Addressing criticism of government investment in clean energy innovation
Posted January 27, 2011 in Moving Beyond Oil, Solving Global Warming
The President’s “call to action” on a comprehensive clean energy strategy is a welcome development, and builds on the Administration’s extensive support for the clean energy industry. During the Obama administration, the transportation, efficiency and renewable electricity sectors have all seen tremendous success despite a punishing recession. From the start of 2009 to the end of 2010:
- The wind industry added 15 gigawatts of capacity, increasing total capacity by 60%
- Solar power doubled its aggregate capacity.
- 300,000 low-income homes were weatherized.
- And, the U.S. has become a hub for battery manufacturing for electric vehicles.
These examples, and many historical ones, demonstrate the powerful impact of targeted and strategic government investment in an energy sector that is rife with inefficiency, market failures and barriers to entry for emerging technologies. More recently, bookshelves worth of white papers, reports, documents and strategy memos have been published (I can go on) , all arguing the same basic concept – that investment in clean energy innovation has historically been too limited, that our current situation requires we make this funding a priority and that government support, in conjunction with the private sector, can help to alleviate this shortfall.**
Unfortunately, despite the wide-ranging evidence in support of these conclusions, others continue to argue the opposite. Two recent events seem indicative. On Tuesday night, speaking about the role of government, U.S. House Budget Committee Chairman Paul Ryan stated:
“Depending on bureaucracy to foster innovation, competitiveness, and wise consumer choices has never worked”
Actually, railroads, satellites, lasers, the Internet, and energy technologies (such as nuclear, coal and natural gas) have all benefited and prospered from a wide range of government support. This is not to argue for heavy government intervention in all aspects of a technology’s development, only that specific gaps and market failures exist in the energy sector which can be optimally addressed by the government.
Prior to Ryan’s comments, the “Spending Reduction Act of 2010 (HR 408) was introduced last week, promoted by the Republican Study Committee, that proposes to cut $2.5 trillion in spending over the next 10 years mostly by holding non-discretionary federal government spending to 2006 levels through 2021. Setting aside issues with this approach, ten clean energy-related programs are eliminated in this Act, in a manner that seems both arbitrary and ineffective, given that the programs they seek to cut are ones viewed by experts as being successful examples of good government investment. As the Obama Administration has so far done a solid job in targeting its investment in clean energy innovation, it makes this effort that much more disappointing.
My colleagues speak to the efficiency and transportation/transit cuts, which represent most of the clean energy cuts [which I’ll link to later]. Kate Gordon at CAP delivered an excellent critique of many of the proposed clean energy cuts here, and I’ll just add a couple additional notes below.
“Applied Research at Department of Energy” would be eliminated under this act, putting a host of valuable programs and technologies at risk. Applied research is one of the most important of Department of Energy (DOE) activities, translating basic pure research into practical real-world ideas and technologies that investors can finance and entrepreneurs build companies around. Done poorly, this could decimate key programs, at DOE, stifling critical research in clean energy technology.
The Manufacturing Extension Partnership (MEP) program would also be eliminated, thus ending, at a most inopportune time, a program dedicated to improve the global competitiveness of small U.S. manufacturers. Studies have shown the MEP program pay for themselves and can greatly improve client productivity.
These two cuts, and Ryan’s comments above, are prime examples of what I hope not to see in the coming months. Both of these initiatives add value far beyond their cost and seek to solve complex and important challenges. Moreover, these kinds of cuts – and ignoring the role of government in innovation – have the potential to cause serious damage to America’s future economic health and global competitiveness. We should absolutely address our deficit, but let’s not cut potentially transformative clean energy programs that won’t have even a superficial impact on spending in the process.
**We would also argue the need for complementary policies in addition to R&D, including joint public/private sector grants and loan guarantees for demonstration projects, deployment and manufacturing incentives, financing support, regulatory changes, job training, transmission and siting/permitting policies - much of which is discussed, admittedly sporadically, on this blog
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Comments
Libby C — Jan 27 2011 03:07 PM
Great article - I completely agree with you. Would be interested to hear your thoughts on what would be "good" cuts to combat the deficit.
Cai Steger — Jan 27 2011 05:31 PM
Thanks. Responding to your question properly is a full post (or two) and probably isn't the best forum for my personal perspective, but a few thoughts as they relate to clean energy incentives:
- for starters, cutting fossil fuel subsidies is a must for a number of reasons. The President has been using $4 billion, other studies (such as ELI's one which I blogged on last year) are double or triple that. You can get pretty close to the clean energy investment figures called for in some of the reports I linked just by doing that.
- you can also improve the cost-effectiveness and efficiency of existing clean energy expenditures by making them more certain and long-term, and perhaps restructuring them. For example, there's some good literature from BNEF and Hudson Clean Energy about the inefficiency of the tax credit relative to the cash grant. I'm not advocating for a long term cash grant, but there are a number of ways to improve the efficiency of the tax credit. This allows the government to get more "return" on its investment so to speak. Similarly, the on again/off again approach to incentives and funds leads to damaging market uncertainty which elevates risk premiums and limits capital availability, and makes it harder to build out an efficient supply chain. Longer term extensions/approaches would help address some of that and more bang for the buck.
