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Thursday, September 30, 2010

Community Solar Pioneers

David Brosch had a problem many Americans can relate to. He wanted solar power, but wasn't able to put it on his house. His roof had the wrong orientation, a tree partially blocked the sun, and it was more than he could afford. Many of his neighbors were in the same situation -- some were renters, others were too busy to handle the process of an installation on their house.

They got together and formed a company, University Park Community Solar, and approached a local church with a large roof and good solar orientation. In exchange for placing solar panels on it’s roof, the church would be guaranteed a long-term low price of electricity. David told us: “We wanted a project that could stand on it’s own. Not one funded by donations, but something that was financially viable that folks would be willing to invest in. A solar project done right can turn a profit, so we thought, let’s pool our money and do it together.” Sounds simple enough, right?

As far as we can tell, no one had ever pulled off a project quite like that before. UPCS needed to come up with the right legal entity, faced Securities regulations that restrict non-accredited investors (i.e. non-wealthy people) from investing in the project, and had to figure out how to utilize federal credits that required "passive income" to apply it to. It took nearly three years but this Maryland group finally installed the 21.9 kW system this past May. It is believed to be one of the first community-initiated and owned solar electric systems in the U.S.

The project is expected to generate a 7-8% return on investment over the life of the project for the 30-plus area members. By providing clean electricity for the Church of the Brethren, UPCS will be reducing the region’s reliance on coal-based power. PEPCO, the major electric utility for Washington D.C. and the Maryland suburbs, purchases more than half of its power from coal-burning generating plants, which get their coal from destructive Mountaintop Removal mining operations in Appalachia. [Check to see if your electricity comes at the expense of mountains too.]

You'd think the Federal Government would do anything it could to support the replication of the University Park model. It's a market-based solution to the unemployment problem, while also helping achieve clean energy and climate objectives. But it's actually the Federal Government that's in the way.

One of the biggest roadblocks is the 1933 Securities Act that was designed to protect “widows and orphans” from crooked securities dealers during the era’s financial depression. Today it prevents people who make less than $200k a year or who hold liquid assets of less than $1m from investing in a whole host of unregistered securities, including most clean energy projects. There should to be a way for average people to invest without the need for deal-killing securities registration requirements.

Another roadblock is that most of the incentives for clean energy development are structured as tax-credits, so most potential community organizations (including non-profits like churches and schools, Native American tribes, etc.) can’t take advantage of them. Because UPCS completed their project prior to the end of 2010, it can trade the tax credits for a 30% grant through the US Treasury as a result of the Federal Stimulus Bill. However, solar projects completed after 2010 will not be able to receive the grant, reducing their financial viability.

The University Park Community Solar ran into every bureaucratic red-taped government wall and jumped over, dug under, and blew it up and changed the model. They are one of many groups across the country working to not only clean up, but also democratize energy in America, with community solar power. They're already planning a second project. We hope others follow their lead.

(written with Daniel Rosen and cross-posted from

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Chunks: A(nother) New Approach to Energy Policy?

By Alex Trembath. Cross-posted at Energetics and the Americans for Energy Leadership Blog.

In a recent interview with Rolling Stone, President Obama addressed the failed climate/energy attempt of this summer, promising to move forward with a reinvigorated agenda in 2011. However, any such action will likely bear little resemblance to previous attempts. Mr. Obama conceded that "we may have to end up having to do it in chunks, as opposed to some sort of comprehensive legislation." If this is indeed going to be the form of a new course of action on climate/energy for Mr. Obama, commentators are beginning to wonder exactly what those "chunks" will be.

Never mind the fact that the most recent attempts at energy reform have been piece-meal to begin with--that's more or less inevitable with so many regulations, markets, fuels, interest groups and players at stake. Before its total dismantling, the American Power Act (formerly Kerry-Graham-Lieberman) was a hodge-podge of cap-and-trade, tax incentives and subsidies for renewables and clean coal technology, loan guarantees for next-generation nuclear power production, and a slew of regulatory reforms to preempt state action of GHGs and promote energy efficiency. Of course that bill never came close to a floor vote in the Senate, but my point stands: a "comprehensive" bill would have to be built one brick at a time anyway, so maybe Obama's explicit "chunks" approach will get the job done.

So what's on the table this time around? And, more importantly, what can pass a divided Congress?

Glenn Hurowitz at Grist proposes his favorite chunks in his "Peanut Butter Plan." He advocates a combination of tax credits for carbon capture; regulations to reduce black carbon pollution; intensifying regulations banning HFCs; and international finance to help LDCs adapt to climate change. Hurowitz refers to these four as "low-hanging fruit" solutions, and believes that if combined properly they could achieve greater emissions reductions than more comprehensive legislation.

Andrew Revkin kick-started a similar discussion over at DotEarth, putting forward a couple of his favorite policy chunks to replace a larger bill. He credits Hurowitz's list, and adds making the R&D tax credit permanent and the RE-ENERGYSE program to the list. If anything, Mr. Revkin's recommendations are more comprehensive than "chunky," as he puts it. Rather than approaching certain piece-meal aspects of climate/energy one at a time, Revkin's suggestions create policy infrastructure for energy innovation and energy education at large. Instead of writing different legislation for solar, wind, CCS, nuclear, EE, carbon finance, and emissions regulations (to name a few), funding for innovation and education create the foundations of a workable and flexible industrial policy on energy.

I'm a fan of piece-meal, and I'm a fan of big picture. But the problems will arise, as usual, with the politics. As Senator Jay Rockefeller said, "We [the Senate] tend not to be very good at chunks, but then you could argue that we tend not to be very good at big things either." Bonus points for honesty. However, a recent piece in Politico might forecast some political leeway for the President as he moves forward with a chunks approach. The article cites Senators Brown (R-MA), Alexander (R-TN), and Snowe (R-ME) as potential allies on a chunky approach, in addition to Democrats like Rockefeller, John Kerry and Dick Durbin.

A quick aside on the politics. Much has been said that, if Republicans have been so unwilling to cooperate thusfar with the Obama Administration, what makes us think that the chances for climate/energy legislation will be higher in 2011, when Republicans will certainly have more seats in both Houses? To the naysayers, I offer my cautious optimism that Republicans will accept their increased share in political power as an opportunity to shake off the still trenchant "Party of No" vision that many voters have adopted for them. Beating Democrats in Midterms is one thing; beating a still reasonably popular President in 2012 without a legitimate Republican frontrunner will take more than straight obstruction. Time will tell.

But I digress. What would I add to the chunky climate agenda? Well, I appreciate the efforts of individual members of Congress to promote clean coal, nuclear, renewables, energy efficiency, biofuels and other fuel-focused policies. However, I would add my name Mr. Revkin's endorsement of research and innovation before partitioning climate/energy policy into too many segments. In addition to increasing cleantech R&D funding to at least $15 billion annually and re-investing in science and engineering education, we should expand the scope of DoE's ARPA-E, the Advanced Research Projects Agency - Energy, and create public private partnerships with similar goals of targeting and funding specific energy technology projects for demonstration and deployment.

Like extending the research tax credit and RE-ENERGYSE, these proposals are less chunky and have received proportionately lower attention in Congress. However, policy and business leaders from the Brookings Institution and the Information Technology and Innovation Council to the American Energy Innovation Foundation and the Breakthrough Institute have all advocated similar approaches to our energy challenges. I've consistently added my voice to these calls to actions here and with Americans for Energy Leadership, who have done excellent work on the RE-ENERGYSE proposal in particular.

At the end of the day, we need a strong energy agenda, one way or another. But looking past the chunks, we must keep pushing for a policy infrastructure built on education, research and innovation, without which such piece-meal approaches may not be able to form an effective climate/energy agenda.

