The Stimulus Act: An Energy Policy of Tea Leaves, First Drafts and Down Payments

by Richard Lehfeldt and Andrew Weinstein, Dickstein Shapiro LLP

Where does national energy policy fall in the pecking order of the administration’s and the 111th Congress’ agenda? After economic recovery, jobs, Afghanistan and health care reform? Did the Obama administration lose its focus earlier this year after expending significant political capital insisting on a comprehensive policy including greenhouse gas reductions, a federal renewable portfolio standard, cap and trade, energy efficiency and smart grids?

Not really. The American Recovery and Reinvestment Act of 2009—the “Recovery Act”—is a snapshot and Rorschach blot of a transformative energy policy supporting the deployment of billions of dollars into projects that will change how we generate, deliver and use electricity.

Almost 9 percent of the Recovery Act’s $800-billion price tag was allocated to energy-related projects and objectives. (This does not even include the late cash for clunkers program, also a colorable piece of energy strategy.)

In the past few months alone, more than $4 billion in competitive grants have been awarded to dozens of projects, from revamping the transmission system to incorporating smart grid technology; $1.9 billion in formula grants have been awarded for energy efficiency projects such as retrofitting buildings to incorporate energy-efficient technologies; and $75 million in competitive grants have been awarded to carbon capture and storage projects.

The energy-related crown jewel of the Recovery Act is probably the Grants for Specified Energy Property in Lieu of Tax Credits, which authorizes Treasury Department payments of up to 30 percent of the capital costs for renewable energy projects that are either placed in service in 2009 or 2010 or commence construction before 2011. These are noncompetitive grants, i.e., any project that meets the qualification criteria is entitled to the credits. The Treasury Department has doled out $1.7 billion in grants to approximately 120 renewable energy projects since this program started a few months ago. At least $5 billion in renewable energy projects have been placed in service in 2009 alone. We should expect billions more in renewable investment next year, helped along by this significant cash infusion.

Not every funding opportunity under the Recovery Act has worked as expected, however. The U.S. Department of Energy’s (DOE’s) Loan Guarantee Program, established in 2005 to help finance innovative energy projects, continues to mature slowly. The Recovery Act expanded the Loan Guarantee Program to support conventional renewable energy projects and transmission infrastructure projects. The program has huge potential and could support project financing of tens of billions of dollars in renewables development. Yet, after five years, the DOE has finalized only one loan guarantee: a $535-million guarantee for Solyndra Inc. This is troubling, particularly because the Recovery Act loan guarantees are available only to projects that commence construction before September 2011. Unless Congress extends this deadline, the DOE will have to pick up the pace substantially in awarding these loan guarantees.

If the above list gives fair indication of the energy sector winners in the Recovery Act sweepstakes—energy efficiency, renewables and smart grid—the parameters of the statute’s energy policy are defined, as well, by its omissions: nuclear power, transmission (other than smart grid) and traditional coal plants (other than dollars allocated to the development of carbon capture and sequestration). Appropriations bills—even the Recovery Act, arguably the biggest appropriations bill in the nation’s history—ought never to be confused with the tough political brokering and program design typical of authorization bills (such as the Waxman-Markey climate change bill that passed the House of Representatives in 2009). Nonetheless, the Recovery Act serves as this Congress’s version 1.0 of an energy and environmental policy; whether or not Congress reaches the finish line on a version 2.0, it is a substantial down payment on that venture and telltale indicator of what the final product might look like.


Richard Lehfeldt is a partner in Dickstein Shapiro LLP’s energy practice. Reach him at 202- 420-2215 or

Andrew Weinstein is an associate in Dickstein Shapiro’s energy practice. Reach him at 202- 420-2618 or

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