Is green energy at the heart of U.S., China’s stimulus plans?
As COVID-19 posts threats to public health and financial crisis of more than 200 countries worldwide, analysts see the crisis a reminiscent of the 2008 financial crisis. Back then, both Beijing and Washington introduced huge stimulus packages that lifted demand, including renewables. This time around, is there room for aggressive stimulus again?
Solar expansion amid economic downturn
In the wake of financial crisis, Chinese solar manufacturers started grabbing more market share as solar demand dropped in Europe. While shifting the solar policy to promote solar PV deployment, China has been ramping up domestic manufacturing capacity. Since 2008, it has become the largest solar cell manufacturer in the world. Despite shrinking overseas demand amid recession, the cumulative installed PV capacity in China grew from 0.3 GW to 205 GW over 2009 to 2019, outstripping other countries in the global solar race.
China isn’t the same country it was in 2008
PV InfoLink projects that the Chinese government will not include solar in its spending package amid the COVID-19 crisis, as the industry is neither among the hardest hit sectors nor key to reopening the economy. Indeed, China has brought the coronavirus outbreak under control, and it appears that the government has no intention to extend the June 30 grid-connection deadline for the 2019 subsidized projects.
Hidden debt problem
China is expected to launch a stimulus package to reboot the economy after COVID-19. In many ways, the situation sounds familiar. In 2009, China unveiled a massive US$590 billion stimulus package that revved the economy after the 2008 economic collapse. This time, however, China’s stimulus may not be the same due to its debt mountain.
According to the Financial Times, China at present contributes to one third of the world’s economic growth. While China is seen as the global economic locomotive, the country has saddled with piles of debts since it deployed the “big bazooka” in the 2008 financial meltdown. Before 2009, China’s debt levels to GDP ratio were modest, but the figure has grew by 4.5 times over the next decade, with its new bank lending representing about half of the global GDP in 2019.
Financial crisis accelerates US solar energy commercialization
The financial crisis of 2008 turned out to be rather a blessing for the renewable industry in the U.S., said reporter Ben Geman at Axios. The Obama administration’s 2009 stimulus invested US$90 billion to promote low-carbon energy through incentives such as tax credits. However, the tax equity market collapsed alongside the financial sector. The U.S. Treasury Department promptly provided over US$26 billion in grants to support the renewables industry.
The U.S. government expanded the stimulus to include federal loans for various clean energy projects. This has helped the deployment of utility-scale solar PV. It also provided the first funding for the Advanced Research Projects Agency-Energy (ARPA-E), helping pave the way to the next-wave tech and commercialization.
Stimulus bill leaves out help for renewables
In California and several states, installing and maintaining renewable energy sources is considered “essential activities” to help solar developers meet the deadline amid economic crisis. The clean energy sector was left disappointed as the Trump administration lashed out green deal.
Earlier in March, President Trump has signed a US$2 trillion stimulus bill into law to deliver needed relief to individual Americans, health care facilities, and businesses. The coronavirus aid package, however, omits the solar tax credit extensions and direct payments to renewables.
Solar companies and lobbyists have pleaded the Congress to extend the 26% solar investment tax credit (ITC), arguing that the industry faces a crisis due to supply chain disruptions from the pandemic. The Solar Energy Industries Association (SEIA) also urged the government to extend the 5% safe harbor for additional two years. Whether the requests will be granted remains unclear until the Congress reconvenes.
More green jobs postcrisis
The U.S. government has changed its attitude toward renewables since 2008, according to Katherine Hamilton, co-founder of 38 North Solutions. Clean energy’s resilience to get through a recession has reinforced investors’ view of renewables as not only an efficient investment for decreasing carbon emissions but a mechanism that has higher job creation rate than the conventional fossil fuel-based energy.
A DWS report titled “Economic Stimulus: The Case for ‘Green’ Infrastructure, Energy Security and ‘Green’ Jobs” published in 2008 cited a 2008 Center for American Progress report that stated “$100 billion investment in clean energy and efficiency would result in 2 million new jobs, whereas a similar investment in old energy would only create around 540,000 jobs.” From a job-creation perspective, a stimulus in the renewable energy sector is more feasible for the government, the paper concluded.
The impact of coronavirus on renewables – IHS Markit
Coronavirus: will China rescue the world economy? – Financial Times
IRENA Renewables country rankings
The financial meltdown's green aftermath – AXIOS
Economic Stimulus: The Case for“Green” Infrastructure, Energy Security and “Green” Jobs - DWS
How the 2008 Financial Meltdown Shaped Clean Energy – GreenTechMedia
Wind and Solar Call for PTC & ITC Safe Harbor Due to Coronavirus
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