Guess bloggers Ken Berlin and Bracken Hendricks first posted this on TPM Cafe.
In 1973, Motorola demonstrated the world’s first cell phone, weighing in at close to four and a half pounds[1]. It was not introduced into the U.S. until 1983, and after slow growth at first, over the course of just ten years from 1997 to 2007 the total number of mobile phone subscriptions jumped from reaching 8% of global population to serving nearly half of all the world’s inhabitants. By the close of 2009, the number of cellular phone users had grown still further to 4.6 billion in a world of 6.8 billion people[2]. Today, universal access to information through cellular technology is transforming service delivery in areas as diverse as health care, agriculture and banking. Mobile phones are allowing developing countries to leapfrog a generation of infrastructure, while unleashing innovation, new markets, and economic development the world over.
A similar technological revolution is taking place in the clean energy industry today. Driven by pressures from rising global demand for finite energy supplies, national security pressures from oil dependence, the increasing threat of economic disruptions due to climate change, and the need to create a more efficient, productive and globally competitive economy, many countries are making massive investment in clean energy technologies.
As in the telecom revolution, these investments by the private sector in clean energy will create countless economic opportunities, and transform the way we all do business. But unlike our recent experience with telecommunications, the United States may miss out on most of the economic benefits of deploying clean energy technology. To date, the United States has been far less effective than our Asian and European competitors at deploying existing clean technology or commercializing energy innovations broadly across our economy.
The Chinese government’s National Energy Administration (NEA) for example, has released a plan that outlines direct investments totaling 5 trillion Yuan ($746 billion USD) in clean energy development over the next ten years in China, an amount more than eight times greater than the $90 billion the Obama Administration estimates our stimulus package invested in clean energy. Perhaps based on that investment, the Chinese government’s State Council, a body akin to the White House Cabinet, issued a document this week which decreed that new strategic industries — including biotechnology, advanced materials, energy saving cars and technologies and environmental protection — would account for nearly one in eight dollars of Chinese G.D.P. by 2015. The reality is that the United States has no such plan in place to compete with China’s ambitious goals for clean energy right now. Instead, China is on the offense in this strategically vital market.
To create jobs in the United States – jobs now, and jobs that last – and to compete globally in a clean energy economy, the US needs to pursue policies that unleash American innovation, investment and entrepreneurial spirit. Given current fiscal constraints and other profound differences sustained direct public spending is unlikely. However, Congress and the administration can be more resourceful and call upon not only direct investment, but improved tax treatment, better access to low cost finance, and smart regulation as well. We will attempt to show in this and follow-up postings how this can be done in a manner that enhances innovation by investing in the deployment at scale of clean energy technologies.
Such an investment led strategy for industry creation is not a long-term replacement for climate legislation. Yet, making clean energy cheaper and reducing barriers to its deployment, while making markets more predictable, can be very effective in driving innovation. Taking a pause in the debate over pricing pollution, will create new opportunities for bringing all Americans together, aligning interests across industries, regions, and across party lines, to show that we can rebuild our economy and create jobs on the foundation of efficient, clean, and innovative technology.
Building a Clean Energy Economy in the Absence of a Price on Carbon:
Assuming that Congress will be unable to pass cap and trade legislation that puts a price on carbon in this or the next Congress, a fundamental challenge will be to find ways to accomplish many of the short-term goals of building a clean energy infrastructure by instead removing the financial and other barriers that are preventing the emergence of an efficient, clean energy economy. Through a series of policy reforms these goals can be met while receiving broad based and bipartisan support.
Given the current political atmosphere, as a practical matter we believe this effort should be guided by several pragmatic working assumptions:
o Cap and trade legislation will not likely pass before 2013 at the earliest;
o There will be only minor appropriations, except perhaps for infrastructure spending that can be shown to create significant jobs;
o There will be no new taxes;
o Energy credits and tax deductions will be acceptable to any new Congress;
o Establishing a green bank that can borrow from the federal treasury to leverage private capital investment while not costing taxpayers will also be acceptable on both sides of the aisle; and
o Efforts to streamline regulations without harming the environment will be acceptable to both legislators and the public alike.
