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Obama's second term brings hope of more favourable climate for renewables

UNITED STATES: November's re-election of America's most wind-friendly president to date has helped to buoy the hopes of an industry that has been struggling with uncertainty, but a still-divided Congress could continue to hinder progress on policies that would put the sector on a solid long-term footing.

Obama: a second-term president can pursue a more aggressive renewables policy
Obama: a second-term president can pursue a more aggressive renewables policy

President Barack Obama kept his job and the Democrats held the Senate, while the Republicans kept control of the House of Representatives. While the same combination has produced little but partisan bickering and legislative gridlock in recent years, veteran lobbyists expect there to be a new dynamic now that the campaign is over.

"Even though in the big picture we have the same parties in control, I do think things have changed considerably," said Greg Wetstone, vice-president of governmental affairs at renewable energy company Terra-Gen Power.

The fact that Obama's second term will be his last should make it easier for him and his Republican opponents to compromise without giving up any political advantage. It also gives Obama the flexibility to more aggressively pursue his own agenda, which includes strong support for renewables.

At the same time, there are challenges. Momentum is building to overhaul the tax system in the US, essentially by lowering tax rates and at the same time cutting off some of the loopholes companies use to avoid paying taxes. That could pose a significant threat to the wind industry's key support mechanism, the $0.022/kWh production tax credit. Richard Glick, vice-president of government affairs at energy firm Iberdrola Renewables, expects to see the tax credit phased out.

"All energy tax incentives are going to be on the table," he said. "I think it would be foolish for the wind industry or the solar industry or any other technology receiving credits not to plan for that."

Given the fiscal challenges facing the US, said Glick, the industry will need to advocate for support that does not cost the government either cash or lost tax revenue. A possibility is a clean energy standard (CES), which would require utilities to supply a minimum quota of electricity from clean sources and could boost the market for new wind. The idea has the backing of both Obama and the Senate, said Glick.

The hurdle is Congress, where opposition to a CES is strong. It seems that the only way a CES could pass is as part of a broader energy bill that tackles more than renewables. "In that case, I think there is potential for bargaining," said Glick.

Tax reform

Although climate change issues barely registered during the election campaign, it did score a mention in Obama's victory speech, leading some to hope the president will take up the cause during his last term. While climate policy faces the same challenges as a CES, there may be a slight opening for progress. If tax reform results in big cuts to corporate taxes, the government will have to find new revenue. A study from the Massachusetts Institute of Technology in August found a carbon tax would raise $1.5 trillion over ten years.

"There has been increasing chatter about a carbon tax, even among some Republican and conservative-oriented groups," said Glick. "Some might view this as a trade-off worth having if they get significant reductions in corporate taxes in exchange."

Beyond politics

Ultimately, the greatest impact on wind energy may come from the market and not the country's political masters. "We cannot ignore the huge impact of natural gas prices and how they are crowding out renewables," said Jonathan Weisgall, vice-president of legislative and regulatory affairs at utility MidAmerican Energy Holdings.

An extraction technique known as fracking has unlocked previously inaccessible gas reserves and sent prices tumbling to historic lows. Although there are environmental concerns associated with the practice, Obama seems unlikely to try to impose new regulations on the sector.

"I think you see in the president someone who is a pretty strong supporter of natural gas, who sees it still as that bridge to lower greenhouse gas emissions," said Weisgall.

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