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November 25, 2008 Industry Report
Think Greentech Reason for Report:
Energy Technology: Obama Factor In Greensville—But Wait, There's More!
President-elect Obama's two-year Economic Recovery Plan includes provisions for (1) "building wind farms and solar panels"; (2) $150 billion over 10 years to commercialize and scale renewable energy; and, (3) building a digital electricity grid. Meanwhile, House Democrats have chosen a Californian to Chair an influential energy committee. Given that Washington appears much friendlier to new energy technologies, we expect to see short-, medium-and long-term legislation emerge as early at January 2009. Barring further tightening of credit markets, we expect fundamentals in the alternative and renewable energy sector to improve, and we expect valuations to follow.
KEY POINTS: Obama's Green Energy Agenda
We believe President-elect Obama's energy policies are a great fit for renewable and alternative energy. They include (1) a five-year extension of the production tax credit (PTC); (2) a National Renewable Energy Standard (RES) of 25% renewables by 2025 and a mid-term milestone of 10% by 2012; (3) an enhanced electricity transmission infrastructure to promote renewable deployment; (4) an ambitious emissions cap-and-trade bill; and, (5) renewable energy as the leading edge of the economic recovery agenda.
But Wait, There's More!—Busted Filibuster
Democrats have gained 7 seats so far, putting the majority at 58 to 40, making it easier, but not automatic, to secure 60 votes to overcome a filibuster. Big shifts in the Senate away from Republicans in Alaska, North Carolina, Virginia, New Hampshire, Colorado, and New Mexico should result in a significant reduction in opposition to renewable energy legislation. Moreover, once the vote count reaches 60 in the Senate, we believe there is a "bandwagon" effect, as there are fewer reasons to vote against issues that will pass regardless.
California Climate Agenda To Go "National"
In a secret ballot vote of the House Democratic Caucus last week, Rep. Henry Waxman (D-California), 69, became the new chairman of the House Energy and Commerce Committee. We understand that both Speaker Nancy Pelosi and President-elect Obama supported the replacement of prior Chairman John Dingell (D-Michigan), 82, with Waxman. We see this move as one of the more significant "changes" in Washington. We note that junior California Senator, Barbara Boxer, 68, is the Chair of the Senate Environment and Public Works Committee. The 111th Congress, together with President-elect Obama's Economic Recovery Plan, will likely set out to achieve an aggressive agenda of climate and renewable energy legislation.
Blue Dog Democrats Likely To Lose Leverage
Democrats have gained 20 seats in the House, for a 255-to-175 margin, with 5 seats still undecided. We expect this larger majority to facilitate a more-ambitious "green" agenda, as it will likely reduce leverage of moderate and conservative Blue Dog Democrats who promote, among other things, fiscal conservatism and accountability. Meanwhile, John Dingell's replacement by Henry Waxman is a pivotal leadership change, in our opinion. We have little question that the pace and content of climate legislation will accelerate and increase.
Jonathan D. Hoopes
Managing Director, Energy Technology Research ThinkEquity LLC, a Panmure Gordon Company
31 West 52nd Street, 17th Floor
New York, NY 10019