2012 Will Be a Make-or-Break Year for Alternative Energy Technologies
This year will prove pivotal for alternative energy technologies. If you consider the economy, the political climate, the state of the technologies, and recent events, developing a reliable forecast for how things will look a year from now is impossible. Let’s look a little deeper into each of these areas to see what has happened, what will be happening and what the likely outcomes may be.
First, let’s look at the economy. Most in the U.S. would agree this is the biggest issue the country is dealing with. About half of the country says less federal money should be spent on renewable energy and the other half saying the government should not be picking winners and losers. What this means to alternative energy technology providers is that funding will be cut off. It may not be this year, but it is likely to be next year. Any plans for growth based on federal (and possibly local governmental) support, will be put on hold until the situation with the economy improves. Also, as of the first of this year, the 30% federal cash rebate for new projects has expired. This means developers pushed everything they could into 2011 and will likely develop fewer projects this year.
Second, the political climate will stall any significant changes in policy direction for at least a year. This can be viewed as good and bad. Viewing from an alternative energy provider perspective, the good is that the government (state and federal) have established mandates to meet renewable energy production targets. States have implemented Renewable Portfolio Standards (RPS) and the federal government has department-specific goals that must be met. These two areas provide significant opportunity for new business. Additionally, the EPA has enacted (or is in the process of enacting) substantial new regulations on base load (primarily coal) generators. This will force some coal-fired generation facilities to close and have some of that capacity replaced by alternative energy technologies.
Globally, there are some worrisome events that are benefitting alternative energy manufacturers. The continued unrest in the Middle East has driven oil up to over $100 a barrel again. At this price, some of these new energy technologies can be justified. Just this week, Iran has threatened to block the Strait of Hormuz if additional sanctions are placed on it. Over twenty percent of the world’s oil flows through that region. Who knows what will happen to the price of oil if any conflict arises out of this threat. In any case, the argument will be made that alternative energy technologies produced here provide greater energy security for the U.S.
With the good comes the bad. Many constituents (voters in an election year) view funding of these projects for private industries bad policy. Their votes will be cast based on how effective they view these incentives to be performing. Unfortunately, the renewable energy industry (especially PV) is being thrust into the political spotlight due to some highly publicized (and federally funded) companies that have gone bankrupt. Most voters know about Solyndra and are now seeing other PV manufacturers going belly up or suspending operations for extended periods of time. This is due to a global glut in PV availability caused by too rapid a scale up in production capacity. These bankruptcies and disappointing financial performances will continue throughout the year. All of these issues lead politicians to play it safe or avoid the issue at all cost until the election is over.
Third, recent news has everyone guessing what could be next. Just when the country was starting to understand the vast shale gas resource that lies beneath the Midwest and other regions, questions about fracking fluid contaminating drinking water started to arise. Now, there is concern that the re-injection of fracking fluid may be causing minor earthquakes. There is no proof of any of this, but speculation abounds.
There also has been a recent spate of bat and bird deaths at some of the large wind farms. As a result, wind farm operators must now limit the times of day they can run the turbines. Many of these limitations occur at night when the turbines can create the most power. This inability to operate at design parameters completely upends the financial model developers use to support the project payback.
All this turmoil and uncertainty has led to angst among manufacturers, service suppliers, elected officials and consumers. This environment limits risk taking and development of new business models to improve implementation of alternative energy technologies. By this time next year, much of this uncertainty should be behind us. Let’s hope that the innovators that brought us to this point will still be interested in pursuing an alternative energy world.

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