Like the rest of America, I have been closely following the numerous (and often unflattering) accounts of the debt-ceiling drama that has unfolded in the U.S. Congress and Senate.  The questions being debated have countless implications for industries all across the country, but very few have quite as much at stake as the renewable energy industry.   

As we all know, renewable resources will only become the new standard when the cost of generating energy from wind and solar resources is equal to or less than the cost of generating energy from natural gas.   As the market stands right now, both traditional and renewable energy sources receive a number of tax breaks and economic incentives from the federal government.  The legislature can tip the scales one way or another and make those incentives favor renewable resources or traditional resources, and which way they go is a huge factor in determining how quickly cost parity can be reached.

Last week, Congress and President Barack Obama agreed on a deal that increased the U.S. debt limit by at least $2.1 trillion, and implemented additional discretionary spending caps for a period of 10 years.  Perhaps most importantly for renewable energy developers, the legislation also created a bipartisan committee of Congressman and the Senators to take a hard look at the U.S. federal budget and propose $1.5 trillion in cuts.  The Committee’s recommendation will then go to Congress for approval, but if Congress fails to approve the Committee’s recommendations by December 23, 2011, automatic spending reductions will be made beginning in 2013, split evenly between domestic and defence spending.

In essence, the true impact of these budget cuts will depend entirely on the Congressman and Senators that are appointed to the “Super-Committee.”  As I have described previously, energy policy has always seemed to defy traditional party lines, and you can’t always predict whether a politician will favor traditional resources, nuclear energy, or renewable resources based solely upon their party affiliations.  Nonetheless, whether the federal energy incentive scale gets tipped towards coal and natural gas, nuclear or renewable energy will largely depend on how many representatives on the Committee are willing to take a stand for each of these camps.

In short, it is clear that energy policy will be one of the issues that the “Super-Committee” closely examines, but without knowing more about the specific political motivations of the decision-makers, we cannot know which programs are likely to be cut.  Bloomberg writers Jim Efstathiou Jr. and Christopher Martin wrote an excellent summary of the energy programs that might be at risk over the coming months.  In an effort to shed some positive light on the potential ramifications of this process on renewable energy, they close the article with the following quote from Denise Bode, the chief executive officer of the American Wind Energy Association (AWEA):

Current wind ‘projects are safe, and prospects for extension of the program beyond 2012 are as good as ever,’ Bode said in an e-mail. ‘I had a front-row seat to tax reform in the mid-1980s, and I feel confident that wind incentives will survive this process.’

As an optimist-at-heart and a supporter of the various renewable energy industries, I certainly hope that this is the case.  However, as someone who has had a front-row seat to the political process, I am also positive that we won’t be able to predict the true impacts of this deal until we know which Congressman and Senators will be appointed to the “Super-Committee.”  There is no question that quite a bit is at stake.