Originally posted at the Breakthrough Institute
Last month, U.S. Senators Debbie Stabenow (D-MI), Michael Bennet (D-CO), and Robert Menendez (D-NJ), as well as Congressman Dave Camp (R-MI) introduced the Solar Manufacturing Jobs Creation Act, intended to boost the international competitiveness the U.S. solar manufacturing industry. After introducing the legislation, Senator Stabenow said it was necessary to "help us win the global race against China and other countries to produce solar technology in the clean energy economy."
The bi-partisan legislation would extend the existing solar Investment Tax Credit (ITC), which offers a 30 percent tax credit for solar energy investment and deployment, to cover the construction of new solar manufacturing facilities as well. The ITC was recently given an eight-year extension in the Emergency Economic Stabilization Act (EESA) of 2008.
The new legislation would also give solar manufacturers access to the temporary cash grant program created by the American Recovery and Reinvestment Act (ARRA), which has successfully boosted the deployment of renewable technologies, primarily wind power.
The new U.S. legislation is the second in as many months that aims to support the domestic solar industry. In late October, the U.S. House of Representatives passed the Solar Technology Roadmap Act, which would require the U.S. Department of Energy to appoint a group of experts to create a long-term plan to guide solar energy R&D and the commercialization of next-generation solar technologies. While the bill only authorizes $2.25 billion for solar R&D over the next five years, it represents a sizable increase in funding and a move toward a more strategic and targeted approach to clean energy development.If the U.S. is to regain its position as a global leader in clean energy technology, and solar in particular, much more targeted policy support is needed. Both the Solar Technology Roadmap Act and the Solar Manufacturing Jobs Creation Act are important first steps forward in developing a comprehensive clean energy economy strategy capable of revitalizing the U.S. economy and making the United States a world leader in clean energy technology once again.
U.S. Falling Behind Foreign Competitors in Solar Manufacturing
The United States has fallen behind international competitors in East Asia in the capability to manufacture and produce clean energy technologies on a large scale. China, Japan, and South Korea will build on their current advantages over the coming years and will out-invest the United States by a factor of three-to-one in clean tech sectors, according to "Rising Tigers, Sleeping Giant," a new report by the Breakthrough Institute and the Information Technology and Innovation Foundation (ITIF).
China already manufactures 30 percent of the world's solar cells, and is expected to lead worldwide growth in new solar cell manufacturing capacity, according to the report. Japan is redoubling its efforts to grow its domestic solar industry, and South Korea is emerging as a major solar manufacturer, with a focus on capturing new global market share in solar PV. By contrast, the United States' global share of solar cell manufacturing has fallen from more than 40 percent a decade ago to just 5 percent today. The Breakthrough/ITIF report concludes that without significant and targeted public investments to close the gap with its competitors, "the United States will import the overwhelming majority of clean energy technologies it deploys...which could jeopardize America's economic recovery and its long-term competitiveness while making it even more difficult to reduce the U.S. trade deficit."
Targeted Support for Clean Energy Technologies: A Strategy for a Clean Energy Economy
The "Rising Tigers" report comes at a time of increasing anxiety that the United States may lose out on the clean energy industries and jobs of the future. According to the report, the climate and energy legislation working its way through Congress, as currently formulated, will not be sufficient to close the widening clean tech investment gap between the United States and its economic competitors. Larger and more targeted public investments in clean technology will be needed for the United States to keep pace.
As we note in the report, multiple barriers inhibit the widespread deployment of, and discourage private investment in clean energy technologies. Four barriers in particular must be overcome to drive the widespread deployment of clean energy technologies. These four barriers include the significant price gap that exists between clean energy and fossil fuels, technology spillover risks that discourage investment in research and development, financial risk created by the large scale and long time horizon of most clean energy projects, and the need for new enabling infrastructure to accommodate the growth of clean energy technologies.
Not all clean energy technologies are created equal, and each of these barriers poses different challenges to different technologies. Therefore, public policy should be optimized to meet the needs of individual technologies. Other nations are making direct and targeted investments aimed at removing the barriers to clean technology adoption for specific technologies, which will give them an early advantage in the growing clean energy sector and allow them to attract much of the future private investment in clean energy technologies.
Remaining competitive in the global clean energy race will require a comprehensive federal clean energy economy strategy that invests directly in clean technology innovation, manufacturing, and deployment, as well as associated infrastructure. Both the Solar Manufacturing Jobs Creation Act and the Solar Technology Roadmap Act are commendable first steps forward as components of a broader clean energy economy strategy to help us compete with our rivals. We must build on these pieces of legislation and ensure that we have a suite of long-term and targeted clean energy technology policies on the scale necessary to match the aggressive policies of our economic competitors.