WASHINGTON -(Dow Jones)- Congress will funnel more than $40 billion into clean energy and efficiency programs – and offer around $20 billion in tax breaks – as part of a near $800 billion stimulus bill designed to jolt industries into life across the econ

The provisions in the bill – a deal hammered out between House and Senate negotiators late Wednesday that still needs to be passed by both chambers – will primarily give a major boost to renewable energy, electricity transmission and energy efficiency sectors.

It also gives money for pilot carbon dioxide storage projects and grants for advanced battery technologies. Based on preliminary summaries of the deal, a controversial provision that could have provided up to $50 billion in nuclear loan guarantees was dropped.

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U.S. President Barack Obama said the recovery package will create or save millions of jobs. The portions designed to increase the efficient use of energy and shift the country away from reliance on fossil fuels will help axe greenhouse gases thought to contribute to global warming, he said. Final votes are expected by the week’s end.

“The plan…will save or create more than 3.5 million jobs over the next two years…will ignite spending by businesses and consumers and make the investments necessary for lasting economic growth and prosperity,” Obama said Wednesday at a stop in East Peoria, Ill., one of many towns across the country hit hard by the economic meltdown.

One of the biggest ticket items – at $11 billion – is aimed at creating a ” smart” grid, an artificially intelligent electricity transmission system that is necessary to more efficiently transmit electrons, especially from sources such as wind, solar and power stored in batteries. Although in the past decade demand for electricity has grown 20%, the grid has only expanded by about 5%, and that growth hasn’t adequately taken into account distributed renewable energy generation.

Speaking to reporters at a Platts Energy event, Federal Energy Regulatory Commission Acting Chairman

Jon Wellinghoff

said the funding was “seed money…but it really isn’t enough money to make huge advances in the overall backbone grid that we’re talking about to integrate substantial amounts of wind.”

The full investment to meet the type of renewable growth that Obama’s targeted would cost more than $200 billion, he said.

With record growth to around 25 gigawatts of total wind capacity last year, the U.S. is now one of the world’s biggest producers of renewable energy. But between 200 gigawatts to 300 gigawatts of drafted wind projects remain stranded on paper because there isn’t the transmission capacity to link them to demand.

Companies such as Ambient Corp. (OBB), Echelon Corp. (ELON) and Direct Energy, a unit of Centrica (CNA.LN) could benefit from the package.

In addition to nearly $20 billion in efficiency and renewable energy tax credits over the next 10 years, lawmakers have set aside $6 billion in loan guarantees and $2.5 billion in research grants for the renewable energy sector. One of the tax provisions – worth up to $2.3 billion – is for a newly-created manufacturing credit for investment in advanced energy facilities, such as plants that manufacture components for the production of renewable energy, advanced battery technology, and other innovative next-generation green technologies.

“This bill is a critical down payment on long-term policies needed to meet the President’s ambitious renewable energy goals, enhance America’s energy security, grow our economy and reduce global warming pollution,” said Greg Wetstone, senior director for governmental affairs at the American Wind Energy Association. Despite record growth last year, the financial crisis had stalled development.

Wind turbine manufacturers such as GE Energy, a unit of the General Electric Co. (GE), Spain’s Iberdrola (IBE.MC), India’s Suzlon Energy (532667.BY) and Denmark’s Vestas Wind Systems (VWS.OS), as well as solar firms such as Norway’s Renewable Energy Corp. ASA (REC.OS), and U.S.-headquartered First Solar Inc. ( FSLR) and Evergreen Solar Inc. (ESLR) would benefit from the measures.

Another major chunk of the funding goes toward energy efficiency and conservation grants, including $6.3 billion for the government to distribute at the state level to increase energy efficiency in buildings, homes and businesses. Although some electricity companies have lobbied hard against the caveat, the grants could be conditioned on requiring utilities to reform their rates so that power firms aren’t encouraged to base their profits on how much they sell, a restructuring designed to increase efficiency. Around $4.5 billion would be spent to retrofit federal facilities for efficiency and to use green technology.

On the tax side, lawmakers provided for $2 billion in credits for energy efficiency improvements in existing homes.

In an effort to transform the transportation industry from a fossil fuel consuming sector to one powered by electricity, there is $2 billion in grant funding for manufacturing advanced batteries, storage units that are lighter and can power longer than existing technology.

The deal includes $3.4 billion in funding for “fossil energy” research, primarily what is called carbon dioxide sequestration projects, which could turn one of the country’s largest greenhouse gas emitters – the coal generation industry – into a zero carbon power source. Environmentalists have battled against the measure, saying that such “clean coal” projects are fantasy, though industry experts estimate the technology could be commercial in about a decade.

-By

Ian Talley

, Dow Jones Newswires; 202-862-9285; ian.talley@dowjones.com

(END) Dow Jones Newswires
02-12-09 1757ET
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