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Tuesday, September 28, 2010

RES: Symbolism or Substance?

By Daniel GoldfarbOriginally published at the Huffington Post and Americans for Energy Leadership

Amongst those who have fought for energy reform, the announcement that Senators Jeff Bingaman (D- N.M.) and Sam Brownback (R-Kan.) are pursuing a stand-alone renewable energy standard (RES) should be cause for both cautious celebration and deep concern. While a RES could be an effective tool to help catalyze a market for clean-energy, this particular bill falls short of the ambitious legislation needed to ensure that America is competitive in the global clean-energy economy. In talking about this piece of legislation it is important that we distinguish between the effects of the policy and the symbolism of its potential passage.

Although the final language hasn't been released, Bingaman's bill will likely set out of the goal of 15% of renewable production by 2021 with up to 4% coming from efficiency. This proposal is essentially a paired down version of Bingaman's contribution to the 2009 American Clean Energy Leadership Act (ACELA), which called for a stiffer 20% renewable production goal.

Here are some facts about renewable energy standards in America. 36 states already have some form of an RES in place, most of which are more ambitious than the proposed bill - although it should be noted that some do not contain the enforcement mechanisms that a national bill would. Yet even for those states that don't have an RES in place it still may have little effect. A 2009 analysis by the National Renewable Energy Laboratory, a research arm of the Department of Energy, shows that a goal of 15% renewable production by 2021 with 4% coming from efficiency is actually right on track with business-as-usual growth in the industry. Marchant Wentworth, deputy legislative director for the Union of Concerned Scientists, said of the original more ambitious RES standard, "This bill's renewable standard is so pitiful that it wouldn't require any new renewable energy development beyond business as usual."

Some Senators on both sides of the aisle have recognized the realistic implications of this bill, putting aside talking points and rallying around a RES. As of today, Republican Sens. John Ensign of Nevada and Susan Collins of Maine have agreed to co-sponsor the bill. Bingaman's earlier inclusion of a RES in ACELA saw bipartisan support in his committee, with Senators Corker, Sessions, and Murkowski voting "yes" for the RES provision.

Although there are hopes of bipartisan support for the effort, the debate is more likely to descend into party line arguments similar to those employed during comprehensive climate legislation. Republican Senators have begun to make the argument that a RES will drastically raise electricity costs, while Senate Democrats are asserting that without an RES the American clean energy economy will be seriously hampered. While both of these statements are potentially true when talking about an ambitious renewable energy standard, it turns out this particular bill will do almost nothing to change the way America produces its electricity.

Any debate over what is in this RES bill will be taken as an opportunity revert to ideological arguments, leading to gross confabulations from both sides of the aisle about what such a piece of policy would do. Any constructive debate, therefore, should be about what is not in this particular bill. This could provide a national stage for a dialogue that our nation wants and needs, namely, how we can stay competitive and create jobs in the 21st century. While a weak RES will do little to address these problems, the principles behind this type of policy are competitive and industrial in nature. As a net importer of energy sources, the United States is a "price taker", and the biggest one at that. This means that when there are fluctuations in the global price of fossil fuels, the United States is the world's largest loser. As we all know from the 1970s and 2000s, high oil prices mean low job numbers. Now that the energy sector has begun to shift towards renewable sources, America has an opportunity to become energy independent and develop technologies that produce energy at stable rates. The debate around this RES bill could be the jumping off point for a much needed larger discussion, are we willing to invest in energy independence or are we okay with having our economy, jobs, and security being dependent on foreign nations?

At a special committee on Energy Independence and the Environment, Rep. Edward Markey (D-Mass.) warned that if nothing is done, "We will trade our addiction to Middle Eastern oil for an addiction to Asian or European clean energy technologies." In the last ten years China has jumped way ahead in the production of clean-energy technologies. China and Taiwan combined to produce 49% of the solar market in 2009, with 95% of the technology being exported. At the same time China is making efforts to duplicate its success with solar exports in the wind turbine market. Much of China's gains in these sectors, importantly, have been attributed to RES like measures to create robust and stable domestic markets. Surprisingly, according to heads of industry, it is not labor prices that are driving jobs to China, but stable markets.

So if the RES will do little or nothing to actually stimulate an American market for clean energy, then why is it worth advocating for? On the symbolic level, a RES bill represents a critical departure from the environmental rhetoric that has bogged down past energy efforts, and a moment of potential for clean energy industrial and competitiveness policy.

In terms of the real effects of this policy, the passage of this bill would send a stable signal to companies that there will be a market for renewable energy in America ten years down the road, although it will do nothing to guarantee that it will be a robust market. With the impending changes in Congress's make up as well as the expirations of the Clean Energy Treasury Grant Program, the Production Tax Credit (PTC), the Investment Tax Credit (ITC) and ARRA's funding for energy innovation and deployment, America's clean-energy sector may be heading towards a cliff. Although the RES will do little to push America's market for clean-energy past business-as-usual, it will ensure that the market doesn't begin moving backwards. For this reason it is important that this particular bill, in the words of Wentworth, provides a "floor, not a ceiling" for America's clean-energy economy.

In advocating for this bill we must not only recognize its importance, but its serious limitations. A lone RES proposal gets nowhere near the comprehensive energy strategy that will be necessary to create a thriving American clean-energy sector nor does it seriously begin to curb carbon emissions 83% by 2050. While seriously flawed, this RES bill is a necessary step towards a new energy agenda, one based on the limitless potential of technological innovation and not on the politics or capping and limits.

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Tuesday, September 21, 2010

How Can America Secure Clean Energy Jobs?

By Teryn Norris & Daniel Goldfarb
Originally published at Americans for Energy Leadership

As China continues advancing in the clean energy race, a growing number of policymakers and commentators are decrying the lack of U.S. federal policies to scale the nation’s clean energy industry to secure jobs, manufacturing capacity, and even private research and development.

Senator Jeff Bingaman (D-NM), Chairman of the Senate Energy & Natural Resource Committee, made a rare entry into Politico’s op-ed page today calling for the establishment of a Clean Energy Deployment Administration. The United Sates cannot compete solely on the basis of R&D and technological breakthroughs, he argues, and must adopt stronger policies to scale its clean energy industry through direct deployment and manufacturing – which in the long-run will attract the private R&D:

