THE RIGHT NEW ENERGY INCENTIVE?

Clean Energy: How Do You Jumpstart It?
Keith Johnson, January 21, 2009 (Wall Street Journal)

"...economics are not working in favor of clean energy. That puts even more pressure on President Obama’s clean-energy plans…One of the biggest challenges facing the administration isn’t summoning support for clean energy; the stimulus package alone shows the breadth of support for throwing money at new energy solutions. The real challenge will be the shape that support takes.

"Since 1992, clean energy in the U.S., such as wind and solar power, has been promoted by tax credits…

"Tax credits work when businesses have taxable income they need to offset. The recent credit crunch and economic slowdown highlighted the shortcomings...the number of financial players willing and able to help finance clean-energy development shrank dramatically. That’s the main reason that the wind and solar lobbies called for “refundable tax credits” that would give companies credit even if they aren’t in the black...

"The bigger problem with tax credits is that even when they work, they don’t always work. That is, they can actually distort the electricity market..."

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"…Europe loves feed-in tariffs, where renewable-energy projects simply get a cash premium over traditional power…[But] clean-energy pioneers like Germany and Spain have had to throttle back their generous subsidy programs after the lucrative schemes led to an avalanche of new installations that raised electricity prices for consumers.

"And a national, renewable-energy standard? State-level mandates to generate a certain percent of electricity from renewable energy were a big driver behind America’s recent clean-energy push…a national renewable-energy standard is apparently at the top of the Obama administration’s energy wishlist.

"The problem…is that not all states have sun or wind in equal measure. A one-size-fits-all national standard would face stiff opposition…especially in the South…as with so much of energy policy, turning support on the Hill into wind turbines on the hills will mean tackling the devil in the details."