Meltdown 101: The economy and alternative energy

With oil trading around $147 a barrel, why wouldn't consumers and business turn to something other than the status quo? Even billionaire oilman and investor T. Boone Pickens was jumping on the bandwagon, launching a plan to boost the use of wind and natural gas to ease American dependence on foreign oil.

What a difference a quarter of a year makes.

Numerous collapses of financial institutions have led to a worldwide credit crunch, oil prices have plunged more than 60 percent and rising corn costs have left biofuels companies dealing with profit margins approaching zero.

Here are some questions and answers about the effect of the economic crisis on alternative energy:

Q: Didn't the government bailout of the financial sector include some help for the solar industry?

A: Yes. The government's $700 billion plan to bail out banks and other institutions included an eight-year extension of tax credits for solar power. It eliminated a $2,000 tax break limit for residential installations and removed an exemption for utilities.

But the renewable industry depends on equity and credit to complete projects, and neither is particularly healthy these days.

Piper Jaffray analyst Jesse Pichel said in a recent interview that without access to capital, solar companies may cut back on expansion plans and look to Asia to produce solar panels.

Q: Why are ethanol companies taken a beating in the stock market?