Mr. Hammond: Within alternative energy we focus on the wind, solar, alternative fuels and the fuel cell sectors. And then we also focus on what I call "alternative energy macro," which is really how alternative energy, both from a policy standpoint and from an economic standpoint, talks to traditional energy.
TWST: How do you expect the recently increased federal public policy support to
impact the industry? And how soon do you think it will translate into real
growth for companies in the space?
Mr. Hammond: Well, I think there are several ways to look at it. First of all,
the level of public support that we're receiving right now from the government
here in the U.S. is the best it's ever been. And part of that is an outgrowth of
the slowdown and trying to solve some of the financing model problems. So for
example, the wind industry in the U.S. for years has really been driven by the
production tax credit, PTC, which is a federal tax credit, as well as by
renewable portfolio standards at the state level, whereby it mandates a certain
percentage of the state's electricity needs to come from renewables by a set
date, say like 20% by 2020. So those have been the two big drivers. One of the
problems with the PTC is the implosion in the financial sector. We've seen the
number of what we call "tax equity investors" start to decline dramatically
compared to a year ago. There was somewhere in the range of about 15 of those
participants; now there's like six to eight. So it's basically been cut in half.
And so the federal government has also created a couple of new programs, one of
which is we call the ITC, the investment tax credit, and then the ITC cash
grant, which specifically tries to get around the tax equity issue, because if
you don't have a tax appetite, then getting the tax credit will not do you a lot
of good. Now, are we seeing any big pickup in activity since those have been
initiated this year? The answer thus far is No, but we will. It just takes time.
Now the other thing that the federal government is talking about, which would be
very impactful further down the line, would be a nationwide renewable
electricity standard. So right now, the majority of states have a renewable
portfolio standard and about 60% of the U.S. power load is covered under a
renewable portfolio standard. But there have been some states that haven't
adopted one. If you had a federal program, then all states are on board. So that
would be helpful, and in the Waxman proposal, you can view it as roughly 15%
total U.S. electricity needs to come from non-hydro renewables by 2020. There
are little variations to that, I mean, if they have some improvements in
efficiency, but that's a nice driver longer term. And the other one, of course,
is the carbon bill, which will make the price of fuels that have carbon in them
that much more expensive. Under a carbon bill, natural gas, coal, oil-based
fuels will cost more and sort of will help narrow the different price
differential, the cost differential between the technologies.
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