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Stumbling economy pushes energy issues to back burner

With credit markets in gridlock and a national debt skyrocketing, the economic crisis has overshadowed new energy plans.

BY MARK HARRINGTON | mark.harrington@newsday.com

October 6, 2008

The price of energy -- from soaring electric bills to pain at the gas pump -- remains a central issue in the presidential election, but the candidates' ability to address it at a time of economic free fall remains a source of considerable debate.

With a lockup of credit markets, increasing unemployment and a soaring national debt, the economy has already far eclipsed new energy initiatives in the minds of voters. What's more, paying for candidates' wish lists, including new nuclear plants, wind farms and solar energy, may be hampered by a $10 trillion national debt that could grow by another $700 billion once the bailout package begins dispensing taxpayer cash.

"The financial crisis may constrain or delay the opportunities for doing all that," said Geoffrey Dabelko, an analyst at the Woodrow Wilson Center, a nonpartisan Washington think tank.

The challenge: reduce reliance on foreign oil, address high fuel bills and stimulate the economy on a tighter budget.

Analysts say Sens. John McCain's and Barack Obama's plans for energy independence and clean power are long-term strategies with high costs. Aside from a windfall profits tax and consumer rebate promised by Obama, those ambitions may do little in the short term to cut gas and heating oil bills, or reduce reliance on foreign oil.

"All these new energy sources have a huge capital investment that has to be picked up by the ratepayer because the federal government doesn't have the money for it," said Martin Cantor, director of the Long Island Economic and Social Policy Institute at Dowling College. "I think they are going to have to back off a lot on their shopping lists."

At the same time, the candidates and environmentalists say getting behind clean energy now is essential to putting the economy on a healthier course, regardless of the short-term costs. The bailout package included tax breaks for businesses and an enhanced tax credit for solar panel installations that could give the industry a much-needed boost.

"There's no better time than now to start building more low-emission transportation, wind and solar," said Ashok Gupta of the Natural Resources Defense Council, a national environmental group.

The centerpiece of McCain's plan is the construction of 45 nuclear power plants by 2030, at a cost of $6 billion per plant.

"The nuclear energy industry tells us they can't borrow any money from Wall Street . . . unless the federal government underwrites those loans," said Jerry Taylor, senior fellow at the Cato Institute, a conservative Washington think tank. But Taylor said that with so much money tied up in the mortgage bailout, there is little chance the government would also have the ability to guarantee such huge loans for the nuclear industry.

Obama's plan to inject $150 billion into renewable energy sources may also come under pressure, even if, as the campaign says, the initiative creates 5 million "green-collar" jobs.

Gupta said worrying only about the higher cost was "narrow thinking" in light of potential benefits.

"We have to look to technology, energy efficiency and renewables to be the answer," he said. "That's the only way - to invest our way out of the [economic] problems."