US clean energy stimulus spending starts slow: CCS funding last out of the gate | Global CCS Institute

In 2009, when newly elected President Obama signed the American Recovery and Reinvestment Act, nearly $65 billion was allotted to fund green programs.

For the U.S.’s nascent clean energy industry, the funds were like finding fresh water on a long, parched journey.  The funds promised to rejuvenate American cleantech industries, and help them catch-up with European players who had benefitted from more public funding, over a longer period.

Yet two years on, many U.S. players remain thirsty for the promised funds.  Only about 36% in green stimulus funding has actually been spent, according to a report from Bloomberg New Energy Finance (BNEF) published on Feb. 18.

Among six programs targeted by Obama’s green agenda, some exceeded this spending rate, while others lagged far behind. Nearly half of the $25 billion allotted for energy efficiency has been spent. Carbon capture and sequestration (CCS) has seen the least spent, both nominally and as a share of its budget: 3% of the $4.4 billion has been deployed.

Of course, it’s not unusual for public funding of complex technology programs to move relatively slowly from promise to reality. Even so, the US rate of deploying the greens funds is lagging its peers. The 12 largest economies had spent about 49% of $194 billion they pledged for clean tech programs by end 2010, according to BNEF analysis.

China has spent 69% of its $46 billion green stimulus package, estimates BNEF, and Japan has doled out 86% of its smaller, $10 billion eco-stimulus.

CCS offers a microcosm of the factors that have delayed some of the funding in U.S. cleantech areas. Of four CCS projects included for funding (Future Gen 2.0; geological sequestration site characterization; clean coal power initiative round III; and energy department R&D on CCS), just $132 million has been spent out of $4.379 billion allotted.

Why the trickle? CCS has experienced “tepid funding demand,” BNEF observed, because the programs require matching funds from the private sector. And so far, funds have been slow to materialize without any national price on carbon in the U.S.

What’s more, CCS projects are typically long-term, capital- and planning-intensive projects, with few slated to even break ground before 2012. Most CCS projects, for example, are connected to existing or new fossil-fuelled power plants, which typically require a year or more for environmental review.

Overall, BNEF sees reason to expect deployments of funding to accelerate this year now that some, if not all, lingering administrative obstacles had been dismantled.

Regulations requiring that local governments pay “prevailing wages” for funded projects slowed initial dispersals. The passage of time has let the bulk of projects meet these standards (known as Davis-Bacon Act rules).  BNEF points out that labor-intensive home weatherization projects, for example, shot up in number to 320,000 completions by the end of January 2011, up from less than 10,000 a year earlier.

Another barrier that dissolved was opposition by a handful of senators who objected to supplying federal money for green technology made outside of the US. Solar industry advocates helped neutralize these concerns by raising questions about data initially used by the senators.

In a related issue, a number of projects that required waivers to import clean tech goods required waivers from “buy American” rules. Many of these waivers were granted in 2010, opening the door to more spending in the future.

Lastly, BNEF points out, many of the programs funded by the U.S. stimulus package are offered as tax credits or loan guarantees to private players, requiring initial action from companies before the public funds are made available. And with recessionary conditions lingering through 2010, this funding was slow to materialize in many cases. Improving macroeconomic conditions suggest private monies should increase their flow this year.