Will Obama Put Real Money on the Table for Clean Energy?

February 23, 2009 | Jesse Jenkins,

I know I may be chastised for criticizing Obama so soon after he delivered an unprecedented clean energy investment in the stimulus. But let's be clear: those investments were just the beginning, and Obama needs to articulate a clear and viable plan to make the sustained commitment and ongoing public investments necessary to truly build a new energy economy.

The public is overwhelmingly behind President Obama right now, and if he was elected with a mandate to do anything beyond stem the economic crisis, it was a mandate to build a new, clean energy economy that finally secures America's energy independence and averts potentially catastrophic climate change.

Yet once you start looking at the critical areas for public investment - research, development and demonstration, or RD&D; critical infrastructure, like a modernized electrical grid; deployment incentives to spur emerging technologies; and efficiency incentives, financing and other investments to retrofit American homes, businesses and factories - it's not hard to see why $15 billion per year is simply not up to the task.

RD&D: There's widespread consensus - including among Obama advisers like White House science adviser John Holdren, Sec. of Energy Steven Chu, and Obama campaign energy adviser Dan Kammen - that public investments in clean energy RD&D alone need to rise to $15-30 billion annually, putting them on the same scale as other national innovation priorities (e.g. health research at NIH, military R&D, etc.) and past R&D initiatives (e.g. Apollo, Manhattan, Project Independence, etc.).

Building a 21st century electrical grid: building a modern electrical grid, including long-distance transmission expansion and the integration of smart grid (and probably utility-scale energy storage) technologies will cost on the scale of hundreds of billions over the coming decade or two. Not all of that will have to come from the public sector, but a sizable chunk will, maybe $5-15 billion annually. Breakthrough proposes creating a National Electricity Modernization Authority to facilitate and finance grid modernization activities across the country, investing $50 billion in public seed money to get the Authority started. More on what it will take to build a 21st Century Grid in an upcoming post...

Driving clean energy deployment: Incentives to spur the deployment of emerging clean energy technologies and drive down their cost are also necessary, even with a cap and trade program in place. Denmark provides a perfect case study of the necessity of pairing carbon pricing with direct investments in clean energy technology deployment. Looking elsewhere in Europe, it's also not hard to see that the EU's Emissions Trading Scheme doesn't preclude Germany's sizable investment in solar deployment, a roughly 50 cents/kWh feed-in tariff, for example, nor does it stop nations across the EU from putting in place more modest deployment incentives for wind, solar, biomass and other renewables. Here in the United States, the three-year PTC expansion in the stimulus is projected to cost $13 billion over the next ten years, and the cost of supporting emerging renewable energy technologies will only increase as the scale of their deployment ramps up.

If the United States launched a cohesive strategy to support a whole portfolio of emerging clean energy technologies (for both electricity and transportation), aimed at achieving economies of scale and improving price and performance, it could cost on the scale of $30 billion annually before long. Those are smart investments though to make clean energy cheap over time (in real, unsubsidized terms), especially when compared to the total expected cost of cap and trade ($100-300 billion/year). Since deployment incentives can be targeted strategically at specific technologies, they will cost our economy and taxpayers far less than the blunt instrument that is carbon pricing; why make all energy more expensive than solar (a three-to-five-fold increase in the price of energy) in order make solar competitive when you can design a deployment incentive specifically for solar that accomplishes the same goal at a fraction of the cost?

Rebuilding an efficient economy: Spurring widespread and ongoing energy efficiency retrofits and upgrades across multiple sectors of the US economy will require major public investments as well, particularly in the form of low-cost financing to bring down the high capital costs of efficiency retrofits - what I call the "Capital Barrier." On the higher end, Architecture 2030 recently called for a $171 billion, two-year stimulus investment to bring down the Capital Barrier for efficiency, predominantly through low-interest mortgages and loans. Green for All, the Center on Wisconsin Strategies, and Center for American Progress have called for a much more modest investment of $15 billion over five years to underwrite the establishment of a $50 billion public revolving loan fund to bring down the Capital Barrier for efficiency retrofits. The stimulus bill, with at least $8.5 billion in annual investments in efficiency gives us another scale reference. And of course, those investments merely begin the task of building a more efficient American economy.

In summary, it's no wonder the Breakthrough Institute is joined by the the Apollo Alliance, and the Center for American Progress in proposing public investments in clean energy on the scale of $50 billion annually. Obama's plans to spend just $15 billion a year simply falls far short of what is needed (even after the good start he's made in the stimulus).

So what will it take to get Obama to double, triple or even quadruple his commitment to the strategic public investments necessary to spark a clean energy economy?


At Breakthrough, we're not wedded to financing these investments with money from carbon price revenue (especially since we're not confident cap and trade will pass soon enough to provide a near-term revenue stream). But if the money doesn't come from carbon auctions, it's gotta come from elsewhere (and soon). Does Obama have a plan to finance the scale and type of clean energy investments on the scale we need?

Obama says that sparking a clean energy economy is his top priority (after getting the economy out of crisis). It's time for him to put (real) money on the table.


Comments

Hi Robert,

You should check out Monica Prasad's op ed in the Times I link to there regarding Denmark. While their particular grid situation made Denmark well suited to deploy wind (rather than say, solar or geothermal), but it was their smart use of carbon tax revenue to fund translational research and direct support for the deployment of the emerging wind technologies, allowing them to reach economies of scale that brought major cost reductions (and helped Denmark companies secure 1/3rd of the global market for wind turbines!).

And BTW, with investments in the grid, the United States' broad geography, huge diversity of clean energy potential and more should make it a far better candidate to go renewable than little Denmark. In the meantime, the Pacific Northwest, with it's abundant hydro resources, makes a good analog (which is one reason why OR and WA top lists for wind installation, despite having poorer wind resources than many other states).

Thanks for reading and as always, thanks for the comments,

Jesse

By Jesse Jenkins on 2009 02 24


I would think Denmark a special case due to geography: they are a small country connected to the German and Norweigan electric grids. This allows them to build higher percentages of renewables such as wind and the bigger European grids essentially provide the energy storage and energy management. I am not sure the Denamrk experience applies to the US.

By R Margolis on 2009 02 24