The budget brinksmanship that, amazingly, lasted all the way into the first days of August pushed me over the edge. Whether a willful choice, or some kind of subliminal denial, I opted for a partial mental vacation in recent weeks, trying to tune out from the mostly dismal news about elections, energy and environment.

But all vacations must end, and as distasteful as the political process has been for the last few weeks, the late-summer news cycle holds potentially big impacts for the world of cleantech.

From policies enacted and planned to electoral and financial developments, all signs suggest we're moving from relative boom times for cleantech into what will almost certainly be dark days.

Cleantech's "Age of Austerity"

Let's start with the fallout from budget deal, known officially as the Budget Control Act (BCA) of 2011. Scanning a few weeks' worth of news releases from Bloomberg New Energy Finance (BNEF), the prospects for cleantech finance are nothing short of grim.

"For the clean energy sector, the Act heralds an era of austerity in which current subsidy programmes may not be extended beyond their current funding," wrote Stephen Munro, a policy analyst at BNEF, in a research note on Aug 5 titled "An age of austerity for clean energy?"

The BCA agreement requires cuts of $917 billion in discretionary spending. Clean energy programs aren't named specifically, but they fall under the discretionary spending portion of the budget, Munro points out.

Programs are likely to become vulnerable as they come up for renewal. First up is the Treasury Department's "1603" cash grant program for early-stage project investment, which expires at the end of this year.

For solar and wind developers formerly dependent on tax equity finance -- which evaporated as a result of the mortgage-backed security crisis -- these 1063 grants, which can cover 30 percent of a project's upfront costs, have been a lifesaver. Last December, the Solar Energy Industry Association estimated that the grant program had made possible more than 1,100 solar projects in 42 states, with a total investment value $18 billion.

Similarly, the 100 percent bonus depreciation incentive for new equipment and property purchased for renewable energy projects sunsets soon. Known by the unwieldy acronym MACRS (short for Modified Accelerated Cost-Recovery System), the federal program allows businesses to accelerate deductions for the capital investments to five years, or just one, for certain bonus projects.

Renewal looks "unlikely" for either of these programs.

There's some stirring that the tax-equity market -- which the 1603 cash grants were established to replace -- will rise again. ClimateWire's Joel Kirkland recently wrote that a return to tax equity financing may be nigh (via the NYT). Given that corporate America is sitting on mountains of cash, it follows that they'll seek higher returns than are available through Treasury bills.

Kirkland's central example is Google, which has made seven green energy investments totaling $700 million over the past few years. Although it would be encouraging if those investments marked the start of a rush to market, that's not the sense I'm getting from my review.

Further out, the bipartisan committee of 12 created as part of the BCA boondoggle is required to come up with another $1.5 trillion in cuts over the next decade. For wind, solar and geothermal projects, tax credits end as early next year, and deadlines continue through 2016.


What's more, the fisticuffs aren't over. The Act doesn't make adjustments to the overall budgets for the Energy Dept. or Environmental Protection Agency or any of their sub-programs, such as ARPA-E. Yet these budgets, Munro points out, will be among the first to be addressed when lawmakers return from their summer recess on Sept. 5. Given the bludgeoning GOP presidential aspirants have lately been administering to the EPA, it's likely the EPA and DOE budgets could be especially tortured in the next couple of weeks.