HOUSTON — The oil spill in the Gulf of Mexico adds a sense of urgency to the quest for clean, renewable energy sources, but economic, technical, and regulatory obstacles exist, experts told The Bond Buyer’s conference on Financing Sustainable Energy and Efficiency yesterday.
“Investment opportunities in non-hydro sustainable sources represents an investment opportunity of $400 billion,” said Gary Krellenstein, managing director at JPMorgan. “But developing the technology to store and dispatch power will be the key to reduce dependence and investor risk on subsidies and regulatory mandates.”
Among the major challenges cited by speakers are the lack of capacity to transmit power from remote sources of sustainable energy, like wind farms, to urban consumers; the inability to store power from intermittent wind and solar sources; resistance from landowners to having high-power lines on their property; overlapping regulatory authority; and regional disputes.
“Siting transmission lines is a logistical nightmare,” Krellenstein said. “I would put it on par with building a coal-fired power plant.”
From an economic standpoint, renewable energy is challenged by the abundance of natural gas, which is a relatively clean, cheap energy source, as well as conservation measures, which are even more of a bargain, he said. Conservation includes improving building insulation, which in some cities and counties has become a bond-funded program.
Shadowing the entire industry, including carbon-based sources, is the intermittent federal regulatory atmosphere, said James Hoecker, former chairman of the Federal Energy Regulatory Commission and now senior counsel at the law firm of Husch Blackwell Sanders.
“We have tremendous uncertainty,” Hoecker said. “And I know that uncertainty is death for the capital markets. The good news is that Washington is focused on this like a laser. We just have trouble agreeing on whether the sun’s going to come up tomorrow.”
Hoecker said additions to the U.S. transmission network are expected to triple between 2009 and 2018, growing at the rate of 3,100 miles per year. Over the next 20 years, generation and transmission projects are expected to require about $1.5 trillion nationwide, he said.
“Project proposals abound, with 90 planned projects totaling $120 billion,” he said. “Unfortunately, our performance record isn’t very good. I suspect that an awful lot of these projects will die of frustration and neglect.”
Key bills that could affect the cost allocation and planning for new transmission lines are S. 1462, the American Clean Energy Leadership Act; HR 2454, the American Clean Energy and Security Act; and the American Power Act, sponsored by Sens. John Kerry, D-Mass., and Joseph Lieberman, I-Conn.
The fact that Sen. Lindsay Graham, R-S.C., dropped out of the sponsorship illustrates the political challenges facing renewable energy, Hoecker said. “Unfortunately, I think it will be two or three Congresses from now before we get anything done,” he said.
In addition to the industry challenges, public utilities that had planned to build renewable energy portfolios are seeing pressure from state and local leaders seeking to balance budgets, said Chris Jumper, an analyst at Fitch Ratings.
He noted that in New Jersey, Gov. Chris Christie took $158 million from the state’s Clean Energy Fund to help close an $11 billion budget gap, leaving solar projects without the promised tax rebates. The Mid-Atlantic Solar Energy Industries Association, a trade group, sued over the move May 3 in state court.
In Texas, meanwhile, Democratic gubernatorial candidate Bill White, former mayor of Houston and former deputy secretary of the U.S. Department of Energy, criticized Republican Gov. Rick Perry for calling the Gulf oil spill an “act of God”.
“We cannot afford an energy policy that is based on either wishful thinking or irrational fear. Claims by those in public office or the industry that somehow this tragedy was unavoidable or some 'act of God’ are not helpful,” he told the conference.