Obama's Green Economy

December 12, 2008

Ken Silverstein, EnergyBiz Insider
Editor-in-Chief

Is it a bail-out or a build-up? That's the question being put to federal lawmakers right now as they try to grapple with the nation's economic woes and with how to allocate its depleting resources.

President-elect Barack Obama says that while his administration will insist on financial prudence, it must address the current recession head-on. In January, he is expected to introduce an economic stimulus package that is reported to be in the $500 billion range. An estimated $15 billion would be targeted toward green energy initiatives to create or preserve millions of jobs.

To skeptics, it sounds like a giant make-work program -- one that would spend billions on rebuilding the nation's infrastructure and create a massive budget shortfall in the process. But to the president-elect and most Democrats, it is a necessary step to not just avoid falling off the precipice but to also generate the next-generation of jobs and those predicated on the green economy.

"My presidency will mark a new chapter in America's leadership on climate change that will strengthen our security and create millions of new jobs in the process," Obama said in a video. "We will invest in solar power, wind power, and next generation bio-fuels. We will tap nuclear power, while making sure it's safe. And we will develop clean coal technologies."

News stories are replete with inside scoops on where else the billions would be channeled. Pouring money into the smart grid is one place while weatherization programs that seek to make homes more energy efficient is another. Meanwhile, mass transit groups say that they have at least $8 billion in projects ready to go.

Obama said on numerous campaign stops that addressing global warming would become a national priority under his administration. To reduce the associated heat trapping emissions, a cap-and-trade program would be implemented. Under such a regime, the government would set emissions limits and then auction "credits" to those companies unable to meet the thresholds. That money -- pegged at $150 billion -- would then go to the creation of green energy technologies.

But many of his comments were made prior to economy's precipitous fall in October. At that point, American industry became more concerned with weathering the storm than investing in expensive technologies. The incoming administration has subsequently acknowledged that its attention must focus initially on getting the economy healthy and secondarily on reducing greenhouse gas emissions to 80 percent below 1990 levels by 2050 -- the amount that some climate scientists said is necessary to avoid catastrophic consequences. Hence, the nation's budget deficit will expand in the short run.

"The primary focus of the new administration will be on improving the conditions of the domestic economy, which makes energy policy a secondary concern," says Andrew Watt, managing director of Standard & Poor's Ratings Services. "Moreover, funding of the plan will be problematic in this deteriorating economy that has also seen a rapid decline in crude oil and natural gas prices."

New Possibilities

Needless-to-say, the rejuvenation of the economy and the creation of clean technology jobs dovetail with one another. And with billions about to be doled out for those purposes, energy-related interest groups are converging on Washington.

The Western Governor's Association, which is a non-partisan group representing 19 states, just penned a letter to President-elect Obama that says energy efficiency and the development of alternative fuel sources must become a main concern. That's because the U.S. Energy Information Administration projects that by 2030 the domestic demand for electricity will rise by at least 20 percent while the demand for petroleum and other liquid fuels will increase by 10 percent.

The ultimate goal is a low-carbon society. As such, the effort will require bi-partisan and public-private partnerships to build more wind, solar, geothermal, biomass and hydro facilities, the governors say. At the same time, they caution the new administration not to neglect traditional fuel sources that are prevalent today.

"There is no getting around it -- if we want to 'keep the lights on' in America, we are going to need to build new base-load power plants, erect new high-voltage transmission lines, and increase our production of all forms of American energy," adds Colorado State Senator Bill Cadman, a Republican. "Modernizing our energy infrastructure is critical to our security, and that means taking immediate action. The new Congress and President-elect Obama have a great opportunity to get it right this year."

Obama understands that crafting energy policy is an urgent but delicate matter. The sheer complexity means that he must prioritize his time and efforts. And he's made it clear that the promotion of green energy and next generation jobs will garner his attention.

While government may provide stimulus packages and safety nets during these hard times, it will be the private sector that finishes the job. For their part, many utilities are waiting until conditions improve. Others, though, are searching for new possibilities that involve investing in new forms of generation to meet tomorrow's needs.

"We believe there remains significant investment opportunities for the industry to implement public energy policy as renewable energy resources are built and smart grid technology is evaluated and deployed," says David Parker, a utility analyst with Baird & Co. "There remains opportunity to develop a more efficient generating fleet as older generating resources are retired and replaced with more advanced technologies."

The federal government is leveraging its goodwill. But its current and future involvement are meant to resurrect the ailing economy and to create the foundation for a green energy uprising. It's an issue that gets to the heart of Obama's platform and one that will not just determine his political success but also the nation's economic and energy futures.

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Ken Silverstein
EnergyBiz Insider
Editor-in-Chief

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