“The United States may still have the world’s strongest R&D pipeline for new technologies and an extremely robust entrepreneurial culture to support new ventures. Yet the fact that leading U.S. clean technology companies are building manufacturing and R&D centers in China, rather than in the United States, is a troubling sign that we could lose our lead. Other nations are seeing the benefit of this new paradigm, in which development of leading manufacturing capabilities results in pulling more R&D operations to their shores as well. The result is not positive for the United States.”
Thomas Friedman identified a similar problem in his Sunday NYT op-ed, arguing that China is securing clean energy jobs much more successfully than the United States due to stronger domestic market demand from government policies. He highlights Mike Biddle, founder of MBA Polymers, as an example of how federal R&D without broader industry-scaling strategy can produce unintended consequences:
“Biddle’s seed money was provided mostly by U.S. taxpayers through federal research grants, yet today only his tiny headquarters are in the U.S. His factories are in Austria, China and Britain. “I employ 25 people in California and 250 overseas,” he says. His dream is to have a factory in America that would repay all those research grants, but that would require a smart U.S. energy bill… So we educated him, we paid for his tech breakthroughs — and now Chinese and European workers will harvest his fruit. Aren’t we clever?”
China’s commitment to clean energy deployment and manufacturing, however, is also beginning to attract private R&D centers. Friedman cites Peggy Liu, chairwoman of the Joint U.S.-China Collaboration on Clean Energy, who said:
“China is changing from the factory of the world to the clean-tech laboratory of the world. China has the unique ability to pit low-cost capital with large-scale experiments to find models that work. They’re able to quickly throw spaghetti on the wall to see what clean-tech models stick, and then have the political will to scale them quickly across the country. This allows China to create jobs and learn quickly.”
These observations build on recent commentary from technology industry experts like Andy Grove, co-founder of Intel. According to Grove, high-tech domestic job creation depends on supportive public policy mechanisms, including targeted public investment, to achieve scaling and economic cluster formation. Unfortunately, the U.S. has lost large numbers of high-tech jobs because it has failed to implement a broader industrial development strategy, including investment in manufacturing capacity:
“The scaling process is no longer happening in the U.S. And as long as that's the case, plowing capital into young companies that build their factories elsewhere will continue to yield a bad return in terms of American jobs… [Asian] countries seem to understand that job creation must be the No. 1 objective of state economic policy. The government plays a strategic role in setting the priorities and arraying the forces and organization necessary to achieve this goal. The rapid development of the Asian economies provides numerous illustrations.”
Of course, market demand is only one part of the equation and must be matched by a broader clean energy competitiveness strategy along each stage of the innovation pipeline. Yet unless the federal government can stimulate a robust market for clean-energy technologies in the United States, American innovations will continue failing to create American jobs. If U.S. policymakers want to address the jobs crisis, they should heed Senator Bingaman’s call and pass a Clean Energy Deployment Administration, along with other policies to create robust deployment of clean energy in America.

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Friday, September 17, 2010

Brooks: Anti-government Ideology Threatens American Greatness

By Devon Swezey and Jesse Jenkins, originally at the Breakthrough Institute

It is fashionable these days to paint the government as a useless yet ravenous institution, the expansion of which will turn America into a third world country - or, worse yet, France.

Even the Economist, a respected, moderate publication, has recently taken to framing the government as a hideous Leviathan consuming private business, and everything else in its path.

But according to a new column by conservative commentator David Brooks, the hysterical, anti-government ideology that has taken root within even mainstream corners of the Republican Party is driven by an "oversimplified version of American history, with dangerous implications."

Writing in the New York Times, Brooks reminds his fellow conservatives that the history of American innovation and economic strength is one of "limited but energetic governments that used aggressive federal power to promote growth and social mobility."

"George Washington used industrial policy, trade policy and federal research dollars to build a manufacturing economy alongside the agricultural one. The Whig Party used federal dollars to promote a development project called the American System.

Abraham Lincoln supported state-sponsored banks to encourage development, lavish infrastructure projects, increased spending on public education. Franklin Roosevelt provided basic security so people were freer to move and dare. The Republican sponsors of welfare reform increased regulations and government spending -- demanding work in exchange for dollars."
Certainly, this country's innovative private businesses and intrepid entrepreneurs have been central to making America the world's leading economy. But time and again, America's entrepreneurs have succeeded with the full and active support of the federal government, without which, things may have turned out very differently.

As the Breakthrough Institute documented in our 2009 report, "Case Studies in American Innovation," the story of American innovation is one of enduring partnership between the public and private sector, where smart public investments have catalyzed entrepreneurialism and innovation and paved the way for so many of the great American technological and economic success stories of the 20th century.

Time and again, public-private partnerships have driven the development of whole new industries, and created the conditions for leading private sector companies to thrive. Without the public sector as both an initial funder and demanding customer, the vibrant industries built around great American innovations in communications, aerospace, semiconductors, computing, biotechnology and many more may have sprouted up elsewhere, or not at all.

Giving credit where credit is due, former Microsoft Chairman Bill Gates, one of the nation's greatest entrepreneurs and business leaders, recently noted that early government investment in information technology was central to the success of Microsoft and so much of the IT revolution that propelled Americas economy in the later years of the 20th century:
"The Internet and the microprocessor, which were very fundamental to Microsoft being able to take the magic of software and having the PC explode, were among many of the elements that came through government research and development."
Indeed, the catalytic investments of the federal government have been central to the success of countless leading American firms, including HP, Apple, Genentech, Boeing, and Dow Chemical, along with hundreds of the small businesses and entrepreneurs that are the core of America's economic strength.

According to R&D Magazine, a quarter of the top 100 innovations in America each year consistently come from small businesses that are funded by one federal program alone--the Small Business Innovation Research (SBIR) program.

Many conservatives, and indeed many liberals and environmentalists as well, have forgotten this history, and believe that the private sector is most innovative when the government is most absent.

Yet, as Brooks reminds us, the greatest American Presidents, from Washington to Lincoln, to Roosevelt, didn't build their philosophies or their policies around small government or big government, but smart government:
"Government is a means, not an end. They built their philosophy on making America virtuous, dynamic and great. They supported government action when it furthered those ends and opposed it when it didn't."
This "long, mainstream American tradition" is by the reflexive anti-government ideology of the surging Tea Party, now fighting for the soul of today's Republican Party.

For America to remain a great nation in the 21st century, smart government policies and investments will be essential. Whether or not those pivotal investments are made may hinge on the ability of conservatives and liberals alike to overcome this collective amnesia about what made this country great in the first place.

See also:

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Thursday, September 16, 2010

Solar Leasing: An Exciting New Way to Get Solar Panels

(photo courtesy SunRun)

There are many ways to go about getting solar panels on your home. Most of them involve hiring a good contractor to design and install a system on your roof. And, unfortunately, it often involves spending a lot of money up front on the system and installation. Fortunately, there are alternatives that are rapidly evolving that can bring the initial cost of the system down to something much more affordable and sometimes can cost NOTHING up front.
(photo courtesy SunRun)

What are these programs?
They come in many forms, but for the most part they are called solar leasing programs. You may also hear them called solar financing, solar power purchase agreements, or solar rental programs.

How do they work?
They vary slightly, but here are the basics:
  • You contact a solar leasing program provider (we’ll discuss them below)
  • The provider comes to your home and determines if your home qualifies for their program. They evaluate things like sun exposure, roof angle and access issues.
  • If your home is right for solar power, the company usually collects a deposit and you sign an agreement ranging from 10-20 years. In some cases, depending on local solar incentives, the provider may not require any money from you. That’s right, your system could be FREE!
  • The provider hires the installer and oversees the installation. They also manage all maintenance and warranty issues with the system for the life of the contract.
  • The provider collects any and all utility incentives and tax breaks.
  • You immediately start seeing benefits in lower power bills. The solar leasing company is essentially selling you power at a reduced rate that they generate from the solar panels. Savings vary from 5% to 25% on monthly electric bills.
  • Here’s where it gets really good: your power rates from the leasing company are locked in for the life of the agreement. So when the utility rates start to rise (and they most definitely will) your rates will stay the same and your power savings will really take off.
  • You get the satisfaction of generating clean, renewable energy while helping the planet.
What’s the catch?
There are of course some qualifications for the program. People who qualify generally meet these guidelines:
  • They live in states with great solar incentives like Arizona, California, Colorado, Massachusetts, New Jersey, and Pennsylvania. Programs will be in place very soon for other places like Texas and Florida.
  • They are serviced by a major utility that has a solar incentive program in place, not a local or municipal power cooperative.
  • They have a large space on the roof that is clear of obstructions and faces south.
  • They have a desire to save money and help the planet at the same time.
How do I find a provider?
There are several major solar leasing firms nationwide. They include SunRun (, SunPower (, and SolarCity ( All of these companies have an online form that you can fill out to be contacted for an estimate. There are other programs nationwide, and you can find out more by contacting your utility provider or finding a local solar contractor.

