Renewables targets, ‘Green Bank’ likely if cap and trade fails

New York, 14 January: If climate legislation stalls in the US Congress this year, lawmakers will likely move forward with an energy bill that includes a federal renewable portfolio standard (RPS) and a 'Green Bank' to help finance renewable energy projects, according to law firm Van Ness Feldman’s 2010 outlook.

The House of Representatives passed a comprehensive climate bill in June 2009, but negotiations in the Senate are slow leading to growing concern that legislators will run out of time to pass the bill ahead of November elections.

If the Senate efforts fall short, there will be “tremendous pressure” to proceed with a bill adopted by the energy and natural resources committee last year, said Curt Rich, head of the Washington, DC-based firm’s public policy practice group.

The committee’s bill passed with bipartisan support, which is important because the Democrats are expected to lose seats in both the House and the Senate, he said.

“The energy bill would be a good test run for negotiations down the road on climate to see if there is common ground on a bill that attracts both Democratic and Republican support,” he said. “That’s going to be the hallmark going into the election and coming out of it.”

Both the House legislation and the Senate committee proposal would establish a federal RPS – which mandates renewable energy uptake – and create a Green Bank, but there are differences that would need to be resolved such as different funding levels and separate views on the Green Bank’s ideal relationship with the Department of Energy (DOE).

“Apart from those differences, I think there is a clear consensus that the federal government is going to have a substantial role in providing financial support beyond grants to emerging energy technologies that are just being commercialised and that there is a need for a Green Bank,” Rich said.

Even if Congress approves a Green Bank in 2010, it would be three or four years before the entity is capable of providing adequate assistance to projects, making it imperative that the DOE’s renewable energy loan guarantee programme effectively supports financing in the meantime.

But the programme has struggled, with only a “slow trickle” of projects receiving financial support, and is likely to be absorbed by the Green Bank once it is functional, Rich said.

“DOE is struggling as they balance the intent of this programme to promote projects that can’t obtain commercial funding with that agency’s extreme aversion to assuming any sort of risk of default on project financing,” he said.