Message to Congress: Not Picking Energy Winners Should Not Mean Disadvantaging Clean Techby Trevor Winnie
April 19, 2012
Earlier this week I had the privilege to participate in Environmental Entrepreneurs' (E2) annual advocacy trip to Washington, D.C., joining a small delegation of E2 members to voice the economic benefits of clean energy directly to our nation's leadership, from Senators and Representatives in Congress to key Administration offices and Department officials. After nearly 20 meetings in less than 48 hours – and many more meetings for the delegation as a whole – I left the Capitol inspired as ever that clean tech can and will be a true engine for the U.S. economy; but I also left even more convinced that our system in Washington is broken, and that today’s stalemate created by partisan politics increasingly risks cannibalizing U.S. economic competitiveness in the 21st century.
While our discussions aimed to support job-building industry incentives, EPA regulations, and military clean-energy initiatives, one topic continued to take center stage: the production tax credit (PTC) for wind energy. Set to expire at the end of this year, the PTC (which provides a 2.2 cents/kWh incentive for wind power producers) has come to epitomize the lack of federal clean-energy commitment. The inability to provide long-term certainty to investors over the years has resulted in a jarring boom-bust cycle for the U.S. wind industry. A market contraction this time, however, would have far more negative impact, as the recent supply chain build out in the U.S. means we have many more American wind jobs to lose (domestic content of wind turbines installed in the U.S. today is nearly 70 percent, compared to just 25 percent in 2006). As many as 37,000 wind supported U.S. jobs will be lost if the PTC is not extended, according to analysis from Navigant.
What was surprising in our discussion of the wind PTC with members of Congress was the general lack of disagreement on the merits of supporting clean energy, especially after the intensity of the right’s recent Solyndra-fueled attacks on government involvement in clean tech. One reason for this may be that wind energy has become a critical source of local employment, investment, and tax revenue in many rural – and red-blooded conservative – communities across the nation. But supportive words, no matter how welcome, are not action and do not change the truth: that federal support for clean energy is being held hostage by broader ideological battles and political posturing that carry blame on both sides of the aisle.
Oddly enough, clean energy's best chances in the U.S. might lie in the success stories of the fossil fuel industry. Even those unfamiliar with energy have likely heard about the U.S. shale gas boom, which has led to a surplus of cheap electricity fuel that is leading a transition away from dirtier coal (for now, for the sake of making a point, let's ignore the serious environmental concerns related to gas fracking). What is often overlooked is that the technology enabling today's cost-effective extraction of shale gas is a direct result of decades of U.S. government incentives and technical support which enabled private industry and investors to drive innovation in the area of unconventional gas extraction (a great overview here by The Breakthrough Institute). Clean-energy technologies deserve this same government support. In fact, they deserve it for the same reasons – that, when made cost-effective, clean energy offers significant economic and energy security advantages to our nation. One argument against government support for clean energy is a desire to not "pick winners." But by not extending the same opportunities to emerging energy technologies like wind and solar that were (and still are) available to oil and gas, you are doing exactly that – with winners in this instance being those technologies to have already benefitted from decades of government subsidies.
Ultimately, incentives should not be biased toward any individual technology, one of many reasons the PTC is not the best way to support clean energy in the long term. One alternative worth exploring is the master limited partnership (MLP) model, a method long used by the oil and gas industry to source development capital (more about MLPs and renewables here). But for now – paraphrasing the thinking of one Republican staffer we encountered – it doesn't make sense to abruptly pull the rug out from under a young industry that is starting to make a significant economic impact. Extending the PTC is the simplest way to save today’s American wind energy jobs, but before long Washington leadership will need to have a conversation about how to level the playing field in the energy industry and also encourage continued innovation – eliminating handouts for mature, cost-effective technologies (whether dirty or clean) while supporting, for a limited time (say ten years) development of emerging technologies that are just now reaching cost parity.
The anti-clean tech crowd in the U.S., invigorated by partisan gridlock and the increased politicization of clean energy, argues that government has no place meddling in energy innovation. As if almost on cue during one of our many walks across Capitol Hill this week, the space shuttle Discovery circled overhead on its final flight before retirement at the Smithsonian – a clear reminder of how focused government support of technology in America has inspired scientists, engineers, and entrepreneurs; ignited national pride; and, most importantly, birthed innovations that have strengthened U.S. economic competitiveness and improved the fundamental quality of American life. Continuing in this tradition, we owe it to ourselves to pursue better energy – not just cleaner, but cheaper, more stable and secure, and increasingly more American. Nothing less than our nation’s status as an innovation powerhouse hangs in the balance.
Trevor Winnie is Clean Edge's senior research analyst. He is involved in a range of activities, including preparation of reports, subscription products, and consulting projects. Trevor also serves as a director of the Pacific Northwest Chapter of Environmental Entrepreneurs (E2), a national community of business leaders promoting economically sound environmental policy. E-mail him at winnie[at]cleanedge[dot]com. The firm's latest publication, Clean Energy Trends 2012 can be downloaded free of charge.