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Tuesday, August 24, 2010

White House Report: Stimulus Driving Clean Energy Innovation, Manufacturing, Markets – But What Comes Next?

With global competition mounting and Recovery Act momentum poised to fade, can the Obama Administration secure a lasting clean energy legacy?

By Jesse Jenkins and Devon Swezey

The American Recovery and Reinvestment Act has funded breakthrough innovation and new growth industries that are driving down the cost of clean energy and building the foundation for competitive 21st century U.S. industries, according to a new White House report released today on the impacts of the U.S. stimulus bill.

The report, “The Recovery Act: Transforming the American Economy Through Innovation,” is notable for highlighting the multifaceted and relatively comprehensive clean economy strategy now underway with stimulus investments, and for the Administration’s welcome focus on making clean energy cheap.

Yet while the White House report highlights the considerable clean energy momentum established by the Recovery Act, it also inadvertently raises the specter of an impending clean tech funding cliff which risks sending U.S. clean energy industries into deep freeze as stimulus funds begin to expire over the coming months.

To achieve the White House’s long-term objectives – driving down the costs of emerging clean energy technologies such as solar power and advanced batteries and building globally competitive American clean energy industries – will require a long-term, comprehensive clean economy strategy and sustained investments in innovation, advanced manufacturing, and competitive market deployment.

The White House report correctly frames the overriding goal of clean energy investment around making clean energy cheap in real, unsubsidized terms. For solar energy, according to the report, the near-term goal is for solar electricity to be competitive with retail electricity rates, with a long-term goal to compete with central fossil fuel power plants. As the Breakthrough Institute has consistently argued, taking clean energy alternatives to scale and building globally competitive clean energy industries will ultimately depend on such improvements in cost and performance.

Cost reductions and performance improvements in solar technology, advanced batteries, and electric-drive vehicles will be driven by a confluence of factors, according to the report, including direct public support for energy innovation, manufacturing and deployment, and by strengthening the linkages across all three areas.

The White House report notes that the Recovery Act is accelerating solar energy innovation by providing funding for greater solar energy deployment, manufacturing and scale-up, and catalyzing needed technological breakthroughs to create novel and more efficient technologies. All told, these measures may help reduce to cost of solar power by 50% in coming years, according to White House estimates, while building domestic manufacturing capacity and investing in next-generation solar breakthroughs that could form the basis of entire new U.S. industries.

Similarly, stimulus investments have helped transform the United States from a bit player in international advanced battery markets to a global competitor with an estimated 20 percent of worldwide manufacturing capacity online by 2012, all while potentially driving down the cost of electric vehicle batteries by up to 70%. The key to success, the White House says, has been “investments across the innovation chain – from retooling current auto factories to new manufacturing and commercial deployment to research and development of electric drives and batteries.”

This multifaceted focus on innovation, manufacturing, and markets, bears a striking resemblance to the comprehensive clean economy strategy the Breakthrough Institute has spent much of the past two years advocating through an ongoing series of reports, policy recommendations, Congressional testimony, and writings.

It is notable, however, how distinct such a strategy is from the dominant cap and trade debate that has consumed essentially the entire Congressional calendar since passage of the Recovery Act in February 2009. The nearly complete focus of the subsequent Congressional energy and climate debate on the primacy of carbon pricing may have ultimately prevented meaningful debate on how to optimize and extend the critical, comprehensive clean energy investments begun under to stimulus and enact a long-term investment strategy to strengthen clean energy competitiveness.

Indeed, while the stimulus was supposed to be a “down payment” on a new clean energy economy, the Congressional cap and trade bills—which would have invested little in clean energy technology—left the country likely to default on long-term clean energy promises.

Meanwhile, our economic competitors are not making the same mistakes we are, and are continuing to publicly invest in their domestic energy innovation systems in a bid to capture the increasing economic rewards inherent to the burgeoning clean energy industry.

China is set to unveil a massive $740 billion, 10-year package of direct investments to secure their economic leadership in emerging clean energy industries. China already dominates global market share for electric batters, wind turbines, and solar panels, and is rapidly boosting its capacity to innovate and produce next-generation clean energy technologies. Japan, South Korea, Germany, Spain, Denmark and a host of other international competitors are also fast at work building domestic clean energy industries with a multifaceted focus on innovation, manufacturing, and markets.

Facing such intense global competition, and with Recovery Act funds poised to expire soon, sending U.S. clean energy markets off a clean tech funding cliff, the U.S. is in dire need of a long-term clean energy investment strategy to regain economic and technological leadership in this new growth sector.

The substantial and successful impact of the public investments in the U.S. stimulus bill point to a way forward, but unless rapidly followed by a long-term, sustained investment strategy, the Obama Administration’s clean energy legacy may wind up tarnished by the continued erosion of U.S. clean energy competitiveness.

Jesse Jenkins is Director of Energy and Climate Policy and Devon Swezey is Project Director at the Breakthrough Institute. Both are co-authors of “Rising Tigers, Sleeping Giant” a comprehensive report on global clean tech competitiveness, and “Strengthening Clean Energy Competitiveness,” a set of Congressional policy recommendations.


Richard Mercer said...

You speak of reaching the goal of having no subsidies for renewables, but don't mention the larger subsidies for fossil fuels.

And on top of it, you don't want to price carbon. Its called lets pretend there are no externalized costs of fossil fuels, while we subsidize the industry with the biggest profits in history.

So free ride on both counts for fossil fuels, and just research for renewables.

IEA report says fossil fuels get 12 times as much subsidies as renewables do, globally.

I say fund deployment of renewables now. The costs are falling rapidly for PV solar for example. And fund research for bettter, cheaper renewables at the same time.

There is one renewable that can add valuable dispatchable power, in large quantities, day and night, and with a fairly high capacity factor. I'm speaking of solar thermal with molten salt heat storage. According to the NREL, the biggest obstacle to cheap electricity form solar thermal (or concentrating solar power - CSP) is a short learning curve of a few years, and the lack of any economy of scale yet. Build them and they will get much cheaper. NREL projects 4-7cents/kWh when the industry is up to scale.
Capacity factors of 50% for parabolic solar trough plants and up to 72% for power tower type plants according to NREL.

This isn't rocket science. Its fairly low tech. Sure incremental improvements could be made, but the basic technology is already efficient.

Jesse Jenkins said...

@frflyer: where do these assertions about what I want or don't want come from?

-I want the highest politically sustainable price on carbon possible. The exact price we get will have far less to do with the precise calculation of externalitites and almost everything to do with politics. That's reality. So let's get the highest one we can...

-I support and champion the aggressive deployment of clean energy technologies with great potential for cost reductions and competitiveness in the long term without subsidy. Solar thermal is a great candidate for such a program.

But let's be clear: we will never transition the global energy system to clean sources if it requires permanent and substantial subsidies or very high carbon prices. Just look at the developing world, where the vast bulk of energy demand (and emissions) growth will come from. These nations will not be able to sustain permanent subsidy or countenance high carbon prices. So let's keep our eye on the prize: making clean energy cheap, in real, unsubsidized terms. In the short-term, a smart, competitive deployment program (driven by targeted and steadily declining production incentives) coupled with aggressive innovation programs can make that happen.

-I support ending subsidies to all mature energy technologies, including coal, oil and corn ethanol. That's clearly a tough political lift (Dems have been trying since taking the House in 2006, to no avail), but worth it. Funds should be redirected to spur the deployment and improvement of still-maturing, innovative clean energy technologies.

This is all right here, so I'd appreciate it if you take a clearer look at what I advocate before making statements like this.