While it might seem like the spigot of stimulus money has just opened up — with new funding solicitations and announcements coming out every week and companies spending significant time and money in an effort to grab some of it — don’t get too accustomed to thinking of Uncle Sam as cleantech’s Mr. Moneybags. Speakers at the Renewable Energy Finance Forum West in San Francisco on Tuesday reminded cleantech companies and financiers that the government money won’t keep flowing forever — and actually for not that much longer.
Dan Reicher, director of Google’s climate change and energy initiative, said that in the midst of unprecedented government support, “we’re staring at the biggest cliff we’ve ever faced in renewables when the stimulus runs out in 18 months.” John Geesman, a former California energy commissioner and writer of the Green Energy War blog, also warned that the stimulus might have been “the high-water mark” for government support. After that, “the fiscal cabinet is bare,” he said.
The heated race for billions of dollars of stimulus money – along with all the indirect effects of sparking matching investment and local and state policies – mean the industry could be in for a major shock when it abruptly ends. More than half of the total recovery funds have already been announced and a good portion has already been allocated. According to the Recovery Act site, which doesn’t break down the spending specifically on greentech, $85.9 billion in stimulus funds has already been paid out, $239.4 billion in stimulus funds has been announced, and a little over $200 billion in stimulus funds is still available. Matt Rogers, senior advisor to U.S. energy secretary Steven Chu for the Recovery Act, said the Department of Energy has succeeded in spending the money even more quickly than it had set out to do so far, doling out $16.7 billion compared to a goal of $16.3 billion by the end of September.
That quick timeline has been good for companies that got hold of some of the money, but not so awesome if your company was late getting in line. And the quickly depleting pot of money means it’s important for companies not to rely on it. Companies still need to have strong business plans and should avoid making changes that don’t fit into their business plans in order to appeal to government agencies, Josh Green, a general partner at Mohr Davidow Ventures, pointed out at a Thomas Reuters conference back in June. “We encourage our portfolio companies to look for low-hanging fruit, but not to make fundamental changes … to the core business.”
In fact, the impacts of the stimulus haven’t been all positive, pointed out Tim Newell, senior advisor to private-equity firm US Renewables Group, at the Renewable Energy Finance Forum. Overall, government policies have had a surprising “neutral to negative” impact on the capital markets so far this year, he said, as funding in the space actually slowed down while people waited for the rules to get pinned down and to find out how they might impact potential investments. Executives in the smart grid industry have expressed similar concerns about the stimulus funds for that sector.
But Newell expects the neutral to negative effect to change to a “highly positive” one next year as more stimulus awards come out and other policies take effect. Some of those awards will come from applications with deadlines that have already passed, like the smart grid stimulus funds; some could come from funding opportunities that become available over the next few months. But keep an eye out — there are a dwindling number of stimulus opportunities left, and when the window closes, companies need to be able to stand on their own two feet.
Image courtesy of Flickr creative commons.