President Obama has made no secret of his ambition to transform the energy base of the United States. The administration’s seriousness in pursuing its goals—boosting energy and economic security while mitigating the threat of global warming—became clear with the unveiling of the American Recovery and Reinvestment Act. The ARRA appropriates $97 billion in energy-related funding (exhibit) and aims to mobilize roughly $100 billion more in private capital.

The unprecedented speed and scale of the government’s commitment to technologies that use or generate energy efficiently, with minimal impact on the environment, will dislocate strategies and disrupt market shares in the energy sector for years to come. With the government assuming the role of primary banker and customer in many energy markets, executives must decide whether to rethink, and in some cases completely redraw, their capital and marketing plans.

As industry executives wrestle with these decisions, the government itself must come to terms with a series of competing objectives embedded in the stimulus. The ARRA, for example, has a bias toward job creation and “shovel readiness,” which could favor established over nascent renewable-energy players, potentially compromising the long-term goal of transforming the US energy base. The act also relies heavily on public–private coinvestment, which may be difficult to pull off given the growing concern among business leaders about entanglement with the public sector, not to mention the current state of credit markets. Finally, the ARRA emphasizes energy efficiency, a goal to be met primarily through the efforts of state and local governments that aren’t fully prepared to deploy the proposed funds.

Policy makers and the public at large should be realistic about the ability of any short-term spending program, no matter how well conceived, to transform a large, complex sector in a fundamental way. Yet executives in the energy sector shouldn’t underestimate the impact that $97 billion, quickly deployed, will have on its future shape. Despite the tensions inherent in the stimulus package, technology learning curves will probably accelerate, innovative new players should gain a measure of strength, and successful programs sustained by future government support are likely to emerge. And of course, the stimulus may be only the first step. Additional energy and climate bills, along with the 2010 budget, could go further in recasting the sector’s economics.

The task before companies now is to develop careful, coherent plans for dealing with the government as a new shaping force in the energy sector. Two obvious steps are establishing or enhancing regulatory affairs efforts and hiring new salespeople in key places around the country. And while large international energy companies and regulated utilities are used to having governments play a significant role, it represents a novelty for many technology firms and emerging players. Their executives must decide where to put the federal, state, and local governments in their customer account lists and learn how to compete for and do business with these very different new customers.