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Customer demand has made us focus on the US energy market. And due to customers arriving from other parts of Northern Europe, we no longer focus solely on Danish customers. For those reasons, the name Boston Denmark Partnerships no longer applies, and so we have a new website: Muninsight

Review of the American Recovery and Reinvestment Act's Clean Energy Package

In November 2011 Joe Aldy gave a talk at MIT entitled A Preliminary Review of the American Recovery and Reinvestment Act's Clean Energy Package.

 

USA's Recovery Act invested more than $90 billion in clean energy and leveraged more than $100 billion in private capital for investments in manufacturing, power generation, and the residential and commercial building sectors to advance the deployment of energy efficiency, wind, solar, geothermal, biomass, low-carbon fossil fuel, and other technologies. The talk reviewed the rationale, design, and implementation of the act's clean energy package, including a survey of policy principles for clean energy stimulus, a description of the process of crafting this package during the 2008-2009 Presidential transition, and identifying the key elements of the package. Aldy also discussed the initial employment, economic activity, and energy outcomes associated with these energy investments and focus on the Recovery Act's support for renewable power through grants and loan guarantees.

 

Aldy claimed that the American Recovery and Reinvestment Act has led to the creation of some 2m jobs in USA and boosted the installation of wind power – which is now up to 43,461MW. $3b were channeled through the Department of Energy, and since prior to ARRA the DoE administered only $1b, the ramp-up caused some difficulties.

 

Even more of the ARRA money was disbursed through tax credits. In the past, startups or non-USA companies (that do not have the revenue to take advantage of the credits) would have had to trade the credits with financial organizations such as Lehman Brothers or AIG, in the so-called credit equity market – typically at the cost of 7%. The ARRA enabled companies to take grants in lieu of tax credits, thus obviating the cost of trading such credits.

 

One of these tax credits is the Production Tax Credit which will expire unless Congress renews them in the last quarter of 2012, after the presidential election. This is of great relevance to wind turbine manufacturers whose sales forecasts are highly dependent upon the availability of PTCs.www.business.dk/energi-miljoe/vestas-vi-forbereder-os-paa-brat-usa-stop

 

Furthermore, Aldy argued for USA governmental stimulus plans such as ARRA. Stimulus should not be directed towards projects that the private sector would undertake (and of course many projects are inherently unworthy of funding). But there are spillover effects from a portfolio of projects in the clean energy space that one might term general learning. This general learning cannot be captured by the individual companies and so its value does not figure in the balance sheets of the companies receiving stimulus, at least in the sense that the money can be directly traced to ARRA stimulus. The USA governmental stimulus makes sense when it produces enough general learning for the private sector to benefit in the longer term.

 

Queried what the metric might be for general learning, Aldy had no answer. Someone in the audience pointed out that the government is generally very poor at following up and assessing the value of its stimulus programs.

 

Joe Aldy is an Assistant Professor of Public Policy at the John F. Kennedy School of Government at Harvard University, a Nonresident Fellow at Resources for the Future, and a Faculty Research Fellow at USA's National Bureau of Economic Research. In 2009-2010, he served as the Special Assistant to the President for Energy and Environment, reporting through both the National Economic Council and the Office of Energy and Climate Change at the White House.

 

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