This can be a great way to get solar installed on your home and start seeing the benefits of renewable energy right away.

Kriss Bergethon is a writer and solar expert from Colorado. Please visit his site at Solar Panels.

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As Manufacturing Shifts Abroad, Innovation's Reward Dwindles

Originally published at the Breakthrough Institute

President Obama's recent proposal to increase and make permanent the research and development (R&D) tax credit is unlikely to substantially accelerate economic growth without greater efforts to manufacture and commercialize innovations in the United States.

The President recently unveiled the new $100 billion measure as a way to boost the flagging economy and provide incentives for businesses to invest in new products and technologies.

Yet the decades long trend of U.S. innovations being commercialized abroad threatens to dilute the economic benefits--in terms of new industries, jobs, and revenues--of new technology investment. The United States pioneered advanced technologies like flat-panel televisions, printed circuit boards and semiconductors--ubiquitous technologies for which there are enormous global markets--but the production of these technologies and many others has long since shifted overseas, particularly to Asia.

Take the semiconductor industry. In 2009, the percentage of global semiconductor production capacity in the United States was only 14 percent, down from 25 percent in 2005, according to Manufacturing and Technology News. Nearly 75 percent of manufacturing capacity was in Asia.

Overall, the U.S. trade balance in product fields designated as "technologically advanced" is negative, and has remained so for the last eight years.

The Continuing Importance of Manufacturing

Despite what many economists preach about benefits of unfettered free trade and "comparative advantage," the hollowing out of high-tech manufacturing in the United States has deleterious impacts on both job creation in the U.S. and the capacity for innovation in next-generation technologies.

As Richard McCormack, editor of Manufacturing and Technology News, reminds us, when manufacturing moves abroad, it's not just laid-off workers that suffer:

When a factory closes, it creates a vortex that has far-reaching consequences. The Milken Institute estimates that every computer-manufacturing job in California creates 15 jobs outside the factory. Close a manufacturing plant, and a supply chain of producers disappears with it. Dozens of companies get hurt: those supplying computer-aided design and business software; automation and robotics equipment, packaging, office equipment and supplies; telecommunications services; energy and water utilities; research and development, marketing and sales support; and building and equipment maintenance and janitorial services. The burden spreads to local restaurants, cultural establishments, shopping outlets, and then to the tax base that supports police, firemen, schoolteachers, and libraries.

There are three other reasons why the manufacturing of advanced technologies is critically important for future economic prosperity. First, high tech industries produce higher rates of productivity growth and exhibit higher wages compared with other sectors of the economy, according to a 2004 analysis by the Bureau of Labor Statistics.

Second, a disproportionate share of U.S. exports and research and development (R&D) occur in the manufacturing sector. While manufacturing makes up only 12 percent of U.S. GDP, it represents nearly two-thirds of industry R&D spending and accounts for more than 80 percent of U.S. exports.

Third, and perhaps most important, the manufacturing sector is a key component of the national "innovation ecosystem," and is necessary both to encourage greater research and innovation and make those activities more productive by increasing the commercialization of new technologies.

In a quietly-released and underreported 2004 report, George W. Bush's Council of Advisors on Science and Technology (PCAST) wrote that research and manufacturing do not occur in isolation, but in a cyclical dynamic relationship characterized by multiple feedback-loops:

The research-to-manufacturing process is not sequential in a single direction, but rather results from and R&D-manufacturing "ecosystem"...where design, product development, and process evolution all benefit from proximity to manufacturing, so that new ideas can be tested and discussed with those working on the ground...locations that possess both strong R&D centers and manufacturing capabilities have a competitive edge.

Advanced manufacturing is an anchor of competitive innovation ecosystems, and as manufacturing centers move abroad, the U.S. capacity for innovation is weakened. Leading U.S. companies, including firms like Applied Materials, IBM, and GE, have increasingly moved state-of-the-art research and innovation activities overseas to be near manufacturing capabilities. Should this trend continue, new technology innovations may originate--and be produced--in other countries, to the detriment of U.S. economic growth.

In the words of PCAST:

Over time, should our own ecosystems weaken while foreign ecosystems grow in strength, the maintenance of U.S. technological preeminence is not assured.

We're Competing Against Countries, Too

It's not simply greater labor-cost advantages that are sending high-tech manufacturing, and subsequent research and innovation activities, overseas. Indeed, the high-capital intensity of leading-edge manufacturing plants makes non-labor costs much more important.

Rather, national governments are using generous public policy--like tax breaks, cash grants, free land, and access to cheap credit--to make a deliberate play for innovative new industries to drive their economies, and the United States is not in the game.

As innovation expert Robert Atkinson recently told the LA Times, "Other countries do a much better job. We're pretty much the only country with the illusion that we are not in competition with the rest of the world."

The new realities of global technology-based competition--driven by partnerships between the public and private sectors and facilitated through public policy--have made past notions of "comparative advantage" obsolete. In today's high-tech knowledge economy, competitive advantages are created, not endowed.

The rapidly growing clean energy sector is a case in point. China has emerged as a clean energy powerhouse, leading the world in the production of solar cells and wind turbines after virtually no market presence five years ago. China is set to invest more than $700 billion over the next ten years to secure its first-mover advantages in clean energy.

As with many other sectors of the economy, the United States has seen its clean energy innovations commercialized overseas. Avoiding this fate in the future will require a more integrated approach toward both clean energy R&D and manufacturing as key pillars of a new clean energy economy.

Fortunately, a number of important public officials have publicly endorsed such a "cluster" approach, recognizing the importance of public-private partnerships and a strong role for the public sector in facilitating the co-location and integration of R&D and manufacturing.

In a speech earlier this year, Commerce Secretary Gary Locke noted, "When products are designed and manufactured side by side in America, businesses can discover new efficiencies and develop second-, third- and fourth-generation upgrades that simply would never occur in a cloistered research lab." And Secretary of Energy Chu recently penned a thoughtful article, "Revitalizing American Manufacturing," writing, "We can and must make high quality products in America."

Yet with major clean energy investments set to expire with the U.S. stimulus legislation later this year, it's unclear how today's nascent clean energy progress will be sustained. Without a prolonged commitment to rebuilding America's innovation ecosystems, the future may turn into the past, and American prosperity will suffer.

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Italian Mafia Busted Laundering Money Through Clean Energy Projects

Who's cashing in on profitable clean energy markets? Goldman Sachs, China, and now ... the Italian Mafia!

Reuters reports that Italian police seized $1.9 billion in Mafia-linked assets -- reportedly the biggest seizure of mob assets ever -- "in an operation revealing that the crime group was trying to "go green" by laundering money through alternative energy companies."

Investigators said the assets included more than 40 companies, hundreds of parcels of land, buildings, factories, bank accounts, stocks, fast cars and luxury yachts.

Most of the seized assets were located in Sicily, home of the Cosa Nostra, and in southern Calabria, home of its sister crime organization, the 'Ndrangheta.

At the center of the investigation was Sicilian businessman Vito Nicastri, 54, a man known as the "Lord of the Wind" because of his vast holdings in alternative energy concerns, mostly wind farms.

Interior Minister Roberto Maroni called the operation "the largest seizure ever made" against the Mafia.

General Antonio Girone, head of the national anti-Mafia agency DIA, said Nicastri was linked to Matteo Messina Denaro, believed to be Mafia's current "boss of bosses."

Investigators said Nicastri's companies ran numerous wind farms as well as factories that produced solar energy panels.

