Microsoft Word - 20160225_cea_final_clean energy

ARETROSPECTIVE

ASSESSMENTOFCLEAN

ENERGYINVESTMENTSIN

THERECOVERYACT



February2016

**Draft**



1



Contents 

ExecutiveSummary.......................................................................................................................................2

HighlightsoftheARRACleanEnergyRelatedInvestments..........................................................................4

I.Introduction...............................................................................................................................................7

II.EconomicRationaleforCleanEnergy‐RelatedInvestment......................................................................9

III.OverviewofCleanEnergyFundingUndertheRecoveryAct.................................................................12

IV.DramaticTrendsinCleanEnergyMarkets............................................................................................16

Growth

inRenewableEnergyGeneration..............................................................................................16

GrowthinRenewableEnergyCapacity...................................................................................................16

LoweredCleanEnergyCosts...................................................................................................................18

MajorJobGrowthintheRenewableEnergySector...............................................................................19

V.HighlightsoftheARRACleanEnergyInvestments.................................................................................21

RenewableGeneration...........................................................................................................................21

EnergyEfficiency.....................................................................................................................................22

CleanandEnergy

EfficientTransportation.............................................................................................22

CleanEnergyManufacturing...................................................................................................................22

OtherInitiatives......................................................................................................................................23

VI.Conclusions............................................................................................................................................24

References..................................................................................................................................................25

AppendixI:DetailsoftheARRACleanEnergy‐RelatedInvestments.........................................................28

RenewableEnergyInvestments..............................................................................................................28

InvestmentsinEnergyEfficiency............................................................................................................35

TransitInvestments.................................................................................................................................41

Grid

ModernizationInvestments............................................................................................................42

InvestmentsinAdvancedVehiclesandFuels.........................................................................................44

InvestmentsinCarbonCaptureandStorage..........................................................................................47

GreenInnovationandJobTraining.........................................................................................................48

CleanEnergyEquipmentManufacturing................................................................................................49

AppendixII:CEACalculatio n ofARRACleanEnergySpending...................................................................50







2



ExecutiveSummary



President Obama took office in the middle of the worst economic crisis since the Great

Depression.Inthepreviousyear,privateemployersshed3.8millionjobs.Trillionsofdollarsof

household wealth had beenwiped out, and the economy’s total output, as measured by real

grossdomesticproduct(GDP),wasinthemidstofitsmostseveredownturnofthepostwarera.

Inthefaceofthiscrisis,thePresidenttookimmediate,bold,andeffectiveaction.



OnFebruary17,2009,lessthanamonthintohisfirstterm,PresidentObamasignedintolawthe

American Recovery and Reinvestment Act of 2009, also known as the Recovery Act, or ARRA.

ARRAwasnotonlyahistoricactiontohelpbringaboutamacroeconomicrecovery,butitwas

also a dramatic investment in the future of the U.S. economy. In 2009, there was an initial

allocation of $90 billion dollars of ARRA funds towards clean energy‐related investments—an

unprecedentedinvestmentincleanenergyandtowardsasustainable21

centuryeconomy.



Theseinvestmentscontributedtotherecovery—GDPpercapitastartedexpandinginthethird

quarter of 2009 and reached its pre‐crisis level in nearly four years. The Council of Economic

Advisers(CEA)(2014)estimatedthatfromlate2009throughmid‐2011,ARRAliftedGDP2to3

percentabovewhere itwouldhave been, andover6 millionjob‐years(afull ‐time job forone

year)weresupportedbyARRAfrom2009to2012.Thecleanenergy‐relatedfundingmadeup

roughly one eighth of the total, representing a substantial direct boost. In this report, CEA

estimates that ARRA clean energy‐related programs supported roughly 900,000 job‐years in

innovativecleanenergyfieldsfrom2009to2015.



Theshort‐runeffectsofARRAareonlyhalfthestory.Theseinvestmentslaidthegroundworkfor

theremarkablegrowthincleanenergyintheUnitedStatesthathasoccurredoverthepastseven

years.Solarelectricitygeneration has increased over 30‐fold since  2008.Wind generation has

increasedoverthree‐foldsince2008. Throughavarietyofmechanisms,ARRAfundingreached

nearly every aspect of the value chain for numerous key clean energy technologies, including

advanced vehicles, batteries, carbon capture and sequestration, and technologies to enhance

energyefficiency.These investments are a down payment towards an innovative 21

 century

cleaneconomyandpromisetoyieldbenefitsformanyyearsintothefuture.



Some of the highlights of the ARRA funding include the Advanced Research Projects Agency‐

Energyprogramforearly‐stageinnovations,severalofwhicharealreadyontheirwaytomarket;

electric vehicle battery manufacturing facilities in many states; over 180 awards to advanced

clean energy manufacturing; deployment of smart meters in states across the nation; and

weatherizing more than 800,000 homes. There is an economic rationale  for using funding

designedtostimulatetheeconomytoinvestin projectsoflong‐termvalue.The cleanenergy‐

related projects

 funded by ARRA help address a variety of market failures, including

environmentalandinnovationmarketfailures.



3



SinceARRA,therehasbeencontinualgrowthincleanenergyjobsthathaswithstoodsignificant

headwinds. While there is more work to do to keep us on track to a sustainable 21

 century

economy,thecleanenergyARRAinvestmentswereanimportantstepintherightdirection.



4



HighlightsoftheARRACleanEnergyRelatedInvestments



TheboldinvestmentsincleanenergythroughARRAhadasubstantialmacroeconomicimpact,

supportingtheU.S.economyatacriticalmomentbyraisingoutputandsupportingjobs.



 Over $90 billion of ARRA funding was invested in clean energy and related technologies.

These investments covered renewable energy generation, clean transportation, energy

efficiency, grid modernization, advanced vehicles and fuels, carbon capture and storage,

greeninnovationandjobtraining,andcleanenergymanufacturing.



 TheARRAcleanenergy‐relatedprogramssupportedroughly900,000job‐years(full‐timejobs

over one year), from 2009 to 2015. Many of these jobs provided employment during a

significant labor market downturn. Previous CEA analysis estimated roughly 720,000 job‐

yearsweresupportedfrom2009to2012.



 CleanenergyinvestmentsmadeupoveroneeighthoftotalARRAspendingandprovideda 

meaningfulboosttoeconomicoutput.CEAestimatesthatARRAraisedthelevelofGDPby

between2and3percentfromlate2009throughmid‐2011.



ARRA’s clean energy policies laid the foundation for a long‐term transition to a cleaner

economy by improving clean energy markets, unlocking private  capital, helping drive down

cleanenergytechnologycosts,andexpandingresearchanddevelopmentofnewtechnologies.



 TheARRAfundingnot onlyprovidedastimulus,butalsohelpedaddressmarketfailuresin

clean energy markets. The diverse set of funding mechanisms helped to address market

failuressuchasenvironmentalexternalities,innovationmarketfailures,andcapitalmarket

failuresbyinvestinginmeasuresacrossthecleanenergyvaluechain.



Renewable

Generation

29%

Other

Clean

EnergyMfg

Advanced

Vehicles

andFuels…

Grid

Modern‐

ization

12%

CarbonCapture 4%

GreenInnovation

andJobTraining

Energy

Efficiency

22%

Transit

20%

Figure1:Distribution ofInitialCleanEnergy

AppropriationsbyCategory

Source:CEA(2010).



5



 Solar electricity generation has increased over 30 times from 2008 levels, and wind

generationhasincreasedoverthreetimes.TheinvestmentsmadethroughARRAhelpedto

catalyze dramatic trends in clean energy over the past seven years. Along with the lift in

renewable energy generation is a commensurate notable decline in technology costs for

thesetechnologies,makingthemallthemorecompetitiveagainstfossilfuelgeneration.



 ARRAinvestmentsinthedeploymentofcleanenergytechnologiesalsohelpedcontributeto

dramaticcostreductionsforthosesametechnologiesaspartofavirtuouscycle.Forexample,

theovernightcapitalcostofutility‐scalephotovoltaic(PV)systemsfellfrom$4.1/watt(W)in

2008 to $2.0/W in 2014—a decrease of 50 percent. Cost reductions for this and other

technologiesresulted from anumberof factors—including economiesofscale,technology

learning, and new business practices—that were assisted by the widespread

 deployment

madepossiblebyARRA.



 ARRAhassupportedover$27billionininvestmentincleanenergygenerationandcapacity.

Thesefundswerecomplementedbyinvestmentstomodernizethegridsuchthatthesenew

energysourcescouldplayaroleinprovidingcleanenergytohouseholdsandfirms.



 SubstantialARRAcleanenergyfundingwasinvestedinlong‐runresearchanddevelopment,

helping to bring transformative new technologies to fruition. The benefits from this

investmentarebeginningtopayoff,withnewtransformativetechnologiessuchasa1MW

(megawatt) silicon  carbide transistor, engineered microbes that use hydrogen and carbon

dioxidetomakeliquidtransportationfuel,andmajoradvancesinlithium‐ionbatteries.



ARRA helped catalyze substantial shifts toward cleaner energy sources, raising energy

efficiency,supportingjobs,andbuildingtheinfrastructureneededforlarge‐scaleuseofclean

energy.



 ARRA support helped improve residential energy efficiency  by weatherizing over 800,000

homes,leadingtooveronemillionhomesbeingweatherizedbetween2009and2012with

federalsupport.TheWeatherizationAssistanceProgramscaledupquicklyandreachedlow‐

incomehomesacrossthecountry.



 ARRAenergyefficiencyinvestmentsareprojectedtosaveover400millionMMBtu(million

Britishthermalunits)ofenergyoverthenextfourdecades,orthe equivalentofannualenergy

consumptionfor10,000homes.OakRidgeNationalLaboratory(ONRL2015c)estimatesthat

all ARRA investments will save 400 million MMBtu of energy from 2009 to 2050. This is

equivalent to the entire annual energy consumption of 10,000 homes, if the savings are

distributedequallyovertheyears.



 Amajordemonstrationcarboncaptureandstoragefacility in the UnitedStates was made 

possiblethrough ARRAfunding.AsofMay15,2015,theAirProductsandChemicalshydrogen



6



facility in Port Arthur, Texas had successfully captured its second millionth metric ton of

carbondioxide.



 ARRAhelpedtosupportthetrainingofover30,000studentsforsolarcareersandotherclean

energycareers.Over 25 Energy Training Partnership grants provided support for electrical

apprenticeship training, programs targeting unemployed dislocated workers, women,

minoritiesandveterans,andcommunitygroupsservingunemployedanddislocatedworkers.



 ARRA helped lay the groundwork for a transition to a cleaner and more energy efficient

transportationsystemwithover$18billioninitiallyallocatedtowardscleanertransportation.

This investment supported public transit with purchase of 12,000 buses, vans, and rail

vehicles and the constructionor renovation of over 850 transit facilities. It also supported

high‐speed rail  through $8 billion allocated to 49 projects, 98 percent of which are either

completeorwithconstructionunderway.



 The Clean Energy Manufacturing ARRA funding, along with the more stable wind turbine

market facilitated by ARRA support, helped support a dramatic increase in the share of

domestically‐producedwind turbinesusedintheUnitedStatesfrom25percentin2006‐2007

to72 percentin2012. The 30percentclean energy manufacturingtaxcreditwasawidely

oversubscribedsuccess,withnumerousinnovativeprojectsacrossthecleanenergyspace.



 The Smart Grid Investment Program helpedto support the installation of 16 million smart

metersby2016.Smartmeterprojectsaroundthecountrycanhelpconsumersunderstand

theirenergyuseandpricing,helpingtofacilitatethetransitiontoamoreresilientelectricgrid

infrastructure.



 ARRA funds provided a matching grant to enable the deployment of over 4,600 electric

vehiclechargingstations.ChargePointreceiveda$15milliongranttoleverageprivatefunds

toinstallchargingstationsinstatesacrossthenationtohelpsupporttheemergingelectric

vehiclemarket.





7



I. Introduction



The American Recovery and Reinvestment Act (ARRA), also known as the Recovery Act, was

signed by President Obama on February 17, 2009, at a time when the U.S. economy was

contractingataratenotseensincetheGreatDepression.Therewasaseverefinancialcrisis,and

asteepdeclineinconsumerandbusinessconfidence,householdwealth,andaccesstocredit.In

thelastquarterof2008,employmentwasfallingbymorethan700,000jobspermonthandU.S.

realgrossdomesticproduct(GDP)contractedatan8.9percentannualizedrate.ARRAwaspart

ofacomprehensiveandboldcountercyclicalfiscalpolicyresponsetotheeconomic turmoilthat

grippedtheUnitedStatesandtheworldeconomy.



ARRA’simmediategoalwasstabilizetheeconomy,preservingandrestoringjobs,andassisting

deeplysufferingindustries.Inacontextofweakaggregate demand, already aggressive use of

monetarypolicytoolsbringinginterestratestonear‐zerolevels,highlyconstrainedcredit,and

expectations of protracted contraction, there is a strong economic case for a significant fiscal

stimulustoincreasenear‐termeconomicoutput.Asdocumentedinnumerousreports,ARRAis

estimatedtohaveincreasedoutputandemploymentsubstantiallyrelativetoabaselinewithout

thefiscalstimulus.Forexample,theCouncilofEconomicAdvisers(CEA)estimatesthattheentire

ARRApackageincreasedGDPbetween2and3percentfromlate‐2009tomid‐2011.



ARRA also provided a major opportunity for laying the  groundwork for sustainable long‐run

growthandwell‐being.Indeed,thereisareasonwhytheword“Reinvestment”wasincludedin

the title of the Act. A second goal of ARRA was invest in the foundation for a robust and

sustainable21

centuryeconomy.AsizablefractionoftheARRAfundswereinvestedinprojects

thatimprovedlong‐runproductivity,suchastransportationinfrastructureimprovements,aswell

as investments in innovative  technologies, including clean energy technologies and related

innovations.



Thisreportfocusesontheseinvestmentsincleanenergyandasustainable21

centuryeconomy.

ARRAappropriated$787billionatthetimeofpassage,andthiswaslaterrevisedto$831billion

over the 2009 to 2019 period.

 Of the initial allocations, $90 billion was allocated towards

investing in a cleaner, more sustainable energy future.

 These investments can be seen as a

“down‐payment” on the transition to a sustainable 21

 century  economy, and each has an

economic rationale based on addressing multiple  market failures, such as environmental

externalitiesandinnovationmarketfailures.



SeeCEA(2014)forestimatesoftheaggregateeconomiceffectsoftheARRAandtheliteratureontheuseoffiscal

stimulusinarecession.

Thosefigures,though,include$69billionallocatedtoaroutinesetofpatchesfortheAlternativeMinimumTax

(AMT).ThispartoftheAct,acontinuationofalong‐standingpractice,isbestthoughtofasongoingfiscalpolicy,not

asa temporaryfiscalimpulsedesignedspecificallytocounterthe

effectsofaneconomicrecession. Excluding the

AMTpatch,theRecoveryActprovidedatotalfiscalimpulseof$763billion.

Asdescribedbelow,certainprogramswereextendedorhadgreatertake‐upthananticipated. Assuchthetotal

allocationofARRArelatedcleanenergyprogramswillbeover$90billion.CEAcalculationsindicatethatjustunder

$90billionofARRAcleanenergy‐relatedfundinghadbeenspentbytheend

of2015.



8



Thisretrospectivereviewofthecleanenergyandrelatedinvestmentsprovidesseveralinsights.

