SQUARING OFF: THE FIGHT FOR NEW ENERGY INCENTIVES

There is a fight on Capitol Hill to get New Energy incentives through the Senate before they expire at the end of this year. New Energy lost the fight in 2007 and again in February 2008. Already, venture capital is being shifted to nations where policy supports New Energy development. The U.S. is about to fall farther behind in the building of 21st century energy infrastructure.

Michael Eckhart, president, American Council on Renewable Energy (ACORE): “We’re not against [the oil companies], and we didn’t propose this…We’re not out there to penalize anyone. But if tax credits are not extended, we will lose the following of Wall Street. It will be a national embarrassment.”

New Energy is being beaten by an entrenched minority of recalcitrant Senators from states where Big Oil, Big Coal and Big Utilities pay the price and run the show. In the past few weeks, representatives of New Energy associations and companies have been upping the effort to sway swing votes but oil and gas industry lobbyists, armed with big money, are standing their ground.

Center for Responsive Politics: The oil and natural gas industry has contributed $10.4+ million to candidates in 2008. New Energy industries have contributed $500,000+ to candidates in 2008.

The oil and gas industry claims New Energy advocates want to raise oil company taxes and block oil company operations. The companies portray themselves as victims. Mark Kibbe, tax policy analyst, American Petroleum Institute: “Most oil companies are weighing the relative good versus harm…In the end, the harm is pretty significant. We shouldn’t discriminate against a form of energy that we’re still relying on.”

Kibbe is spinning the facts. New Energy advocates simply want to shift subsidies away from an oil and gas industry making unprecedented tens of billions in profits. The NY Times called the oil and gas industry subsidies "wholly unnecessary..." Nobody wants to obstruct the work done by the oil and gas industry. It's just hard to understand how businesses making huge profits require subsidies from the American taxpayer.

Everyone from the heads of ExxonMobil, TexacoChevron and Royal Dutch Shell to the average American have agreed New Energy needs development. Building emissions-free energy infrastructure is a common goal. The oil and gas industry enjoyed government support for more than half a century. Now it is time for New Energy.

A fight like this is not good for either side. It makes oil company investments in New Energy ring hollow. On the New Energy side, a lot of industry advocates would rather not fight such powerful opponents. House leaders set up this confrontation by deciding to grab the attention of voters already resentful toward Big Oil for high pump prices by using oil and gas industry subsidies to fund the New Energy tax credits.

Economists, neutral investment organizations and business associations agree: New Energy will lose crucial opportunity to foreign investment if the incentives are not funded somehow and soon. John Cavalier, vice chairman, Credit Suisse: “Lenders rely on tax equity. Loans don’t work without tax credits. We can’t make loans to projects without tax credits…You will begin to see lenders exit this business.”

The emptiness of the oil and gas industry’s position becomes apparent when its proponents resort to the national security canard to bolster their argument. Charles Drevna, President, National Petrochemical and Refiners Association (NPRA): “This is not going to make us more energy independent…What we’re going to have is less energy security.”

New Energy advocates’ appeal is a little bit emotion and a little bit logic. Barry Cinnamon, CEO, solar installer Akeena: “Even if it means David versus Goliath, we have to engage in this battle…Some people say the oil companies are too big, too nasty and have too much money. I understand that. But I don’t think it’s the right policy to keep giving incentives to people who don’t need it.”

It would be a shame to let political infighting turn growth like this around. Poor leadership set New Energy back a decade in the 1980s and a global climate crisis is the result. (click to enlarge)

Solar energy advocates ask Congress for breaks
Erika Lovley, March 10, 2008 (Politico)

WHO
Nancy Floyd, venture capitalist/founder & managing director, Nth Power; Michael Eckhart, president, American Council on Renewable Energy (ACORE); Mark Kibbe, tax policy analyst, American Petroleum Institute; National Petrochemical and Refiners Association (NPRA) (Charles Drevna, President); John Hofmeister, President, Shell Oil: National Venture Capital Association; Ceres coalition;

Bad political policy can turn growth around in a flash of 20 pieces of silver. (click to enlarge)

WHAT
The measure before the Senate is essentially a proposal to shift $17.65 billion in tax breaks and subsidies away from the oil and gas industry in order to fund tax credits for New Energy, energy efficiency, alternative vehicle fuels and plug-in hybrid electric car development.

click to enlarge

WHEN
- Tax breaks to New Energy that have spurred enormous growth over the past 3 to 5 years will expire in December 2008. Just the threat of expiration has put major projects on hold.
- Some of the oil and gas industry tax breaks and subsidies the Senate proposes to shift are as old as half a century. Others go back to the 1990s or to earlier this decade when the oil and gas industry was still struggling with much lower prices.

WHERE
- The House of Representatives passed the measure now before the Senate. The House passed a similar measure in 2007 that was rejected by the Senate by 1 vote.
- Germany and Spain having booming New Energy industries and government policies very attractive to U.S. New Energy businesses.

Maybe the Senate will listen to these guys... (click to enlarge)

WHY
- President Bush has consistently backed the opponents of the New Energy incentives.
- Oil lobbyists and the National Taxpayers Union claim the shift of incentives will drive gas pump prices up.
- Solar energy industry leader SunPower already gets 60% of its sales from overseas and a failure to extend the incentives may up that figure to 90%.

...or this guy. (click to enlarge)

QUOTES
- Floyd, Nth Power: “I never thought as an investor I’d be as engaged in policy as I am — this is not in our job description…But I’m doing this because it’s so important. I can’t think of a bigger economic development opportunity facing this country, and we’re throwing ice water at it.”
- John Hofmeister, President, Shell: “At $100-something a barrel, we’re not requesting tax breaks to run our business…However, we are deeply troubled that our business would be targeted by name for discriminatory tax treatment.”
- Julie Blunden, v.p., solar energy industry leader SunPower: “We’ve been faced with real uncertainty in the U.S. market…We’ve been fielding questions from Wall Street since the beginning of the year. We need to find a way to get this through in our own right, not lumped onto an oil industry vehicle.”