"It's no surprise that the Sicilian Mafia was infiltrating profitable areas like wind and solar energy," Palermo magistrate Francesco Messineo told a news conference. ...

Senator Costantino Garraffa, a member of the parliamentary anti-Mafia committee, said the Mafia was trying to break into the "new economy," of alternative energy as it sought out virgin ventures to launder money from drugs and other rackets.

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Tuesday, September 14, 2010

Starving Clean Energy to Pay the Rich

Originally published at the Breakthrough Institute.

As the Obama Administration and Republicans are set to do battle over an extension of Bush era tax cuts for the wealthiest Americans, clean energy innovation is getting the short end of the stick.

According to the New York Times, Senate Minority Leader Mitch McConnell is hopping mad about President Obama's plan to let tax cuts expire for the wealthiest 2% of Americans. McConnell's plan, which would extend the tax cuts for the countries wealthiest, would add $700 billion to the national debt over the next 10 years.

Meanwhile, Senate appropriators are considering providing only $200 million for the Department of Energy's Advanced Research Projects Agency for Energy (ARPA-E) for FY2011, $100 million less than the Administration requested and only half the level appropriated to the agency in the stimulus. Most of that money is going to universities and private businesses for high-risk, high-reward research projects that could form the basis for transformative new industries and drive economic growth.

Energy experts have long argued that investments in R&D programs like ARPA-E should be scaled up to accelerate innovation. In a policy brief released last June, the Breakthrough Institute, Brookings Institution, and Information Technology and Innovation Foundation, called for ARPA-E to increase to around $3 billion in ten years time, "a funding level on par with DARPA budgets and at a scale necessary to truly impact the pace of innovation in the expected multi-trillion dollar clean energy market."

To recap: $200 million for clean energy innovation, $700 billion for wealthy Americans.

Come to think of it, I've seen that $700 billion figure before...

Oh that's right--China is planning to invest $738 billion over 10 years in new clean energy industries to dominate an expected multi-trillion global market and become the clean energy factory for the world.

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Does November GOP Win Spell the End for Clean Energy Progress? Maybe Not

By Jesse Jenkins, originally at the Breakthrough Institute

According to most electoral prognosticators, Republicans are poised to win major victories in the upcoming November midterm elections, with control of both the House and Senate within their reach. That should spell the end for climate and clean energy legislation, according to many observers, at least for the next Congressional cycle.

But what if it doesn't? Over at SolveClimate, Elizabeth McGowan takes a fresh look at what a GOP win in November could mean for clean energy progress, noting that split control in Washington could actually improve chances for bipartisan energy legislation.

New dynamics in a Washington under divided rule

With one party in control of the White House and both legislative branches, it's far too easy for priority issues to become politically polarized -- so the argument goes. The majority party lacks significant incentive to reach out to the minority party from the beginning to craft solidly bipartisan bills. Meanwhile the minority party can simply become 'the Party of No,' attempting to block any of the majority party's legislative priorities while riding electoral angst at a "broken Washington" back into power in the next Congressional cycle.

With the White House in the hands of one party and the House, Senate, or both under the other party's control, the dynamic can be quite different, according to Capitol Hill observers.

McGowan quotes Paul Bledsoe, a strategist at the Bipartisan Policy Center's National Commission of Energy Policy with a long resume of inside-the-beltway experience:

When one party has a supermajority, Bledsoe pointed out, those in charge tend to write legislation without consulting the minority. That can make it virtually impossible to "sell" complex and significant mechanisms such as cap and trade--which now appears to be dead on arrival.

Even Republicans who once supported cap and trade approach as valid now dismiss it as an unacceptable tax.

"Traditionally, energy is not a partisan but a geographically focused issue," Bledsoe said, adding that the 2005 and 2007 energy bills passed with bipartisan support, the former in a Republican Senate and the latter in a Democratic Senate. ...

"A strange dynamic can develop when the balance of power is narrower," he said, adding that polarization along party lines can dissipate. "I think senators will feel a greater sense of urgency to initiate legislation together. I see senators of goodwill coming together to create bipartisan approaches."
Moving beyond cap and trade could yield bipartisan clean energy progress

According to Josh Freed, director of the clean energy program at the moderate Democratic DC think tank Third Way, a bipartisan clean energy strategy -- one that moves beyond the failed cap and trade debate toward a renewed public-private partnership aimed at developing and marketing improved clean energy technologies -- is ripe for passage in a Washington under split rule.

Freed spoke with SolveClimate's McGowan, saying:
Some sort of climate and energy legislation will eventually emerge but first, the public and private sectors need to cooperate to invent, demonstrate, deploy and market the green batteries, plug-in hybrid electric vehicles, advanced nuclear power, renewables and other technologies that are actually competitive with fossil fuels.

"As a country, we seem to have lost our way on that model," Freed said, adding that it propelled the success of the airline industry, the Internet and the biotechnology sector. "How do we go about turning that around?"

Congress needs to champion this push with thoughtful, comprehensive and bipartisan legislation, Freed explained, but the American public, business leaders, universities, entrepreneurs, large companies and the financial sector have to act in tandem.
Building a new bipartisan consensus for clean energy progress may take some time, but according to Freed, the effort can begin in the next Congress and external pressures may keep the heat on Congress to act sooner rather than later:
"This is going to take longer than a campaign. It's much like the health care debate in 1993," Freed said, adding that the need for reform was obvious but the mechanism being deployed all those years ago collapsed under its own weight. "It took 17 years to rebuild that coalition. With energy, we don't have the time to wait 17 years but we need to learn those lessons."

Politicians and everybody else involved have to realize that America is playing catch-up because its dawdling has ceded much of the clean technology market to China, South Korea, Spain, Denmark, the Netherlands and Germany.

"This has to be an issue that resonates in Minnesota, Tennessee and Ohio as much as it does in Oregon, Washington and Connecticut," Freed said.
Beware the Tea Party

While there are many strong motivations for bipartisan legislation to clean up, secure, and modernize the U.S. energy system while developing competitive U.S. clean energy industries, progress may ultimately depend on what kind of Republican party takes office in November.

According to Jim DiPeso, vice president of the Michigan-based non-profit Republicans for Environmental Protection, the radicalizing influence of the surging Tea Party movement may torpedo chances for clean energy legislation in the coming Congress. As DiPeso tells SolveClimate:
"All bets are off because those [Tea Party] newcomers will have different ideas about what priorities should be tackled. ... Then, you're looking at gridlock."

His wish is that President Obama, [House Minority Leader John] Boehner and [Senate Minority Leader Mitch] McConnell will be "smart" enough to mollify dissenters and follow President Clinton's lead of the mid-1990s by collaborating on a centrist agenda. ...

[DiPeso] and [Bipartisan Policy Center's] Bledsoe echo one another with their comments about why partisan bickering and backing on the climate front can be so detrimental.

"It's a huge mistake for climate activists to become partisan," Bledsoe emphasized. ...

"You can blame both sides for the polarization but it doesn't matter who is to blame. We need to fix it and that's the only way forward."

Read more!

Thursday, September 09, 2010

Fossil fuel industries seek to use Pacific NW as export hub

Let’s try a word association: what comes to mind when you hear “Pacific Northwest?” Perhaps green, rain, coffee, environmentalists, mountains, salmon, forests. These are all things we pride ourselves on in the Northwest.

But what about coal, tar sands, and pollution?

After years of losing its footholds in the region, let alone expanding their operations, the fossil fuel industry hopes to make the Pacific Northwest its latest export hub. As reported in The Oregonian on Wednesday,

"Ambre Energy, an Australian coal company, is exploring mine acquisitions in the basin and the purchase of the 416-acre Chinook Ventures port site in Longview, Wash., for a bulk export terminal.”
The facility is expected to transport 30 million tons of coal per year.

