Report predicts doom and gloom for green tech

Foreign Affairs essay argues that a pull-back of government subsidies will derail renewable energy industries. But policies that promote new tech, rather than just a few well known ones, can keep green tech moving.

Renewable energy and green technology companies are poised to crash, a recently released Foreign Affairs article argues. Despite the provocative title, the authors offer relatively familiar solutions for speeding energy innovation, such as boosting government funding for research and development.

The July/August edition of Foreign Affairs features "The Crisis in Clean Energy--Stark Realities of the Renewables Craze," which offers a grim outlook for solar, wind, and other green technologies--a crisis that will make it tougher for the U.S. to address energy security, the trade deficit, and global warming. Another piece by Devon Swezey of the Breakthrough Institute, teeing off the Foreign Affairs article, calls it "The Coming Cleantech Crash."

With government spending under intense scrutiny around the world, policies to subsidize renewable energy have become "politically unsustainable" in the U.S. and Europe, according to David Victor, a professor a the School of International Relations at the University of California San Diego, and Kassia Yanosek, founding principal at consulting and investment company Tana Energy Capital. Scaling back subsidies for solar and wind are already causing slowing growth rates, they argue.

"The root cause of today's troubles is a boom-and-bust cycle of policies that have encouraged investors to flock to clean-energy projects that are quick and easy to build rather than invest in more innovative technologies that could stand a better chance of competing with conventional energy sources over the long haul. Indeed, nearly seven-eighths of all clean-energy investment worldwide now goes to deploying existing technologies, most of which are not competitive without the help of government subsidies. Only a tiny share of the investment focuses on innovation," they write.

So how do we speed up the pace of innovation? Victor and Yanosek argue that policies should be structured so new technologies have a chance to flourish through a market "pull" rather than "push" policies that favor a handful of renewable energy generation methods, such as solar, wind, and corn ethanol. Specifically, a federal mandate for utilities to generate a percentage of their electricity from renewable energy, rather than grants to subsidize a few known energy sources, will be more effective in bringing new technologies to market, they said.

The authors join the ranks of people who agree that the U.S. needs to boost investment in research and development, arguing that the Advanced Research Energy Projects Agency-Energy (ARPA-E) offers a good model because the agency spreads its bets across several different companies and technologies.

But one of the primary problems in getting innovations to market is that banks are unwilling to invest in relatively new and unproven technologies, such as a new biofuels production method. Foreign Affairs says the U.S. should create a Clean Energy Deployment Administration with an initial $10 billion capitalization. Proposals for a so-called "clean energy bank" have not advanced in the U.S., but being separated from the Department of Energy bureaucracy would allow "the government to provide more nimble support for testing and deploying technologies, such as enhanced geothermal energy and next-generation nuclear energy, that the private sector cannot, or will not, invest in on its own," they wrote.

Another recommendation to scale new technologies, such as electric vehicles or grid storage, is for the U.S. to greatly step up cooperation with China and other emerging markets where there is the demand for energy is growing rapidly.

The Foreign Affairs article touches on a longstanding debate among supporters of cleaner energy: Is it better to push out existing technologies or focus more on inventing and deploying completely new technologies ? They argue convincingly that new potentially game-changing technologies are being held back by policies structured around only a few established technologies. Until renewable energies are cheaper than fossil fuels, they face an uphill climb getting wide-scale adoption, a point that Swezey of the Breakthrough Institute makes.

But ultimately, the essay's biggest contribution to the ongoing energy debate is calling attention to a possible bust in a history of boom and bust cycles around renewable energy and other green technologies. Innovation in energy typically takes years of development and years more to bring to market. That means without well-thought-out long-term policies , green technologies will remain a niche for years to come.

 

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