Ithighlights dramatictrendsof increasedactivity andinnovationincleanenergymarketsover

thepastsevenyears.Forexample,solarelectricitygeneration increasedover30‐fold,andwind

generation increased over three‐fold since 2008. It reviews

 the direct contributions of the

RecoveryActforjobsandeconomicactivity.TheARRAcleanenergyprogramsareestimatedto

havesupportedroughly900,000job‐years,whereajob‐yearisafull‐timejobforoneyear.Italso

connectsthedotsbetweeninvestmentsmadeintheRecoveryAct

andmajorinnovativeactivity,

suchasthe400potentiallytransformativeAdvancedResearchProjectsAgency‐Energy(ARPA‐E)

projects.Whileformallyprovingcausalityforanypolicy,includingARRA,ishighlychallengingand

requiresareliablecounterfactual,thisreviewprovidesevidencethatARRAcontributedtooneof

thegreatestincreasesincleanenergyactivityinthehistoryoftheUnitedStates,andsupported

hundredsofthousandsofjobsthatweremuch‐neededinthewakeofthefinancialcrisis.



This report is a follow‐on from a series of quarterly  reports by the CEA on the effects of the

RecoveryActonoveralleconomicactivityandemploymentthatranthroughthefourthquarter

of2013.Thereportaddsnewdataonthedramatictrendsoccurringincleanenergymarketsand

providesinsightintowheretheARRAcleanenergyfundingwasspentandthewaysinwhichit

contributedtocleanenergydevelopment.Assuch,thereportprovidesanassessmentoftherole

of ARRA in leading the transition of the energy economy in the United States and a more

completepictureoftheAct’slonger‐termimpactsontheU.S.economy.



Theremainderofthisreportbeginswithadiscussionoftheeconomicrationaleforcleanenergy

investmentaspartoftheARRApackage.Nextisanoverviewofthecleanenergyfundingunder

ARRA,which isfollowedbythenotable  trendsin cleanenergyduringandfollowingARRAand

thenabriefdiscussionofsomeofthehighlightsoftheimpactsofthekeycleanenergy‐related

components of ARRA. Finally the report concludes with a discussion of why the ARRA clean

energy‐related investments were successful. Appendix  I provides much greater detail on the

majorcategoriesofprograms,includingmanymoreexamplesofprogramimpacts.AppendixII

providesanoverviewofCEA’s

calculationoftheARRAcleanenergyspendingovertimeusedfor

thejobsestimate.



9



II. EconomicRationaleforCleanEnergy‐RelatedInvestment



Economictheoryprovidesusefulguidanceforthedevelopmentofpoliciesandprogramsinthe

clean energy space. In particular, there are an array of market failures that can lead to

underinvestment in clean energy, energy efficiency, and research and development in these

areas relative to the socially optimal levels of investment. These market failures will come up

throughoutthediscussioninthisreportofthedifferentcleanenergy‐relatedinvestmentsmade

underARRA.



Thefirstcategoryofmarketfailurethatafflictsmarketsforcleanenergy andenergyefficiency

consists of environmental externalities from the burning of fossil fuels. These environmental

externalities

includedamages from greenhousegasemissionsandotherlocal air pollutants.If

theseenvironmentalexternalitiesareinternalizedintothemarketprice forenergyservices,the

priceoffossilfuel‐basedenergywouldincreaseandtherelativefinancialattractivenessofclean

energy would improve, resulting  in more clean energy investment. Thus,

without some

interventiontointernalizethesenegativeexternalitiesorotherwiseaddressthismarketfailure,

themarketwillunderprovidecleanenergy.



Asecond categoryofmarket failureistheresultof thepositiveexternalityofknowledge  spill‐

overs.These marketfailures,calledinnovationmarketfailures, lead to an underinvestment in

innovative activity on new technologies by private actors because some of the returns from

investmentspill‐overtootherfirms,implyingthatthesocialrateofreturnoninnovati veactivity

is much higher than the private rate of return. Innovation market failures are particularly

important for fledgling technologies that are just being developed, for foundational advances

may be difficult to patent and are more likely to spill‐over to other firms than incremental

advancesinmaturetechnologies.



The most common example of an innovation market failure is the research and development

(R&D) market failure from imperfect appropriability of innovations (i.e., those who

 innovate

cannot appropriate or capture the returns from the innovation). R&D market failures lead to

underinvestmentinR&Dactivity.Anotherexampleofaninnovationmarketfailureisthemarket

failurefromcostdeclines duetolearning‐by‐doing(i.e.,improvingprocessesandloweringcosts

withadditionalexperience)inthetechnologythatspill‐overtootherfirmsinamarket.Learning‐

by‐doing spill‐overs would dampen the incentive to quickly ramp up production in a new

technology to gain experience. Clean energy technologies are often susceptible to both R&D

marketfailuresand learning‐by‐doing marketfailures becausetheyarenewtechnologieswith

significant gains still to be made (and spill‐over to others in society) from both research and

learning.

 Again, this implies that the private market left to its own devices will underprovide

cleanenergyinnovationinvestment.





SeeJaffeandStavins(1994)orGillinghamandSweeney(2012)foramoredetaileddiscussionofinnovationmarket

failuresinthecontextofcleanenergy.



10



Athirdmarketfailureisthepossibilityofenergysecurityexternalitiesfromthe useofoil,which

many clean energy technologies, particularly in the transportation sector, can help offset. As

discussedinworkbyBrownandHuntington(2013)andNordhaus(2009),whentheU.S.economy

isexposedtooilpriceshocks,

therecanhavesignificantmacroeconomiceffects.Theseoilprice

shocks may occur from crises on the other side of the world, such as wars, revolutions, and

decisionsmadebyforeigncountries.Thusoilisunderpricedwhenoneconsidersthecosttothe

economyfromrelyingheavily  onoil, leading to

underinvestmentincleanenergytechnologies

thathelpreduceoilconsumption.



A fourth category of market failures that may lead to underinvestment in clean energy and

energy efficiency consists of information market failures. These may be due to inadequate or

poor information about new clean energy or energy efficient consumer technologies. In the

contextofenergyefficiency,theseinformationmarketfailuresmayeveninteractwith

behavioralfailures,suchasconsumermyopia(i.e.,consumersonlyfocusingontheveryshort‐

runattheexpenseofthelong‐runforaparticulargoodorserviceinawaythatisdifferentthan

otherchoicesconsumersmake)leadingto anoverweightingoftheupfrontcostsforenergy‐using

durablegoods relativetoother decisionsconsumers make.Thereissome evidencethatthese

issuescouldleadtounderinvestmentinconsumerenergyefficiencydecisions.

Itisalsopossible

thattheycouldinfluencecleanenergypurchases.



Othermarketfailuresmayalsoaffectcleanenergyinvestmentsincertaincircumstances.During

times with extremely tight credit markets, such as just after the 2008 financial crisis, there is

oftenlimitedavailabilityofcapitalforinvestmentsinpromisingnewtechnologies.Thesecapital

constraints very likely afflicted clean energy investments just as the  ARRA funding became

available. Such capital constraints at times of crisis call for greater availability of financing for

promisingnewtechnologies.



In some cases, there may also be network externalities that influence the adoption of new

technologies

thatrelyonnetworkeffects.Networkeffectsimplythatthevalueofaproductis

greater when there is a larger network of users  of that product. For instance, electric vehicle

charging stations are more valuable if there is a large network of charging stations and many

electricvehicledrivers.Thesameistrueforbiofuelrefuelingstations.Sometimesthesenetwork

effectsareinternalizedalreadybythe produceroftheproduct. However,inthe caseofmany

cleanenergytechnologies,eitherthebenefitsdonotallaccruetotheproducerorthescaleof

investmentrequiredtocreatethenetworkissolarge(especiallyimportantduringtimesoftight

credit markets), that these network effects are not internalized, and thus  there is an

underinvestmentinthecleanenergytechnologies.Governmentsupportcannotonlyprovidethe

needed funds, but it can also act as a signal to the market that a particular technology has

support,influencingexpectationsoffuturegrowthandinvestmentdecisions.





E.g.,seeGillinghamandPalmer(2014)andAllcottandGreenstone(2012)forreviewsoftheacademicliterature

onmarketandbehavioralfailuresinenergyefficiencypolicy.



11



Such a diverse array of market failures affecting clean energy markets provides an economic

rationalefortheuseofavarietyofpolicytoolsforgovernmentintervention.Italsounderscores

that when a sizable stimulus  package is needed for macroeconomic purposes, there is an

economic rationale for investing this funding in

 clean energy‐related technologies that will

providelong‐termbenefits.NotonlydidtheARRAfundingalleviatemacroeconomicconcerns,

but the investments help to address several important market failures. The package of clean

energy‐relatedinvestmentinARRAhelpstospurcleanenergymarketsallalongthevaluechain,

aswillbeseeninthefollowingsections.



12



III. OverviewofCleanEnergyFundingUndertheRecoveryAct



The over $90 billion ARRA investment in clean energy‐related sectors represents one of the

largestinvestmentsinthesesectorsinU.S.history.Forexample,itwasanorderofmagnitude

largerthanthefive‐year$6.3billionClimateTechnologyInitiativeproposedduringtheClinton

Administration.Further,theARRAcleanenergy‐relatedinvestmentsleveragedontheorderof

$150billion inadditionalprivateandnon‐federalcapitalininvestmentstoward advancing the

deploymentof energyefficiency,wind, solar,geothermal,biomass,low‐carbon  fossil fuel,and

othertechnologies.



DirectinvestmentsfromARRA fundedavarietyofdifferentprojectswithlong‐runimplications.

These projects were broadly targeted to help address market failures, such as environmental

externalitiesandinnovationmarketfailures.Forexample,grantsfordeploymentofrenewable

energyprojects,suchassolarphotovoltaic(PV)projects,helpedtoreducegreenhousegasand

otherpollutantemissions.Similarly,thesegrantsmayhavefosteredlearning‐by‐doingspill‐overs

through a growing and publicizing of the market. Many of the projects involved research and

developmentatcriticalpointsinthevaluechainwhenthe technologyspill‐overstoothersare

likelytobelarge,andthustheprivateinvestmentespeciallylow.



The ARRA clean energy‐related investments can be divided into two categories based on the

fundingmechanism.First,therewere45investmentprovisionswithaninitiallyestimatedtotal

allocation of $60.7 billion. These provisions  were primarily focused on areas of high‐valu e

investmenttoprimeasustainable21

centuryeconomy.Second,therewere11taxincentives,

whichtheU.S.Treasuryestimatedwillinvest$29.5billionthroughfiscalyear2019.

Thesetax

incentiveswere primarily focused on fostering newtechnologiesin the renewableenergyand

advancedvehicletechnologyspace,butalsoprovidestrongsupportforenergyefficiency.Such

investments accelerated the growth of key new technologies, which will help reduce

environmentalexternalitiesandU.S.relianceonoilforyearstocome.



AnotherwaytocategorizetheARRAcleanenergy‐relatedinvestmentsisbythebroadcategory

of project. Figure 1 illustrates the distribution of the initially allocated $90 billion investment

acrosseightbroadcategoriesofcleanenergyprojects:renewablegeneration,energyefficiency,

grid modernization, advanced vehicles and fuels, transit, carbon capture

 and storage, green

innovationandjobtraining,cleanenergymanufacturing.Figure2illustratesthebreakdownof

initial allocations by spending category, and shows that 67 percent of the allocations went

towardsspendingand33percentwenttowardstaxcredits.





CEA(2010)calculatesthat$46billionofthe$90billioninitialallocationhasaco‐investmentcomponentandthat

this$46billionleveragesover$150billioninprivateandnon‐federalcapitalinvestment.SeeAldy(2013)foramore

detaileddiscussionoftheco‐investmentcomponentoftheARRAclean‐

energyinvestments.

Thisestimateonlyconsideredtaxcreditsinplacein2010,anddoesnotincludeinvestmentsfromlaterextensions

ofthetaxcredits(CEA2010).



13







Atnearly30percent,thelargestcategoryofallocationsconsistedofinvestmentsinrenewable

energy generation, which both induced innovation and helped address environmental

externalities.At22percent,thenext‐largestcategoryofallocationswenttowardsinvestments

inenergyefficiency,alsoreducingenvironmentalexternalities.Transitinvestmentsmadeup20

percentofallocations,andservedtobuildinfrastructuretobothimproveeconomicproductivity

andreducetransportationemissions.At12percentofallocations,gridmodernizationalsoserved

to improve infrastructure, increase electricity system reliability, and demonstrate new

technologiesforamoreresilientandsustainableelectricitygrid.Theremaininginvestmentsin

advancedvehiclesandfuels,greeninnovationandjobtraining,carboncaptureandstorage,and

cleanenergymanufacturingallservedtofosterinnovationinnew technologies,preparing the

UnitedStatesforalonger‐termshifttoaclean21

centuryeconomy.



A key element in all of the ARRA clean energy‐related investments is that while they were

designedtoprovidelong‐termbenefits,theallocationsfocusedasmuchaspossibleonprojects

thatwere“shovel‐ready”andcouldbedeployedrelativelyquickly,inordertotakeadvantageof

resources in the economy that were under‐utilized due to the Great Recession. In short, the

allocations aimed to put people back to work and contributed to both the recovery and

reinvestment goals of the legislation. More broadly, the choice of allocation across the many

possibleprojectswasbasedprimarily

onaseveralcriteria:theabilitytodeployresourcesquickly,

thepotentialforfederalsupporttostimulateprivatefinancing,existenceofadministrativeand

authoritativecapacityforpolicyimplementation,CO

reductionpotential, andimpactperdollar

in employment, economic activity, and changes to the energy system.

 Federal capacity to

administer programs and funds were also considered to help assess feasibility. All of these

considerations led to a wide variety of funding mechanisms and policy approaches, as will be

seenlaterinthisreport.



Summers(2008)suggeststhatanypackageintendedtoprovidestimulusshouldbe,atleastinitially,drivenbythe

“3‐T’s”;theyshouldbe“timely,targeted,andtemporary.”Theseprinciplesechothestrongpreferenceforshovel‐

readyprojectsandusingexistingprogramstodistributethefundsinastimelyamanner

aspossiblewhiletheneed

isthegreatest.

Renewable

Generation

29%

Other

Clean

EnergyMfg

Advanced

Vehicles

andFuels…

Grid

Modern‐

ization

12%

CarbonCapture 4%

GreenInnovation

andJobTraining

Energy

Efficiency

22%

Transit

20%

Figure1:Distribution ofInitialCleanEnergy

AppropriationsbyCategory

Source:CEA(2010).

Spending

67%

TaxIncentive

33%

Figure2:DistributionofInitialCleanEnergy

AllocationsbyType

Source: CEACalculations.



14



AllARRAspendingwaschanneledthroughfederalagenciesbeforebeingdisbursedtostateand

localgovernmentsorotherrecipients.Muchoftheenergy‐relatedfunding;includingforenergy

efficiency,carbon capture and storage, and grid modernization; was administered by the U.S.

DepartmentofEnergy(DOE).

TheU.S.TreasuryDepartmenthandledmuchofthesupportfor 

renewable energy through  tax incentives and cash grant program; the Federal Transportation

Administration(FTA)andFederalRailroadAdministration(FRA)handledtransportationfunding.