Peabody Energy, the largest coal producer in the U.S., is also looking to site an export terminal on the West Coast by the end of the year. Due to space limitations in the busy ports of Portland, Ore., and Vancouver, Wash., companies are turning to smaller cities like Longview for their operations.

Longview, located approximately 50 miles north from Portland and 66 miles from the Pacific Ocean, has an economy highly dependent on manufacturing and shipping. The site of a closed smelter is being redeveloped into a port terminal by Chinook Ventures as an attempt to bring new business to Longview.

Despite these efforts, the region’s track record of thwarting the fossil fuel expansion poses a significant barrier to the new coal export plan.

Regional Opposition to Coal
The Northwest is an unlikely target for the coal industry. Only three coal plants operate in the region, one in Oregon and two in Washington at the same facility. There are no coal-fired power pants in Idaho.

In 2007, Washington Governor Christine Gregoire signed into law SB 6001 which prohibited the construction of any coal plants with greenhouse gas emissions higher than natural gas plants. This effectively killed the Pacific Mountain Energy Center, a proposed integrated gasification combined cycle (IGCC) coal plant whose construction was delayed by grassroots organizations until the law went into effect.

Later that year, another integrated gasification combined cycle (IGCC) coal plant, was proposed for the small town of Wallula, WA. This facility was intended as a pilot project to demonstrate the feasibility of carbon capture and storage, which would result in emissions lower than a natural gas facility. After public opposition and evaluation of the project’s risks, the Wallula Port Commission decided to stop the plant.

The Sierra Club launched its Beyond Coal Campaign in the Northwest in 2008, with the goal of making it the first coal-free region in the United States.

For well over a year, activists in Oregon have been working to shut down the Boardman coal plant by 2015, the lone coal plant in the entire state. Portland General Electric (PGE), the company operating the Boardman plant has been frustrated by negotiations with the Oregon Department of Environmental Quality (DEQ) to either shut down the plant in five years or install pollution control technology.

Hundreds of local residents attended DEQ hearings and meeting of the Oregon Public Utility Commission demonstrating their support for closing Boardman. Student governments at 10 colleges, university and high schools in Oregon, representing 100,000 students passed resolutions in support of the closure.

PGE is now threatening the DEQ that they will install the pollution controls and maintains operations until 2040 if the DEQ rejects their most recent proposal.

“The fossil fuel companies are trying to find some way to keep a future for the industry in the region,” said Nick Englefriend, a volunteer with the Beyond Coal Campaign. “One of the ways they are trying to do this is by propping up their operations for as long as possible and then greenwashing their company image. Another way is to turn the Northwest into an export zone and to sell coal from the Powder River Basin overseas, even though the market for coal is drying up in our region.”

Brett VandenHeuvel, executive director of Columbia Riverkeeper, explained the massive implications of the project. “The Ambre proposal is expected to export ten times the volume of coal that the Boardman power plant uses. Oregon and Washington have worked for years to stop burning coal. It’s one step forward and ten steps back if we allow coal export in our region.”

Squaring Off Against Tar Sands
Like the coal industry, the tar sands industry is moving forward with plans to use the Northwest as a conduit for tar sands equipment and crude oil exports. Tar sand oil generates three times the greenhouse gases as conventional oil and has devastated an area the size of Florida in Alberta, Canada.

Enbridge, the same company responsible for the oil spill in Michigan earlier this summer, is proposing a tar sands pipeline across British Columbia to the Port of Kitimat. From Kitimat, tankers would transport tar sands crude to markets in Asia. The coast of British Columbia has been protected from tanker traffic for over 40 years. Opposition from local environmental and indigenous groups has stalled the construction of the pipeline, which is planned to cross First Nations territories.

Not only is the tar sands industry seeking to export its crude to Asian markets, but they hope to transport the mining equipment along the highways of the Pacific Northwest. However, in August, Judge John Bradbury revoked permits issued by the State of Idaho to allow ConocoPhillips to ship oversized equipment along Highway 12, a road that follows a federally protected river corridor in northern Idaho. Groups like Save Our Wild Salmon are committed to preventing the Columbia and Snake Rivers from becoming “the conveyor belt for one of the world's largest intentional environmental disasters.”

Although the tar sands industry is new to the Northwest, already coalitions of environmentalists, business-owners, and indigenous peoples are coming together to stop its expansion.

Coal Exports in Washington

Most of the coal to be exported from the proposed Ambre port would come from the Powder River Basin in Wyoming. Coal from this region is low in sulfur and burns at a high temperature, making it attractive for use in steelmaking. This coal would be exported to China and India, where it would be used to make steel at a lower cost than the United States’ domestic steel industry.

The Ambre project's impact on the Columbia River would come from both the transportation of coal and its use in China, according to VandenHeuvel. “Coal use in Asia is a major source of mercury in the Columbia River system," he said. "If we send our U.S. coal overseas, the mercury from loosely regulated plants will ultimately settle right back into our rivers and pose a serious health risk to people who eat fish.”

Englefried, who is now active in the movement to stop the Longview coal terminal, explained that one of the frequent comments made about opposition to the Boardman plant is that even if it shut down by 2015, the impact will be overwhelmed by the carbon-intensive development in China and India.

“If you care so much about coal in India and China,” he said, “the Northwest now has the chance to influence what's going on over there. Stop the exports.”

Read more!

Republican Candidates Wield Cap and Trade as Political Weapon

If you live in states like Delaware, Pennsylvania, West Virginia or Kentucky, you may have already seen them: new political hatchet ads attacking Democrats and even some moderate Republicans for support of Congressional cap and trade bills.

According to E&E News ($usbcription required), the climate policy, which narrowly passed the House of Representatives last year before stalling in the Senate, is the latest weapon wielded by conservative Republican Congressional candidates across the country, who are trying to ride a wave of anger over perceived, out-of-control big government policies into office.

E&E reports:

Candidates in Delaware, Pennsylvania, West Virginia and Kentucky are all using cap and trade to boost their profiles. Republicans who voted for the House energy bill, which included cap-and-trade provisions, are being assailed by conservative opponents. Among them is Delaware Rep. Michael Castle, who is being attacked by opponent Christine O'Donnell.

"It's a very big deal," said Brian Walsh, spokesman for the National Republican Senatorial Committee.

The issue is already drawing comparisons to last year's health care bill, which was a catalyst for conservative anger and launched the tea party movement. Conservatives are pegging cap and trade as an energy tax, saying it would increase prices.
If support for cap and trade is perceived as a key contributor to the political demise of vulnerable moderate Democrats (or even Republicans), count it as yet another nail in the coffin for the repeatedly-failed policy. New, innovative policy strategy will be necessary to secure climate and clean energy progress in the coming Congress...

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The Rise of China's Green Mercantilism

By Teryn Norris & Daniel Goldfarb
Cross-posted from

China is rising to dominate the clean energy industry primarily due to direct government subsidies, according to a new investigative report by the New York Times. The rise of China's "green mercantilism" marks a new stage in the global clean energy race and raises critical questions for U.S. competitiveness policy. According to the report:

The booming Chinese clean energy sector, now more than a million jobs strong, is quickly coming to dominate the production of technologies essential to slowing global warming... much of China’s clean energy success lies in aggressive government policies that help this crucial export industry in ways most other governments do not... “Who wins this clean energy race,” Mr. Zhao of Sunzone said, “really depends on how much support the government gives.”

