusiasts. The International Energy Agency (IEA) expects the gas glut to last a decade and act as a “major barrier” to the development of renewable energy. The IEA’s chief economist Fatih Birol also said that oil companies including Shell and Exxon-Mobil, “are suffering an “identity crisis” because they find themselves increasingly shut out of regions like the Middle East where most of the world’s remaining oil reserves lie. They are repositioning themselves as gas producers, which companies like Shell are marketing as a cleaner form of energy. In terms of climate change, gas is definitely a good solution compared to coal and oil. However, it falls short when compared to renewables and nuclear.”

Finally, the IEA is estimating that average oil prices will hit $113 a barrel in 2035. This is below 2008’s record high price of $147, and the current price of $90 a barrel. However, prices could fluctuate and be much higher or much lower than $113 in decades to come.

California at critical crossroads

California paints a much different picture for the prospects of the renewable energy sector, a much brighter picture. The Los Angeles Times reported that California, a forerunner in environmental policy, recently elected Jerry Brown to replace Arnold Schwarzenegger as the state’s governor next year. Brown is expected to promote the state’s renewable energy efforts. In addition, Californians upheld their green tradition and voted against Proposition 23, which would have suspended the state’s climate change legislation. If the proposition had passed, it could have stalled green-tech developments in California. In implementing Brown’s energy plan the state regulators have just released problematic numbers on the new Governor’s 2020 plan. The California Public Utilities Commission reports that it would cost 14.5% in rate hikes in addition to billions of dollars in additional private investment. With California facing a budget crises of tens of billions of dollars it finds itself with critical decisions on how to advance the renewable energy agenda. California’s success or failure will have a huge impact on renewable energy efforts in other states.

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