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Mark Nicholls

Mark Nicholls

Mark is a writer for Environmental Finance. Environmental Finance is the leading global publication covering the ever-increasing impact of environmental issues on the lending, insurance,…

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US Government Pushing Renewable Energy

Eight US government departments have come together in a major push to promote renewable energy and energy efficiency exports, which includes promises of new financing tools.

The Renewable Energy and Energy Efficiency Export Initiative, led by the Department of Commerce, is designed to help meet President Barack Obama’s target, announced in January’s National Export Initiative (NEI), of doubling all US exports within five years.

“The Initiative is designed to facilitate a demonstrable increase of renewable energy and energy efficiency exports over the next five years,” wrote US Secretary of Commerce Gary Locke, in a report setting out the initiative’s eight commitments and 23 “deliverables” expected by the eight bodies.

The agencies include the US Export-Import (Ex-Im) Bank and the Overseas Public Investment Corporation (OPIC) – both of which have been prioritising renewable energy support and investments – the US Trade and Development Agency, the Office of the United States Trade Representative, as well as the Departments of Commerce, Energy, State, and Agriculture.

The move comes at a time of growing unease in the US about the success of Chinese and European clean-technology companies. In September, the United Steelworkers filed a petition accusing the Chinese government of violating World Trade Organization rules with clean energy  subsidies.

A spokeswoman for the Department of Commerce said that the initiative does not impose any targets, partly because of the difficulty in defining energy efficiency and renewable energy exports – although the report claims that the US exported around $2 billion of “manufactured renewable energy goods” in 2009.

 However, there are some concrete commitments from some of the agencies involved.

OPIC, for example, is pledging to provide at least $300 million for new private equity investment funds that could ultimately invest more than $1 billion in renewable resources projects in emerging markets. This is in addition to $505 million the agency has provided to clean energy funds since 2008.

OPIC has also committed to “develop a financing tool to support energy efficiency investors in emerging markets”, by providing subordinated debt to finance “the most energy efficient measures possible”. It will use the energy service model of financing to allow project companies to repay the debt through cost savings from the financed energy efficiency improvements. It will also begin leasing US renewable energy and clean technology equipment.

Ex-Im, meanwhile, has identified several constraints to closing renewables export deals, such as a lack of liquidity, limited access to pre-export working capital for production expansion and the availability of foreign-tied aid to support renewable energy exports. “The Ex–Im Bank will review those hurdles and recommend policy solutions,” the review says.

Meanwhile, other commitments include Ex-Im and OPIC pledging to streamline renewables and energy efficiency financing applications, and the US government working to improve market access, via trade agreements and by enforcing multilateral trade agreements.

Both Ex-Im and OPIC have been criticised for failing sufficiently to support clean energy in the past. Ex-Im has a Congressionally-mandated target to direct 10% of its financing to “environmentally beneficial” exports – however, a report by the Government Accountability Office found it directed only 2% of its financing to renewables in 2009. In February, the US legislated that OPIC must cut emissions from its portfolio by 50% and substantially increase its financing for renewables.  

The initiative also aims to “enhance information and trade promotion efforts to link buyers and sellers”, noting that “Exports often result from strong partnerships between US companies and foreign buyers.”

Intriguingly, the report also suggests the US government will help countries with abundant renewables resources that currently lack market mechanisms to create demand for renewables to develop the enabling policy framework necessary.

Locke said that the initiative’s 23 commitments “will be undertaken within existing budgets and existing authorities at no additional cost to the American taxpayer”.

However, exporting is only one part of the story, the report notes. It states that “many of the challenges faced by US RE&EE [renewable energy and energy efficiency] companies result from the lack of a strong national policy to provide incentives for developing domestic RE&EE technologies … the Initiative’s commitments would undoubtedly be strengthened by domestic policies that place a price on carbon emissions.”

By. Mark Nicholls

Source: Environmental Finance




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