China's clean energy industrial policy is unique in its scale and type, and some of its practices may violate World Trade Organization rules and could spark trade conflict between the United States and China:
These measures risk breaking international rules to which China and almost all other nations subscribe, according to some trade experts... Other countries also try to help their clean energy industries, too, but not to the extent that China does — and not, so far at least, to the point of potentially running afoul of W.T.O. rules.
Many of the government subsidies consist of cheap land for export manufacturing facilities, low-interest loans from state banks, and limits on the export of raw materials:
Heavily subsidized land and loans for an exporter like Sunzone are the rule, not the exception, for clean energy businesses in Changsha and across China... Low-interest loans from government-run banks are crucial to China’s clean energy success, some experts say, because of the high cost of factory equipment.
The Obama administration is planning to address some of these clean energy trade issues with the Chinese government:
The Obama administration has begun high-level discussions on how to respond to China’s industrial policies, Treasury Secretary Timothy F. Geithner said in an interview in Washington in July. “We are concerned about the depth and breadth of the measures they have taken,” Mr. Geithner said, later adding, “We will be aggressive on the trade front in terms of fighting anything that is clearly discriminatory.”
While the report may overestimate the role of unlawful industrial policies in the rise of China's clean energy industry (see "Rising Tigers, Sleeping Giant," a Breakthrough Institute and ITIF report co-authored by Norris), the article does note that China's industry also benefits from high levels of engineering talent and low-cost labor, as well as inexpensive construction and speedy permitting processes for manufacturing plants.

China's green mercantilism raises important questions for the United States. We must ensure that China’s practices aren't creating an unfair playing field for U.S. companies, violating WTO rules, and raising the barriers to entry for advanced technologies by locking in mature and incumbent technologies. Not only could China's practices end up suppressing innovation from both domestic and foreign firms, they could also discourage other countries from deploying clean energy. As the article notes:
"The question is whether China is building this industry in ways that are unfair to overseas competitors and make other nations overly dependent on a Chinese industry whose approach to the business may not be economically or politically sustainable... Other countries may also become less enthusiastic about subsidizing renewable energy if it means importing more goods from China instead of creating jobs at home."

However, the most important priority for the United States must be to pursue an aggressive clean energy competitiveness strategy of its own based on real innovation, without descending into zero-sum mercantilist practices. We must be careful about simply establishing clean energy deployment policies that would make us overly reliant on China, replacing our foreign fossil fuel dependency with foreign clean energy dependency. The U.S. must leverage its comparative advantage and focus on energy technology innovation policy, as we recently argued in "How America Can Lead the Clean Energy Race" in the National Journal:

The United States must quickly pursue a new growth agenda, and clean energy technology offers one of our greatest opportunities. For over a decade, the primary goal of U.S. climate and clean energy advocates has been to establish a strong carbon pollution cap. This agenda is dead for the foreseeable future, and precious time has been wasted. The United States must quickly pivot from pollution regulation to an aggressive clean energy competitiveness and innovation agenda, and we can begin with new leadership in the next Congress.

Securing our competitiveness in this sector requires a comprehensive industrial development strategy (see our report, "The Power to Compete"), including robust and targeted federal support for clean energy research and innovation, manufacturing, and domestic market demand, as well as infrastructure, education, and industry cluster formation. This is necessary for a range of technologies, including but not limited to onshore and offshore wind, solar PV and thermal, advanced geothermal, hybrid and electric vehicles and batteries, carbon capture and storage, nuclear, smart-grid, and high-speed rail.

For more information and resources on how the United States can compete, see these articles and reports:

Read more!

Tuesday, September 07, 2010

Climate Movement at the Crossroads

Published by National Journal at the Energy & Environment Expert Blog

When future scholars document the history of global warming, one of the watershed years will almost surely be 2010. For over a decade, the primary goal of U.S. climate policy advocates has been to establish a strong carbon pollution cap and a binding global emissions treaty. Armed with large war chests and major electoral victories, climate advocates had one of the best opportunities to achieve these goals.

This agenda has collapsed. In the aftermath of the Copenhagen climate negotiations and recent developments in the Senate, it is clear that carbon caps in the U.S. and globally will not happen for the foreseeable future. Meanwhile, the IEA projects global CO2 emissions will skyrocket 40% above 2007 levels by 2030, and the EIA predicts China’s emissions will more than double over the next 25 years – which would make its emissions greater than the rest of the world combined.

What happens next? The upcoming lame-duck session in Congress could be one of the last opportunities for national reform before 2013. There are a number of incremental proposals worth pushing, from the American Clean Energy Leadership Act, to Senator Alexander and Senator Dorgan’s Electric Vehicle Deployment Act, to Senator Kerry’s latest Clean Energy Technology Leadership Act. Some still hope for a Hail Mary lame-duck pass on cap and trade, but when asked whether it could be revived, Senator Reidrecently said, “It doesn’t appear so at this stage. It doesn’t have the traction that a lot of us wish it had.”

But none of these alternative proposals contain one of the most critical elements for reform: a dedicated revenue stream to fund major federal investment in clean energy research, development, demonstration, deployment, and manufacturing, as well as infrastructure and workforce development. The American Energy Innovation Council, including business titans like Bill Gates and John Doerr, has called for an increase of $11 billion per year in federal clean energy RD&D alone – an idea that could attract serious bipartisan support after mid-term elections. This proposal enjoys broad support from groups like Breakthrough Institute, Brookings Institution, Third Way, ITIF, and many others.

These investments are critical for ensuring the clean energy accomplishments of ARRAaren’t imperiled as public investment falls off a cliff. They’re also critical for establishing U.S. competitiveness and driving down the price of clean energy technologies through innovation. If the price gap between dirty and clean energy technology isn’t bridged quickly, the world has little chance of avoiding climate destabilization as countries like China and India develop at break-neck speed.

Cap and trade could have originally provided this revenue stream, but now that it’s off the table, we must find an alternative. Potential sources include reduced fossil fuel subsidies, offshore drilling royalties, an oil import fee, a small fee on fossil fuel electricity, or even a low carbon tax beginning at $5 per ton. Another source outside the energy sector could be a small fee on financial transactions. This idea has beenproposed as a way to fund the $100 billion international climate assistance package, and could be applied domestically to reduce speculative trading and support a new growth industry.

Meanwhile, the possibility of achieving a binding global emissions treaty at the upcoming UN climate negotiations in Cancun is all but gone. The new chairwoman of the United Nations climate treaty body recently put it this way: “I do not believe we will ever have a final agreement on climate change, certainly not in my lifetime.” We must therefore put more emphasis on alternative forums like the Clean Energy Ministerial and Major Economies Forum on Energy & Climate. Instead of endlessly debating emissions targets and timetables, the world’s technology policy leaders can break the logjam by identifying specific technical hurdles, creating coordinated technology roadmaps, and mobilizing the resources for rapid implementation.

Beyond the immediate future, climate and clean energy advocates should take the opportunity to fundamentally rethink our strategy. Will we abandon the prospect of major federal reform, or develop a stronger approach for the next Congress? And will we continue focusing on carbon caps, or will we adopt a new approach focused on technological innovation to make clean energy cheaper? These are just some of the questions that will define the next agenda – and our energy and climate future.

Teryn Norris is president and founder of Americans for Energy Leadership.

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Friday, September 03, 2010

The New Supply-and-Demand of Energy Innovation

By Alex Trembath. Originally published on the Americans for Energy Leadership Blog.

Most of us are familiar with the basic economic principle of supply-and-demand. Economists tend to envision the intersection of the supply and demand of goods and services as the “equilibrium point,” where consumer need for a product meets the ability of producers to provide it. That point is what governs fundamental economic indicators and attributes, especially price and market quantity.

