src="" />

Recovery Plan Captures the Energy Opportunity

This article contains an addition.

More than a year after the recession began and after 3.6 million Americans lost their jobs, Congress is about to pass the American Recovery and Reinvestment Act, H.R. 1. The act will inject $789 billion into new programs and tax incentives to stimulate the economy.

Unprecedented investments in clean energy are a central element of the recovery plan. The bill includes $71 billion for clean energy programs—more than three times the current spending for these same programs (download the breakdown here (.xls)). H.R. 1 also adds $20 billion in clean energy tax incentives. The bill would “spark the creation of a clean-energy economy” that President Barack Obama promised during his inaugural address.

The Recovery Act intends to quickly put Americans to work undertaking the essential task of reducing our use of energy and oil, which would strengthen our economy and security. It would also boost investments in clean renewable energy generation from the wind, sun, and other clean sources. The World Resources Institute determined that there is a significant job creation differential between traditional infrastructure investments and those focusing on clean energy initiatives. Every investment of $1 billion in clean energy programs creates nearly 5,000 more jobs than traditional infrastructure spending. These are some of the most important initiatives in the recovery package.

Under the recovery plan, the Weatherization Assistance Program would receive an additional $5 billion to install efficiency measures in low-income households. This amount could weatherize 1 million homes, and, directly and indirectly, create 375,000 jobs.* Low-income families will save an average of $350 annually in reduced energy costs.

Another clean energy program, the federal green buildings program, would receive $4.5 billion in funding from the plan. Modernization and energy efficiency upgrades of federal buildings would put people to work and save taxpayers millions of dollars a year in federal energy bills. President Obama recently noted that efficiency for federal buildings could save taxpayers “$2 billion,” asking, “Why wouldn’t we want to make that kind of investment?”

Energy efficiency and conservation grants for energy efficiency in residential and commercial buildings would gain $6.3 billion. This is in addition to a new program with the Department of Housing and Urban Development for energy efficiency retrofits of low-income housing that would receive $250 million. This funding would directly and indirectly generate over 1 million jobs, and many would be construction jobs—a sector hard hit by the recession.

The bill supplies $8.4 billion for transit projects, and an additional $8 billion for high-speed rail. There are an estimated 787 ready-to-go transit projects eligible for funds from the programs to purchase buses and equipment needed to increase public transportation and improve intermodal and transit facilities. These would also put Americans back to work to the tune of nearly 20,000 jobs for every $1 billion invested in mass transit.

There is also $20 billion in clean energy tax incentives, including a three-year extension of the Production Tax Credit for wind and other renewable energy projects. Due to the credit crunch and recession, many wind projects have had difficulty attracting investors. To address this problem, the bill “provides grants of up to 30 percent of the cost of building a new renewable energy facility to address current renewable energy credit market concerns.”

In 2008, Senate Majority Leader Harry Reid (D-NV), the Center for American Progress Action Fund, and the University of Nevada Las Vegas hosted a National Clean Energy Summit. The many energy experts at the summit agreed that lack of efficient, reliable transmission capacity was a major barrier to a vast expansion of renewable electricity generation. The recovery package tackles this problem with its $17 billion in spending and loan guarantees for “smart grid” technology and 3,000 miles of new transmission lines.

Thankfully, the final bill excludes the Senate’s $500 million allocation that would have provided up to $50 billion in loan guarantees for “low emission” electricity, predominately aimed at nuclear power. With a 50-percent default rate, these nuclear loans could have made taxpayers responsible for at least $25 billion in risky loans. This program would have created very few jobs because it takes a long time to finance and build a nuclear power plant.

The Congressional Budget Office forecasts that without a strong recovery package, real gross domestic product would shrink by 2.2 percent in 2009. In contrast, implementation of the plan would yield as many as 3.6 million new jobs from all spending in less than two years. The American Recovery and Reinvestment Act includes energy investments that would set the foundation for an economy that uses efficient, low-carbon energy sources and highly efficient advanced technology. It is 21st-century energy policy that follows eight years of inertia and reaction, and it is a remarkable achievement for an administration that isn’t yet a month old.

*Addition, February 17, 2009: The organization Economic Opportunity Studies, or EOS, provides an estimate of 118,000-140,000 jobs to be generated by the $5 billion investment in the stimulus package. The EOS analysis is based on the model used by the U.S. Bureau for Economic Analysis for the Weatherization Assistance Program.

For a complete breakdown of the House, Senate, continuing resolution, and conference recovery bill clean energy provisions, download this table (.xls).

More from CAP on economic recovery:

Animation: How the Recovery Works

Background brief: Recovery and Reinvestment 101

Interactive Maps: Recovery Beyond the Beltway

Interactive: Design Your Own Stimulus Package

Video: How the Recovery Package Creates Jobs