Nov/Dec 2009

State News: August 2009



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Plan for the Long-Term with Energy Grants

By Eleanor Saunders, Research Editor,
States facing huge budget gaps may jump the gun on spending federal funds aimed at increasing energy efficiency and developing renewable energy resources to create jobs in the short-term.
But states shouldn’t be so short-sighted—that money may best be used for long-term energy goals.
That’s according to Jeffrey Potent, an adjunct professor at Columbia University’s School of International and Public Affairs and Center for Environmental Research and Conservation. He says the American Recovery and Reinvestment Act would best be used to develop long-term sustainability.
“Every state has a track record on sustainable development,” Potent said, “and, if you’re talking about energy, an infrastructure as well.”
The federal stimulus legislation includes funding that, if spent wisely, could yield economic and environmental benefits for years to come, he said. But many states are desperately looking for ways to plug holes in the worst budget deficits in decades. That may prompt many state officials to focus on boosting immediate job creation and economic growth at the expense of long-term planning for sustainable development.
To ensure success, states should analyze their existing programs and assess their strengths and weaknesses, Potent said. Smart strategies can maximize what economists call multiplier effects, through which spending on one project or in one segment of the economy stimulates further economic growth, said Potent, who also works with the U.S. Environmental Protection Agency’s Ecosystem Services Research Program.
Potent suggests states integrate programs and agencies with overlapping agendas to maximize long-term benefits. Collaboration among agencies is often minimal or nonexistent due to different agendas and administrative structures. Integration can help agencies use funding more efficiently and strengthen a state’s application for federal money, said Potent.
Potent’s recommendations have immediate relevance to some grant programs in the stimulus package, and complement strategies described in Green for All’s “Bringing Home the Green Recovery: A User's Guide to the 2009 American Recovery and Reinvestment Act,” another discussion of the green components of the stimulus package.
For example, the U.S. Department of Energy will funnel $3.1 billion of grant assistance to states to prepare and implement comprehensive energy conservation plans. Such plans will require the kind of careful assessments Potent described in order for states to optimize results and maximize multiplier effects. And one outcome of that analysis may identify the need for more job training to create a work force with the specialized skills that conservation projects require. The Recovery Act offers more than $500 million in funding for this type of job training.
Innovative state and local funding vehicles also can be supported through the Recovery Act. Two provisions specify that states may use grants for revolving loan funds to expand energy efficiency and renewable energy programs.
Some municipalities, according to The New York Times, recently began to develop innovative loan programs to help make residential and commercial buildings more energy efficient and install solar panels to generate electricity.
One example is a pilot program in Berkeley, Calif., in which city officials created a loan fund property owners can use to cover the cost of solar electric systems. Loans are repaid over a 20 year period by an assessment added to property tax bills. The loans pertain to buildings, not property owners, and are transferable when property changes hands. Interest rates are low, and payments cover the cost of the installation plus a small fee for administration of the program. Because it relieves property owners of covering the upfront costs of buying and installing systems all at once, the program holds much promise for hastening the spread of small-scale solar power.
Capital cost is a thorny problem now for energy projects of all scales, according to The New York Times, because of lower fuel prices and current tight credit markets. With the price of crude oil hovering at $40 a barrel, it takes investors longer to recover their investments.
The financial infusion provided by the Recovery Act could, nevertheless, help to overcome some of these difficulties, and keep states’ commitments to sustainable development on track.
“A willingness on the part of states and regional entities to create public-private partnerships may well be a key to creating needed incentives when, at least for the time being, market signals fail to do so,” said Potent.


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