Sunday, January 25, 2009

Economic Constraints Put Energy Projects on Hold

I was surprised to learn in last Thursday’s lecture that only three percent of the United States (US) consumption of energy is attributed to non-hydroelectric renewable energy sources. With little prior knowledge about energy usage in the US I found this to be an astonishing statistic. I was previously under the impression that several US states, particularly California, were spending a considerable amount of time and money on developing the renewable energy sector. This startling statistic demonstrates that the US is still far away from utilizing renewable energy sources at a level that can help solve the mounting potential crises related to our energy consumption habits in the US. Unfortunately, the current economic situation facing the US may further delay investments in renewable sources of energy. After reading through some of the initial blog posts I recognized that this appears to be a common concern for many of the students in our class.

After searching around the web for news articles related to this topic I stumbled upon an article that addresses the affects the economic recession is having upon the solar industry.

According to an article published in the Los Angeles Times a few weeks ago the recession is having some immediate negative effects on the renewable energy sector, particularly for solar companies. The private start-up company, OptiSolar, Inc., which builds utility-scale solar farms, is now facing difficulties in receiving funding, forcing them to lay off nearly 280 out of 600 employees in their California offices.[1] Specifically, OptiSolar, Inc. has been unsuccessful in securing project funding to extend one of their photovoltaic (PV) panel assembly facilities, causing further job losses. The article notes that potential investors appear to be moving away from the solar industry towards companies with a more established history of profits and sales. To help alleviate this issue, OptiSolar, Inc. is now applying to receive loans from the US Department of Energy to continue building its PV facility and possible rehire some of its laid-off employees.

Additionally, economic woes have delayed the construction of a 550 megawatt solar farm in San Luis Obispo, the largest known proposed solar farm in North America. This promising project had already received support from the San Francisco based Power, Gas, and Electric Company who had agreed to purchase renewable energy in a long-term contract. Under California Law, utility companies need to comply with new state regulations set by the California Energy Action Plan (EAP) which require utility companies to meet 20 percent of their electricity needs from renewable energy sources by 2010 and 33 percent of their electricity needs by 2020.[2]

The EAP, amended in 2008, recognizes solar energy to be the most important source of renewable energy for California due to the state’s “abundance of powerful sunlight.” The EAP predicts that its renewable energy goals could be accomplished because California has received full permission and support from the California Energy Commission and the Federal Bureau of Land Management to build utility-scale solar facilities in the state. Some government funding for solar projects also appeared to be promising thanks to the California Solar Initiative, according to the EAP report.

Unfortunately, the economic recession does appear to be putting a halt on renewable energy investments. It’s a shame that at the height of such excitement over clean forms of energy unexpected economic constraints may control the future direction of energy projects.

[1] Maria Dickerson, "future cloudy for California solar farm," The Los Angeles Times, January 13, 2009. Available at:,0,3613875.story

[2] State of California, "2008 Energy Action Plan Update,"


SC_Tang said...

It is very unfortunate to see our economic recession put a halt on the renewable energy development and construction now. I was reading an article today, "The Economic Impact of Renewable energy" from renewable energy, it has stated a quite a shocking statistic.
The author Stephen Lacey stated in his article that expanding renewable energy actually create jobs and economic benefits. It also generates taxes to help struggling communities. According to his article, 13 studies were conducted by University of California Berkeley, and the shocking statistic is "approximately 240,000 jobs could be created and maintained if the country passed a 20 percent by 2020 RPS. If the U.S. relied solely on fossil fuels, the country would only maintain around 75,000 jobs."(Lacey,2007)
Why aren't we doing this?
Anyway, I have to agree with you that most of the articles I read stated the same outcome as you have stated. But if renewable energy can be a solution to our struggling economy then I believe it will be something worth looking at today.

Kelly Twomey said...

It is unfortunate to see the hard hit that the recession has taken on the renewable energy industry in instances such as the solar farm in San Luis Obispo, and Optisolar, Inc. as pointed out by this blogger. However, I believe that while the recession will have a dampening effect on the renewable energy sector in the short-term because of factors such as falling energy prices, the gridlock on capital, and difficulty with project finance, it will be impacted very little in the mid-to-long term. Some sectors will even reap slight benefits from the falling costs of materials such as copper, steel, and other materials used to build hardware, which will decrease the cost of production of traditionally expensive technologies such as PV and wind, making them slightly more competitive to fossil fuels.

Overall, I believe that the degree of resilience of the clean energy industry will be largely dictated by the political environment supporting its growth. We are at a time when we need radical change and while I do not believe that President Obama will necessarily serve as a radical, he will jumpstart the transition to a more sustainable future. The greatest mistake that he and the administration can make is to shy away from enforcing dramatic changes such as carbon legislation, Renewable Portfolio Standards, efficiency standards, etc. that may not be widely accepted and may come with a great cost. As President Obama has communicated over and over again, the upcoming times will require work and sacrifice on the part of the nation and will not come easily. It is one of the first times in history that we as Americans will be asked to reduce our standard of living rather than increase it. He and his administration must remain firm and must make hard decisions that will not always gain public approval.

Some have questioned whether we should place our priorities in preserving the environment in a time of such hard economic times; I would argue that this should be the driving force toward this transition. It gives us the opportunity to create jobs, increase national security, and protect our environment from potentially devastating consequences. The cost of action will be expensive, but the cost of inaction may be far more devastating.