Stimulus Bill Funds Still Not Reaching Cleantech

by Robert Lahey, Ardour Capital Investments
Published: June 17, 2010

Most of the $787b stimulus bill funds have been spent, but the impact on cleantech has fallen below expectations. The American Reinvestment and Recovery Act (ARRA) allocated $36.7b to the Department of Energy (DOE), but as of 6/4/10 only $4.5b has been spent and most of it did not go to cleantech companies.

Nuclear waste cleanup projects and state governments received a majority of the DOE’s stimulus funds spent to date. The nuclear waste projects, which have received $2.1b, have nothing to do with renewable energy or energy efficiency. State governments, which have received $1.3b to date, are supposed to benefit cleantech through Energy Efficiency Conservation Block Grants, Weatherization Assistance, and State Energy programs. However, we are seeing the potential impact on cleantech diluted because of delays at the state level. Also, many states facing significant budget shortfalls are likely to spend a portion of the funds on programs unrelated to energy.

Programs that directly fund cleantech companies have announced significant awards, but the money has not been dispersed. Excluding state nuclear cleanup and state programs, $11.5b has been awarded but not spent. These programs are the most attractive for cleantech companies because there are no state intermediaries to delay or supplant funds. Smart grid companies will benefit significantly as utilities receive $3.9b in matching funds to be spent on smart meters and demand response.

The loan guarantee program remains the most well funded and elusive ARRA opportunity. It is sitting on $3.9b in funding (99% unawarded) which can be used to support $34b in loans to cleantech companies ranging from equipment manufacturers to project developers. This program is having serious trouble getting off the ground and we expect that a majority of the funds will remain unspent well into 2011.

Progress in the loan guarantee program has been greatly exaggerated. Only one cleantech company has ever received a loan (Solyndra), and the 7 companies that have been conditionally approved are applicants from 2008. Conditional approval is a positive step forward in the process, but it does not mean the loan is certain to occur. The absence of real loans is remarkable considering that the program was established in 2005 and has been accepting applications since 2007.

Delays are attributable to personnel deficiencies in terms of quantity and quality (limited finance and private sector experience), new restrictions on lobbyists, stringent credit requirements, and mandatory environmental studies that move at a snail’s pace.

The Treasury Department grant program is a brightspot for cleantech. Renewable electricity project developers applying for these subsidies are exempt from many of the DOE’s most burdensome requirements. Since this program was launched in August 2009, it has given out $3.6b to 671 projects.

While slow progress of ARRA spending is a near-term negative for the sector, we remain optimistic for the long-term impact. The size of these spending programs is unprecedented for cleantech space, and we look for them to have a potentially game-changing affect on the US market.

Robert Lahey is the Senior Legislative Analyst at Ardour Capital Investments, LLC, and can be reached at rlahey@ardourcapital.com. Founded in 2002, Ardour Capital is the leading research and investment-banking firm exclusively focused on energy technology, alternative energy and power, and clean & renewable technologies. Ardour Capital publishes in-depth company coverage and industry specific research. Ardour Capital offers private and public companies a full range of corporate finance, investment banking and capital market services. Ardour Global Indexes is a family of pure play alternative energy indexes that is the primary measure of cleantech equity performance.

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