In addition, assembling such a bill focused on deployment and new investments in innovation must be based on a set of core principles. These include:
First, if Congress cannot raise the cost of carbon pollution, it must reduce the cost of clean alternatives, and there are many ways to accomplish this in addition to direct federal appropriation.
Second, the clean energy economy requires the construction of significant new infrastructure involving major public and private investment.
Third, policy choices should be made with the objective of overcoming the actual financial, market, and regulatory barriers that stand in the way of deploying clean technologies today.
Fourth, federal strategy should build on existing infrastructure, rules, and markets, especially where state, local, or voluntary industry programs are already in place, encouraging a race to the top through positive incentives.
Fifth, strategies can be developed that take into account state and regional differences, and work with state regulators as implementation partners.
Sixth, consistent with announced White House strategy, multiple bills should be developed that are assigned to different committees, but there should be a shared and comprehensive strategy underlying these proposals.
In transforming these principles into a coherent plan of action and regulatory reform, several overarching priorities should organize the efforts of Congress and the administration. Some of these framing challenges include:
Lowering the Cost of Electricity – To date, renewable energy projects have received support in the form of tax credits, loans, guarantees and other financial incentives. These efforts need to be renewed and strengthened. Tax provisions, however, are not enough on their own because of cost limitations if the goal is to bring renewables to scale and build a large number of new clean generation projects.
Tax incentives need to be supplemented by a low cost “green bank,” like the Energy Independence Trust (EIT) proposed by the Coalition for Green Capital. The bank would be a not-for-profit lending entity with the President appointing key officials, and would be dedicated to providing low cost funding to clean energy projects. The bank would not require a federal appropriation, but would be authorized to borrow from the Treasury and repay the loans. Studies have shown that such low cost funding could reduce the cost of energy delivered by these projects by 20-40%, making a much larger number of renewable energy projects competitive within existing markets, and allowing them to be built.
Deploying Renewable Energy – While many new natural gas plants will be built in the years ahead, natural gas plants have a considerable carbon footprint. It is critical that a robust, largely carbon free, renewable industry develop even if natural gas prices become low enough to decrease significantly the competitiveness of renewable energy projects, including renewable energy projects that receive the financial support recommended above. A renewable portfolio standard is needed to ensure the deployment of renewable energy and to provide the certainty needed to encourage investment in clean energy innovation.
Bringing Energy Efficiency to Scale – There are between 80 and 120 million homes in the U.S and almost 5 million commercial buildings. Efficiency is the cheapest, cleanest, and most abundant energy source available. Efforts that don’t rapidly bring energy efficiency measures to scale will have little impact on energy use or carbon emissions. Informed policies must be developed that remove market barriers and allow consumers and businesses to realize economic gains from conservation. So far, no programs have succeeded in achieving the needed scale. Financing programs like those that could be provided by the EIT, tax incentives, programs like Home and Building Star and other ideas should be packaged into a coherent program designed to achieve the needed scale in residential, commercial, and industrial buildings.
Developing Needed Infrastructure – The lack of adequate infrastructure could significantly slow and even stop the development of a clean energy economy. There are three critical areas of electricity infrastructure that need to be addressed: (a) investing in transmission lines dedicated to increasing renewable energy development; (b) upgrading distribution networks to be operated as a smart grid that facilitates the flow of useful data as well as energy; and (c) placement of a charging infrastructure for hybrid and electric vehicles to integrate transportation effectively into our existing electricity grid. The challenges and barriers to development of this infrastructure should be carefully addressed.
Removing Regulatory Barriers to Deployment – There are many steps that could be taken to streamline regulatory processes and lower the cost of clean energy projects without reducing environmental standards. It is more urgent than ever to analyze these issues and propose solutions. These efforts can also be developed in a way that provides federal support and technical assistance while honoring traditional authorities of state energy regulatory agencies.
Encouraging Races to the Top – Streamlining and harmonizing federal investments and policies can encourage a race to the top by providing incentives for states, utilities and industries to act. This strategy has been employed effectively by the Department of Education, which faces a similar challenge of managing a national strategy within a complex framework of state and regional authorities. For example, it is worth asking: Can a suite of tax incentives be developed that utilities can access if they reduce the carbon emissions? Can these be implemented efficiently through a reverse auction process? How would these measures fit within current efforts by states to reduce emissions? A list of such policies should be carefully considered by federal policy makers seeking to drive investment across the economy into innovative clean energy delivery infrastructure. The federal government can play a tremendously beneficial roll in encouraging coordinated planning across regions, providing broadly accessible data resources, harmonizing incentives and standards, and otherwise streamlining and integrating what is currently a fragmented national marketplace for energy.