Table1shows the breakdownofARRAspending across thecategoriesofcleanenergy‐related

investment.Thesecond

columnshows theinitial allocationoffundingacrosscategoriesbased

onthe2009allocations.Thesesumuptothetotalof$90billion,whichisthestandardnumber

usedtodescribetheARRAcleanenergyinvestments.However,someoftheprogramsweretax

creditprograms,ratherthanallocationsoffunding.Forexample,the1603CashGrantprogram

forrenewablesandthe30percentcleanenergymanufacturingtaxcreditwerebothtaxcredit

programs. Both of these programs were in high demand, and in fact the clean energy

manufacturingtaxcreditwassignificantlyoversubscribed.Otherprograms,suchas taxcredits

foradvancedvehicles,continuepast2015andmaynothavespentalloftheallocatedfundingby

2015.CEAestimatesthatthefinalallocationoutto2019willaddroughly$15billiontothetotal

sum, bringing it to roughly $105 billion. Of that total, CEA estimates roughly $88.5 billion has

beenspentsofar.NonARRA‐relatedextensionsofanyoftheprograms,includingtheproduction

taxcreditandinvestmenttaxcredit,areexcludedfromthesetotals.



BasedontheARRAspending,itispossibletoestimatetheimpactonemployment.PreviousCEA

analysisestimatedthatARRAcleanenergy‐relatedinvestmentshelpedsupportroughly720,000

job‐years(whereajob‐ye ar isoneyearoffull‐timeequivalentemployment)overtheperiodfrom



CarleyandHyman(2013).



15



2009to2012.

Thiswasbasedontheextenttowhichinitiallyallocatedfundinghadbeenspent

outoverthatperiod.Includingfurtherspendingoverthelastthreeyears,CEAestimatesroughly

900,000job‐yearsweresupportedbythe$88.5billionARRAcleanenergy‐relatedinvestments

from 2009 to 2015.

 When all of the ARRA funds have been spent out by 2019, CEA analysis

suggests that over one million job‐years will have been supported from 2009 to 2019. Many

programshavebeencontinuedlongbeyondtheARRAtimeframeandcontinuetoprovideboth

employmentandlongtermbenefits

totheeconomy.Further,manyprogramsalsoleveragedand

made possible significant private investment, which supported additional jobs. This report

focusesontheinvestmentsdirectlyfundedororiginatedunderARRA.





TheseCEAestimatesincludebothdirect,indirect,andinducedjobs.Directjobsincludepeoplehireddirectlyby

thegovernmentoritsgranteesorcontractorstodotheworkpaidforbythestimulus.Indirectjobsareadditional

people hired by suppliers to and subcontractors of the original recipients to provide

the inputs needed for the

projects.Inducedjobsarepeoplewhoarehiredbecauseoftheextraspendingbyworkershiredindirectandindirect

jobs.Roughlytwo‐thirdsofthejob‐yearsaredirectandindirectcleanenergyjobs;theremainderareinducedjobs.

Theestimateof900,000job‐yearsiscalculatedbasedonamacroeconomicmultipliersimilartopreviousCEAARRA

analysisadjustedforchangesinnominalGDPandthelaborforce.Otherapproachesyieldanevenlargerestimate;

forexample,usingafullmacroeconomicmodelyieldsanestimateofoveronemillion.

Theestimateincludesdirect,

indirect,andinducedjobs,asdefinedinfootnote10.



16



IV. DramaticTrendsinCleanEnergyMarkets



Cleanenergyinthe UnitedStateshasmade enormousstridesover the pastsevenyearssince

2009. Electricity generation from renewable energy sources has skyrocketed, and costs for

technologieslike wind turbines and solar panels haveplummeted.The clean energyeconomy

has also supported high quality jobs and robust employment growth. While the vast progress

thathasbeenmadeacrossthecleanenergysectorcannotbeentirelyattributedtoARRA,ARRA

supporthasplayedaroleinthedramatictrendsthatcanbeobservedincleanenergymarkets.



GrowthinRenewableEnergyGeneration

Tobegin,theshareofelectricitygeneratedbynon‐hydrorenewableshasincreasedfromroughly

2 percent in 2005 to over 8 percent in 2015 (Figure 3). Growth in wind‐powered and solar‐

poweredelectricitygenerationhasbeenparticularlynotable.DatafromtheEnergyInformation

Administration (EIA) show that since 2008, electricity generation from wind has more than

tripled,andelectricityfromsolarhasincreased30‐fold(Figure4).



Manyfactorshavecontributedtothisdramaticgrowth.Therehavebeenimprovementsinboth

windandsolarPVtechnologies.Manystateshaveimplementedrenewableportfoliostandards.

And many states and municipalities have other policies to encourage renewable energy

generation. All of these other factors complement the major investments in wind and solar

technologydevelopmentanddeploymentinARRA.



GrowthinRenewableEnergyCapacity

Alongwith therapidgrowth in newelectricitygeneration from renewablesourceshas beena

commensurate surge in renewable energy capacity. Electric generation capacity refers to the

maximumoutputthatageneratorcanproduce,whileelectricitygenerationreferstotheactual

electricity produced. As illustrated in Figure 5, non‐hydro renewable energy capacity in the

UnitedStatesmorethantripledbetween2008and2015,fromatotaloflessthan30thousand

2000 2003 2006 2009 2012 2015

Figure3: MonthlyShareofNon‐HydroRenewablesin

NetElectric PowerGeneration

Percentof TotalNetGeneration

Note:Dotted lineisasmoothedtrend,showntodampenthestrong

seasonalpatterns(theshareofnon‐hydrorenewablesdropsduringthe

winterandsummer‐bothseasonsofhighpowergenerationdemand).

Source:EnergyInformationAdministration.

100

200

300

400

500

600

2008 2009 2010 2011 2012 2013 2014 2015

Figure4:ElectricityGenerationfromWindandSolar

ThousandMegawatthoursperDay

Source:EnergyInformationAdministration.

Wind

(leftaxis)

Solar

(rightaxis)



17



megawattsto almost 100 thousand megawatts.Mostoftheincreasewas driven by growth in

windandsolarcapacity.

Thegrowthinrenewableenergycapacityhasnotonlybeenimpressive,butitalsofarexceeded

expectations prior to the enactment of ARRA. The dashed lines in Figures 6 and 7 show EIA’s

projections for installed wind and solar  capacity made in an early release of the 2009 Annual

EnergyOutlook(AEO)thatexcludedanyforecastedimpacts from ARRA. The solid line  in each

figureshowsactualinstalledcapacity,whichiswellabovethepre‐ARRAprojections.



Just as

described above, the impressive performance of the clean energy sector since 2008

cannotbesolely attributeddirectlytoARRApolicies.Otherfactorsverylikelycomplementedthe

ARRAcleanenergyinvestmentsandalsocontributedtorenewablecapacitygrowth.That said,

ARRAfundscontributedsignificantlytoinvestmentsincleanenergyprojectsinseveralwaysas

willbefurtherdiscussedbelow,andareamajor contributortotheremarkableandunexpected

growthinthemarketobservedoverthepastseveralyears.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source:EnergyInformationAdministration.

Figure6:ElectricPowerSectorInstalledWindCapacity

Gigawatts(GW)

Actual

2009Pre‐ARRARelease

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Note:Includes solarPVandsolarthermal.

Source:EnergyInformationAdministration.

Figure7:ElectricPowerSectorInstalledSolarCapacity

Gigawatts(GW)

Actual

2009Pre‐ARRARelease



18



LoweredCleanEnergyCosts

Along with the considerable growth in generation by renewables, there have been sizable

declines in the cost of renewable and othe r clean energy technologies since the ARRA

investments. For example, LED lighting has seen a nearly 90 percent decrease in cost per kilo

lumensince2008.Batterycostsforelectricvehicleshavefallenfromalmost$1,000/kWhin2008

tounder$300/kWhin2014.

Butinparticular,thecostsofwindandsolarPVtechnologyhave

notablydeclinedinrecentyears,andarerapidlybecomingcostcompetitivewithtraditionalfossil

fuelsources.



A common metric for comparing cost competitiveness between renewable and conventional

technologiesisthe“levelizedcostofenergy”(LCOE).TheLCOErepresentstheper‐kilowatt‐hour

cost(inrealdollars)ofbuilding andoperatingageneratingplantoveranassumedfinanciallife

anddutycycle.SeveralkeyinputsaretakenintoaccountwhencalculatingLCOE,includingcapital

costs,fuelc osts, fixed andvariable operations and maintenancecosts,financingcosts, and an

assumedutilizationrateforeachplanttype.

Importantly,theavailabilityofvariousincentives

includingstateorfederaltaxcreditsarealsofactoredin.Becausesolarand windte chnologies

havenofuelcosts,theirLCOEsarehighlydependentontheestimatedcapitalcostsofgeneration 

capacityandavailableincentives,andcanvarysubstantiallybyregion.



BasedonbothLCOEandovernightcapitalcosts(thecosttobuildapowerplantifnointerestwas

incurredduringconstruction),windandsolarcostshavefallensubstantiallyoverthepastdecade.

Figure8indicatesthepatternofcostsovertimesince2005,withthe shadedareaindicatingthe

time period in which the ARRA programs were in the  greatest effect (note that several ARRA

programshavecontinuedpasttheendof2013).AsillustratedinFigure9,theLCOEforonshore

windtechnologieswasdown32percentin2014fromits2005level,andthecostofsolarPVwas

down60percent.Overnightcapitalcostshavealsodeclined,byalmost10percentforwindand

60percentforsolar.





DOE(2015).

EIA(2015).



19



Thedeclineinthelevelizedcostof windtechnologyoverthelast decade has been somewhat

slowerthanthedeclinesseenforsolartechnology.Infact,averagewindturbinepricesactually

morethandoubledbetween2002and2008beforeresumingadownwardtrend.Theincreasein

turbine prices during the pre

‐ARRA period was influenced by several factors, including higher

prices for materials, energy, and labor inputs and an increase in turbine manufacturer

profitabilitydueinparttorobustdemandgrowthandturbineandcomponentsupplyshortages.

Inaddition,overthepast15yearstherehasbeenasubstantialincreasein

turbinesize,including

hub height and rotor diameter. According to the U.S. Department of Energy, the average

nameplatecapacityofnewlyinstalledwindturbinesin2014wasup172percentsince1998‐1999,

andaveragehubheightsandrotordiametersincreased48and108percent,respectively,over

the same time period.

 So, while the levelized costs were declining modestly,the  technology

wasalsoimproving,allowingforwindinstallationsatsitesthatwerepreviouslyuneconomicand

possiblyimplyingevenlargeractualcostsavingsoverthepastdecadethanifthetechnologywas

heldfixed.

Currently,thereisawiderangeofcostsfornewwindandsolargeneration.Therearealready

some places in the United States where new wind—without any subsidies or accounting for

externalities—cancompetehead‐to‐headwithnewfossilfuelgenerationonpurelyatechnology

costbasis.Moreover,inmanylocationsintheUnitedStates,thecostfornewwindandsolaris

atorbelow thecostofnewfossilfuelgenerationwhenincludingsubsidiesandtaxcreditsused

to promote renewable generation. Adjusting for environmental externalities would tip the

balanceevenfurther.Withouttakingintoaccount subsidiesorexternalities,however,windand

solar on average remain more expensive  forms of new generation than coal or natural gas,

underscoring the continued need for government support to catalyze greater investment in

renewablegeneration.Promisingly,forecastsforwindandsolarPVcostsfromthe EIAandthe

InternationalEnergyAgency(IEA)suggestthattheunsubsidizedtechnologycostofnewwindand

solarwithout subsidieswillbe on parorbelow thatof newcoalby2020(Figure 9).TheARRA

investmentsinwindandsolarunquestionablyplayedaroleishelpingthese technologiesgetto

scaleandbecomemorecompetitive.



MajorJobGrowthintheRenewableEnergySector

EmploymentintherenewablesectorspansseveralcategoriesinFederaldatacollectionsystems,

which complicates direct estimation of job growth and output in the sector. However, trade

association data suggest that, along with the rapid expansion in wind and solar electricity

generation,therehasalsobeenasharpriseinemployment.From2010to2015,employmentin

thesolarenergyindustrymorethandoubled,andisexpectedtoincreasebyanother15percent

in2016(seeFigure10).





EERE(2015).



20



Between2010and2015,thesolarindustryhasaddedworkersatapace12timesfasterthanthe

overalleconomy.Infact,solarjobsaccountedfor1.2percentofallnetjobsaddedintheUnited

Statesin2015.Employmentinthewindindustryhasalsobeenquiterobust.In2012,whenjobs

wereneededthemost,employmentreached80,000.Itsincedroppedsomefromthislevel,but

increasedagainfrom2013to2014,reachingatotalwindindustryemploymentofroughly73,000

workersin2014,upfrom50,000intheprioryear.

Thesearehighqualityjobstoo—Brookings

(2011)reportsthatthemedianwageforatypicalcleaneconomyjobapproaches$44,000,which

isabovethenationalmedianwage.





AWEA(2015).

100

150

200

250

300

2010 2011 2012 2013 2014 2015 2016

Source: TheSolarFoundation,NationalSolarJobsCensus2015.

Figure10:Solar‐Related Employment

ThousandJobs

Projected



21



V. HighlightsoftheARRACleanEnergyInvestments



AcrosstheeightmajorcategoriesofcleanenergyinvestmentslistedinFigure1,ARRAfunding

laidthegroundworkforthetransitiontoacleanenergyeconomy.Thissectionprovidesabrief

overviewofsomeofthehighlightsfromtheARRAcleanenergy‐relatedinvestments.Thereview

coversthecategoriesinFigure1,inorderfromlargesttosmallestintermsoffundingallocation.

Appendix I goes into much greater detail on each of the different categories of investment,

includingmuchmorediscussionoftheprogramimpacts.



RenewableGeneration

As noted, clean energy investment may be underprovided by the market due to unpriced

environmentalexternalitiesfromfossilfueluse, innovationrelatedmarketfailures,andcapital 

marketconstraintsduetothechallengesofafinancialcrisis.ARRAsupportedrenewableenergy

generation by both expanding existing incentives and adding programs. The two primary

programsthatwere expanded were the production tax credit (PTC) and investment taxcredit

(ITC).ARRAextendedtheproductiontaxcreditforrenewableenergygenerationbythreeyears,

expandedeligibilityforthe30percentinvestmenttaxcreditforrenewableprojects,andremoved

acaponinvestmenttaxcredits,whichallowedforsmallwindprojects.



Acknowledgingthechallengesthatcertainrenewabledevelopershadintakingadvantageofthe

taxincentivesavailableatthetime,ARRAalsocreatedtwonewprogramstosupportrenewable

energygeneration.First,byprovidingloanguaranteesforrenewableenergyprojects,the1705

LoanGuaranteeProgramaddressedthedifficultyofsecuringfinancingrenewableprojectsinthe

then‐prevailingmarketconditions.The1705programsupportedtheconstructionofthefirstfive

solarPVprojectsover100MWintheUnitedStatesforatotalof1,502MWinrenewableenergy

capacity.



Further,ARRAcreatedthe1603CashGrantprogram,providingrenewableenergyprojectswith

acashgrantequalto30percentofprojectcostsasanalternativetotakingtheinvestmenttax

credit.Astaxequitymarketstightenedduringthefinancialcrisis,the1603CashGrantprogram

allowedforthedevelopment

ofrenewableenergyprojectsbyentitiesthatlackedsufficienttax

liability to take advantage of other tax incentives. Through 2015, the 1603 Cash Grant has

provided $25 billion in  awards to support 9,915 businesses in a range in technology types,

supportingatotalinstalledcapacity33.3GW,andanestimated

annualelectricitygenerationof

88,700GWh.

