Clean Tech Could Come Crashing Down
Federal Support to Nearly Evaporate
Clean tech could come crashing down. That’s what some heavy hitters are saying, noting that if the level of federal subsidies given to such enterprises takes a precipitous fall then it will also bring down some of tomorrow’s companies.
Several clean technology enterprises have grown nicely: Renewable electricity generation doubled from 2006 to 2011, say the think tanks that authored the report called “Beyond Boom and Bust.” Wind and solar equipment prices fell, enabling those energies to make headway into the market. Other entities also grew and include advanced batteries and vehicles. Altogether, employment in the clean tech sector jumped by 12 percent from 2007 to 2010, adding 70,000 jobs.
Now, many of the federal programs that have given life to such businesses will expire, or be significantly curtailed. And while some programs may get renewed, the uncertainty is building. “Without timely and targeted policy reform, several sectors are likely to experience more bankruptcies, consolidations, and market contraction,” say the Breakthrough Institute, Brookings Institution and World Resources Institute.
The authors are trying to convey that this is not the time to mourn, or celebrate. But it is the moment to rethink America’s energy policy and to more constructively channel its outlays. It’s about accelerating technological progress and more effectively spending taxpayer resources.
According to the authors, the U.S. federal government will spend more than $150 billion on clean tech from 2009 until 2014. The federal awards provided during this time are three-times the levels given during the previous six years. Of the $150 billion, about $44 billion is the result of the 2009 federal stimulus.
But now more than 70 percent of those programs will die or be crippled by 2014, when they have been set by legislative code for expiration. This year, such federal support will decline to $16 billion and in 2014, the level of government financing is expected to drop to $11 billion.
The authors are acknowledging that the $44 billion awarded in 2009 to clean tech companies is unsustainable. As part of the whole thought process, they are also saying that the amount of federal research and development energy funds should triple from its current level of $4.7 billion a year.
Consider the production tax credit offered to the wind industry: The American Wind Energy Association says that wind power accounts for 35 percent of all new American electric generation in the last five years. It also provides 75,000 current jobs. But the tax credit that propelled such an expansion is set to expire at year-end, potentially eroding the industry’s future, it says.
“Economic studies have shown that congressional inaction on the PTC will eliminate 37,000 American jobs, shutter plants and cancel billions of dollars in private investment,” says Denise Bode, executive director of the wind group, in a column she penned for Forbes.
Critics of this thinking point out that such growth levels are predicated on government support. They reason that if the clean technologies were truly competitive then they would not need any preferences. Free markets, in fact, dictate that the businesses with the most creative and marketable ideas will win -- not the ones that are chosen by government bureaucracies.
Skeptics are also noting that Western European nations that have given preferential treatment to their renewable energy sectors are cutting back. Germany, Italy, Spain and Great Britain are trying to balance their desires to cut carbon emissions and promote green energy growth against much tougher economic times.
The reality is that in recent years the renewable sector has received the preponderance of the federal benefits being offered. But if viewed over decades, the combined support given to the fossil fuels is considerably more. In fact, President Obama likes to say that the government subsidies given to the natural gas drilling industry has allowed it to unlock the shale revolution -- a potential economic boom that could help the whole country.
“The combination of significantly lower prices and modest gains in investment has accelerated deployment of clean energy generating capacity in recent years,” says the Pew Charitable Trust, which looked at global clean tech growth. But the organization continues to say that America’s stop-and-go energy policies serve to weaken it as a destination for clean technology investment.
The green sector will not get the levels of public support it received after the stimulus measure was implemented. While those support levels are being reconfigured, policymakers must work to ensure that potential beneficiaries are benchmarked and monitored. It's about giving innovative ideas the extra push they may need -- ones that may one day truly change lives.