U.S. renewable energy faces weak economy, old grid

WASHINGTON Mon Feb 23, 2009 5:46pm GMT

President Barack Obama tours a solar panel instillation with the Denver skyline in the background at the Denver Museum of Nature and Science, February 17, 2009. REUTERS/Larry Downing

President Barack Obama tours a solar panel instillation with the Denver skyline in the background at the Denver Museum of Nature and Science, February 17, 2009.

Credit: Reuters/Larry Downing

WASHINGTON (Reuters) - U.S. President Barack Obama set the goal: double U.S. renewable energy production in three years. Congress provided the incentives as part of the $787 billion stimulus package.

Still, it may take awhile for solar and wind energy companies to get new business and the smart grid to transmit those power supplies.

People in the industries say the stimulus will help speed the process, but it still may not be fast enough to meet the Obama administration's goal of ramping up renewable energy production and related investments to revive the economy.

The stimulus extends tax breaks for generating electricity from renewable sources. The government also will provide incentives for homeowners and businesses to buy solar power equipment, and will help fund other energy-saving measures.

But with the U.S. recession expected to get worse, consumers are worried about losing jobs and paying bills and may not take advantage of alternative energy tax breaks. Also, many businesses are cutting costs and credit is tight.

"We need reassurances that it will be green and low-carbon energy coming online. But we also need assurances that it will be built -- that it will be built fast," said Bracken Hendricks, senior fellow at the Center for American Progress.

Even if demand for renewable energy surges, moving those power supplies will pose problems. The electricity grid is little changed from the one that powered the radios that carried President Roosevelt's fireside chats in the 1930s.

"What we have to do as well is figure out how we're going to get the grid upgraded, which is part of the economic recovery package, so that we can get the energy from where it is being produced to the areas where it will be consumed," said U.S. Interior Secretary Ken Salazar, whose department oversees the federal lands where new transmission lines may be built.

"It doesn't do much good to create a bunch of (solar) energy in the deserts of New Mexico if we can't figure out a way to get that energy transmitted to Los Angeles and San Diego," Salazar said.

Rhone Resch, president of the Solar Energy Industries Association, conceded that renewable energy generation cannot be doubled in three years "without renewed investment in our electric transmission infrastructure."

"It's a million dollars a mile to build that transmission," said Denise Bode, CEO of the American Wind Energy Association.

Oil prices have tumbled more than $100 a barrel since last summer, making renewable energy projects less competitive.

The U.S. Energy Department says renewable energy sources, which include solar, wind, hydroelectric, geothermal, biofuels and other biomass, accounted for 7 percent of U.S. energy supplies in 2007.

PROJECTS TRICKLE OUT

The Bonneville Power Administration announced last week it was using some of the $3.25 billion in new borrowing authority it was awarded in the stimulus package to build a 75-mile transmission line to carry 700 megawatts of new wind energy. However, the line won't move supplies until late 2012.

The Federal Energy Regulatory Commission last week approved rates for two 1,000-mile transmission projects to deliver wind-generated electricity from Montana and Wyoming to consumers in Nevada and other Southwestern states. But experts do not expect both lines to be in service until 2014.

"This (stimulus package) may not result in new transmission lines tomorrow, but it will certainly result in new transmission lines a lot more quickly than it's been done in the past," said Monty Humble, general counsel for Mesa Power.

In addition to a modern grid to move renewable power supplies, the United States will need more total electricity generation for recharging the expected future fleet of plug-in cars. The stimulus package provides tax credits ranging from $2,500 to $7,500 for the hybrid vehicles.

The White House has not yet specified all the renewable energy sources it wants increased to meet its goal, except for wind and solar power.

"That's going to place new demands on the grid," said Reid Detchon, executive director of the Energy Future Coalition.

U.S. Energy Secretary Steven Chu, speaking to reporters last week, could not spell out the administration's plan for doubling renewable energy production.

Chu said he thought the wind industry was the "most mature," followed by solar.

(Reporting by Tom Doggett; Editing by David Gregorio)

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