Yet even as the U.S. has lost its lead in solar, the worldwide demand for it, and other renewable power sources, such as wind, has surged. According to one report, solar and wind power generation capacity has grown by more than 30 percent annually over the past five years. That’s the kind of growth market high-tech venture capitalists and entrepreneurs are normally desperate for.
But while demand is growing, and countries such as Japan and Germany are pushing renewable energy technology development to the limit, the U.S. is lagging. For some energy experts, the failure is more than just a missed opportunity for profits — it’s a profound strategic and environmental screw-up. And the responsibility for it belongs right at the very top — the energy policy formulated and executed by the current presidential administration. The high price of oil, the threat of global warming, the mandate to develop markets that will spur domestic job growth: all these factors call out for leadership that would push the development of new sources of energy, that would encourage the growth of markets that could literally save the world.
The time could not be more ripe for investing in technology that would help reduce fossil fuel dependence. On Friday, the lower house of the Russian Parliament approved the Kyoto Protocol, an international treaty committing the participating countries to reducing emissions of carbon dioxide over the next decade. Meeting the Kyoto Protocol’s goals will undoubtedly accelerate the demand for energy sources that don’t produce greenhouse gases.
President Bush has often been criticized for tailoring energy and foreign policy to benefit his buddies in the oil industry. He’s been dinged by environmentalists for ignoring global warming and hyping futuristic hydrogen fuel-cell cars while excusing the sorry fuel economy of the gas-guzzling, CO2-spewing cars we drive now. But it’s not just responsibility for protecting the environment that the U.S. is ceding to the rest of the world by pursuing fossil-fuels-or-bust policies.
“How much wind and photovoltaics and energy efficiency will be needed? The answer is: a lot,” says Joseph Romm, author of “The Hype About Hydrogen: Fact and Fiction in the Race to Save the Climate.” During the Clinton administration, Romm was the chief official in the Department of Energy in charge of conservation and alternative fuels. “Clean energy technologies are going to be some of the biggest markets and job-creating technologies this century. That is incredibly obvious.”
To experts convinced that American leaders could make a difference, the misplaced priorities of the Bush administration are more than just a matter of mistaken policy. They are a disaster of the highest order.
“We had the largest blackout in U.S. history in August of 2003,” says Romm. “And we have no energy bill, and we have a war in the Persian gulf, and we have oil at $55 a barrel, and we have an obvious problem with natural gas supply and price, and we have a looming problem of global warming. That has got to be called a catastrophic failure of political leadership, and it should be an absolute grave embarrassment.”
The price of oil daily hovers near all-time highs, and natural gas prices are near records, too. But Congress is still unable to pass an energy bill. Instead, it has passed a massive corporate tax cut, with billions of dollars worth of handouts to big oil. The bill did include tax credit for alternative fuel, but don’t look too closely. Under the bill, the burning of farm-animal feces counts as an alternative fuel.
Still, a little cow dung in your alternative-energy tax credit is hardly the U.S.’s biggest embarrassment when it comes to energy policy. CO2 emissions are showing an unexpected jump, but the U.S. is still sitting on the global warming sidelines. In the specific domain of renewable energy research, the Bush administration is fixated on fossil fuel-based solutions, such as so-called “clean coal.” When Bush looks to the future, he hypes hydrogen fuel-cell cars, but they likely won’t be widely available for decades, if then.
The focus on hydrogen has stripped invaluable support from a nascent renewable industry sector.
“Hydrogen has basically sucked the money out of the renewable energy and efficiency budget in the Department of Energy. And it didn’t have to be that way,” says Marchant Wentworth, a legislative representative for the Union of Concerned Scientists. “They plunked down $35 to $40 million on hydrogen, and kept the overall [budget] number the same. Those cuts had to come from somewhere.”
Dan Reicher, an energy advisor to the Kerry campaign, was assistant secretary of energy for energy efficiency and renewable energy under Clinton, and now makes investments in renewable energy companies. He says that some of his former colleagues at the Department of Energy who are still there “are lamenting the cuts they’ve seen in most of the renewable energy technology [budget.] But the president is an oilman from Texas, and those are the folks who supported him, so it is not his priority.”
As Romm and other clean-energy experts stress, this isn’t just about saving the environment. By neglecting an industrial sector that will clearly be crucial during the rest of the 21st century, the U.S. is allowing other nations to grab a market that would help address one of the biggest domestic American economic priorities: jobs.
“As we continue to outsource everything but innovation, this is an area where we should be leading, not lagging,” says Andrew Beebe, president of “Energy Innovations,” a solar technology start-up in Pasadena, Calif. That’s because the market around the world for clean energy technologies can only grow as the rest of the world — if not the U.S. — grapples with how to fight global warming.
In the absence of federal leadership in the U.S., some states have taken on the issue. Seventeen, including California and Texas, under then governor George W. Bush, have implemented renewable energy standards that aim for a percentage of the state’s electricity mix to be derived from clean sources like wind or solar by a target date. For instance, in September 2004, New York state announced how it will work to get 25 percent of electricity sold to consumers from renewables by 2013.
