Support Grows for Clean Tech Subsidy Reform

April 19, 2012 | Alex Trembath,

Support is building for policies to encourage the growth of a globally competitive, subsidy independent clean tech sector in the United States, as moderate Republicans, industry insiders and analysts expressed keen interest in reforms that would drive production of cheaper, more innovative forms of energy.

"I think that there could be quite a lot of Republican support for a reform policy," Neil Brown, an aide to Senator Richard Lugar (R-IN), told National Journal. "It's really only a recent phenomenon that renewable energy has been seen to be a partisan issue. It's a much more regional issue at the base of it. There are going to be Republicans that are against any subsidy. The concern we have is corporate welfare -- the degree to which a program can be reformed and it can be shown that it will eventually phase out."

Pressure is on the industry to become cost competitive with fossil fuels and foreign-produced energy technologies as federal investment in clean energy is set to drop 75 percent between 2009 and 2014, according to a new report by analysts at the Breakthrough Institute, Brookings Institution and World Resources Institute called "Beyond Boom and Bust: Putting Clean Tech on a Path to Subsidy Independence."

The report - released this week to widespread media coverage, including in Time magazine, the Washington Post, the New York Times, the Los Angeles Times, the San Jose Mercury News, Nature, Grist, the Financial Times, Bloomberg, Forbes, and CNN - counsels the adoption of a suite of new clean tech deployment policies that will simultaneously drive both market demand and continual innovation.

McKie Campbell, the Republican staff director of the Senate Energy and Natural Resources Committee, signaled openness to re-tooling federal subsidies. "You basically have to make things cost competitive or they aren't going to work," the Wall Street Journal quoted him as saying. "It's clearly against our national interest to engage in long-term subsidies where the moment you pull the subsidy," businesses fail, he added.

Amid recent gains in clean tech sectors, business insiders also expressed interest this week in subsidy reforms that could make the industry more competitive.

Jon Goldstein, the director of public affairs for the American Wind Energy Association told ClimateWire that the industry is planning for a future that is not tethered to ongoing subsidies. "We just want to get to the point where we can finish the job we've begun," Goldstein said.

Ben Higgins, the director of public affairs for solar company REC Solar, said the report's authors were "simply proposing to do at the federal level precisely what many state governments are already doing -- and what the solar industry has actively supported in dozens of venues -- incentives which are high initially (to encourage investment and growth of industry scale) but then decline to account for (and encourage) cost reduction."

The recent comments follow earlier support expressed by some Republicans and industry groups for energy subsidy reform.

Senator John Thune (R-SD) voiced support last month for a gradual phase out of the production tax credit (PTC) for wind, a reform that would encourage the industry to bring down costs. "I think anybody that can come forward with a specific proposal that would have that sort of a wind-down in it is going to be well placed relative to those discussions about tax reform," he said. The American Energy Innovation Council, a group of business leaders, including former Microsoft Chairman Bill Gates and GE's Jeffrey Immelt, called last fall for robust public R&D investment paired with limited subsidies that would "allow new technologies to scale up while driving down costs."

The ideas are gaining traction among the environmental community as well. Cai Steiger, a policy analyst at the Natural Resources Defense Council, called the new report "insightful and thought-provoking," commending its efforts to explore "ways to boost deployment of renewables in the most cost effective and efficient manner." David Robert's, Grist.org's prolific climate and energy blogger, lauded the report's "welcome and much-needed attempt to put some numbers behind the debate over federal cleantech support."

Just as clean energy technology has achieved record setting cost improvements, federal support is headed for a cliff while global competition has intensified. The clean tech sector is at an inflection point, and now is not the time to walk away from these emerging industries, report co-authors Jesse Jenkins, Letha Tawney, and Mark Muro wrote in The Hill. If policy makers instead pursue smart reforms to federal subsidies that bring further improvements in cost and performance, a globally competitive, subsidy independent industry is within reach.

"Beyond Boom and Bust" recommends an integrated suite of policies, including expanded investment in research, development, and commercialization of advanced energy technologies as well as smarter deployment subsidies and policies designed to phase out over time while demanding - and rewarding - declining technology costs.

Click here to read an overview or download the full report, "Beyond Boom and Bust: Putting Clean Tech on a Path to Subsidy Independence."

Roundup of Press Coverage for "Beyond Boom and Bust"

"Subsidies for Clean Energy Get Fresh Look," Keith Johnson in the Wall Street Journal

"Clean-energy subsidies are vanishing. What should replace them?" Brad Plumer in the Washington Post

"Clean Technology on the Brink," John Broder in the New York Times

"Clean Tech Support Is About to Fall Off a Cliff. Here's One Way to Save It," Bryan Walsh in Time Magazine

"Federal spending on clean tech is 'falling off a cliff,'" Dana Hull in the San Jose Mercury News (syndicated at the Los Angeles Times, Miami Herald, and the Kansas City Star)

"Averting the clean tech bust," Jeff Tollefson in Nature

"Clean Tech Could Disappear - But Doesn't Have to," Sarah Laskow in GOOD Magazine

"U.S. Faces clean energy bust as subsidies expire, report warns," Matt Smith at CNN Online

"Renewable energy subsidies to shrink," Ed Crooks in the Financial Times

"Clean Energy Advocates Urge Overhaul as Aid Shrinks 75% by 2014," Jim Snyder in Bloomberg

"Green Power on the Brink, Think Tanks Warn," Coral Davenport in the National Journal

"Collapsing Federal Support Means More Trouble For U.S. Clean Energy, Says New Report," Keith Schneider at Mode Shift

"Think tanks warn of turbulent outlook for US renewables industry," James Murray in Business Green

"Projected Drop in Federal Spending Could Clip Cleantech's Momentum," Walter Frick in BostInno

"U.S. cleantech support about to fall off a cliff," David Roberts at Grist

"Moving from 'Boom and Bust' to 'Reform and Innovation,'" Matthew Stepp at the Innovation Files

"Subsidy reforms are necessary to end clean-tech boom-and-bust cycles--report," Daniel Cusick at ClimateWire

"Overhauling subsidies could boost renewables, think tanks say," Nick Juliano in Greenwire

"New Report Highlights Importance of Clean Energy Policy, as Well As Need For Reform," Cai Steiger at NRDC Switchboard

"How to Survive the Coming Clean Tech Crash," Todd Woody at Forbes

"The Pending Subsidy Cliff, and the Way Out," Steve Leone at Renewable Energy World

"Federal Clean tech spending to drop 75% to $11 billion in 2014," Mark Jaffe in the Denver Post

"What comes after the renewabubble?" Kenneth P. Green at the American

"Clean Tech Could Come Crashing Down," Ken Silverstein at the Energy Biz

"Clean Tech Industry Falling Due to Reduced Government Incentives, Study Says," at the Green Optimistic

"New Study Makes Good Points, but Why Focus Only on Clean Energy Subsidies?" at Scaling Green

"Report: Clean tech investments reach peak," at Power Engineering

"US subsidy boom and bust is 'a threat to green sector,'" by Benjamin Romano at Recharge