Foratypicalhouseholdusing11,000kWhperyear,thiswouldimplythatthetotal

electricitygenerationwouldpowerover8millionhomesperyear.





LPO(2015).

UST(2016a).



22



EnergyEfficiency

Inadditiontoinvestinginacleanerenergysupply,theRecoveryActalsohelpedreduceenergy

demand through a suite  of investments designed to increase energy efficiency in homes,

commercial buildings, and factories. All of these programs are designed to help address

environmental externalities by reducing energy use, most of which is provided by fossil fuels.

Those programs thatreducedtheuseoffueloilalsocouldhelpreducereliance  on foreign oil

productionandthusmayhelpreduceenergysecurityexternalities.



Oak Ridge National Laboratory (ORNL 2015c) projected that total ARRA energy efficiency

investmentswillsaveover400millionMMBtusofenergyoverthenextfourdecades.Assuming

thesavingshappenuniformlyoverthatperiod,thisisnearly10millionMMBtuperyear,orthe

equivalentoftheannualenergyconsumptionfor10,000homes.Inparticular,theexpansionof

the Weatherization Assistance Program (WAP) with nearly $5 billion in additional funds

supported the weatherization of over 800,000 sites over the 2009 to 2013 period, with an

estimated97millionMMBtuenergysavedandover5millionmetrictonsofcarbonsaved.

18

One

ofthemostvaluablefeaturesofallocatingfundingtowardsWAPwastheabilitytoutilizeexisting

administrativecapacityandrampupquickly.Infact,mostoftheARRAWAPfundswerespentby

theendof2013.Thissupportedjobsatatimetheyweremuch‐needed;WAPsupported28,000

directandindirectjobsin2010alone.



CleanandEnergyEfficientTransportation

ARRA helped lay the groundwork for a transition to a cleaner and more energy efficient

transportation system with over $18 billion initially allocated towards cleaner transportation.

Thisinvestmentsupportedpublictransitwithpurchaseof12,000buses,vans,andrailvehicles

andtheconstructionorrenovationofover850transitfacilities.Italsosupportedhigh‐speedrail

through $8 billion allocated to 49 projects, 98 percent of which are either complete or with

constructionunderway.Further,theARRAtransportationinvestmentsenabledthedeployment

ofover4,600electricvehiclechargingstationsaroundthecountry.



CleanEnergyManufacturing

ARRAsupportedcleanenergymanufacturingthroughinvestmenttaxcreditsforawiderangeof

clean energy products such as equipment for renewable energy generating facilities,  energy

storage,energyconservation,carboncaptureandsequestration,fuelcells,andtherefining and

blending of renewable fuels. The credit was awarded for 30 percent of

 project costs to clean

energymanufacturerson acompetitive bases.Interest intheprogramgreatlyexceededinitial

expectations,withover500applicationsseeking$8billionincredits.Sincethiswasmuchabove

the allocated funding level, funding was increased,allowingforawards in the amount of$2.3

billionto183

domesticcleanenergymanufacturers,promotingthedevelopmentofadomestic

supplychaintosupportagrowingcleanenergyindustry.



EnergysavingscalculationbasedonsiteestimatesfromORNL,furtherdescribedinAppendixI.

ORNL(2015a).



23



OtherInitiatives

Initiativesundertheotherfivecategoriesofspendingalsomadeimportantcontributionstohelp

lay the groundwork for a long‐term shift toward a clean energy economy. The Smart Grid

InvestmentProgramhelpedtosupporttheinstallationof16millionsmartmetersby2016,and

a major demonstration carbon capture and storage facility in the United States was made

possiblethroughARRAfunding.Finally,substantialARRAcleanenergyfundingwasinvestedin

long‐run research and development—an investment that will continue to pay off far  into the

futurebyhelpingtobringaboutmajoradvancesintransformativetechnologies.



24



VI. Conclusions



The American Recovery and Reinvestment Act represented an unprecedented clean energy

investment in United States history. The investment had a dual purpose: jump‐starting the

economytogetAmericansbacktoworkand atthesametimemakingalong‐runinvestmentor

down payment towards the transition to a sustainable 21

 century economy. Thus, it was

designed to leverage existing administrative and technical capacities so that the investments

couldgetoffthegroundquickly.Thismeantbuildingonexistingtaxcredits,providingfundingon 

a competitive basis to grantees with experience, leveraging private capital, and expanding

currently existing successful programs in addition to creating new ones. These clean energy

investments through ARRA provided a strong economic boost, and by the end of 2015 have

supportedroughly900,000job‐years.



Whilemostoftheseinvestments occurredquickly—roughly70percentoftheinitialallocation

wasspentbymid‐2013,providingaboostatthetimeitwasmostneeded—theinvestmentscan

beexpectedtoprovidebenefitslongintothefuture.Moreover,thereisastrongeconomiccase

fortheinvestmentsbasedonhelpingtoaddressmarketfailures.Nearlyalloftheinvestments

willhelpaddressenvironmentalexternalitieseitherintheshortorlongrun.Butmanyalsohelp

address innovation market failures that slow the innovation so critical to long‐run economic

growth.Still others help address further market failures, such as energy securityexternalities,

information market failures, and severe capital constraints that occurred as a result of the

financialcrisis.Justastherearemultiplemarketfailures,theARRAinvestmentsinvolvedmultiple

policymechanisms.Further,suchamixofpolicymechanismsfocusingonmultipletechnologies

andmultipleinnovationopportunitiesnotonlyaddressesbarriersallalongtheinnovationvalue

chain,butalsoenablesthebesttechnologiestosucceed.



While many of the investments are in early‐stage technologies that may take time to pay

dividends to society, there are already remarkable trends in clean energy markets. The

concentratedfocusonencouragingcleanenergyinnovationanddeploymentsentastrongand

consistent signal to markets, contributing to the greatest growth in renewable electricity

generation in history.

 This growth occurred alongside, and helped facilitate, dramatically

decreasingcostsforcleanenergytechnologies.Infact,therearemanyplacesintheUnitedStates

whererenewablesarelessexpensive thantraditionalfossil  fuel generationonalevelized cost

basis.ThesedramatictrendsinrenewableenergymarketswerenotprojectedpriortoARRA.



Thelong‐terminvestmentsmadeunderARRAsupportedjobsatacriticaltime,helpedaddress

marketfailures,andaresettingthestageforthetransitiontoacleanenergy‐based,sustainable

centuryeconomy. 



25



References



Aldy,JosephE.2013.“APreliminaryAssessment of the AmericanRecovery andReinvestment

Act’sCleanEnergyPackage.”ReviewofEnvironmentalEconomicsandPolicy7(1):136‐155.

Allcott,Hunt,andMichael Greenstone.2012.“IsThereandEnergyEfficiencyGap?”TheJournal

ofEconomicPerspectives26(1):3‐28.

American Wind  Energy Association (AWEA). 2015. “Wind Energy Facts at a Glance.”

http://www.awea.org/Resources/Content.aspx?ItemNumber=5059

Beresteanu,Arie,andShanjunLi.2011."GasolinePrices,GovernmentSupport,andtheDemand

forHybridVehiclesintheUnitedStates."InternationalEconomicReview52(1):161‐182.

Brookings Institution. 2011. “Sizing the Clean Economy: A National and Regional Green Jobs

Assessment.”

Brown,StephenP.A.,andHillardG.Huntington.2013."AssessingtheUSoilsecuritypremium."

EnergyEconomics38:118‐127.

Carley, Sanya, and Martin Robert Hyman. 2013. "The 'Grand Experiment': An Early Review of

Energy‐RelatedRecoveryActEfforts."AvailableatSSRN2316827.

ChargePoint. 2016. “ChargePoint Announces the Successful Completion of its  ARRA‐Funding



ChargePointAmericaProgram.”

Congressional Research Service (CRS). 2013. “Battery Manufacturing for Hybrid and Electric

Vehicles:PolicyIssues.”

______.2016.“ResidentialEnergyTaxCredits:OverviewandAnalysis.”

CouncilofEconomic Advisers (CEA).2010. “The Economic Impactofthe AmericanRecovery&

ReinvestmentActof2009,ThirdQuarterlyReport.”

______.2014.“The

EconomicImpactoftheAmericanRecoveryandReinvestmentActFiveYears

Later.”

Diamond, David. 2009. "The Impact of Government Incentives for Hybrid‐Electric Vehicles:

EvidencefromU.S.States."EnergyPolicy37(3):972‐983.

Energy Information Administration (EIA). 2009a. Annual Energy Outlook. U.S. Department of

Energy.

______. 2009b. “Residential Energy Consumption Survey.”

http://www.eia.gov/consumption/residential/data/2009/

______.2015.“LevelizedCostandLevelizedAvoidedCostofNewGenerationResourcesinthe

AnnualEnergyOutlook2015.”U.S.DepartmentofEnergy.

Environmental Protection Agency (EPA). 2016. “Global Greenhouse Gas Emissions Data.”

http://www3.epa.gov/climatechange/ghgemissions/global.html.

Federal Railroad Administration (FRA 2016a). “High Speed Rail Overview.”

https://www.fra.dot.gov/Page/P0060.

______. (FRA 2016b). “High Speed Intercity

Passenger Rail Funding by Region.”

https://www.fra.dot.gov/Page/P0554.

FederalTransitAdministration(FTA).2010.“HearingonFTAFY2011BudgetRequests.”

Fowlie, Meredith, Michael Greenstone, and Catherine Wolfram. 2015. “Do Energy Efficiency

InvestmentsDeliver? EvidencefromtheWeatherizationAssistanceProgram."WorkingPaper

no.w21331.NationalBureauofEconomicResearch.



26



Gallagher,KellySims,andErichMuehlegger.2011."GivingGreentoGetGreen?Incentivesand

ConsumerAdoptionofHybridVehicleTechnology."JournalofEnvironmentalEconomicsand

Management61(1):1‐15.

Gillingham, Kenneth, and James Sweeney. 2012. “Barriers to Implementing Low Carbon

Technologies.”ClimateChangeEconomics3(4):1‐25.

Gillingham,Kenneth,andKarenPalmer.2014.“BridgingtheEnergyEfficiencyGap:PolicyInsights

from Economic  Theory and Empirical Evidence.” Review of Environmental Economics and

Policy8(1):18‐38.

Intergovernmental Panel on Climate Change (IPCC). 2005. “IPCC Special Report on Carbon

DioxideCaptureandStorage.”IPCC,CambridgeUniversityPress.

Jacobsen, Grant D., and Matthew J. Kotchen. 2013. "Are Building Codes Effective at Saving

Energy?EvidencefromResidentialBillingDatainFlorida."ReviewofEconomicsandStatistics

95.1:34‐49.

Jaffe, Adam B., and Robert N. Stavins. 1994. "The Energy Paradox and the Diffusion of

ConservationTechnology."ResourceandEnergyEconomics16(2):91‐122.

Kotchen, Matthew J. 2015. “Do Building Energy Codes Have a Lasting Effect on Energy

Consumption? New Evidence from Residential Billing  Data in Florida.” Working Paper no.

w21398.NationalBureauofEconomicResearch.

LawrenceBerkeleyNationalLaboratory(LBNL).2010."PreliminaryEvaluationoftheSection1603

TreasuryGrantProgramforRenewablePowerProjectsintheUnitedStates."EnergyPolicy

38(11):6804‐6819.

Lazard. 2014. Lazard’s Levelized Cost of Energy Analysis—Version 8.0.

https://www.lazard.com/media/1777/levelized_cost_of_energy_‐_version_80.pdf.

Levinson,Arik.2014.“HowmuchEnergydoBuildingEnergy CodesReallySave? Evidencefrom

California.”WorkingPaperno.w20797.NationalBureauofEconomicResearch.

LoanProgramsOffice(LPO).2015.“PoweringNewMarkets:Utility‐ScalePhotovoltaicSolar.”U.S.

DepartmentofEnergy.

Mundaca, Luis, and Jessika Luth Richter. 2015. "Assessing ‘Green Energy Economy Stimulus

Packages: Evidence from the U.S. Programs Targeting Renewable Energy." Renewable and

SustainableEnergyReviews42:1174‐1186.

NationalRenewableEnergyLaboratory(NREL).2009.“FinancingPublicSectorProjectswithClean

Renewable

EnergyBonds(CREBs).

______. 2012. "Preliminary  Analysis of the Jobs and Economic Impacts of Renewable Energy

ProjectsSupportedbythe§1603TreasuryGrantProgram."TechnicalReport303:275‐3000.

Nordhaus, William D. 2009. "The Economics of an Integrated World Oil Market.” Keynote

Address,InternationalEnergyWorkshop.Venice,Italy.

Oak Ridge National Laboratory (ORNL). 1994. “Weatherization Works:  Final Report of the

NationalWeatherizationEvaluation.”

______. 2015a. “Weatherization Works II – Summary of Findings from the ARRA Period

EvaluationoftheU.S.DepartmentofEnergy’sWeatherizationProgram.”

______. 2015b. “National Evaluation of the State Energy Program: An Evaluation of Select

ActivitiesConductedUndertheStateEnergyProgram.”



27



______. 2015c. “National Evaluation of the Energy Efficiency and Conservation Block Grant

Program.”

OfficeofElectricityDeliveryandEnergyReliability(EDER).2012.“CaseStudy– FloridaPower&

Light:SmartGridSolutionsStrengthenElectricReliabilityandCustomerServicesinFlorida.”

U.S.DepartmentofEnergy.

______SmartGrid.gov.U.S.DepartmentofEnergy.

OfficeofEnergyEfficiencyandRenewableEnergy(EERE).2013.“2012WindTechnologiesMarket

Report.”U.S.DepartmentofEnergy.

______.2015.“2014WindTechnologiesMarketReport.”U.S.DepartmentofEnergy.

______. 2016. “Advance Metering Infrastructure and Customer Systems.” U.S. Department of

Energy.

Sallee,JamesM.2011."TheSurprisingIncidenceofTaxCreditsfortheToyotaPrius."American

EconomicJournal:EconomicPolicy3(2):189‐219.

Schey, Stephen, Don Scoffield, and John Smart. 2012. "A First Look at the Impact of Electric

VehicleChargingontheElectricGridintheEVProject."26thElectricVehicleSymposium(EVS‐

26),LosAngeles.

The Solar Foundation. 2015. National

Solar Jobs Census.

http://www.thesolarfoundation.org/national/.

Summers, Lawrence. 2008. “Why America must have a fiscal stimulus.” Financial Times.

http://www.ft.com/intl/cms/s/0/3b3bd570‐bc76‐11dc‐bcf9‐

0000779fd2ac.html#axzz4173gMaQX.

U.S.Department of Energy.2015. “Revolution…Now: The FutureArrivesfor Five Clean Energy

Technologies—2015Update.”

______.2013.

“RecoveryActRecipientData.”Energy.gov.

______.2016a.RecoveryActRecipientData.

______.2016b.“ConcentratingSolarPowerProjects.”

______.2016c.“ARPA‐EHistory.”

U.S. Department of the Treasury (UST). 2016a. “Overview and Status Update of the 1603

Program.”

______. 2016b. “List of Awards: Section 1603‐Payments for Specified Renewable Energy

PropertyinLieuofTaxCredits.”

U.S.InternalRevenueService(IRS).2016.“IRC30D–Plug‐InElectricDriveMotorVehicleCredit

QuarterlySales.”