But the U.S. still lacks a coherent federal policy. Presidential candidate John Kerry has pledged to derive 20 percent of electricity in the U.S. from renewables by 2020. But the Clinton administration couldn’t even win support for a milder 5.5 percent by 2010 goal. And the Bush administration has subverted attempts by the Senate to enact such a standard.
“The Senate adopted it twice, but the Bush administration teamed up with the utilities to kill this renewable energy portfolio standard at the federal level,” explains Dave Gardner of CERES, a coalition of investment funds, environmental and public policy groups.
While Bush talks about hydrogen and gives tax cuts to Big Oil, the U.S. has ceded its one-time technological lead in renewable energy to Europe and Japan. That’s in part because the market for renewable energy technologies is simply bigger in other parts of the world, spurred by aggressive government subsidies: “Japan and Germany are the dominant market segments, and then North America is a distant third,” says Werner.
If Kerry’s goal of 20 percent by 2020 was achieved, the Union of Concerned Scientists calculates it would create 355,000 new jobs in manufacturing, construction, operation, maintenance and other industries. That’s why labor groups like the AFL-CIO and the Boilermakers Union have joined environmentalists in a coalition called the Apollo Alliance to lobby for investment in clean energy.
Take solar, where Peter Aschenbreneer, vice president of sales and marketing for SunPower, says the market has basically two segments. Demand for solar has been growing at about 20 percent a year for 25 years from remote homes and businesses, which are “off the grid.” But the newer market, which has been growing at about 50 percent a year for seven years, is made up of residential rooftop systems for homes, demand for which is driven by government subsidies. “People can’t build the factories fast enough. The problem is the place they’re building the factory is where the demand is: in Europe and Japan. The market in the U.S. has not been growing as fast, and so the importance of the U.S. market has dwindled over time. About 10 percent of the solar manufacturing is in the U.S. A decade ago that was 50 percent.”
But where those markets are is likely to influence who supplies them. “It was just two or three years ago that Germany passed the U.S. in installed wind. This has not gotten a lot of attention in the U.S., but it’s really a great tragedy,” says Romm. “It’s exceedingly rare for a country to be a world leader in a product line where its citizens aren’t major purchasers of that product. And the nation that leads the way on developing technologies that reduce greenhouse gases is not only going to benefit its environment, it’s going to create jobs. We are not the world-leader in photovoltaics. That’s Japan and Europe. And we are not the leader in wind. That is really Europe.”
The issue is not solely about jobs; it also affects the balance of trade. “If you look at the nation’s balance of trade, the importation of fuel is an enormous contribution. If the United States becomes the leader in renewable energy, it could be a huge net export gain for America,” says Howard Berke, CEO of Konarka Technologies, a solar company based in Lowell, Mass., whose investors include ChevronTexaco. “But lacking the federal policy, other nations like Japan and Germany can become net exporters and become the world leader in certain renewable technology.”
As the renewables market has grown in Germany, so has the power of the solar industry and its lobby. “The industry in North America is less predictable,” says SunPower’s Werner. “And talent goes to where the money is. And we’re draining renewables in general of talent, because that’s not where the money is going. There is no question that there could be more jobs created by a more consistent policy, and what would follow would be a bigger industry.”
Whether it would be politically feasible for the U.S. to subsidize renewables as aggressively as Germany and Japan is highly questionable, according to Reicher. “They have used direct government dollars to essentially fund the cost of solar,” he explains. “I don’t know that we’re going to get to that point in this country.” But that doesn’t mean that the U.S. can’t do a lot, beyond funding renewable research and deployment at the federal level, instead of diverting all the money to hydrogen. It could also provide tax incentives: “We do have a tax code that definitely lends itself to encouragement,” says Reicher. “And we saw the wind tax credit expire for quite a long period of time, which put the wind industry on its back.”
When executives at renewable companies say that they need “consistency” and “predictability” from the federal government, that’s what they’re really talking about: how can you plan to make a business decision when the financial picture of available tax incentives changes annually? “The wind and renewable tax credit comes up almost every year,” says Konarka’s Berke.
“For a company like ours, there may be a program in place this year, it might be very attractive, but there is no certainty that next year that program will be in place,” explains Aschenbreneer of SunPower. “Almost anything you do in business takes more than a year.”
And abdicating the responsibility to do anything means not only loss of jobs, but reliable energy in the future: “You would think on the heels of a 50 million-user blackout, and hurricanes throughout Florida and the southeast, with all of these challenges to our electricity grid, and the dramatic rise in fossil fuel costs — petroleum, crude oil and natural gas — that Congress could pass an energy bill,” says Berke. “Whoever the next president is, one Yalie or another, I hope to see a unified energy policy that is very focused on renewable energy with a Cabinet-level energy secretary, who is a strong and very vocal member of the Cabinet.”