Reid, Pelosi and Clinton are right: POTUS can act to avoid a debt-ceiling crash

If America is faced with a national default because of Republican obstruction against raising the debt ceiling, in my opinion President Obama has authority under Article 4 of the 14th Amendment to the U.S. Constitution to act unilaterally if necessary to avoid a debt ceiling-induced default. If default is the only other option, the president should exercise this authority.

Unilateral presidential action to avoid a debt-ceiling default is the second worst option, and should be avoided if at all possible. Unilateral action sends an awful message to financial markets. While I believe such action would be reluctantly approved by a narrow Supreme Court majority after an inevitable challenge, judicial approval is not certain. Bipartisan and comprehensive budget, spending and revenue negotiations on all outstanding issues is a far more desirable outcome.

Former President Bill Clinton has championed the option of presidential authority if needed. House Minority Leader Nancy Pelosi (D-Calif.) has also championed this authority. And now Senate Majority Leader Harry Reid (D-Nev.), Senate Democratic Whip Dick Durbin (Ill.), Senate Democratic Policy Committee Chairman Charles Schumer (N.Y.) and Democratic Conference Secretary Patty Murray (Wash.) have supported this authority in a recent letter. I applaud them all.

President Obama is right in stating that America is not a deadbeat nation and that Republicans should stop holding the good faith and credit of the United States hostage. I would add that America must stop acting like a banana republic on matters of budgets, spending and taxes. These constant last-minute fiascos, the abuse by both parties of creating intense fear among Americans as a political tactic and the constant dangers of both real and self-induced catastrophes are unworthy of the United States and must end.

President Obama has expressed doubt about unilateral presidential action. To the degree he prefers to avoid this option, he is right. To the degree he may be forced to choose between unilateral action and default, he should state as soon as possible, as firmly as possible, that unilateral action may be the second worst choice but default would be, by far, the worst choice.

The proper solution is a bipartisan budget deal that is significant and moves far beyond the debt-ceiling issue. The president won the 2012 election. Senate Democrats were huge winners in the 2012 election. House Democrats gained seats and won more national popular votes than House Republicans in the last election. Democrats have won three out of the last four national elections. So any bipartisan agreement should be tilted toward the Democratic position.

At the same time, all House Republicans also won their seats in the 2012 election, which gives them some moral and political right to some concessions from Democrats, in proportion to the will of voters, expressed in elections, to achieve an agreement.

The president and Democrats should avoid the danger of hubris and overreaching. The Republicans must end the use or threats of legislative blackmail, extortion, obstruction, hostage-taking and willingness to force a default that could cause a crash because of an extremism and distemper that threatens to make the GOP a minority party for a generation.

Bipartisanship is preferable to constitutional confrontation. But if the only alternatives are to submit to legislative blackmail by Republicans or accept a disastrous national default, the authority of the president is constitutionally locked and loaded. The president would be supported by a large majority of voters if he chooses to use it, and if necessary, he should.

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Oil Giant’s Rig Crash Could Be A Tax Dodging Attempt Gone Wrong

The latest of a series of Shell mishaps in the Arctic occurred on New Year’s Eve, when Shell’s drilling rig, Kulluk, ran aground while being towed out of Alaskan waters. Harsh weather conditions began shortly after Shell began towing, causing the rig and its 150,000 gallons of fuel and drilling fluid to wash up on an island along the Alaska coastline.

Rep. Ed Markey (D-MA) challenged the suspicious timing of Shell’s decision to move despite the harsh conditions. If Shell had kept its rig stationed in Alaska waters on January 1, the company would have potentially paid $6 million in state taxes:

Shell could have been exposed to potential state tax liability on the Kulluk drill rig if it remained in the state on January 1st. Chapter 43.56 of the Alaska Statutes states that an annual tax of 2 percent can be assessed each tax year on January 1st on “the full and true value of taxable [oil and gas] property taxable under this chapter” Shell had reportedly spent $292 million just on upgrades to the Kulluk since purchasing the drill rig in 2005. That would mean that Shell could have potentially been exposed to state tax liability on the Kulluk in excess of $6 million.

Shell’s official response maintains that the “two-week window of good weather” prompted the decision to move out of Alaskan waters.

Shell has a history of tax dodging. For example, it has offshored pre-tax profits to avoid UK taxes. At the federal level in the U.S., Shell also lowers its tax bill with $200 million in annual tax breaks.