28



AppendixI:DetailsoftheA RRACleanEnergy‐RelatedInvestments



This report has illustrated the major shifts in renewable energy markets during and after the

major ARRA clean energy‐related investments. This appendix takes a closer look at these

investments, by drawing upon the best evidence available on the impact of the  funding. The

discussionwillcovereachofthemajorcategoriesofprogramsillustratedinFigure1(shownagain

here for convenience), proceeding in order of the size of the allocation to the category. The

discussion demonstrates the great diversity of funding approaches and mechanisms, ranging

fromloanguaranteesandcompetitivemerit‐basedcost‐sharedgrantstosupportforleadership

andcapacitybuilding.



RenewableEnergyInvestments

The Recovery Act supported renewable energy generation working through several programs.

Twoofthemajorprogramsweretheproductiontaxcredit(PTC)andinvestmenttaxcredit(ITC),

both of which were expanded or extended by ARRA. In addition, ARRA included two new

programs,the1603CashGrantprogramandthe1705

LoanGuaranteeProgram.

Finally,ARRA

alsoprovidedsupportforrenewableenergythroughincreasedfundingforbondsforrenewable

energy,calledCleanRenewableEnergyBonds(CREBs).



Combined, these programs supported the dramatic increase in renewable energy generation

observed over the past decade, and likely also contributed substantially towards spurring

technologicalinnovation.Forexample,over

thepastsevenyears,windinstallationshaveseen

large increases in hub heights and larger rotors, which allows for viable wind project

development in new regions where previously the wind resources could not be successfully



The1705programmodifiedthepre‐existing1703programto includeconventionalrenewableenergyprojects,

transmissionprojects,andbiofuelsprojects.



29



accessed. While it is impossible to attribute technological innovation to any single cause,

Mundaca and Richter (2015) examine clean energy patents over theperiod2009 to2012and

provideevidencesuggestingthatcleanenergy innovationwassubstantiallyencouragedbythe

ARRAprograms.

ProductionTaxCreditandInvestmentTaxCredit

Prior to ARRA, federal support the renewable energy project investment and development

occurredprimarilythroughthePTC,mostoftenusedbywinddevelopers,andtheITC,mostoften

usedforsolarenergydevelopers.Bothtypesofpoliciescanhelpaddressenvironmentalmarket 

failuresbyencouragingrenewableenergydevelopmentthatoffsetsfossilfuelgeneration.Atthe

same time, they also provide incentives for private investment in innovation in these

technologies by raising the expected rate of return on these technologies. They were

exceptionally useful as part of the ARRA because they were alreadywell‐established and thus

couldquicklybeputtoworktoachieverapidstimuluseffects.



Prior to the Recovery Act, production tax credits offered performance‐based incentives for

eligible renewable energy generation technologies (excluding solar) through rebates of

$0.023/kWhforwind,geothermal,andclosed‐loopbiomassand$0.012/kWhforothereligible

technologies(in 2015dollars).ITCssupportedprojectinvestmentby offering tax credits of 30

percentofprojectcostsforsolar,fuelcells,andsmall windand10percentforgeothermal,micro‐

turbines,andCHPrenewableenergyprojects.



The Recovery Act expanded the impact of these credits through several mechanisms. First, it

extendedtheexpirationdateofthePTC.Specifically,ARRAextendedthePTCforwindfacilities

toDecember31, 2012 andfor other technologies to December 31, 2013 (theITC was already

givenan8‐yearextensionin2008,sothekeycontributionofARRAonthesolarmarketwasthe

1603CashGrantprogram).Thisextensionwascriticallyimportantbecausepreviouslytherewas

anannualboomandbustcycleinwindandotherrenewablesdevelopmentduetouncertainty

aboutwhetherthesecreditswouldberenewed.

SubsequentextensionsfollowingARRAhave

allowedITC/PTCstocontinuetosupportrenewableenergyprojectinvestmentandgeneration

through2016andbeyond.



Second,ARRAincreasedITCsupportforsmallwindprojectsbyremovingapreviouslyimposed

capofa$4,000maximumamountofcreditsclaimedforwindlessthan100kWincapacity.Third,

itallowedfacilitieseligibleforthePTCto electtoclaimtheITCinstead.Thisprovidedadditional

optionalityfor

largewindprojectspreviouslyonlyeligibleforaPTC.



MundacaandRichter(2015).

Mostrecently,PTC/ITCswereagain extendedinDecember2015.ITCsareavailableforsolartechnologiesexcluding

hybridsolar lighting through 2019at30 percent, ratcheting downto10 percent by 2022. ITCs forlarge windare

available at30 percent through 2016, phasing out by 2020; ITCs for geothermalcontinue

at 10percent; ITCs for

othereligibletechnologiesthrough2016.PTCsforwindwereextendedthrough2016withaphasedownover2017

‐2019;forothereligibletechnologiesPTCsexpireafter2016.



30



1603CashGrantProgram

The1603programofferedcashgrantstorenewableenergyprojectinvestmentsforanamount

ofupto30percentofaproject’scapitalcosts.

Projectdevelopershadachoicebetweentaking

thiscashgrantoroneofthetaxcredits,suchastheinvestmenttaxcredit.Eligibleprojectsfor

the cash grant were required to commence construction by December 31, 2011, or incur 5

percentofprojectcostsbytheendof2011.

Whiletheinvestmenttaxcreditwasalsoavailable

forupto30 percent of a project’s capital costs, there wereseveraladvantagesto providing  a

cashgrant.



Thefirstisthatsomerenewableenergydevelopersmaynothavehadasufficienttaxliabilityto

claimthetaxcredits.Manyrenewableenergy developersaresmallcompanies,withalimitedtax

burden.InordertotaketheITC,suchcompanieswouldhavetoenterintoafinancialagreement

withapartnerthatwouldprovidetaxequityinreturnfortheclaimedtaxcredits.Duringnormal

economictimes,thismaybearelativelyeasytransaction,butduringthefinancialcrisis,itbecame

difficulttofindsuchpartners.

25



A second advantage is that even if it may have been possible to find a partner, in a time of

financialturmoilthereisanincreasedriskthatthepartnerwouldbackout.Withcertaintyofthe

grantfunding,renewableenergyproject developers found it easier toraiseprojectdebt. Aldy

(2013) also  points out that financiers were hesitant to support long‐term investment projects

when there was uncertainty regarding the future of the PTC and ITC. The 1603 Cash Grant

programprovidedthecashgrantsquickly,thusreducinguncertainty.



Apreliminaryanalysis of1603’simpact by LBNL(2010)findsadditionalbenefits to developers

from the  cash grant program rather than a tax credit program. These benefits accrue from

reducingthedependenceonscarceorcostlythird‐partytax equitytomonetizeaproject’sfederal

taxbenefits.Financingislessexpensiveusingproject‐leveltermdebt andcarryingdepreciation

deductionsforwardintimeuntiltheycanbeabsorbedbytheproject(i.e.,“self‐sheltering”).The

report estimates the value of self‐sheltering at around 8 percent of installed project costs for

winddevelopers.LBNLalsoestimatesthatthe‘facevalue’ofthe cashgrantishigherthanafter‐

taxeconomic valueofthe ITC/PTC,estimatedaround2.2 percentof installedproject costsfor

windpowerprojects.



LBNL(2010)furtherexaminesearly1603recipientsanddoesnotfindanyevidenceofinefficient

project design, which would lead to poor performance. Inefficient project design could be a

concern for a cash grant program because by its structure, it does not specifically incentivize



UST(2016a).

 Whenthe 1603 program was first established, the project constructionstart date required was December31,

2010.In 2010this deadlinewas extended toDecember31,2011.1603 projectswith aconstructionstart datein

2011arealsoincludedintheCEAcalculationsforinthisreport.

NRELreportsthenumberoftaxequityinvestorswillingtomakeinvestmentsdecreasedfrom20toaround5during

2008‐2009.

LBNL(2010).



31



efficient project construction. However, nearly all renewable energy projects sell electricity

through a power purchase agreement (PPA), which involves safeguards to attempt to ensure

efficientprojectconstruction.



TheTreasuryDepartmentreportsthat$25billioninfundswereusedtosupportthedevelopment

of renewable energy facilities through the 1603 Cash Grant program as of January 1, 2016.



Includingprivate,regional,andstate,andfederalinvestments,$90billionhasbeeninvestedin

1603projects.

Fundshavesupported9,915businessestodevelopprojectsofthetechnology

mixbelow,showingthatthedominantfirmtechnologytypewasforsolarelectricity,makingup

80 percent of the firm awards associated with 76,000 solar projects.

 The next largest firm

technology,wind,comprised9percentofawardedfirms;solarthermalconstitutes5percentof

awardedfirms,andtheremaining10percentcomefromavarietyofothersources.



Figure A1 and A2 show that while solar firms dominate the count of awardees, wind projects

receivedmoreofthefundinginaggregate.Theaverageawardforawindprojectismuchlarger

thantheaverageawardforasolarproject.



FigureA3illustrates thegenerationcapacityand

estimatedgeneration from 1603 CashGrant‐

fundedprojectsthrough2015.Windandnon‐residentialsolarPVarethelargestcategories:1603 

grants funded projects that generated 56,200 GWh from wind and 14,300 GWh from non‐

residentialsolarPV asofDecember31,2015.Bytheendof2015,theprogramfunded

a total

installedcapacity33.3GW, translatingtoanestimatedannualelectricitygeneration of 88,700

GWh.FigureA4belowshowstheestimatedgenerationfromsupportedprojectsbyprojecttype.



UST(2016b).

UST(2016a).

MundacaandRichter(2015).

 The Treasury Department’s status update shows 104,211 projects as of December 31, 2015; the awards

spreadsheetkeeps track offunding byfirm nameand notproject. Allthegraphs below are based on numberof

firms,andnotnumberofprojects.

Solar,34%

Biomass,4%

SolarThermal,3%

Geothermal,3%

Hydropower,2%

Other,2%

Wind,52%

FigureA1:Distributionof1603AwardedFundingby

TechnologyType

Note:"Other" includestheFuelCells,LandfillGas,Marine,Microturbine,

CombinedHeatandPower,andTrashFacility.

Source:U.S.TreasuryDepartment.

Solar,80%

Hydropower,

Other,2%

SolarThermal,5%

Geothermal,1%

Biomass,2%

Wind,9%

FigureA2:1603Awardees byTechnologyType

Note:"Other" includestheFuelCells,LandfillGas,Marine,Microturbine,

CombinedHeatandPower,andTrashFacility.

Source:U.S.TreasuryDepartment.



32



Thecost ofsupportingthisrenewablegenerationwas$0.23/kWhforwindand$0.59/kWhfor

non‐residentialsolarPV(in2015dollars).



FigureA5andFigureA6belowillustratethetiminganddestinationofthe1603project funding.

Aswindwasthemostcompetitive technology,themajorityoftheprojectfundswenttowards

windenergy,followedby solarPV,withnearly  allofthe solarPVcomingfromnon‐residential

solarPV.

NREL (2012) estimates gross jobs as a result of the 1603 program and finds that through

November10,2011,thesolarPVandlargewindprojectsthatreceived1603fundssupportedan

average of 52,000 to 75,000 direct and indirect jobs over the 2009 to 2011 period from



construction and installation‐related expenditures. These estimates reflect the impact of $9

billion in 1603 funds supporting 13.5 GW in electric generating capacity, which is over one

percentofthe2011totalsummergeneratingcapacity.Further,thereportfindsthe1603projects

led to up to a $26 to $44 billion  increase in total economic output over the period analyzed.

Takingtheseestimatesfortheperiod2009to 2011atfacevalue,andscalingtheestimatesto



ThiscalculationdividestotalfederalprojectfundingfortherespectivetechnologypertheTreasuryAwardListby

totalenergyforprojectspertheTreasury1603Statusupdate(UST2016a).

Wind Non‐Resid.

Solar

Biomass Other Geothermal Resid.

Solar

FigureA3:Generation Capacityfrom1603ProjectsbyType

ThousandMegawatts

Note:FigurerepresentscapacityasofDecember31,2015.

Source:Department oftheTreasury.

Wind Non‐Resid.

Solar

Biomass Other Geothermal Resid.

Solar

FigureA4:EstimatedGeneration from1603

ProjectsbyType

ThousandGWh

Note:EstimatesasofDecember31,2015.

Source:Department oftheTreasury.

2009 2010 2011 2012 2013 2014 2015

FigureA5:Cumulative 1603ProjectFunding

BillionDollars

Source: U.S.TreasuryDepartment.

2009201020112012201320142015

Biomass

SolarThermal

Wind

Geothermal

Solar

Hydropower

CombinedHeat&Power

Other

FigureA6:Cumulative1603FundingbyTechnologyType

BillionDollars

Source:U.S.TreasuryDepartment.



33



thecurrenttotalofgenerationcapacitysupportedbytheprogram(33.3GW),suggestsatleasta

doublingoftheseemploymentandeconomicoutputestimates.

1705LoanGuaranteeProgram

The 1705 program provided loan guarantees for renewable energy generating facilities that

began construction prior to September 30, 2011.

 While a previously existing loan guarantee

program (1703) offered loans for innovative commercial energy programs, 1705 modified the

1703 program to include conventional renewable energy sources, transmission, and biofuel

projects.Anexpandedeligibilityofloanguaranteessupportedrenewableenergyprojectfinance

during the time of the financial crisis, when there were severe credit constraints. The loan

guaranteesturnedouttobeparticularlyusefulforlargeutility‐scalesolarPVprojects,whichwere

having great difficulty obtaining financing due to severe credit constraints from the financial

crisis.Asofyear‐end2015,anestimated$1.47billioninAR RAfundshavebeendirectedtoward

the1705LoanGuaranteeProgram.



Over$4.6billioninloanguaranteesfromthe1705programsupportedtheconstructionofthe

first five solar electricity  generation projects over 100 MW in the  United States. These five

projects,financedbetween2010and2012,ledtoatotalof1502MWofsolarelectricitycapacity

either operating or under construction. The 1705 program also supported Brookfield

Renewable’s Granite Reliable Wind Farm, a 99 MW wind power generation project located in

New Hampshire, with a $169 million partial loan guarantee. The project was one of the first

onshorewindprojectstousea3MWturbineforitselectricalgenerationtechnology,leadingto

costreductionsonapermegawattbasis.



Inaddition,the1705program hassupportedfiveconcentratingsolarpowerprojectswithatotal

generationcapacityof1,252MWandanexpected3,544GWhofannual generation.Onesuch

projectincludesCrescentDunes,a110MWfacilitythatconcentratessolarenergytoheatmolten

saltanduponcompletionwillbethelargemoltensaltpowertowerintheworld,projectedto

mitigate279,000metrictonsofCO

annually.The1705programalsosupportedNextEraEnergy’s

Genesis project with a partial loan guarantee through the Financial Institution Partnership

Program (FIPP) to support a 250 MW facility using parabolic trough technology preventing

322,000metrictonsofannualCO

emissions.



Noinvestmentportfolioisperfect,buttheRecoveryAct’scleanenergyprogramshavehadsome

prettyremarkableresults.Thestandardruleofthumbinventurecapitalisthatthreeoutoffour

start‐ups fail. The DOE Loan Programs Office has provided $34.2 billion in loans and loan

guarantees, and

 companies have defaulted on only $780 million‐‐a loss rate of only

approximately2percent.DOEalsohascollected$810millionin interestpayments,puttingthe

program$30millionintheblack.



LPO(2015).

DOE(2016a).

DOE(2016b).



