In the year since it was enacted by Congress, the federal stimulus bill has helped the solar and wind markets grow in the United States, but has done relatively little to boost domestic renewable energy manufacturing.
Last February’s stimulus bill, aka the American Recovery and Reinvestment Act, allocated $45.1 billion for renewable energy, energy efficiency, and other energy-related programs and incentives. As expected, due to the multiyear nature of many of the projects, most of that money hasn’t been spent yet. For example, of the $36.7 billion the U.S. Department of Energy has to spend, so far it has distributed just $2.4 billion (although it’s announced awards totaling $25.4 billion).
But the money that has been spent on renewable energy–and the anticipation by investors of more to come–has helped increase the size of the solar and wind markets in the United States. The biggest help has come from grants for building renewable energy projects, such as solar and wind farms. This money–$2.3 billion has been spent so far–helped turn around what was expected to be a dismal year for wind and solar markets in the United States, says Edward Feo, a partner in the law practice of Milbank Tweed Hadley & McCloy. Feo says that experts expected the wind market to drop sharply in 2009 because of the poor economy and tight credit markets. Most presumed there would be half as many installations as the year before. Instead, wind installations increased from about 8,000 megawatts of wind power in 2008 to almost 10,000 megawatts in 2009, he says.
Similarly, the solar industry continued to grow last year. So far the grants have allowed 182 solar energy projects, according to the Solar Energy Industry Association. Altogether, stimulus-related incentives have created 18,000 jobs in the United States, the association says.
The impact of the stimulus is expected to be even greater this year. Last year, the grants were only available for the second half of the year; they’ll be available for the whole of 2010. What’s more, none of the loan guarantees that had been authorized by the stimulus for renewable energy projects have been issued so far. Such loan guarantees, some of which are expected this year, could be key for some projects to get financed, says Feo. This is especially true for large-scale solar thermal power plants. (There have been a few loan guarantees issued from a 2005 energy bill, such as one to the solar company Solyndra, and another to Nordic Windpower.)
But the larger markets for wind and solar don’t immediately translate into manufacturing jobs in renewable energy–at least not within the United States. They do create jobs installing wind and solar farms and maintaining them, but 75 percent of the jobs that these projects generate are not in installation or maintenance, but rather in manufacturing the solar panels and wind turbines, says Joan Fitzgerald, director of the Law, Policy and Society Program at Northeastern University. And for the most part, this manufacturing is done outside of the United States, in places such as Germany and China. In addition to further incentives to grow the market for renewable energy, such as a national requirement that utilities use a certain amount of it, it’s important to have incentives to help companies build new factories and retool existing ones, she says.
Some such incentives exist now, such as the loan guarantees made possible under the 2005 energy bill. The stimulus bill also established a manufacturing tax credit that would provide credits equal to 30 percent of the cost of constructing factories that make clean energy products (this includes making solar panels or wind turbines, for example, as well the parts or machines needed to make them). Last month, President Obama announced 183 projects that will get these credits, which will come to $2.3 billion and will fund projects worth about $7.7 billion. Last year the administration also granted loans for the manufacturing of advanced technology vehicles, such as electric cars. The loans were established by the Energy Independence and Security Act of 2007, but hadn’t been granted.
The stimulus bill has started to draw manufacturing from foreign companies to the United States. In part because of the bill, a solar factory in New Mexico owned by the Germany-based Schott Solar doubled the number of employees assembling solar panels. The Chinese company Suntech pushed up plans to build a factory in Arizona by one to two years in response to the Recovery Act, says Roger Efird, the managing director of Suntech America, a branch of Suntech Power.
Although the money hasn’t been spent yet for two key projects–the smart grid and high-speed rail–the DOE and the U.S. Department of Transportation have announced who the money will be awarded to, and will soon start to distribute funds. The smart grid and high-speed rail projects’ funding will come to $12.5 billion.