All told, the $789 billion economic stimulus bill contains about $50 billion for renewable energy projects, electric utilities, and other green companies. It’s possible to look at this sum in at least a couple of different ways.

First, the stimulus package is aimed at creating jobs.  Some 3-4 million jobs according to President Obama.

Estimates from the Solar Energy Industries Association and the American Wind Energy Association figure more than 200,000 jobs in their industries alone. With unemployment rates projected to go to nearly 10% nationwide next year, creating that many new jobs is a good thing.

But from a different perspective, those 200,000 jobs could serve to raise significant barriers to entry to competing, and better, renewable energy companies. Those jobs are not targeted at R&D, but at manufacturing. That, too, is a good thing, given the loss of manufacturing jobs in the auto industry and elsewhere. Provided, of course, that the necessary skills are transferable.

Still, if existing solar and wind energy companies can’t thrive and expand with the current levels of government incentives, how can throwing more money at renewable energy make things better? Subsidies for ethanol have distorted the market for corn and gasoline. And the grants proposed under the stimulus package amount to subsidies.

The government agency that oversees and makes the grants will come under a lot of pressure to pick one technology over another. The choices the agency makes could be right, or they could be wrong. In either case, some jobs will be created. But how long will those jobs last?

It’s a difficult choice. Recall the first $350 billion in TARP funds that was given to banks with virtually no strings attached and no accountability. A few billion went out as bonuses, much to the public’s dismay.

Given the nature of the current recession, only the federal government has the tools to kick-start the economy. But it walks a fine line. It can either just toss the money over the fence and wait to see what happens, as it did with the banks. Or it can try to target the money to where it will have the maximum intended effect, as with the funds for renewable energy.

As simple as it sounds, the $5 billion part of the stimulus package that would pay for weatherization of homes may be the most effective idea in the whole $50 billion package. It requires consumers to purchase goods and hire people. Simple, but very effective at creating jobs. More of that please.

Paul Ausick
February 13, 2009

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