34



CleanRenewableEnergyBonds

Clean Renewable Energy Bonds (CREBS) provide another financing mechanism for renewable

energyprojects.Stateandlocalgovernments,cooperativeelectriccompanies,cleanrenewable

energybondlenders,andIndiantribalgovernmentscanissuethesebonds,whichareatypeof

taxcreditbond.Ratherthantheissuerpayinginterest,thefederalgovernmentpaystheinterest

intheformoftaxcredits,sotheissuingentitycanborrowatlowereffectiveinterestrates,and

sometimesevenaslowaszerointerestrates.

Thus,CREBSsupportsinvestmentinrenewable

energybyloweringthecostofdebt.



CREBSwere first established by the EnergyPolicyAct of 2005andreceivedadditionalfunding

throughtheTaxReliefandHealthCareActof2006.TheEnergyImprovementandExtensionAct

of 2008 fur ther allocated $800 million  in funds for CREBS, accompanied by new rules and

requirements for CREBS as compared to the program prior to 2008 (“New CREBs”). ARRA

increasedthefundingavailableforNewCREBSby$1.6billion,foratotalNewCREBallocationof

$2.4billion.



In October of 2009 the U.S. Treasury Department announced $2.2billion in allocation of new

CREBs to public power providers, cooperative electric companies, and government bodies

supporting805projectsacrossthenation.Oftheseallocations,publicprovidersreceived$800

million,electriccooperativesreceived$609million,andgovernmentbodiesincludingcitiesand

schooldistrictsreceivedtheremaining$800million.Theremainingunallocated$190millionin

funds were distributed through a solicitation in September 2010 explicitly for electric

cooperativessuchthatCREBvolumesacrossthethreeentitytypeswouldequitable.Bondsare

intendedtobeusedwithin3yearsofnoticeofallocation,andanyunusedbondsafterthistime

framearerelinquishedandmaybeofferedinfuturesolicitations.



In2009,CREBsallocationssupported22renewableenergyprojectsfrommunicipalities,31from

electric cooperatives, and 736 from governments for 711 solar, 47 wind, 15 biomass,  26

hydropower,and3geothermal renewable projects. Governmentsmadegreateruse of CREBs,

butfor

smallerprojects.Justasmuchfundingwasallocatedtomunicipalutilitiesasgovernments,

butmunicipalutilitiesonlywereawarded22largerprojects,farfewerthanthe736government

projects.



San Diego County in California provides one example of successful application of the CREBS

programtosupportpublicsectordevelopmentof

renewableenergyprojects.Anon‐profitinSan

Diego led a collaborative effort engaging university and high school students to develop a

financial model for CREBs, focusing on on‐site solar projects and application for smaller

allocations of $1 million or less. $154 million in CREBS funding was allocated for 192 projects



 The New CREBs included programchangesthatreducedannual taxcredit rateallowed by 70percent.If a risk

profileofagivenprojectledthemarkettorequireahigherratethanthisreducedrate,theissuerofthebondwould

likelycompensatetheinvestorwithsupplementalinterestpayments.

Anadditionalprogramchangeremovedthe

requirement that the issuermake equal annualpayments over the term; in the new program the issuer has the

flexibilitytorepaythefullprincipalatthematuritydate(NREL2009).



35



acrossmunicipalities,schooldistricts,universities,andawaterdistrictintheregion,supporting

20MWinnewsolarpower.



InvestmentsinEnergyEfficiency

Over $27 billion funds have been spent on a hostof projects and grant programs to improve

buildingenergyefficiency,forresearchanddemonstrationofenergy efficienttechnologies,and

for support for development of forward‐looking state energy plans.

 The larger programs

included the Weatherization Assistance Program (WAP), State Energy Programs (SEP), Energy

Efficiency & Conservation Block Grant Program (EECBGP), and Residential Energy and Energy

EfficiencyPropertyTaxCredit.Othersmallerprogramssupportedenergyefficiencytechnology

research and demonstration, smart appliances, green investments in assisted living, public

housing,andfederalbuildings.



All of these programs are designed to help address environmental externalities by reducing

inefficient use of energy, which also reduces energy generation‐related emissions. Those

programsthatreducedtheuseoffueloilalsocouldhelpreducerelianceonforeignoilproduction

and thus may help reduce energy security externalities. At the same time, some of these

programshaveaspecificemphasisonlow‐incomehouseholdsandthushavetheadditionalaim

ofkeepingthemostvulnerableAmericanswarmandhealthy.WAPisamongthemostnotablein

thiscategory.

WeatherizationAssistanceProgram

WAP started in 1976 and since then has provided gran ts to states  for energy efficiency

improvementstolow‐incomefamilies.Specifically,fundsforWAParedistributedtothestates

asafunctionoftheclimateinthestateandtheaverageenergybillsoflow‐incomehouseholds.

Statesthendistributethefundstosub‐grantees,typicallycommunityactiongroupsorothernon‐

profitentities that identifyeligiblehouseholds.Eligibleparticipatinghouseholds receivea free

energy audits and home retrofits that can include insulation, window replacement, furnace

replacement,andairinfiltrationreduction.



While WAP had been providing energy efficiency improvements prior to

 the Act, ARRA

dramatically increased WAP funding from$230 million per program year to roughly $5 billion

overthreeyears.

Onereasonforthisdramaticramp‐upinfundingisthatWAPwasrelatively

easier to scale up than some other programs, due to the existing administrative capacity and

industryexperiencewiththeprogram.ThebroadgoalsforthisincreaseinfundingtoWAPwere:

1)jobcreationata

timewhenitwasmuchneeded,2)energyconservationandsecurity,and3)

reliefforhouseholdburdenedwithhighenergycosts.





Thisamountexceedthe2010estimateof$19.9billiondirectedtowardenergyefficiency.Thedifferencestems

fromhigheroutlaysforresidentialenergyefficiencycreditsthanforecastedin2010.

 Along with the funding increase, the WAP income eligibility requirement was adjusted upwards to within 200

percent of the poverty line from 150 percent, and the average weatherization cost per site was increased from

$2,500to$6,500.



36



TheWAPprogramwasabletospendmoneyrapidlyandincreaseeconomicactivityduringthe

yearsofthegreatestlabormarketslack.TheDOE’srecordofRecoveryActfundingshows$4.9

billionspentbyMay2013.Figure A7showsthedistributionofARRAWAPexpenditurestracked

bytheDOEPAGEdatabase

overtime,underscoringhowthisfundingnotonlywasaninvestment

inthefuture,butalso wasverywell‐targetedto provide stimulus andjobs in the wake of the

financialcrisis.



Figure A8 shows the number of ARRA units and non‐ARRA units (i.e., formula  units funded

throughthestandardprocess)weatherizedfromQ12008toQ12014.Thespendingseeninthe

previousfigureleddirectlytohundredsofthousandsofweatherizedunitsfromQ32009toQ3

2012, exactly the time when a stimulus was most needed. In fact, when combining the ARRA

fundsandtheformulafunds,overonemillionunitswereweatherizedbetweenApril2009and

September2012.



TheWAPexpendituresintheDOEPAGEdatabasedonotsumuptothetotalARRAexpendituresforWAPasthe

databaseonlytracksasubsetoftotalprogramspending.However,nearlyallARRAWAPspendingwasbeforemid‐

2013,justasintheDOEPAGEdatabase.

100

150

200

250

300

2009 2010 2011 2012 2013 2014

FigureA7:ARRAWAPExpenditures

MillionDollars

Source: DepartmentofEnergy,PAGEDatabase.



37



OakRidgeNationalLaboratory(2015a)usesageneralequilibriummodeltoestimatesthejobs

impactoftherapidexpansionofWAPthatwassupportedbyARRA.Forexample,theyestimate

thatabout28,000jobsweresupportedinprogramyear2010duetotheARRAWAPfunds.Figure

A9 plots the recorded number of jobs per quarter supported by the site weatherization that

occurredinthatquarter.Thejobsdepictedreflectdirectemploymentperquarter,anddonot

include indirect impact on jobs through expenditures on each site on energy efficient

technologies.

ORNL estimates that for Program Year 2010 (PY 2010), weatherized sites observe an average

savingsfromheatingandelectricityusedasrecordedbyutilitybillsof26.6MMBtuinfirstyear

100

2008 2009 2010 2011 2012 2013 2014

Source:OakRidgeNationalLaboratory.

FigureA8:ARRA WeatherizedUnits

ThousandUnits

ARRA Units

FormulaUnits

2009 2010 2011 2012 2013

FigureA9:EstimatedJobsSupportedbyWAP

ThousandJobs

Source:OakRidgeNationalLaboratory.



38



forsite‐builthomes,16.4MMBtuformobilehomes,and15.9MMBtuforlargefamilyhomes.



Theseestimatesarewithintherangeofthoseinotherstudies.Forexample,Fowlieetal.(2015)

estimates a savings of 17.2 MMBtu per weatherized unit in Michigan and a previous ORNL

evaluationofWAPProgramYear1989findsasavingsof17.6MMBtuperyear.





ForProgramYear2010,65percentofhomesweresite‐built,15percentweremobilefamily,and

20percentwerelargemulti‐family.Applyingtheaboveestimatesofsavingsperunittotheover

800,000sitesORNLnotesareweatherizedwithARRAfundsoverthe2010to2013periodimplies

thattherewouldbeanestimated97millionMMBtusavedasaresultoftheARRAfundsinthe

WAP.

 Taking the average of the ORNL savings estimates across site types gives an average

savingsof 19.63MMBtupersiteperyear.UsingtheEIA (2009b) summary dataon household

energyconsumptionandexpenditurestoestimateaverageexpendituresperMMBtu,theenergy

savingsfromWAPleadtoanaveragesavingsof$444peryearperweatherizedsite.



ORNL calculates equivalent emissions reductions from PY 2010 energy savings using  state‐

specific emissions factors based on state‐specific energy portfolios. With this approach they

estimateareductionof7,382,000metrictonsofcarbon.IfattributingtheMMBtutoareduction

inanenergysourcewithanemissionsrateofnaturalgas,thenthisenergysavingscorresponds

toareductioninCO2by403,482fornewlyweatherizedsitesinPY2010.Applyingtheseestimates

toallweatherizedsitesovertheperiod2010to2015impliesareductionofover5millionmetric

tonsofcarbon.Thiscalculationislikelyanunderestimatetotheextentthatenergysavingsoffset

energyusefrommorecarbon‐intensivesources(e.g.,electricityusefromcoal‐firedgeneration).

StateEnergyProgram(SEP)

The State Energy Program is managed by the DOE’s Weatherization and Intergovernmental

Programs Office (WIPO) and was created by Congress in 1996 by merging the State Energy

ConservationProgram(SECP) andtheInstitutionalConservationProgram(ICP).Thepurposeof

SEP is to support states’ development of strategic energy plans by providing leadership and

technicalassistance.Suchassistanceoftenincludesoutreachactivities,technologydeployment,

and access to new partnerships and resources. This assistance may help address information

marketfailuresandassiststatesinaddressingenvironmentalexternalities.





Energysavingsarecalculatedbycollectedmonthlyutilitybillsfromnaturalgasand/orelectricutilitiesforthe12

months pre and post‐weatherization. Heating sources vary including natural gas and electricity; energy savings

reflectcombinedheatandelectricitysavings.

Fowlieatal.2015;ORNL1994.NoteFowlieetal.showthatWAPhasasimilareffectivenessinsavingenergy,but

differ substantially fromORNL in estimating a lower cost‐effectiveness and benefit‐costratio forWAP. The most

significantdifferencesrelatetowhethercertaincategoriesofbenefitsareincluded

inthecalculation.

 This calculation estimates total savings from 2010 to 2015. For example, for a site weatherized in 2010, this

estimateincludes6yearsofenergysavingsandassumesthatenergysavingsinfirstyearpersisttofutureyears.It

alsoassumesamixofsinglefamily,mobileunit,andmulti‐family

unitin2010persistsinfutureyears.

 EIA (2009b) reports $2,024 average energy expenditures per household, with average usage per year of 89.6

MMBtuperhousehold,foranaverageof$23/MMBtu.ThisestimateisusedtomapMMBtusavingsfromWAPto

householdsavings.



39



For the Program Year 2008 prior to ARRA, SEP funding was $33 million. ARRA increased SEP

fundingto$3.1billionovertheperiod2009to2011,withnearlyallspentbyMay2013.Onethird

ofSEPfundswereallocatedequallyacrossstatesandterritories,onethirdbasedonpopulation,

and

onethirdbasedonenergyconsumption.



SEPsupportto develop strategic energyplans included buildingcodesandstandards,  building

retrofits,loans/grants/incentivesforenergyefficiencyandrenewableprojectsacrossanarrayof

sectors,andthedevelopmentofrenewableenergycapacity.Fundingisalsoavailabletosupport

preparations for emergencies and natural

 disasters. SEP encourages sustainable  energy

technologiesacrossabroadhost ofsectorsoftheeconomy fromtheenergyindustrytoschools

andhospitals.



ORNL performed an evaluation of SEP for Program Year 2009. The evaluation separates the

impactoftheSEPintofourkeycategories:buildingretrofits;buildingcodesandstanda rds;loans,

grants,andincentives;andrenewableenergymarketdevelopment.Becauseofthemultitudeof

programtypescoveredunderSEP,theORNLmethodologyinvolvedanassessmentbasedona 

random sample of program types from fun ding  recipients. This approach is inherently

approximate,butitdoesacknowledgedifferentARRAprogramcoverageratesacrossdifferent

activities.TableA1presentstheORNL(2015b)assessmentsoflifetimeofsavingsduetothe2009

SEP‐fundedprojects.Theresultshighlightsignificantenergysavings,especiallyby residentialand

public institutional projects. They also highlight the substantial industrial sector renewable

energygenerationsupportedbySEP.

EnergyEfficiency&ConservationBlockGrantProgram(EECBGP)

This grant program was developed as a one‐time program to jump‐start local investments in

energy efficiency and conservation. ARRA appropriated $2.8 billion for individual program

formula grants to states, U.S. territories, Indian tribes, counties, and cities to support the

development, implementation, and management of energy efficiency programs, almost the



entiretyofwhichhadbeenspentbythe endof2015.

Another$400millionwasallocatedfor

distributionthroughcompetitive grants.Thegrantswereawardedforprojectsthatreducedfossil

emissions,reducedenergyuse,improvedenergyefficiencyintransportation,buildingandother



DOE(2016a).



40



sectors,andcreatedorretainedjobs.Giventhelimiteddurationofthisgrantprogramandthe

singlefundingcycle,projectswithnear‐termexecutiontimelinesreceivedfundingpreference.



Through the program, $2.6 billion in grants were allocated to 2,187 cities, counties, states,

territories,andIndiantribesacross14differentgrantcategories.Thelargestcategorybyfunding

isenergyefficiencyretrofits(38.8percentoffunding),followedbyfinancialincentiveprograms

(17.9percent),andbuildingsandfacilities(9.7percent).



AnORNL(2015b)assessmentofthe programestimatesthat409millionMMBtuwillbereduced

over the 2009 to 2050 period as a result of all of the combined programs included in EECBG. 

Assuming the savings happen uniformly over that period, this is nearly 10 million MMBtu per

year.Basedontheaveragenaturalgasusageperhouseholdreportedby theEIA,thesesavings

wouldbemorethantheentireannualenergyconsumptionof10,000homes.TableA2showsthe

ORNL estimated lifetime energy savings from the program by category of grant. Financial

incentivesareestimatedtoprovidethelargestenergysavings,atnearly58percentofthetotal

energysavings,sincetheyleverageprivatefundstoamuchgreaterdegreethantheothergrant

categories.