- One of the good things in the Obama Administration (which isn't unique to them by the way) is the focus on cost sharing/matching and mechanisms that help to minimize government risk/investment (e.g. loan guarantees, demonstration grants, ARPA-E funds, etc.) Again, more bang for your buck, and is a valuable tool in increasing private sector engagement in early-stage, riskier, emerging technologies.
- Finally, and the most obvious to us (we might have written a few blogs on this topic, and maybe published a couple of reports) - put a cap on carbon and use that revenue to help pay for this.
Keith Cleveland — Jan 27 2011 09:37 PM
Industrial Wind Turbines are not like the small turbines people have with battery back-ups to get off the grid. The electricity isn't stored and you can't control the wind, so it needs to be paired with a form of generation that can be controlled. That's why we're building more gas plants and will need to continue building more.
The price of natural gas has been kept artificially low by a process called "fracking" which has contaminated wells to the point that you can light up your kitchen tap. The process injects a mix of proprietary protected chemicals and water into the ground to break up the shale underneath. This water cannot be recovered. Quebec, considering a ban on this practice, has reported that over half of the shale gas wells in the province are leaking and an unknown amount of natural gas emissions, most likely methane, is escaping into the atmosphere. Methane is over twenty times worse than carbon dioxide as a greenhouse gas.
Conservation is what is needed.
Abdul Rahim — Jan 28 2011 10:51 AM
The main advantage of renewable energy over fossil fuels is the fact that it is renewable. This means that it can easily be replenished without so much effort for man. This is because this energy is produced through natural processes so they are generally found in nature. These makes them virtually infinite in quantity and so are not in danger of running out. Also, this energy can’t be easily wasted because it just goes back to nature where it was harnessed.
John — Jan 28 2011 06:23 PM
Cai, my apology in advance for addressing something else you wrote about in 2009, although, from my perspective, it involves all municipalities with waste treatment facilities (and farms with animals that make lots of waste). Yep, of course, algae, who consume the effluent, either from a biodigester or from the Patz Ozy system. In either case, the neutralized effluent is fed to algae growing in a controlled environment (think inflatable cover for tennis court) in vertically stacked, hydroponic "trays" of reinforced plastic. Pour the fresh effluent into the top tray at a certain mixture to make them multiply, then let the contents of that tray drain down to the next tray, but change their nutrient and other conditions to "fatten them up." Continue this for a few more days of daily tray drops and, at the bottom, you get a green liquid that has to be separated; lipids from cellulosic material. Patz ozy again. Google Algeponics(C) (Gail Busch in VT); also see http://www.necn.com/Boston/Business/2009/07/15/Algae-may-play-key-role-on/1247700676.html I'm not sure of the current cost estimate per gallon for production, but it was $1.70/gal last year. No ponds, instead controlled, vertically stacked hydroponics. OK, now here's the other half that gives you finished biodiesel from algae so pure, it doesn't gel at 45 degrees F. The cost estimate for this conversion process is $0.26/gal determined by Professor Larry Tavlarides at Syracuse Univ., who has been there since 1981 and is not about to tarnish his academic reputation w/hype. Larry pointed out to me a particular page (p.19) of the white paper that shows the cost estimate comparison. The table in the paper shows $0.56/gal current method of lipid to biodiesel, vs. $0.26 / gal with his method. He calls this method supercritical transesterfication (see MIT's Technology Review for the two applications of this technology. You'll also see Dr. George Anitescu's name. George worked with Larry for 15 of the 18 years Larry has devoted to it. George has since moved on to NIST in Colorado). My understanding is that the process is the same basic chemical reaction as the current method, except with the extremely high temp and pressure, the unwanted by products, e.g. glycol, keep getting pushed back into the reaction, thus, yielding a 95% efficient conversion from lipids to a completely uniform quality final product, Minutes instead of hours, scalable (transportation not required), 1/2 price of current technology. Bolt this on the back of the patented hydroponic algae farm and voila, a "steady" stream of biodiesel fuel for the municipal fleet from municipal poop. Gail Busch has been in a pilot for 2 yrs., sponsored by VT Dept. of Ag. Larry's technology is still being held hostage in his lab for lack of funding. I've sent Kit several e-mails on this, but, she ignores me. Anyway, this exportable-green-technology-to-be (once Larry's prototype is built) has just about all the virtues you can think of, even patriotic, not to mention survival, when some wacko in the Middle East interrupts the flow of petroleum to the world markets. If you are still interested in algae as the optimal biofuel, as long as there are people and animals on this planet, there's a more than plentiful feedstock. At $2/gal in quantity, isn't this new information worth investigating? I'll let them all know you *may* (or may not) be contacting them.