Clean-energy wonks to Washington: Get a clue
CAMBRIDGE, Mass.--A change in national energy policies would help spur innovation around green technologies, but policymakers are motivated by power and pet projects rather than energy security or environmental protection, a panel of energy and business experts argued here Thursday.
The speakers--three academics with expertise in energy and economics and a venture capitalist from Khosla Ventures--delved into the question of what role government should play in energy at the EmTech emerging technology conference at the Massachusetts Institute of Technology on Thursday. On the whole, they were pessimistic about the prospects of effective legislation for promoting a cleaner energy industry.
The talk was timely. Although political debate in Washington has been dominated by health care over the past few months, the Senate is expected to take up a climate change and energy bill as early as next week, following a House version which narrowly passed in May. The broad House bill proposes a national system for regulating greenhouse gases, introduces higher efficiency standards, and calls for a mandate on renewable energy from utilities.
Many companies and investors see energy as a promising area of economic growth, with more than $5.8 billion of venture capital placed in green tech last year. But energy is very different from information technology or other traditional tech industries. Bringing new energy products to market requires not only technology breakthroughs but also coordination among start-ups, large corporations, financiers, and government.
The panelists argued that the House bill of the version is far from perfect but it's an important step because it puts a price on carbon emissions. Under a cap-and-trade program--one of which is already in effect in the U.S.-- large polluters, such as utilities and manufacturers, are given permits to pollute. Those carbon allowances can be bought and sold among participants so that they stay under a cap set by the government.
"We can go into the details about the problems with all the subsidy schemes that have been tried but fundamentally there is this common sense that underlies cap and trade, which is that if something is bad, you should tax it and that is, in effect, what cap and trade does. And that puts things that don't have that bad characteristic in a better competitive position," said Richard Schmalensee, the director of the MIT Center for Energy and Environmental Policy Research.
Right now, there are subsidies and tax credits to promote the installation of solar and wind power. In the federal stimulus plan, the Department of Energy was allotted tens of billions of dollars to fund long-term research and promote development of existing technologies, such as plug-in electric vehicles.
In the past, renewable energy policies have led to boom and bust periods, which resulted in many failed companies, said Henry Lee, the director of environment and natural resources programs at Harvard University's school of government.
To avoid that cycle, the U.S. needs a combination of policies, including tax incentives, research money, and a cap-and-trade program, Lee said. Caps on carbon emissions won't start to take hold for many years, panelists said. So, abandoning existing supports for solar now would essentially shut that industry down, even though the cost of solar continues to drop, Schmalensee said.
Rising oil prices can help drive investments in clean-energy technologies, but the volatility of prices makes sustained investment difficult, said Lee. Another challenge related to energy in the U.S. is the difficulty of locating good spots for wind and solar power projects and the resistance from states over national efforts to build new transmission lines to transfer solar and wind power.
No kind words
In practice, policy making around energy is messy business, the panelists said. It's even harder now, given the fierce partisanship now in Washington and the shaky economic situation, noted Lee.
The trend in energy policy has to been to promote a set of technologies, such as fuel cells or biofuels, for a while but not stay with it, said Lee. Corn ethanol, for example, has been criticized for questionable environmental benefits and contributing to higher food prices, but maintaining the program makes sense because second-generation ethanol could deliver significant improvements, he said.
"One of the problems with Washington is that they fall in love and then they fall out of love after two or three years," said Lee. "But you can't give up on these things after three or four years and in our government we have a tendency to do that. We don't have a lot of patience and it takes time to make things that really work."
Small green-tech start-ups and venture capitalists are now spending a significant amount of time in Washington because energy is heavily regulated. But there's concern that bills are structured to favor certain technologies, said Alex Kinnier from Khosla Ventures, a Silicon Valley venture capital firm that is making an aggressive push into green tech.
"We're all in agreement we want a price on carbon...The thing that concerns us greatly is that the ways these rules can be written can very much bias who the winners are and who the losers are over the long term and can sub-optimize the ultimate solutions," Kinnier said.
For example, incentives to store carbon underground at coal plants will lead many companies into that field. But Kinnier said that policies should also encourage technologies that use carbon dioxide to make a product, such as building materials or chemicals.
Ken Zweibel, director of the GW Solar Institute at George Washington University, criticized the trend toward overemphasizing high-risk, high-reward energy research. "Programs to do practical research have shrunk during the last five years and programs to do high-risk, blue-sky research have gone through roof," he said. Solar photovoltaics are becoming more affordable as prices fall, but proposals to the newly formed ARPA-E are unlikely to yield anything useful, Zweibel said.
He also complained policymakers make decisions based on "very shallow knowledge" and are easily swayed by the media. Fears that China is taking over leadership in low-carbon technologies appear to motivate policymakers more than protecting the environment or concerns regarding climate change, Zweibel and Schmalensee said.
"We are not convinced that we have a global warming problem," said Zweibel. "Let's face it--that's the truth."
Updated September 26 at 6:50 a.m. PT with correction to Alex Kinnier's affiliation.
Martin LaMonica is a senior writer for CNET's Green Tech blog. He started at CNET News in 2002, covering IT and Web development. Before that, he was executive editor at IT publication InfoWorld. E-mail Martin. 
Can't wait to triple my energy bill to build an addition on Al Gore's mega house.
Command-and-control marches on.
Don't question the Anointed Ones, just shut up and do as you're told, peon, while we make life as expensive and difficult as possible for anyone who works for a living.
Instead it's only used to justify more government and more control over people's lives and paychecks.
Just saw that apple has a new green initiative. How green is it to employ people to calculate your greenness???? It's just crazy.