Thereisalsoevidencefromtheacademicliteraturethatisrelevanttounderstandingtheeffects

oftheblockgrantprogram,aswellastheSEP.Forexample,110oftheblockgrantsareforthe

development of building codes. There is evidence that building codes are effective in saving

energy. Jacobsen and Kotchen (2013) study the impact of building codes and estimate that

building codes in Gainesville, FL led to 4 percent decrease in electricity consumption and 6

percentdecreasein naturalgasconsumption.Theseestimatedsavingsareclosetotheex‐ante

predictionsoftheregulation’simpact.

InupdatedanalysisinGainesvilleusing11yearsofbilling

data,Kotchen(2015)findsthatwhileelectricityconsumptionreductionsfromthebuildingcodes 

donotpersist,reductionsinnaturalgasconsumptionarepersistentinthelong‐term.





 Levinson (2014) finds that building codes in California do not have impacts on electricity consumption when

controllingforbuildingcharacteristicssuchassize,location,vintage,andcharacteristicsoftheresidence.However,

incontrasttoLevinson(2014),Kotchen(2015)continuestofindpersistentenergysavings.



41



ResidentialCleanEnergyandEnergyEfficiencyTaxCredits

Over $10 billion has gone towards ARRA residential tax credits to encourage homeowner

investments in renewable and efficient energy technologyand property. These residential tax

creditsbuiltuponprevioustaxcreditsforenergyefficientinvestmentsalreadyinexistenceatthe

time. ARRA removed or raised some of the previously imposed maximum credit amounts,

allowingforataxcreditequalto30percentofthecostofaqualifiedinvestment.





The expansion of these credits through ARRA contributed to the increase in the value of the

credits by over three times over the 2006 to 2010 period. This larger credit value was

accompaniedbyanincreaseinthenumberofclaimsovertheperiod,withaverageannual claims

in2009and2010increasingtooverthreetimesthenumberofclaimsin2008.



With the support of these credits, homeowners have invested in insulation, energy efficient

exteriorwindows,andenergyefficientheatingandairconditioningsystems.TheuseofEnergy

Star criteria to establish eligibility of certain products helped to streamline rebate claims for

qualifying improvements. Tax rebates were also provided for the residential purchase of

renewableenergysuchasgeothermalpumps,solarheating,solarelectricity,fuelcells,andwind

turbines.Overtheperiod2009to2010,over13millionresidentialenergycreditswereclaimed,

withanaveragecreditamountof$863to$868.



TransitInvestments

AsdiscussedinsectionII,cleanenergyprogramscanhelpaddressmarketfailuresintheclean 

energygeneration,suchastheexistenceofunpricednegativeexternalitiesfromthecombustion

offossilfuels.Cleanertransportationisanotherwaytoreducetheemissionsfromfossilfueluse.

Thefailuretointernalizetheexternalitiesmayalsobiastransportationsystemsawayfrommass

transitandothercleanertransportationoptions.Accordingly,ARRAallocationsincludedfunding

for investments in rail and transit. By laying the groundwork for a shift towards a cleaner

transportationsystem,theseinvestmentscanhelpreduceenvironmentalexternalities,aswell

asothermarketfailures,suchascongestionandaccidentexternalities.

HighSpeedRailandIntercityRailCapitalGrants

ARRAprovidedcloseto$8billioninfundstostatesacrossthecountrytodevelopanationwide

high‐speedintercitypassengerrailservice.Thefundshavesupportedplanningandconstruction

projects to develop large‐scale high‐speed rail corridors across the country, targeted through

investmentsinfivekeyregions.Theprogramreceivedanadditional$2billionin2011foratotal

of$10billiontosupporthigh‐speedrail.

Inadditiontoprovidingamoreenergy‐efficientmeans

oftravel,therailinvestmentisintendedtocreateandsavejobsintrack‐laying,manufacturing,



ForSection1121rebates,ARRA raisedmaximumlimitto$1,500,and forSection1122rebates,ARRA removed

some of the previous caps. A credit of 30 percent of projectcosts up to $1,500is permitted forenergy‐efficient

installationswereavailable for2009and2010;thecreditrateis10

percentforinstallationsin2011to2016with

$500maximum.Creditsforrenewableenergyinvestmentsremainedat30percent.

CRS(2016).

FRA(2016a).



42



planningandengineering,andrailmaintenanceandoperation.Toensurethatthisinvestment

leads to domestic jobs, both domestic and foreign rail companies have agreed to establish or

expandtheirbasetotheUnitedStatesifselectedtosupplytheraillines.

TheFederalRailroadAdministration(FRA)reportsthattodate,$5.3billionhasbeenmobilized

towards49constructionprojectsthatareunderwayorcompleted(24completed)in25states 

andtheDistrictofColumbia.Additionally,oneconstructionprojectofapproximately$3.4million

isexpectedto be underway by mid‐2016.Approximately98percentofobligatedconstruction

projectshavebeencompletedorarecurrentlyunderway.Withalong‐termvisionofconnecting

80percentofAmericanstohigh‐speedrailin25years,ARRAfundsaimedtobalancelong‐term

objectives of developing the infrastructure needed for a modern, low‐carbon transportation

system,whileprovidingtimelynear‐termjobcreationanddemandfordomesticmanufacturing

supply.



Projectssupportedbythesefundsincludea$4milliongranttodevelopanewtransitcenterin

San Francisco, with construction  currently underway andexpectedcompletion in 2017. Funds

were also awarded to support California’s high speed trail system with initial construction

underwayandprojectcompletionin2029.ARRAgrantsallowedforthedevelopmentof30miles

ofnewtrackfortheexpansionoftheAmtrakDowneasterservicetoFreeportandBrunswick,ME,

througha$38milliongrantprovidingservicetothesecitiesstartingin November2012.A$15

milliongrantsupportednewtracksforfreighttrainaccesswithoutdisruptingpassengerservice

inthePortofVancouverinWashington,completedinMarch2015.



FormulaTransitGrants

The Federal Transit Administration has awarded $8.78 billion through 1,072 grants tosupport

transitcapitalassistanceinurban,rural,andtribalareasaswellasforinvestmentsingreenhouse

gasandenergyreduction,where$6billionofwhichwasdirectedtowardtransit capitalassistance

inurbanareas.InSeptember2010theFTAreportedhavingawardedallofitsARRAfunding,with

16.4percentoffundsnotyetdisbursed.



ARRAfundinghasalsoprovidedover12,000buses,vans,andrail vehicles,andtheconstruction

or renovation of more than 850 transit facilities, and over $620 million in preventative

maintenance.





GridModernizationInvestments

Transitioning to a clean energy electric portfolio involves sourcing electricity from increasing

amounts of intermittent generating sources. Key renewable resources such as wind and solar

requireintegratingintermittentresourceprofilesontotheelectricgrid.Inthiscontext,bothon‐

going maintenance and modernization of U.S. electric grids with cutting‐edge technology



becomes important for keeping up with a changing electricity portfolio. For example, modern

electricgridswithadvancedmeteringinfrastructure(AMI),suchassmartmeters,pavetheway



FRA(2016b).

FTA(2010).



43



forend‐userstoparticipateinthemanagingofanincreasinglylowcarbonsystem.Consumers’ 

thermalloadscanbeleveragedasenergystorageopportunitiesthroughdemandresponseand

demand‐sidemanagementprograms,thedeploymentofwhichisgreatlyfacilitated,andinsome

casesnecessitates,AMI.



Investmentsinelectricitydeliveryandreliabilityarecoreinvestmentsineconomicproductivity.

Reliableelectricityisessentialforeconomicgrowthanda flexibleresilientelectricitysystemisan

enabler that will allow for higher levels of penetration of renewable energy on the grid, thus

helpingtoreduceenvironmentalexternalities.



TheRecoveryActallocated$10.4billiontowardprogramsandprojectstoenhancethereliability

ofthe nation’selectricgrid,totransformthegridinpreparationofincreasingintermittentenergy

supply,andforresearchanddevelopmentofadvancedgridtechnologies.$4.487billionofthese

funds were appropriated to support states development of modern and reliable electric and

energysystems.Bytheendof2015,$4.4billionofthesefundshadbeenoutlaid.

Abreakdown

ofspendingisbelowinTableA3.Ascanbeseen,mostofthefundingwenttowardsinvestments

insmartgrids,whichisdiscussedinmoredetailbelow.

SmartGridI nvestmentGrantProgram(SGIG)

Through the Smart Grid Investment Grant Program (SGIG, EISA 1306) DOE and the electricity

industry jointly invested $8 billion in 112 cost‐shared projects. Over 200 participating electric

utilities and other organizations were involved. These projects focused on strengthening

cybersecurity, improving interoperability, and collecting data on smart grid operations and

benefits.

Since2009,$3.5billionhasbeenawardedandspentthroughthesmartgridprogramas 

ofyear‐end2015.



ThroughtheSmartGridInvestmentGrantprogram,11synchrophasorprojects(i.e.,projectsto

providereal‐timemeasurementofimportantmetricsontheelectricgrid)havebeencompleted,



DOE(2016a).



44



installing over 800 networked phase measurement units (PMUs). PMUs improve electric grid

reliabilitybyallowinggridoperatorstoidentifyandcorrectgriddisturbancesbeforetheybecome

major grid stability issues. In addition, the 65 SGIG smart meter projects reached the goal of

installing15.5millionsmartmeters,withover16million

nowinstalledandoperational.



AnexampleofSGIGatworkistheFloridaPowerandLightCompany’s(FPL)$800milliondollar

projecttomodernizeitselectricitygridsystem,$200millionofwhichweresupportedbyARRA

funds.WithSGIGfunding, FPLwasableto expand itsplanforsmartgrid projectsbyincluding

over

 5,000 intelligent monitors, sensors, and controls on the transmission and distribution

system.SGIGfundsalsosupportedFPLsenhanceddiagnosticsystemtocollectandinterpretdata

from substation devices and transmit information to FPL diagnostic centers for problem

detection and outage prevention. For example, FPLs new Transmission Performance and

DiagnosticCenter(TPDC)remotelymonitors500FPLsubstationstomonitorvoltagelevelsand

impedance, allowing for substation problems to be detected and repaired before leading to

outages. Further, the  new smart grid capabilities provide customers with access to detailed

informationaboutusageandcoststhroughanonline“EnergyDashboard”displayingdailyenergy

metrics.



SmartGridRegionalandEnergyStorageDemonstrationProject

TheSmartGridRegionalandEnergy StorageDemonstrationProject(EISA1304)alsosupported

modernizationof the electricgrid. It directed $684 million, along with a $900 million  industry

costshare,towards32RegionalSmartGridDemonstrationandEnergyStorageDemonstration

projects under the Smart Grid Demonstration Program (SGDP).

 One example of a successful 

EISA1304grantincludeda$45millionawardtoConsolidatedEdisonCompanyofNewYork,Inc.,

to demonstrate  a scalable Smart Grid prototype that promotes cyber‐security, distributed

resources,electricvehiclechargingandconsumerparticipationinenergymix.



InvestmentsinAdvancedVehiclesandFuels

Thetransportationsectoris the secondlargestcontributorofgreenhousegases inthenation,

comprising 27 percent of national emissions in 2013, and its emissions have increased by 16

percentsince1990.

Thecombustionofpetroleum‐basedproductsfrompassengervehiclesand

light‐dutytrucksmakesupoverhalfoftheemissionsfromthetransportationsector.Developing

newtechnologiesiscriticalforreducingemissionsfromtransportation.



The ARRA investments in advanced vehicles and fuels help to address environmental

externalities, energy security externalities,

 innovation market failures, and even network

externalities. The investments can help address environmental externalities in the long‐run

throughadecarbonizingofthevehiclefleet.Theycanhelpaddressenergysecurityexternalities

by replacing petroleum products with other fuels in transportation. They can help innovation



EDER(2012).

EDER(2012).

Ofthe$684millionappropriated,almostallhasbeenspentasofyear‐end2015(DOE2016).

EPA(2015).



45



marketfailuresinboththeshort‐runandlong‐runbyfosteringinnovationwithhighdegreesof

spill‐oversandhighsocialreturns.Theycanhelpaddressnetworkexternalitiessincethereare

network effects from sufficient  refueling or recharging infrastructure. For instance, with few

rechargingstationsfordedicatedelectricvehicles(EVs),

eachrechargingstationwouldhavelittle

valueforfewconsumerswouldbuyelectricvehicles.Butwithmanyrechargingstations,thereis

morelikelytobeanactivemarketforelectricvehicles,andthuseachstationhashighersocial

value.



ARRAdirected$6.1billiontowardprogramstopromoteresearchonand

deploymentofthe next

generationofautomobilebatteries,advancedbiofuels,plug‐inhybrids,andall‐electricvehicles,

andtheinfrastructureneededtosupportoperationalizingthesetechnologies.Programsincluded

fundingforataxcreditforplug‐inhybridelectricvehiclesanddedicatedelectricvehiclesofupto

$7,500pervehicle,with$2.2billionallocated.

Thetaxcreditforeachqualifyingvehiclemodel

phasesoutafterthemanufacturersells200,000qualifiedvehiclesofthatmodel.Inaddition,$2.4

billion in grants were awarded, alongwith cost‐sharing, through a competitive process. These

competitivegrantssupportdomesticmanufacturinganddeploymentofadvancedbatteriesand

electricand

plug‐inhybridvehiclecomponents.$600millionoftheARRAfundingwasdirected

towardsadvancingbiofuels.Further,$300millionoftheARRAfundingwasdirectedtowardseach

of the following: alternative fueled vehicles pilot grant program, diesel retrofits, and federal

motorvehiclefleetprocurement.

AdvancedVehicleTaxIncentives

Agrowingbodyofeconomicliteraturedemonstratesthattaxincentives,suchastheincentives

inARRA,increasetheadoptionratesandmarketsharesofadvancedvehicles.Mostofthiswork

has focused on hybrid vehicles, due to the lack of data on plug‐in hybrid electric vehicles and

electric vehicles. As a first example of how tax incentives increase the adoption of advanced

vehicles,GallagherandMuehlegger(2011)studytheeffectofgovernmentincentivesonhybrid

electricvehicleadoptionfrom2000to2006. Theyfindthatbothsalestaxwaiversandincome

taxcreditsincreasehybridsales.Diamond(2009)alsofindsthatgovernmentfinancialincentives

increase the market share of hybrids, although gasoline prices have the strongest impact. 

Beresteanu and Li (2011) find a 20 percent increase in hybrid vehicle sales due to federal

incentives using data from 2006. Sallee (2011) examines data on consumer purchases of the

ToyotaPriushybridvehicle

andfindsthatthetaxincentivesarelargelycapturedbyconsumers,

ratherthanproducers.



Whiletheseresultsintheeconomicsliteraturemaynotentirelyapplytoplug‐inhybridelectric

vehicles or electric vehicles, they are indicative of the effects that may be expected from the

ARRAtaxincentivesas

well.Indeed,withthesupportofthetaxincentive,salesofplug‐inelectric

drivevehicleseligibleforthecreditreachednearly69,000from2012totheendof2015.





Only$202millionofthisestimatedtotalallocationisforecastedtohavebeenspentbytheendof2015basedon

OSTFY2012forecast.

IRS(2016).