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The Year In Solar Power: Prices Crash, Sales Soar, Industry Restructures, Saudis Leap In, CSP Suffers

Financial Innovation and Collaboration Takes the Solar Cake

If you ask Tom Kimbis what he thinks was one of the most important developments of 2012 for solar energy, he may tell you something you didn’t quite expect to hear. Kimbis, VP of External Affairs for the Solar Energy Industries Association (SEIA), says that much of the credit for what’s being seen as a landmark year for downstream solar growth belongs not to technical innovations, but financial innovations — the kind that are making it increasingly possible for people everywhere to be able to afford solar without having to take out a second mortgage on their homes.

“Innovation can take place throughout the entire value chain,” Kimbis said. “We’ve seen phenomenal innovation with the various leasing and third party ownership models that have driven the markets in the U.S. forward more than the increase in cell efficiency.”

According to the U.S. Solar Market Insight Report, which was released by SEIA and GTM Research, 2012 has seen total installed solar capacity in the United States reach 1,992 MW. This far exceeds the annual total capacity reached in 2011, which was 1,885 MW — a not inconsiderable accomplishment, considering that 2012 isn’t even over yet. There were 684 MW of solar capacity installation in the third quarter of 2012 alone, and in that same time frame the residential PV sector installed over 118 MW of capacity.

Kimbis credits the biggest quarterly growth yet for U.S. residential PV to an increase in third party solar leasing options for consumers, which he likens to financial options that car buyers have — where instead of having to pay cash, leasing or financing options help make ownership a possibility. “Overcoming that first cost issue is what the third party ownership’s all about,” Kimbis said.

Upstream financial collaborations also led to the green lighting of numerous global projects in 2012, including the Letsatsi and Lesedi solar farms in South Africa. Both were made possible by dollars from U.S. developer SolarReserve and two local companies, Intikon Energy and Kensani Capital. In Peru, OPIC came together with Latin America’s development bank CAF and investment firm Conduit Capital Partners for the funding of two solar projects that will result in a combined solar capacity of 40 MW.

Oversupply Goes Up, PV Cost Goes Down

Despite a boom in solar demand in the United States in 2012 and a growth rate which SEIA estimates will be at about 70 percent over last year (compared to 14 percent global market growth), the reality of global PV panel oversupply remains an issue of concern.

In 2012, that oversupply led to a showdown between Chinese solar manufacturers and the United States Department of Commerce. Chinese manufacturers were accused of dumping their oversupply into the U.S. market at such low prices that they injured the ability of US-based solar manufacturers to compete fairly. This ultimately led to a decision by the International Trade Administration to levy tariffs to levy tariffs on the importation of solar modules using cells manufactured in China. In the final ruling, it was announced that the tariffs would range from 24 percent to 36 percent.

Alas, the old adage about every cloud having a silver lining may be very true, especially if you look at it from a global perspective. In 2012, oversupply led to low cost, which in turn drove an increased global expansion in development among wealthy and developing nations alike, all eager to capitalize on the low cost of materials.

Marc Norman, lawyer for Chadbourne & Parke LLP and director of the Emirates Solar Industry Association (ESIA), called this a possible case of “creative destruction” that’s given developing countries an opportunity to enter the solar game.

Norman said that the low cost of solar PV could enable developing countries in particular to benefit from solar technology without even being connected to the power grid. “Solar technology can be applied off-grid,” Norman said. “For example, in rural areas where there’s a lack of infrastructure. There’s a golden opportunity for more bottom-up market evolution, as opposed to a more traditional top-down approach.”

Kimbis agrees, noting the inherent irony: “Falling pricing is a double edged sword. It’s great for deployment, it’s great for the consumer, and it’s caused greater amounts of solar installation. On the other hand, falling prices have yielded smaller margins for manufacturers, making it tougher to survive in a very competitive climate.”

Industry Jobs and Widespread Bankruptcies

In the United States, 2012 showed evidence that growth in the solar industry occurred at a much faster rate than other industries. According to The Solar Foundation’s National Solar Jobs Census report, U.S. employment in the solar industry grew at a rate of 13.2 percent and the sector added 13,872 jobs in 2012, while Bureau of Labor statistics indicated that solar accounted for 1 out of every 230 jobs created.

This information may seem to fly in the face of the numerous solar company bankruptcies and consolidations that have taken place globally in the last year, but according to Kimbis, that’s par for the course in an emerging industry.

“It’s just like any other industry,” Kimbis said. “Competition is extreme. This is something that the industry has known about for awhile; companies have been bracing for global competition for the last several years. It’s a story which has repeated itself through everything from personal computing, to telecom, to the automobile industry.”

Job outlook, while encouraging within the United States, was not so rosy in China in 2012. In November, it was reported that Suntech Power Holdings (which is the world’s biggest maker of solar panels) would be shedding some 1,500 jobs in China to reduce operating costs and ratchet down on solar cell capacity.

