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Clean-Energy Stimulus
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by Alan Durning

A whole lot of money . . . or not?

“It’s about to be raining money.”

That’s how Terry Oliver of the Bonneville Power Administration described the federal economic stimulus’ clean-energy provisions. He was speaking earlier this month to nearly 1,000 people from the growing clean-energy business in a packed Seattle conference hall. (You can actually watch him say this—praise be to the YouTube impulse—along with everything else that any plenary speaker said on this state website.) The turnout—possibly the largest for a conference on energy efficiency and renewables in Cascadian history—was largely a testament to how widely held that sentiment was.

(Undiscliplined aside: The spectacle of hundreds of swarming clean-energy enthusiasts reminded me of the punch line about how to herd cats: you move the food. They clearly smelled food—er, money—in that conference hall. [Second undisciplined aside: The smell of food is not the premise of my favorite cat-herding video.] And, all irony aside, the fact that clean energy now smells like money is exceptionally good news, because nothing mobilizes human enterprise like the confluence of enthusiasm and profit-seeking.)

The whole US federal stimulus—almost $800 billion total, $78 billion of it for clean-energy nationwide, as much as $2.9 billion just for clean-energy projects in the state of Washington alone in the next two years, with as much as another $2 billion in Oregon and Idaho—is also a paltry sum when set beside the enormity of the challenge we face. The Cascadian energy economy drained more than $28 billion from the economies of the Northwest states last year alone.

This chart shows that Idaho, Oregon, and Washington together commonly see changes in energy spending far in excess of the (up to) $2.5 billion per year that the stimulus is injecting. From 2007 to 2008, for example, spiking fossil-fuel prices increased the burden on our regional economy by $6 billion—more than twice the annual value of the federal stimulus.

NW energy spending over time graph

Fortunately, stimulus funding is not the end of the story where federal clean-energy budgets are concerned. The federal budget adds substantial increases for clean-energy programs. On the other hand, state, county, and city energy-program budgets are under the knife, and private investment in energy—as in just about everything else--has fallen off a cliff.

So if Mr. Oliver is right that it’s about to be raining money, it’ll be a gentle Northwest shower, not a deluge. And it’s falling during a severe drought.

Still, any money-rain brings opportunity. The opportunity for Cascadia’s leaders is to invest federal funds in programs with lasting dividends: programs that move us off the fossil-fuel roller coaster, stimulate profitable new clean-energy businesses, melt barriers to private-sector investment in energy efficiency, correct market failures, train a new generation of clean-energy workers, buffer working families from economic meltdown, and trim climate-disrupting emissions.

The challenge for Cascadia’s leaders is to avoid the fate of many crash programs—crashing. Fortunately, in Washington at least, state leaders appear to be making excellent decisions about stimulus investments.

Economist Daniel Malarkey, a clean-energy entrepreneur and a new advisor to the state on energy efficiency, has summarized how much clean-energy federal stimulus Washington would receive, if it won its “fair share” of federal funds in each category. (The stimulus includes funds distributed by formula to states and cities, funds distributed by competitive grant, and funds distributed to federal agencies. I have yet to find a similar analysis for British Columbia, Idaho, Oregon, or other Cascadian jurisdictions. If you do, please share! Jennifer posted one video overview.)

Clean energy funding energy in WA 1

The single largest increment is $1.3 billion in new borrowing authority for the Bonneville Power Administration. BPA, because it’s a government agency that runs transmission lines and markets electricity from public dams, is an unusual corporate entity. Its ability to borrow private capital to expand its infrastructure—such as transmission lines for new wind farms—is restricted. The stimulus essentially gives BPA a bigger line of credit at the US Treasury. I hope BPA will use that credit to invest in transmission infrastructure for dispersed renewables and to invest directly in energy efficiency, recouping its investments through its rates.

Excluding BPA’s line of Treasury credit, as this second chart from Mr. Malarkey does, makes clear that the federal renewable energy tax credit is the second largest increment, with a “fair share” value in Washington of $378 million. But the largest increment that Washington is receiving automatically – regardless of private actions and without competing for grants – is the $250 million energy efficiency funding (in red on the chart).

This quarter-billion-dollar energy-efficiency stimulus budget is broken in three equal parts, according to Tony Usibelli, assistant director for energy policy at the state Department of Community, Trade, and Economic Development. About $60 million is going to the state’s low-income weatherization program, which is managed by 26 existing community action agencies and housing authorities. Chuck Eberdt of one of those agencies, the Opportunity Council in Whatcom County, Washington, estimates that these funds will double the budget for low-income weatherization in the state for two years. That’s a large boost, but it’s just half of the increase—for one-fifth of the period—I recommended here.

Another $60 million (roughly) will flow to cities (and tribes) under the new Energy Efficiency and Conversation Block Grants program. They will use it for the kinds of programs we’ve described in Portland and Seattle.

The remaining $60 million (roughly) will go to a portfolio of innovative initiatives, including about $15 million to be divided among three local pilot projects of my favorite neighborhood-retrofit-green-collar-jobs model SustainableWorks. Almost $40 million will capitalize a revolving loan fund for efficiency businesses, with another $5 million to help financial institutions invest in efficiency, too—both streams of funding will help with financing more retrofits. Good stuff!

Green-collar job training funds in the federal stimulus—the bottom bar on Mr. Malarkey’s chart—are far from ample, considering the surging demand for clean-energy training at Cascadia’s community and technical colleges, as reported by the Oregonian. On the other hand, the $23 million to which Washington is entitled by federal formula (in red on the chart) is the second largest increment (after efficiency funding) to which it is entitled. So that’s something.

Stimulus spending works as stimulus just so long as it gets spent. (As Keynes said, during a severe recession such as we’re enduring, the government could bury money in the ground, then pay people to dig it up, and it would stimulate the economy.) To work as a path to a clean-energy economy, it needs to establish new patterns that endure when the money runs out. So far, I’m optimistic about Washington’s approach to its clean-energy stimulus.

This piece originally appeared in Sightline Institute's blog, The Daily Score.

Photo courtesy of Flickr photographer Steve Wampler.

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I think it is fantastic how we are using renewable energy and going green in so many ways. I think we also need to do things like reducing our energy usage, like installing geothermal heat pumps to replace high energy heating and cooling systems.

Posted by: Chuck on 26 Jun 09

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