United States: Treasury spends one billion in a month

Concern over public perception of grants given to foreign firms.

In just one month, the US Treasury Department has paid out over $1 billion for renewable energy and energy efficiency projects, with foreign wind power firms taking the largest slice of the cash. The distribution of money to overseas companies is raising hushed concerns in US wind circles that the US public may question the use of taxpayer dollars for foreign firms even if a closer analysis shows that the majority of the investment and benefits stays in the US.

Two rounds of grants have been released so far by the Treasury Department. Last month, wind energy firms - all foreign - took over $464 million of the $550 million second-round disbursement. This followed September's funding where wind farms secured $499.9 million of the $502 million total.

Tax credits alternative

Created under the American Recovery and Reinvestment Act in February, the programme provides cash grants worth approximately 30% of the installed cost of a wind project. It is meant as an equal value alternative to tax credits that have been available off and on in past years based on electricity production. However, while those were paid out in tax rebates over ten years, the cash grants are given as a lump sum.

German utility E.On Climate & Renewables took the largest grant with $121 million for its Texas 249 MW Pyron wind farm. As in the first round, Spain's Iberdrola took the greatest number of grants, totalling around $250 million across its Texas 120 MW Barton Chapel wind plant, its Missouri 146 MW Farmers City wind farm and its Iowa 160 MW Barton wind farm. Japan's Eurus Energy took the final $91 million for its 180 MW Bull Creek wind farm in Texas.

That US wind companies were absent from the latest round could raise eyebrows, says Ryan Wiser, a renewables specialist at the Lawrence Berkeley National Laboratory: "It will be interesting to see if it creates a backlash that the majority of the applicants to have received funds thus far are Europeans. I have no problem with that whatsoever personally, but there will be those in the country who believe in the 'Buy American' principle who may be a little concerned."

Wiser cautions against making judgements on the early rounds, as awards are driven mostly by the timing of completed projects and applications. Grants are available for wind projects brought online in 2009 and 2010, or that are constructed between 2010 and 2013. "Who gets first-round funding has no bearing on who gets funding in the second round or a third round," says Wiser.

Even if future funding rounds are dominated by European firms, which play a heavy role in the US wind market, any criticism should be balanced by the fact that foreign investment can benefit the US economy.

As Wiser says: "Half the turbines being installed are GE turbines, a US company, and all the concrete comes from US companies, and that's true of much of the supply chain. A lot of these European companies have US employees located in the US, so there's a direct correlation there. Most of the funding ultimately is staying local." Nonetheless, he adds, there is a growing perception that the public's economic stimulus investment is leaking out of the US.

The noticeable absence in funding so far of America's largest owner and operator of wind projects, NextEra Energy - formerly FPL Energy - pushes that perception. But company spokesman Steve Stengel says its absence is only the result of timing and it will soon take a slice of the grant pie.

"We've said publicly in the last two quarters that we would be utilising the cash grant for a portion of our build," says Stengel. He adds that Iberdrola's awards are also based on timing, with a number of its projects due to complete in 2008 falling into early 2009.

However, NextEra has not been idle while grants are doled out. Last month it agreed to buy three operating wind projects with a combined capacity of 185 MW, all eligible for the cash grant because they came online this year.