Setting Principles to Shape Future Market Growth – Just as the conventions of openness and universal access shaped the subsequent development of the Internet and the on-line economy, so too coming changes to energy regulation and emerging clean energy markets will have far reaching implications for consumers. It will be important in considering regulatory reform to address up front key concerns related to privacy, security and reliability, data ownership, consumer protection, and open access to distribution networks for innovative technologies and new market entrants. The basic rules and protections should be written proactively into the design of new markets, rather then addressed once problems arise. Further, where incentives and subsidies are needed to encourage early commercialization, these can sunset as technologies and markets become mature.
Developing Shared Strategy and Tactics – In implementing these ideas, it is not essential to move a single comprehensive energy bill. Rather it likely will be advantageous to prepare a comprehensive list of measures, but broken down into component parts and allocated to different jurisdictional committees within Congress. While all the measures would be considered separately by legislators, the President and Congressional leaders could present to the public a comprehensive program of needed measures. While negotiations on particular policy measures will be intense, alignment around the broader whole package of objectives will help to avoid losing the forest for the trees. Further, this strategy is not limited simply to new legislation; it should also include improved organization of existing government measures to support rapid improvements in creation of a clean economy and energy security. Lastly, the administration has many tools at its disposal to immediately take action on these measures using existing authorities, whether at DOE, HUD, Agriculture, Labor, Transportation, or a host of other Agencies and Departments, as well as within the energy and economic policy advisors within the White House, including CEQ, the NEC, and OMB.
Taken together, these principles and priorities offer a framework for designing new clean energy legislation to foster innovation, accelerate deployment, and improve our global competitiveness. This is a strategy that can be immediately put into action regardless of political ideology. We will be writing in coming weeks to put meat on the bones of this proposal. But one thing is for sure. During this economic crisis the rest of the world will not be waiting for America to catch up. It is time to get to work.
Most of the ideas raised in this memorandum will be discussed at a conference in Washington DC on November 16 entitled the “Future of Energy Reform”. The conference will be free and open to the public on a limited seating basis. Visit coalitionforgreencapital.com for more details.
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[1] Heeks, Richard (2008). “Meet Marty Cooper – the inventor of the mobile phone”. BBC 41 (6): 26-33. doi:10.1109/MC.2008.192. http://news.bbc.co.uk/2/hi/programmes/click_online/8639590.stm.
[2] Heeks, Richard (2008). “ICT4D 2.0: The Next Phase of Applying ICT for International Development”. IEEE Computer 41 (6): 26-33. doi:10.1109/MC.2008.192. http://doi.ieeecomputersociety.org/10.1109/MC.2008.192.
Kenneth Berlin
berlin.kenneth@gmail.com
Kenneth Berlin is on the Board of Directors of and is the General Counsel of the Coalition for Green Capital. From 1994 – October 2010. Mr Berlin was the head of the law firm of Skadden, Arps, Slate, Meagher & Flom’s environmental and climate change practices. Mr. Berlin is Chairman of the Board of Center for International Environmental Law and former Chairman of the Board of the Environmental Law Institute from 2003-2005. Mr. Berlin has been extremely involved in many aspects of setting climate change, energy and environmental policy. He is the author of several articles on clean coal and climate change and lectures widely on climate change issues. His article, A Framework for Achieving Energy Security and Arresting Global Warming was published by the Center for American Progress in December 2008. Mr. Berlin was on the Obama EPA Transition Team.
Bracken Hendricks
bhendricks@americanprogress.org
Bracken Hendricks is a Senior Fellow with the Center for American Progress and is also a member of the Board of Directors of the Coalition for Green Capital. He is the co-author of the book Apollo’s Fire: Igniting America’s Clean Energy Economy with U.S. Congressman Jay Inslee (WA), and was a Co-Founder and first Executive Director of the Apollo Alliance for good jobs and clean energy. Hendricks is an Advisor to the Clinton Global Initiative on technology, infrastructure and the environment, and served in the Clinton administration in the Office of the Vice President and the Department of Commerce, and has advised the Obama administration, members of congress, and other elected leaders on global warming solutions and economic policy.