46



InvestmentsinBatteryTechnologyandTransportationElectrification

The cost, size, durability, and safety of battery technology remains a critical hurdle to the

widespreaddeploymentofplug‐inhybridelectricvehicles(PHEVs)anddedicatedelectricvehicles

(EVs).ThelimiteddrivingrangeandcostofmostcommercialEVscreateabarriertoconsumer

adoption,andarelargelyduetothestateofdevelopmentofcurrentbatterytechnologies.The

higherenergyandpowerdensitiesoflithium‐ionbatteriesareessentialforthefeasibilityofthe

current PHEVs and EVs, but there is still a great need for further improvement in battery

technology.



Developmentsinimprovedbatterytechnologyhaveaveryhighsocialreturn,withbatteriesbeing

used in a wide variety of commercial and military applications. ARRA investments in battery

technology help address innovation market failures in battery technology development,

encouragingthedevelopmentoftechnologythatwillhavespilloverbenefitsacrosstheeconomy.

ARRA funds provided grant funding to support both the use and development in lithium‐ion

batterytechnologyandtheestablishmentofadomesticbatterymanufacturingsupplychain.



Thebatterysupplychainincludesextractingrawmaterials,developingbatterycellcomponents,

fabricating battery cells, and assembly of the battery pack. ARRA funds have supported

companiesallalongthesupplychain.Specifically,theRecoveryActsupportedthedevelopment

ofthelithiumbatterysupplychainthroughgrantsof$28.4milliontodeveloplithiumsupplies,

$260milliontoproducecellcomponents,$730millionforcellswithdifferentchemistries,$460

millionforpackassemblyfacilities,and$9.5millionforalithium recyclingfacility.



One example of a grant awarded to support development of domestic electric vehicle supply

chainwasthe$95.5milliontoSaftAmerica,Inc.,forthe productionoflithium‐ioncells,modules,

and battery packs for industrial and agricultural vehicles and defense application markets.

Another example is the $161 million grant awarded to Dow Kokam, now XALT energy, for

manganesecathodesandlithiumbatteryproductionatitsplantinHolland,Michigan.Another

wenttoGeneralMotorsfor$105.9milliontoproducelithium‐ioncellsandpacksfortheVolt.



Thetransportationelectrificationgrantprogramalsodirected$400millioningrantsforprojects

toadvance thedevelopment ofelectricdrive vehicle systemsand infrastructure.Forexample,

ChargePointreceiveda$15millionmatchinggrantthroughtheprogramforthedeploymentof

over4,600home,public,andcommercialelectricchargingpointsatanaveragecostof$3,300of

federalfundsperchargingstation.Completedin2013,theprojectalsoprovidesdatatoIdaho

National Laboratory to provide researchers and planners the information needed to better

understandchargingpatternsandfutureEDVinfrastructureneeds.





In addition, ARRA funding supported “The EV Project” with a $115 million matching grant,



deploying5,700NissanLeafs,2,600 PHEVChevroletVolts,and14,000EVchargersand300DC



CRS(2013).

ChargePoint(2013).

Matchingfundingleadto$230millionprojectbudget(Scheyetal.2012).



47



chargers.ThroughauniquepartnershipacrossNissanNorthAmerica,GeneralMotors,theIdaho

NationalLaboratory,city,localandstategovernmentsandutilities,theEVProjectimplemented

alarge‐saleelectricvehiclecharginginfrastructuredemonstration.Thedemonstrationdeployed

EVsandchargerstocollectdatacharacterizingchargingstationusageacrossdifferentlocalities,

evaluateeffectivenessof charging infrastructure,andanalyzechargingimpacts on the electric

grid.Suchdemonstration projects provide valuable data toresearchersseeking tounderstand

chargingpatternsandgridimpacts,pavingthewayforimprovedandinformeddesignofpublic

andprivatechargingnetworks.



ARRA also supported domestic  manufacturing in batteries and energy storage though Section

48CgrantsforCleanEnergyManufacturing,asdiscussedbelow.



InvestmentsinCarbonCaptureandStorage

Thetransitioningto a lowcarbonenergysystemwilllikely requirea  diverse setof low‐carbon

technologies. Carbon capture and storage (CCS) technology offers the opportunity to reduce

carbondioxideemissionsofexistingpower plantsandindustrialfacilities,rapidlyincreasingthe

speed of decarbonization. CCS works by capturing carbon dioxide emission from large point‐

sourcesofemissions,transportinggasestosubsurfacerockformation,andpermanentlystoring

the carbon to prevent its release into this atmosphere. Equipping a power plant with CCS

technologycanreducecarbonemissionsby80to90percent.Infact,theIPCC(2005)estimates

thatthereisatechnicalpotentialofatleast2,000GtCO

storagecapacityworldwideingeological

formations, and predicts CCS will contribute 15 to 55 percent of worldwide mitigation effort

through2100.



ARRAauthorized$3.4billioninactivitiesinCCSresearchanddesign,commercialdemonstration,

implementation,andeducation.WhileCCStechnologiesaresuccessfullybeingdeployedinthis

countryandaroundtheworld,thedevelopmentofanynewtechnologyisadifficultendeavor.

Oftheinitialallocation, theDOEisreturning$1.3billiontotheU.S.DepartmentofTreasuryfor

fourCCSprojectsthatwerefundedbyDOEundertheARRAandwerenotabletoadvancetothe

point that the

ARRA funding could be spent within the timeframe specified by statute. DOE’s

return of these ARRA funds to Treasury is a reflection of the significant challenges faced by

businessesthatareintroducinginnovative,early‐stageenergytechnologiestomarketsandnot

necessarilyanegativereflectiononthereadinessofCCStechnologies.



OnesuccessfulprojectsupportedthroughARRAfundsincludestheAirProductsandChemicals

Inc.(APCI)hydrogenfacilityinPortArthur,Texas.A$280millionARRAgranttosupportsa$430 

million dollar project combining CCS technology with enhanced oil recovery (EOR) to use the

captured carbon to extract un‐tapped

fossil resources before it is stored underground. At full

scale operation, theproject captures over 90 percentof the carbon dioxide from the product

steam of two methane steam reformers,translatingtoapproximately1million metric tons of

carbon dioxide delivered to sequestrations per year.On May 15, 2015, the DOE and APCI



DOE(2016)estimatesCCSspendingthrough2015yearendat$1.84billion.



48



announcedthattheprojecthadsuccessfullycaptureditssecondmillionthmetric tonofcarbon

dioxide.



GreenInnovationandJobTraining

Greeninnovationandcreatingjobsinthesustainable21

centuryeconomyaretwoofthekey

elements of the Recovery Act. Many of the areas described above involve research and

developmentofnewtechnologies.Thegreeninnovationandjobtrainingcategorycompletesthe

suite of clean energy research, again helping to address innovation market failures. The job

trainingalsoallowsourworkforcetoshifttobecompetitiveinthe21

centuryeconomy.



TheRecoveryActdirected$3.5billiontowardsprogramstosupportresearchanddevelopment

of advanced biofuels, clean energy‐related information and communications technology, and

enhanced geothermal systems. In addition, $400 million of these funds was allocated to the

Advanced Research Projects Agency‐Energy (ARPA‐E) program, which funds new, creative

researchideas aimedatacceleratingthe pace of innovationinadvancedenergytechnologies.

While the ARPA‐E was created by statute  in 2007, ARPA‐E’s first projects were funded by the

RecoveryAct. Funding in ARPA‐E was focused on early stage innovations with very highsocial

value.



ARPA‐Ehassponsoredover400energytechnologyprojectsatthecuttingedgeofcleanenergy

markettransformation sinceits initialfunding in2009.Someexamplesinclude a1 MWsilicon

carbide transistor, engineered microbes that use hydrogen and carbon dioxide to make liquid

transportationfuel,andanear‐isothermalcompressedairenergystoragesystem.

Othergrant

awardssupportarangeofdemonstrationprojectsincludingasolarconversiontowertoprovide

dispatchable solar energy, developing plants that produce vegetable oils in leaves and stems,

algaeharvesting frombiofuels,andvariousprojectsworkingtowardimprovementinbatteries 

andelectricitystorage.



TheRecoveryActalsoincluded$500millionforcompetitivegrantstostateagenciesandnon‐

profitstosupportprogramsthattrainworkersforjobsintheenergyefficiencyandcleanenergy

industriesofthefuture.Itincludedanother$100million  fortrainingandhiringworkersinthe

utilityandelectricalmanufacturingsectors.



This ARRA funding for

 greenjobs supported 25 Energy Training Partnership green job training

grantstoprovidetrainingforworkersinenergyefficiencyandrenewableenergyindustries.The

grants support partnerships among labor organizations and public and private employers to

design and distribute training methods, as well as build an understanding of green industries.

Specific grants included support for electrical apprenticeship training, programs targeting

unemployed dislocated workers, women, minorities and veterans, and community groups

servingunemployedanddislocatedworkers.AnexampleistheSolar InstructorTrainingNetwork

(SITN), which was originally funded under ARRA, and hasprovidedinstructor training to more



DOE(2016c).



49



than 1,000 qualified and credentialed solar PV instructors—leading to over 30,000 students

throughouttheUnitedStatesreceivingtrainingincareersinsolarenergy.



CleanEnergyEquipmentManufacturing

To promote the development of a  domestic supply chain to support a growing clean energy

industry, $2.3 billion  in ARRA funds were allocated toward a 30 percent tax credit (under IRS

Section 48C) to be awarded on a competitive basis. Eligible projects included investments in

advanced clean energy manufacturing for a wide range of clean energy products such as

equipment for renewable energy generating facilities, energy storage, energy conservation,

carboncaptureandsequestration,fuelcells,andtherefiningandblending ofrenewablefuels.

Since nearly all of theseinvolve new technologies with possible innovation spillovers, ARRA is

helping to address innovation market failures in multiple  areas through these competitively

awardedtaxcredits.



The $2.3 billion program was highly oversubscribed, with interest vastly exceeding DOE

expectations. There were over 500 applications, which requested over $8 billion in credits

combined. Credits were awarded based on commercial viability, domestic job creation,

technological innovation, and speed to project completion.

 Awards were provided to 183

domestic clean energy manufacturing facilities until the $2.3 billion available was exhausted.

Thesecreditswerematchedby privatesector fundingofupto$5.4billion.Thesuccess ofthe

programledtoanotherroundofcompetitivefunding(PhaseII)announcedinFebruary2013for

$150millioninremainingtaxcreditsnotfullyutilizedbypreviousgranteesforprojectstobeput

inserviceby2017.



Oneindustrysignificantlysupportedbythegrantswaswindturbinemanufacturing.Whilemany

factors may have contributed, there was a  dramatic increase in the share of domestically‐

producedwindturbinesinstalledintheUnitedStatesafterARRA,from25percentin2006‐2007

to72percentin2012.

Thegrantsalsosupportedenergystorageprojects.Justasthebattery

awards described above spurred new battery technologies, Section 48C complemented these

awards. Section 48C Phase I and II awards included at least $36 million in credits for battery

related manufacturing including mobile charging, advanced battery packs, and intermediate

materialsandcomponents.

 



MundacaandRichter(2015).

EERE(2013).



50



AppendixII:CEACalculationofARRACleanEnergySpending



This appendix provides an overview of CEA’s calculation of the amount of ARRA clean energy

funding that was spent by the end of 2015. This spending estimate is used to calculate the

numberofjob‐yearssupportedbythecleanenergyinvestmentsinARRA.



Forthecalculation,CEAusesthebestevidenceavailableonactualARRAspendingfromDOE,the

U.S. Treasury (UST), and the Office of Management and Budget (OMB) to develop a spending 

path from 2009 to the end of 2015. All non‐ARRA spending is also removed, including any

extensionsofprogramsaftertheARRAperiod.

Whereactualspendingisnotavailable,themost

recentavailableforecastsareused.Theapproachusedfollowsthreesteps:(1)useforecastsof

tax outlays from the UST for tax incentives, (2) add in known spending  from the respective

sources,and(3)allocatethefundsspentinremainingprograms.



Step1.UseForecastsofTaxOutlaysfromTreasury



First,CEAusestheforecastofannualgovernmentoutlaysfromARRAtaxincentivesprovidedby

theUSTOfficeofTaxAnalysisforFY2012.

Thisforecastisthenmodifiedasfollows:



1. 1603CashGrantinLieuofITC

Forthe1603program,theUSTexpectedoutlaysarereplacedwithactualawardsprovidedin

theyears2009to2015. Followingthestaticbudgetscoringmethodology,theCEAanalysis

alsoadjusts forreceiptsthatrepresentaforecastedreductioningovernmentreceiptsthat

occurselsewhereasaresultofthe1603program.Inotherwords,totaloutlaysoverthe2009

to2015periodarereducedbyforecastedreceiptsfrom2009to2015.



2. CleanEnergyManufacturingSection48c

ThisprogramwasforecastedbyUSTwithoutlaysof$1.6billion.However,updatedspending

estimatesindicatethatthisprogramactuallyawarded$2.3billioningrantstocleanenergy

manufacturers.Thus,thespendingpathforecastfromUSTisadjustedfortheactualspending

of$2.3billion.Inotherwords,thespendingpathfromUSTwaspro‐ratedsuchthatthetotal

outlayssumto$2.3billion.





Theonlyexceptionwhereanextensionfromtheoriginal2009allocationisincludedisthecaseofthe1603Cash

Grant.In2010thisprogramextendedtheconstructionstartdaterequiredforprojectsto be eligibleforthecash

grantbyoneyear.Projectsthattookadvantageofthis extension

areincludedinthespendingestimates.

 TheCEA (2010) 3

 QR ARRA Updateuses Treasury forecast for FY 2011. The FY 2012 shows largeroutlays for

residential energy efficiency credits. Clean energy subcategories with OTA forecasts of tax outlays include: PTC

extension;extensionofITCeligibility;1603CashGrantinLieuofITC(modifiedwithprogramspecificdetails);removal

of

the ITC cap for small wind; expansion of the residential energy efficiency tax credit; Clean Renewable Energy

Bonds; Qualified energy conservation bonds; refueling tax credit; alternative motor vehicle credit; tax parity for

transitandparkingcredits;andSection48cManufacturing(modifiedwithprogramspecificdetails).



ReceiptsforecastedfromUSTFY2011areusedhereas1603outlayswerenotincludedinUSTFY2012estimates

oftaxbenefits.



51



Step2.AddInKnownSpending



For categories with records of funds spent by a given date, the total spending is distributed

equally across years before that date. These programs include: the Weatherization Assistance

Program (updates from DOE), 1705 Loan Program (updates from DOE), high speed rail and

FederalTransitAdministrationgrantspending(updatesfromFRAandDOT),andtheincreasein

borrowing authority to the Bonneville Power Administration and Western Area Power

Administration(updatesfromOMB).



Step3.AllocateFundsSpentinRemainingPrograms



The majority of the categories remaining after considering the spending categories with tax

forecasts and known spending are managed by the DOE. As of May 2013, 82 percent of DOE

allocatedfundshadbeenspent.Asofyear‐end2015,90percent ofallocated funds had been

spent.Assuch,forprogramswithspendingpathsnotfilledinbyStep1andStep2above,apath

isdistributedequallyacrossyearssuchthat82percentofthefundsarespentbymid‐2013.Next,

spendingisdistributedequallyacrossfrommid‐2013toyearend2015isdevelopedsuchthat

in

total90percentoffundsarespentbyyear‐endof2015.FundsleftoverafterSteps1through3

areassumednotspentoverthe2009to2015period.





ForWAPthespendingpathisnotuniform:aspendingpathidentifiedfromtheDOEPAGEdatabaseisusedtopro‐

ratetotalWAPexpendituresreportedbyDOE(2016a)todevelopaspendingpathfrom2009to2013.