|Bailout Bill Is Rife With Tasty Green Pork|
By Alexis Madrigal
October 8, 2008
Clean technology companies of all sorts are cheering the green pork that
legislators added to the $700-billion Wall Street bailout bill that passed
Congress last week.
Extensions to tax credits for wind and solar power producers finally got their
long-awaited passage, but a slate of more obscure provisions could help drive
new interest in a diverse array of green businesses, including geothermal, solar
thermal, tidal, and wave power, plug-in hybrid cars, and energy efficiency aids.
"It's a pretty comprehensive bill, much more so than extending the [tax credit]
for solar. While that's probably the premiere provision, there's a whole lot
more in there," said Josh Green, general partner at MDV, a Silicon Valley
venture capital firm with large investments in green tech. "I'm not a huge fan
of all the pork that was put into the bill, but if it's going to be in there,
I'm glad there's all this energy stuff."
With both candidates pitching "green jobs" as central to their economic plans,
providing incentives for American companies to develop cleaner and more
efficient energy technologies has become a safe political issue. That allowed
green tech industry backers to finally get the slate of tax breaks passed after
years of failed attempts. Some industries made out particularly well: solar,
tidal, and wave power got investment credits extending all the way to 2016.
Silicon Valley investment firms breathed a collective sigh of relief over the
extensions of wind and solar tax credits, which threatened some large power projects.
"We were delighted, and we were relieved," said Paul Holland, general partner at
Foundation Capital, which manages $2.5 billion, including 10 clean tech
investments. "We are confident this is going to spur renewed interest and
renewed investment in clean tech."
While some of the tax breaks are obvious -- like a new provision giving the
first 250,000 plug-in hybrid buyers up to a $7,500 credit -- others are more
subtle, but just as likely to have wide-reaching impacts.
Take a small provision for advanced metering and smart grid applications. The
bailout bill added a line so that utilities that install smart meters, smart
meters, which allow consumers real-time access to their energy usage and two-way
communication with utilities, can depreciate the cost of the meters in 10 years
instead of 20. Sound trivial? Think again.
By halving the time over which the companies can write-off their investments,
they double the amount of money they can save on their taxes. At the scale of
billions of dollars, that's no small feat.
"What it does is that it ends up providing a significant discount to the cost of
the meter for the person who is buying it," Green explains. "Now you're going to
see widespread adoption, more than you've seen."
Adrian Tuck, CEO of the smart meter maker Tendril, agreed. He foresees major
changes in his business after the adoption of the legislation, which had been in
the works for years.
"It's showing all the signs of being a game-changer for us because it's going to
force people to get up and move," Tuck said. "Quite how that translates into
business on the ground, it's too early to say, but all of the conversations I've
had on it have been enthusiastic."
The bill is stocked with similar small tax breaks that could end up having
outsized impacts by enabling fledgling clean tech businesses to get on their feet.
But not all the items are likely to have major impacts. For example, the bill
gives a tax credit for carbon dioxide sequestration of $20 per metric ton.
"This is a start," said Chris Davis, a lawyer in Goodwin Procter clean tech
practice. "I'm not convinced that $20 a ton makes it economical, but it sweetens it."
Green also criticized a $2.5 billion tax break given to the coal industry for
what he described as "coal technology that doesn't have a lot to do with clean coal."
But overall, Green, Davis and Holland were pleased with both the broad intent of
the legislation and its details. Perhaps, all the political talk of fostering a
green economy is actually translating into good legislation.
"We're actually seeing functional government happen here," Holland said. "We're
seeing goals that are congruous with one another instead of being incongruous."