Despite an aggressive regimen of treatments from the conventional to the exotic — more than $800 billion in federal spending, and trillions of dollars worth of credit from the Federal Reserve — fears of a second recession are growing, along with worries that the country may face several more years of lean prospects.

How should President Obama respond?  The NYT editorial board suggests the following:

Mr. Obama also needs to inspire Americans who have been ground down by the economic crisis and Washington’s small-bore sniping. He needs to rally the nation around a big idea — a project that is worth sacrificing for, worth paying for, worth working for. One that lets them know that there is more ahead than just a return to a status quo of lopsided growth in which corporate profits surge while jobs and incomes lag.

That mission could be the “21st century infrastructure,” that Mr. Obama mentioned on a multi-city trip this month, “not just roads and bridges, but faster Internet access and high-speed rail.” It could be energy independence, with high-tech green jobs and a real chance for addressing global warming. Either of the above would make sense, economically and politically.

How about a national clean energy competitiveness and innovation project?

Yesterday, the White House released a report touting the recovery act’s success at fostering innovation in key economic sectors, most notably clean energy.  ARRA’s $30 billion clean energy investment is unique in its comprehensive approach, the White House notes, containing “investments across the innovation chain – from retooling current auto factories to new manufacturing and commercial deployment to research and development of electric drives and batteries.”

According to the report, the energy investment spike will achieve three major breakthroughs:

“1) Cutting the cost of solar power in half by 2015, putting it on par with the cost of retail electricity from the grid.

2) Cutting the cost of batteries for electric vehicles by 70 percent between 2009 and 2015, putting the lifetime cost of an electric vehicle on-par with that of its non-electric counterpart.

3) Doubling U.S. renewable energy generation capacity and U.S. renewable manufacturing capacity by 2012, a breakthrough that would not be possible without the Recovery Act.“

Robust federal investment in clean energy technologies has created the foundation for an energy industrial revolution in the United States, but the subtext of all this good news is that the achievements are being threatened by an impending funding cliff.  When the funding dries up, the fruits of many of these investments could wilt on the branches before they ever have time to ripen.  As Jesse Jenkins and Devon Swezey noted at Breakthrough Institute:

“Yet while the White House report highlights the considerable clean energy momentum established by the Recovery Act, it also inadvertently raises the specter of an impending clean tech funding cliff which risks sending U.S. clean energy industries into deep freeze as stimulus funds begin to expire over the coming months…. Facing such intense global competition, and with Recovery Act funds poised to expire soon, sending U.S. clean energy markets off a clean tech funding cliff, the U.S. is in dire need of a long-term clean energy investment strategy to regain economic and technological leadership in this new growth sector.”

The report’s summary of investments in wind and solar offers a poignant lesson in both the successes of large scale investment and the dangers in non-sustained funding.  ARRA has allotted over “$3 billion so far in payments-in-lieu-of-tax -credits to over 500 projects in 44 states to support renewable energy generation projects” which in turn  ”supports more than 10,000 construction jobs and over 2,000 ongoing operating and maintenance jobs.”  The Recovery act also dolled out “over $2 billion in tax credits to 183 projects in 43 states for clean energy manufacturing projects,” and “$2 billion in conditional or closed loan guarantees for renewables deployment and manufacturing projects,” which will “will create or save more than 5,000 construction and permanent jobs, lead to more than 3 GW of clean power generating capacity, and avoid more than 30 million tons of CO2 per year, according to company estimates.”

When the funding for these tax credits and loan guarantees dry up so too will many of the jobs and advancements in still young American industries.  America’s clean energy sector, which has only started to blossom because of these investments will be cut loose to compete against Chinese competitors operating in a country spending around $740 billion over 10 years on renewable energy related investments.

The achievements of the Recovery Act are commendable, and now is the time to take stock of past successes and failures and move forward with renewed conviction.  Equally as important as the amount of investments in clean energy will be the length over which these investments occur.  To fully recoup the benefits of these efforts we must build on the foundation with sustained, long term investment in clean energy innovation.

