October 25, 2010

This Weekend's News: Reflections on Our Clean Energy Policies

With midterm elections just over a week away, there are a number of introspective reports on the Obama administration’s domestic policies, including on the clean energy initiatives supported by the stimulus package. On Sunday, The Washington Post offered a balanced appraisal of the administration’s energy policies in this piece, “Clean Energy Industry Looks Ahead.”

According to the Post’s Juliet Eilperin and Steven Mufson, the federal stimulus package provided billions of dollars that helped expand “green energy” industries and create “green jobs,” especially for the wind and solar industries, despite a struggling economy. Yet for all these successes, these industries’ future may not be as promising as one might hope. Eilperin and Mufson write:

President Obama frequently points to these wave-of-the-future jobs as one of the substantial achievements of his administration, and wind and solar executives say that the economic stimulus bill turned 2009 into a banner year instead of a catastrophic one for their businesses. But limited funding in one area, a slow ramp-up in another, prolonged negotiations over loan guarantees and the continuing economic slump have made it difficult for the industry to make the kind of progress Obama and many others had hoped for and imagined. As a result, the president does not appear to have gotten much political credit for new green jobs, despite his many visits to battery, solar and wind facilities aided by the stimulus package.

The report offers a glimpse at just a few of the many wind and solar projects funded by stimulus cash, from large-scale multimillion dollar projects that will producer longer-term economic results, to small-scale projects that have an immediate impact for small businesses, such as a Department of Energy-backed program that “funneled $15,964 to the Grumpy Troll Brewery, Restaurant and Pizzeria in Mount Horeb, Wis., so the brewpub could install 38 solar panels on its roof.”

These programs are not without their critics, of course. As the authors note:

Critics of the stimulus, however, question whether the money was the most effective way to create jobs. Andrew Morris, a University of Alabama law professor and senior fellow at the Montana-based Property and Environment Research Center, said neither side of the debate has proved whether this sort of federal spending does or does not sustain long-term employment.

Yet as Cathy Zoi, Assistant Secretary of Energy for Energy Efficiency and Renewable Energy, suggested to Eilperin and Mufson, “What it's proving is clean energy investments are ready for prime time,” meaning the scene is set for scaling up these kinds of investments. “This is the single largest investment in clean energy this country's ever had,” Zoi said. “It is a critical down payment on a transition to a clean energy economy.”

But one sticking point worth considering is, post-stimulus funding, how does the U.S. government help sustain these types of investments by venture capitalists and businesses, given the uncertainty (or lack of incentives) in the domestic energy market? As Eilperin and Mufson explicitly noted, “Without legislation mandating a national renewable energy standard for utilities or limits on greenhouse gases, experts say, it remains unclear whether wind and solar energy will make meaningful inroads into the nation's energy market.”

National legislation on renewable energy standards for utilities and climate legislation to curb greenhouse gas emissions could generate an incredible demand signal for investing in renewable energy projects. Indeed, we’ve seen this happen in California, when in 2006 legislators passed the state’s landmark climate change law – AB32 – that would cap greenhouse gas emissions to 1990 levels by 2020. The statewide legislation, which included financial incentives for renewable energy investors, generated a significant amount of investment from venture capitalists and helped California become the leader in green jobs creation.

It’s not entirely clear what the domestic energy market will look like moving forward. But besides the stimulus-funded programs, there seems to be increasing interest in alternative and renewable energy programs, especially from the military, which is a great test bed for new or perfected technologies. Nevertheless, anything the government can continue to do to level the playing field and pique the interests of other investors is a policy win in my book.