Recently, however, a new supply-versus-demand debate has begun to take shape in the minds of activists and policy-makers alike. Put simply, this new paradigm concerns the supply and demand of clean energy technology.

Conventional wisdom, as it has evolved among global warming activists, tells us that society already has the requisite technology supply to decarbonize the economy. Al Gore has said that “we have all the tools we need to solve three or four climate crises,” and influential climate blogger Joe Romm maintains that “we have all the technologies we need and just lack the political will.” This would suggest that the current supply of clean energy technological is sufficient, and that “political will” should come in the form of demand-side, deployment policies.

But this notion has been increasingly challenged. Energy Secretary Steven Chu, a Nobel laureate, has called for a “second industrial revolution” in clean energy technology, contradicting the perception that political will is the only missing factor on the path to a clean energy future. Chu’s message has become a siren call for many clean energy advocates, but it has not completely dulled the chorus of climate activists who still believe that the technology will materialize once we have fostered adequate demand.

Many of these climate activists have promoted a cap on carbon emissions as their policy-of-choice, ostensibly a mandate that energy companies considerably scale down the burning of carbon sources for energy in favor of cleaner alternatives like solar or nuclear power. However, most governments lack the political will to impose a serious, or “hard”, cap, ending up with a “soft” cap at best, one that allows energy companies to pass on the modestly higher cost of producing carbon energy onto consumers. The theoretical effect of this cap would be to shift consumer energy demand towards cleaner alternatives.

Climate activists point to a similar cap program on chlorofluorocarbons in the early 1990s. But the technological innovations that were required to fix the CFC problem were child’s play next to the mind-boggling challenges of redesigning and deploying entirely new systems for generating, converting, transporting, storing and using energy. In addition, a politically palatable carbon price, like one that would be established by a U.S. cap-and-trade program, would have the approximate effect of increasing the per-gallon price of gas by approximately 10-30 cents—hardly the economic impetus to create a new world.

Subsequently, advocates are now beginning to question the political feasibility of even a soft cap on carbon emissions, following the failure of such a policy to pass the U.S. Senate earlier this summer (the fourth such failure in a decade). A European carbon cap, now in its fifth year of operation, has yet to abate emissions to any considerable degree. Carbon trading schemes are also in the works regionally in the U.S, with the Western Climate Initiative and the Regional Greenhouse Gas Initiative, but these are a far cry from the once yearned-after global cap on carbon emissions. Effort after effort has revealed that nations are unwilling to increase the price of dirty energy, despite IEA projections of a 40% increase in global emissions by 2030. Thus, we see that the chief demand-side effort to reform consumer behavior has met with little success. What, then, is the best path to a clean energy future?

For a more effective and comprehensive solution to our energy problems, we must turn to “supply-side” policies with technological innovation at the forefront. Perhaps the primary obstacle between the status quo and a global clean energy economy is the price gap between clean and dirty energy technology, and a politically palatable price on carbon emissions will do little to bridge that divide. The workable solutions stem from making clean energy cheap, in unsubsidized terms, and available to consumers worldwide.

We can achieve these goals through various supply-side “technology push” policies, such as major public financing of energy RD&D; making the R&D tax credit permanent; and the creation of new public-private partnerships and institutions whose explicit goals are to develop clean technology. These measures must be significant and sustained, and they must complement demand-side industrial policy of which cap-and-trade may be only a small part.

Supply-side innovation policy can be traced to the origins of the Internet, the jet engine, biotechnology, the Manhattan and Apollo projects, and the personal computer. In these and other game-changing technologies, governments played a central role in the initial RD&D processes, to the point where the private sector was able to take full advantage of a technologically transformed economy. We cannot trust the creation of a brand new global energy infrastructure to demand-side policies alone, nor to the assumption that we have all the technologies we need. Partial solutions like cap-and-trade will keep failing until we effectively combine supply and demand approaches towards an innovative mission to build a clean, safe, and sustainable energy future.

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Wednesday, September 01, 2010

The Mountain West Can Lead the Way on Energy Innovation

Originally published at the Breakthrough Institute

The United States Mountain West has long been a hotbed of experimentation and innovation, due in no small part to a decades-long partnership between government, universities, and private enterprise. Throughout the 20th century, the federal government invested in dams, transportation infrastructure, and military installations that facilitated economic expansion and the emergence of new private industries.

And according to a new report released today by the Brookings Institution Metropolitan Policy Program, the Mountain West has a pivotal role to play in securing our nation's clean energy future.

In the report, "Centers of Invention: Leveraging the Mountain West Innovation Complex for Energy System Transformation," Brookings' Mark Muro and Sarah Rahman detail the unique role that the Mountain West region (Arizona, Colorado, Idaho, Nevada, New Mexico and Utah) can play in driving innovation to make clean energy cheap and ubiquitous. Building off of their 2009 proposal for energy discovery innovation institutes (E-DIIs), the new report also proposes the creation of four to six new "federally funded, commercialization-oriented, and broadly collaborative energy research and innovation centers," intended to align existing regional assets to accelerate technology commercialization.

This latest Brookings' publication adds to a clear and growing consensus among leading policy organizations that new research and commercialization paradigms are needed to overcome the disjointed and overly stove-piped nature of today's national energy innovation system. Last year, the Breakthrough Institute and Third Way proposed the creation of a National Institutes of Energy--an institution with similar goals.

There are numerous bottlenecks that slow or prevent the successful commercialization of advanced, next-generation technologies, according to the report. These challenges include the price gap between new clean energy technologies and incumbent, low-cost competitors; limited private sector capital; spillover risks from research that cause firms to focus on short-term, low-risk research and product development; and a general disconnect between publicly funded research and technology commercialization in the private marketplace.

Combine that with the federal government's anemic support for energy research and development (R&D)--about $3 billion annually and an order of magnitude less than what the government invests in health and defense-related research--and you have a recipe for a stagnant energy sector ill-equipped to meet the nation's climate and clean energy goals.

Fortunately, notes the report, the Mountain West region already offers many existing assets that can help advance the nation's clean energy priorities. These assets include world-leading federal energy research facilities, such as the National Renewable Energy Laboratory (NREL) in Colorado and the Los Alamos National Laboratory (LANL) in New Mexico; leading universities conducting path-breaking research on biomass and biofuels (University of Idaho), nuclear (UNLV), and solar (University of Arizona), among others; and abundant supplies of sustainable energy resources. For example, every Mountain West state ranks within the top ten nationally for solar power potential and all have high-temperature geothermal resources. Three states--Colorado, New Mexico, and Idaho--rank among the top 15 nationally in wind power potential.

To leverage these regional strengths, Brookings recommends creating a network of energy innovation centers, funded at levels similar to the national labs today, intended to facilitate partnerships among leading universities, labs, and industry to conduct translational R&D capable of both addressing national energy priorities and stimulating regional and national economic growth. The centers would leverage existing regional advantages by pursuing research and commercialization activities organized around themes that are largely determined by the private market. For example, southern Nevada and Arizona, already national leaders in solar energy innovation and production, could coordinate with universities and leading private solar developers to host a solar energy innovation center to conduct research on the entire solar energy supply chain.

The new report clearly indicates the innovation potential of the country's regional assets. Last June, Brookings released a similar report highlighting the strong energy innovation resources of the United States' Great Lakes region. Together, these findings show, unequivocally, that nascent clusters of clean energy innovation and production are forming throughout the country, and that with the right type of integrated public-private partnership, these clusters can transform America's energy system and its economy.

In the wake of the United States failed cap and trade experiment, it is time for Congress to get behind this bold new research effort and finally make progress on our climate and energy challenges.

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