Obama to push change in a changing energy landscape
From Times staff writer Edward Silver:
Barack Obama is not likely to abandon his oft-stated commitment to foster a new energy economy. That’s despite the painful recession bearing down on the U.S. and the depleted condition of public financing.
The signs are many. Obama’s energy and environmental fact sheets are remarkably detailed, and ambitious. In October, he told Time magazine that energy is "going to be my No. 1 priority when I get into office," reprising the assertion he made during the second presidential debate. Furthermore, his transition team is led by John Podesta, who, since leaving the Clinton White House, has become a prominent green policy advocate as CEO of the Center for American Progress.
Nevertheless, the president-elect faces an energy landscape in great disarray. For environmentalists and renewable-energy investors, late 2008 has served up a steady diet of doom and gloom.
Amid the credit crisis, financing for large solar and wind projects has shriveled, forcing scale-backs and cancellations. Many players that have sunk capital into this field -- General Electric Co., Lehman Bros., the state of California, to name a few -- either are hurting for cash or have left the scene.
Just as dire, when it seemed that vaulting fossil fuel prices had almost made renewable energy a decent deal by comparison, oil and natural gas started their long slide, quashing the price argument.
A high-profile casualty: T. Boone Pickens’ massive Texas wind farm. This week, the storied energy investor confessed that the multibillion-dollar project would be delayed, plagued by tight credit and cheap natural gas.
Less costly conventional energy is a salve to the consumer, and Obama presumably welcomes it. Yet he remains focused, for the long term, on the nation’s dependence on these insecure, finite sources and the greenhouse gases they throw off....
.... Among Obama's collection of proposals are $15 billion a year to "accelerate the commercialization" of renewables (not a breathtaking sum) and targeted tax incentives to hasten adoption. Add to that a sizable infrastructure program, seen as an economic stimulus and jobs engine.
That dovetails with the agenda of the now-dominant Democrats in Congress, though the scale of the program has yet to be defined. Likewise, how much will be funneled to energy, conservation, public transit and other green projects. Considering who holds the levers in Washington, though, look for an accent on sustainability.
Who wins in an infrastructure build? Deficit spending aside, the answer is likely to be almost everyone. Certainly the industrial sector, from Goodyear Tire to GE to Caterpillar. If the program has a green tinge, it could boost renewables across the board. Two investment ideas: the PowerShares WilderHill Clean Energy fund, which has been drained of two-thirds of its value this year, and Quanta Services Inc., which plummeted 26% in the last two sessions on a poor forecast for the current quarter.
Quanta, however, has a specialty in laying electric lines, positioning it for growth carrying power from wind and solar fields to the grid.
Obama’s program also waves an arsenal of legislative weaponry at the oil giants, hoping to prod them to devote more of their vast resources into moving beyond petroleum. Exxon Mobil, for instance, earned $14.8 billion in the third quarter on a staggering $138 billion in revenue. It produced about 8% less oil and gas than a year earlier, and spent $8 billion on share buybacks. The colossus famously earmarks so little for renewables that some of its own institutional investors fear Exxon is jeopardizing its ability to replenish the product it sells.
If Big Oil doesn’t get on board, the president-elect may finance some of his investment program via a windfall profits levy. And he spells out support for alternatives that could, in the fullness of time, make crude obsolete. For instance, he proposes showering buyers of plug-in electric and other "advanced" vehicles with a $7,000 tax credit as well as getting serious about brewing ethanol from plant waste.
There’s more: With Obama and the Democrats in charge, the path is cleared legislatively to launch a "cap and trade" system that auctions the right to emit carbon. This is a means to bill polluters for harming the planet, encourage alternatives and feed public coffers. But with the nation’s finances in a sorry state, the path is hindered economically.
It has to be said that the oil majors are not quaking just yet -- did I mention "in the fullness of time"?
In their first year of governing, Obama and his cohorts will inherit a beaten-up budget that could run $1 trillion in the red, pundits say. Yet his program is one of investment. There’s infrastructure, energy, healthcare and more.
Where will the cash come from? Windfall profits? Maybe. Cap and trade? Eventually. Pulling up stakes in Iraq? Those funds might be conscripted to Afghanistan.
The dividends of fresh infrastructure and new energy industries? Hopefully. And if that works, the gains could make the costs look small.
Photo: Barack Obama (Morry Gash / Associated Press)