All hopes have been dashed that a settlement to the debt crisis, which plagued American politics and global markets through the final weeks of July, would result in smooth sailing through August.

Prices for energy commodities were whipsawed amid wild volatility as indicators for the broader economy showed signs of weakening even as Congress finally signed a debt deal. Oil prices, so often a proxy for the broader energy sector, fell sharply on August 8.

The weakness in fuel prices represented new understanding of a global economy that continued to stagnate in the first six months of 2011. The lackluster performance of many energy firms compounded the impression in markets that the vaunted economic recovery of 2011 has not yet materialized, and renewable energy in particular is under pressure as government subsidy programs fade.

New, Again

A firm that has dealt with more than its share of volatility in energy markets reported losses this week. Dynegy, which was at the center of controversies surrounding the deregulating power markets and the collapse of Enron a decade ago, is remaking itself once again, this time based on fuel types rather than market geography. The firm has an almost entirely new executive team, and said it is getting past its cash problems to face a new, and brighter, future.

As subsidies in renewable energy have faded, the industry has begun to chase scale, with each firm hoping to mature fast enough to attract investors, customers and industry partners that can guarantee longer-term survival. One of the solar industry’s most prominent players, SunPower, reported a hugely widened loss in the second quarter of 2011 as it raced to expand production and sales on slipping per-unit returns. The company needs to gain scale amid compressing margins across the solar sector, and it is using the funds provided by partner oil and gas firm Total to gain traction.

Partnering with large-scale investors and operators accustomed to the complexity of energy markets is an increasingly popular strategy in the renewable energy world. Wind farm developer First Wind has been an early adopter of the model, selling part of its existing portfolio to generating firm Emera in a not-yet-completed deal so it can continue to focus on developing projects rather than operating them.

Linking Up

Building transmission projects requires a scale start-ups cannot achieve on their own, and increasingly requires a scale that even individual generating companies and regional partnerships cannot reach. That means it is becoming necessary to spread the cost and the responsibility of new investment in transmission over a broader number of players, a cooperative practice that one executive says is already under way in the Southwest Power Pool.

Creating an increasingly effective smart grid will require coordination across the sector and across the multiple jurisdictions and operating systems in the US. The Federal Energy Regulatory Commission’s grandly named Order 1000 is intended to set the structure for that coordination, and is a huge potential change to the way the electricity sector works, but is maddeningly complex. To help with that problem, and encourage input from the industry on implementation, FERC has put out an unusual “what you need to know” document, hosted here on Breaking Energy.

Partisan Power

FERC is a bipartisan body that generally seeks the kind of consensus-led and reality-informed decision-making that has been difficult to find parallels of in the higher reaches of the Administration and in Congress over recent months.

As the presidential election of 2012 approaches, an already-contentious political environment has become increasingly strained, and politicians are using energy policy to initiate early attacks.

Senate majority leader Harry Reid took the opportunity of a briefing on an upcoming clean energy summit this week to bash Republicans over energy policy. With federal policy on energy remaining elusive, states are making their own attempts at promoting energy development, with Illinois this week easing wind farm development and speeding permitting processes in an effort to boost development there.

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