THE BLOG
12/09/2014 10:40 am ET Updated Feb 06, 2015

In Clean Energy, Macro Trends Trump Midterm Political Winds

Here are some notable news headlines from the month of November:

• SunEdison, TerraForm to Buy First Wind for $2.4 Billion
• LED Bulbs Fall Below $8
• US and China Reach Historic Climate Accord
• Solar and Wind Energy Start to Win on Price vs. Conventional Fuels
• Cuomo Unveils First NY Green Bank Transactions for Clean Energy Projects
• Amazon Pledges to Run on 100% Renewable Energy, Joining Apple, Google, and Facebook
• Republicans Sweep to Big Midterm Victories, Win Control of Senate

No, this is not a 'which of these does not fit?' quiz. It's an attempt to characterize clean energy in the U.S. as we near the end of 2014 - and to show that some trends are bigger than a midterm U.S. election result.

Without a doubt, the midterms were not good news for U.S. clean energy and climate action. GOP control of the Senate, particularly winning chairs and majorities on the all-important legislative committees, clearly seems to spell two years of pro-fossil fuel, anti-renewable policy attempts on Capitol Hill. That's not at all good for the future outlook of the Production and Investment Tax Credits, the critical wind and solar power incentives that the clean-tech industry battles endlessly to preserve. In the wake of this election, don't expect our Congressional lawmakers to heed the winds of public opinion, such as the 2014 Clean Edge/Solar City Homeowners Survey showing that 88 percent of U.S. homeowners (and 87 percent of Republicans) believe that renewable energy is important to America's future.

But don't despair. The world in general, and the clean-energy industry in particular, is a very different place than it was when the Republicans last controlled the Senate in 2006 - or when the ITC was last extended in 2008. "It's a whole new ballgame, because now we're huge," says Nancy Pfund, founder and managing director of venture firm DBL Investors, whose clean-tech portfolio includes Tesla Motors, BrightSource Energy, and SolarCity. Pfund, speaking in a recent Clean Edge webinar on clean energy retail investing, added, "the penetration of renewables in this country since 2008 has made us very, very important in terms of job creation and cheap energy availability. We are no longer the little kid that's trying to act big. We are a force to be reckoned with - and it's a positive force."

And you don't just have to take the word of a San Francisco-based clean-tech investor. Ask utility giant American Electric Power (AEP), one of the nation's largest operators of coal plants, which recently tripled its purchase of wind power in Oklahoma (a state without an RPS mandate for utilities) based solely on low cost. "Wind was on sale, it was a Blue Light Special," AEP's Jay Godfrey told the New York Times. "We were doing it because it made sense for our ratepayers." The average rates on some long-term wind contracts in the Midwest are about 2.1 cents per kWh (including tax credits) - down more than 50 percent in the last five years, according to the American Wind Energy Association. And solar PV prices, of course, have also fallen dramatically, causing the boom in residential, commercial, and utility-scale solar installations.

Or ask staunch veteran Republican Sen. Chuck Grassley of Iowa, who knows the economic and employment impact of an industry -- wind power - that generates more than 25 percent of his state's electricity. Grassley recently warned his colleagues "not to pull the rug out" from under the wind industry when debating a proposed tax credit extenders package.

Policy (and therefore politics) will always be critical to clean energy growth - particularly the PTC and ITC - but economic trends are trumping political winds. "In the build out of renewable energy markets today, it really is more about the capital markets and less about the political markets," says SolarCity VP of financial products Tim Newell, another speaker on the Clean Edge webinar. "We've reached the point where investing in and deploying solar makes sense strictly in economic terms, and those are the main drivers."

Let's face it - our gridlocked Congress has done very little to support the clean-energy industry for a while now. Even if the gridlock will now be caused by presidential veto threats rather than a split Congress, I expect that legislative inaction will continue to be the theme of the next two years. (The executive branch is another story; from the EPA's carbon regulations to the historic climate action pledges from China, President Obama seems committed to creating a strong clean energy and climate legacy).

But in the policy arena in the U.S., as Clean Edge has said for several years, the state and city levels are really where the action is. It's why we benchmark state and metro activity annually in the U.S. Clean Tech Leadership Index, and why we closely follow developments ranging from new state-level green banks to battles over net metering and RPS mandates. With states now charged with meeting the EPA Power Plan goals, they will be in even more of the policy and regulatory spotlight.

But falling costs, financing innovations, and a host of other factors have made the world of clean energy a very different place than it was just a few years ago. "What happened a few Tuesdays ago is not going to move the needle," says Pfund of DBL Investors. "What moves the needle is cheap, clean energy." All the macro trends point to that needle continuing to move for the foreseeable future, despite any potential ill winds emanating from Capitol Hill.