Saudi Arabia: The Dark Horse

When discussing landmark events in solar, it’s impossible to ignore what took place in Saudi Arabia earlier in 2012. In May, the King Abdullah City for Atomic and Renewable Energy (also known as K.A.CARE) established the goal to develop 54,000 MW of renewable energy capacity by 2030.

Why is an oil-rich nation like Saudi Arabia concerned with adopting renewable energy? Quite simply, to limit the local consumption of oil so that exports can be increased. With low cost access to oil and unchecked usage, it’s believed that Saudi Arabia could find itself entirely out of the oil exportation business by 2030.

Under K.A.CARE’s proposed plan, 41,000 MW of the total 54,000 MW capacity will come whole from solar: 16,000 MW from photovoltaic (PV) projects and 25,000 from solar thermal projects. As a first phase, 700 MW of utility-scale projects are set to be undertaken by the end of 2013.

Norman calls the K.A.CARE program “a massive game changer for the global renewable energy industry, and particularly solar” and says that it could also have a beneficial impact on the local job market in Saudi. Unemployment is estimated at around 10 percent in the Kingdom. “The government sees this as an opportunity to create a global center of excellence for renewables, in addition to job creation.”

Norman explains that Saudi Arabia will require a certain percentage of local content on all renewables projects; this is seen as a means to stimulate the local job market.

2012’s Impact on CSP

With the low cost of solar PV panels, some may wonder what impact 2012 had on the solar thermal market, of which concentrated solar power (CSP) is a big part. Did CSP suffer due to the comparatively low cost of solar PV? It depends on who you ask, really.

The answer to that question, according to Norman, is obvious. “As a result of the reduction in PV prices, CSP has taken a hit in the last few years,” Norman said. “But they also have an advantage that can’t be overlooked, and that’s storage. Some developers have devised CSP plants that can store energy. That’s something that PV technology can’t measure up to at present.”

Not everyone sees 2012 as having been a good year for CSP. Jigar Shah, partner at Inerjys Ventures, predicted the death of CSP as far back as 2007 and calls it a technology that’s officially punched the big ticket. “I think in 2012, CSP basically died,” Shah said. “Siemens shut down their CSP plant. Areva is building one unit in Morocco,  but they shut down CSP plants in Australia and a few other places. BrightSource wasn’t able to go public, so they’ve got an existing utility contract they’re honoring with an existing DOE loan guarantee — and I don’t think anyone believes that they’re going to get a second contract. CSP is dead.”

While the aforementioned U.S. Solar Market Insight Report mentioned several large scale CSP projects underway in the United States, it was reported that the third quarter of 2012 saw no new capacity installed in that segment.

Additional Solar Highlights from Around the World in 2012

In June, Chile brought its largest PV plant online. Although modest in comparison with the scope of other global projects, the 1 MW Calama Solar 3 was an important step that has since resulted in increased interest among developers and investors. There were other notable Latin American solar developments in 2012, including two Peruvian solar farms (the already operational Tacna solar farm and the still in production Panamericana solar farm) whose combined generating capacity will reach 40 MW.In Germany, a 145 MW solar park in Neuhardenberg, Brandenberg, was constructed in a record-breaking five weeks. The solar park was finished just under the wire to beat the expiration of subsidies for PV installations greater than 10 MW in size. The construction of Neuhardenberg solar park, which is scheduled to be fully operational by the end of 2012, helped push Germany’s total installed solar capacity for the year to over 7,000 MW.8minuteenergy Renewables, a solar PV developer located in southern California, received the financial stamp of approval in November to proceed with construction on a project that, once in operation, will be the largest PV farm in the world. The Mount Signal solar farm, which is being constructed in Imperial Valley, will generate 800 MW (DC) of utility-scale energy.The Charanka Solar Park in Gujarat, India, is home to numerous independent solar power stations, occupying approximately 2000-hectares of land. While many the park’s solar stations remain in production, 2012 saw its combined total output capacity reach nearly 700 MW.In an effort to shore up their enormous oversupply of solar panels, China decided in 2012 to underwrite a $1.6B loan — through the China Development Bank (CDB), which is seen as the engine behind the country’s economic development — to essentially create downstream demand within its borders. The loan was given to Shanghai-headquartered Sky Solar, which earlier in 2012 broke ground on two PV projects in China: one 800-MW project in the Xinjiang Province, and another 50 MW plant in the Qinghai Province.

Vince Font is a professional freelance writer specializing in the fields of renewable energy, high tech, travel, and entertainment. Read his blog at www.vincefont.com or follow him on Twitter @vincefont. This piece was originally published at Renewable Energy World and was reprinted with permission.

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