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I applaud this effort, but I think the following assumptions:
“o Energy credits and tax deductions will be acceptable to any new Congress;
o Establishing a green bank that can borrow from the federal treasury to leverage private capital investment while not costing taxpayers will also be acceptable on both sides of the aisle;”
are not valid, given how many of our legislators are beholden to Big Fossil. Not to mention that any of these proposals are likely to originate with Democrats, and therefore will automatically be stamped “NO” by Republicans.
This is one of those times when I really, really hope I’m wrong.
The recommendations are deeply flawed on several levels, many of which have been identified in previous CP posts by Joe.
The telecom analogy is wildly inappropriate — cell phones leapfrogged conventional telephony because they provide better services to end consumers and are very comeptitively priced without subsidies.
In contrast, electricity from “clean energy” is indistinguishable to consumers from “conventional electricity.”
Also, virtually all clean energy technologies have been supported by significant subsdies for some time, so the claim that production and/or credit subsidies are the key to making these technologies “competitive” is highly suspect.
Moreover, even if “clean technology” could be economically competitive in markets where electricity load is growing rapidly, such as the U.S. 50 years ago or China today, the situation in the U.S. today, where electricity use is growing very slowly, is that clean technology must compete against EXISTING coal plants that can run at a cost of 2 to 3 cents per kilowatt hour. Furthermore, if the U.S. is successful with energy efficiency policies, including those advocated by the authors, electicity demand will grow even more slowly, or might even decline.
Even in the market for new capacity, the low price of natural gas in North AMercia given the abundance of shale gas calls into question the economic competitiveness of “clean energy” technologies.
A further concern is that many of the biggest subsidies for “clean energy” technologies directly benefit the wealthy, who are the ones who can afford to put solar PV on their houses or buy a Leaf or a Volt, pocket big tax credts, and brag about their greenness.
Bottom line: Its nice to try to rally the troops, and to posit that all of the technologies to reduce demand and increase “green supply” all fit under the same big tent, but the policies being advocated are internally inconsistent and by no means an appropriate substitute for a real policy towards carbon emissions in the form of either an emissions cap that declines over time or a carbon tax that grows over time.
[JR: I think the post is clear about the need for a carbon price. Telecom analogy has some relevance, but it isn't exact.]
If we want to increase the “price of carbon” contamination, why don’t we put federal (as well as state and international lending institution) fuel system subsidies front and center on the chopping block. We seem to be addicted to publicly damaging corporate welfare, for the richest corporate entities in the world, which are such perhaps due to these handouts and the resultant transfer of political power.
If we have our fiscal foot on the accelerator driving carbon releases it will be difficult to reduce these emissions. Picture some dysfunctional adolescent “driving” with both pedals to the metal. According to the International Energy Agency, on a global scale, financial subsidies taken from national treasuries amount to at least one-half trillion dollars per year. Any inconsistency there? Nope, just business as usual.
Standards lower costs and speed the adoption of all technologies.
Our 60 hz, 120 volts AC standard, with the 3-pronged pug and socket, means that every electrical device works with every socket in every home and office. Plug and play. A no-brainer for manufacturers and for users.
A complementary DC standard would lower the cost and speed the adoption of clean energy, especially for the poorest billion people. Every DC standard LED light would work with every DC standard battery, which would work with every DC standard PV panel. Low cost, high value DC power for cell phones, all electronics, and LED lights. Plug and play. A no-brainer for manufacturers and for users.
Yes, let’s remove market barriers to clean energy, especially at the low end. A DC standard. There is zero technology barrier, and very low cost.
One way to ramp up energy efficiency projects and create jobs would be to create a way for government agencies at all levels to enter into performance-based retrofit projects where the projects would be fully financed off-budget and paid back out of a percentage of the savings generated. Each agency would have as an incentive the residual amout of savings not used to pay for the project. If the funds came from the Federal Reserve, it would be an off-budget form of stimulus, like quantitative easing, except that it would be narrowly directed and have a definate payback.