I agree: don't subidize this industry! And also pull ALL of the subsidies, tax insentives, etc. going to ALL of the other industries. While you're at it let's remove all tarrifs and other government influences on business, products, and pricing. Let's truly compete in this world economy. After all only those products that people really want to purchase will survive right?
People just love to oversimplify...
The cap and trade system is actually pretty smart. Want to release 10 tons of CO2 today? Buy it from someone who prevents that 10 tons from getting released. We could simplify the system by only allowing the purchase of CO2 credits but then people would start screaming when that money gets used to shoot another space shuttle into space or something.
Of course if you still believe CO2 build up in the atmosphere is a non-issue then non of this matters to you. But I hope you'll be consistent enough not to ask for help when your seashore house gets washed away by rising waters. Either get on board trying to solve this or suffer alone with the problem.
There is no such thing as a free lunch. So many people have forgotten this nowadays. Either you pay a higher base cost, a tax, fee, or surcharge, or you pay with the assumption of risk. Problem with global warming is the risk isn't to us, it's to our children's children.
I am of the belief that if someone chooses not to engage in decent husbandry of resources and plan for the future, they should not be procreating. While I do have faith in God, I do NOT believe he put us here to ruin his world. Either we learn to care for it and use it wisely, or we (as a race) deserve to die off.
When the government shares what it knows with everyone, we create awareness and show the need. When the government provides a forum where discussions can happen about these needs, we have leadership. Then when the government gets out of the way, we give room for clever private business innovation. When we have business innovation, we have great products people want and a vibrant economy.
But when the government takes money out of the economy and forces its will on people...soon-to-be socialized health care rationing, cap and trade, and so forth...innovation is squashed, there's no true, viable, long-term, clever solution to what's ailing us, and the bill just keeps climbing.
Groups that attempt to take control of the big government hammer are doin' it wrong. It may seem to work, but that bill that eventually gets passed will look nothing like you want, won't do what you want, and will cost you tons more than they said it would. And there'll be another group trying to grab the big hammer to un-do what was just done.
When we get away from government being the answer, we may actually start fixing our problems with real solutions people want.
Ha! The irony of it all ....
(1) "If Cleantech is so important to everyone, why does it need subsidy?"
Well, it depends on your definition of great. I'd argue that solar ISN'T that great right now. At $6-8/W installed, it has a ways to go to get to "grid parity," or $1/W. It may get there over time, but it's going to take a while. If private markets and the forces of capitalism were left to choose between solar and coal, they'd pick the latter because it's more economical today. However, many of us believe that climate change is potentially a bad thing, so we should probably stop burning as much coal as we do. Put differently, the mere CHOICE 50 years from now NOT to have baseload power be 90% dependent on coal and nuclear has value. In order to ever have that choice, we need to make a strategic, not economic, decision to subsidize certain alternative energy sources today. It's always dangerous to deviate from economic price signals, but sometimes you need to look farther into the future than the market can bear and think stragically.
(2) "Come to think of it, why subsidize technology development at all? Why don't you pay for your own innovation?"
There are always phases of technology development that are too early for private markets to fund. As a venture capitalist, I know there are big ideas out there like nuclear fusion that we know we're too early on (although some would disagree). That being said, the idea of having a trash can sized reactor with no emissions that could power your house for 10 years sounds like it's worth throwing my tax dollars at for a little while.
If I were an economist, I'd ask what the cost of capital of my tax dollars is. I'd like to think it's high, but it's probably not. In fact, I think tax dollars are the best type of capital to throw at the highest risk / highest return projects because big returns usually benefit lots of people.
In short, we subsidize innovation because, if we didn't, we'd have no pipeline of technology today to feed the ancillary innovations of tomorrow. We'd be robbing ourselves of some great ideas.
(3) "Cap and trade is government command-and-control or, worse, socialism."
Actually, cap and trade is about as opposite of command-and-control as you can get for climate legislation. Any time you make up a new commodity, in this case carbon credits, you have to do one of two things. One, you can set the price and let the market determine the volume; this is a tax/tariff. Or, you can set the volume and let the market determine the price; this is cap & trade. The latter is more economically efficient (in theory) because permits will be allocated towards those for whom the cost to abate emissions is highest. Those who can afford to abate will do so and sell their permits. Thus, abatement occurs at the lowest cost per unit. This system worked well during the 1990's with SOx and NOx regulation, although results were less favorable in Europe under the First Kyoto Protocol because permit allocation got screwed up.
The arbitrary manner in which Congress allocates or auctions off the permits is the tricky part. Cap & trade is a good idea, but it's hard to implement. It's not socialism since the government isn't telling individuals what to do, or to do it in the same way; it's setting a limit for the country or an industry and letting the country or industry figure out the optimal allocation on its own. Saying cap & trade is socialist is like saying capping the mecury concentration in drinking water is socialist.
(3)
I would like to see some developement done on nuclear reactors as well. If the U.S. Navy can power a huge warship within the size restrictions they have, why don't we have "reactor-in-a-can" technology that can park reactors in bunkers and feed all of our cities? Think of it like a really big battery. When it runs out of juice in 20-30 years, either refuel it, or remove it and park it at Hanford, just like the navy does.
An interesting observation: the majority of the people in this country don't believe in"global warming". Obama's science czar has stated that everyone who doesn't believe in global warming should be put in prison. Paranoid? I don't think so.
And the bozos that insist that this be part of school curriculum.
Amazing!
- by jpbgmail September 29, 2009 5:14 PM PDT
- 'Socialist nightmare' - have you even visited a socialist country? Or lived in one?
- Like this Reply to this comment
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(25 Comments)You must be one of the 50s generation, fed and bred on a constant diet of fear and loathing of the evils of 'socialism' ....