The Atlantis-AK1000 tidal energy turbine unveiled last week in Scotland.

That America is lagging behind other nations in developing and deploying products in the emerging $600 billion renewable energy technology market has been well-documented. But it can be surprising to realize just how rapidly others are progressing relative to the U.S:

• Just yesterday, France announced a $1.73 billion (USD) national investment in renewable energy technologies. The money, to be spent over 4 years, will be used to subsidize and provide low-interest loans to accelerate the deployment of renewable energy fossil-fuel alternatives that go beyond the country’s existing nuclear and wind power options.
• Last week, Scotland unveiled a cutting-edge tidal turbine energy platform in Invergordon. The lone turbine—a beta deployment of a technology designed to be installed in large fields a la wind turbines—is planned to produce 1 MW, enough to power 1,000 homes. The turbine, which was developed by London-based Atlantis Resources, has already injected more than $6.3 million (USD) into Britain’s renewable energy sector and has provided employment across a broad range of sectors including design, engineering, fabrication and project management. “We are at the start of a new industrial boom, akin to the development of the North Sea oil and gas fields,” said Atlantis CEO Tim Cornelius. “If we receive the same support from all levels of government that the oil and gas industry received to make the North Sea the success that it is, then the future is very bright for marine power and even brighter for Scotland.” Experts believe that tidal energy technologies, such as that used in the AK1000 project, have the potential to produce 5 TW, or 30% of global energy demand. If only for this reason, tidal energy expertise is a hefty prize in the renewable energy race.
• And finally, China yesterday announced that it has plans to build a MagLev/Vacuum train that will attain speeds of up to 620 mph. The technology behind the train—which would be capable of reaching Los Angeles from San Francisco in 50 minutes or New York from Washington in 30 minutes— is expected to attract sovereign and private demand for Chinese expertise around the world to the great benefit of Beijing’s coffers.

President Obama speaking at ZBB Energy in Wisconsin. The President emphasized the importance of developing renewable energy economy in order to secure a prosperous future.

At a speech at ZBB Energy in Wisconsin this week, the President announced a commitment to create 800,000 clean energy jobs by 2012 that will not only “create work in the short-term, but lay the foundation for lasting economic growth.”

ZBB produces advanced zinc bromide flow batteries and intelligent power control platforms for renewable energy storage with the help of a $1.3 million loan through the American Recovery and Reinvestment Act (ARRA) State Energy Program loan. The company is using the loan to support a $4.5 million factory renovation that it anticipates will triple its capacity to manufacture flow batteries and power systems—proof of what federal capital applied to innovative energy technologies stands to achieve.

The President emphasized that despite the prognostications of pessimists, the sun has not set on American manufacturing, and that renewable energy technologies provide an opportunity to “jumpstart a homegrown clean energy industry” in America. The global market for clean energy technologies is forecast to reach $450 billion by 2012, and $600 billion by 2020.

He spoke of the havoc the economy has created for manufacturers and the challenges that remain.

“These have been a very hard couple of years for America,” he said. “And there will be more difficult days ahead. It would be a mistake to pretend otherwise. But we are headed in the right direction, and I am confident about the future because of what I have seen at this plant and because of what I have seen taking place across this country.”

But despite his words, the United States still only invests a fraction of what other countries invest in the development, deployment and demonstration of innovative renewable technologies. Since his initial call for a $150 billion federal investment in renewable energy during his inaugural address, the President has been less ambitious in his commitment to “New Energy for America,” as the plan was dubbed.

Though large sums of ARRA money have been used to support the sort of renewable energy investments that the President has called “critical,” they do not scratch the surface of the investments that the President called for, and which experts have determined are necessary, to catalyze a clean energy future.

“Reports like this one from the nonprofit Center for Energy Workforce Development are a cause for concern, as they warn that 40% – 60% of the current energy utility workforce could be eligible to retire by 2012. The National Renewable Energy Laboratory cautions that a shortage of training and skills is ‘a leading barrier to renewable energy and energy-efficiency growth.’”

The goal of the RFI is to gather data through September 3, 2010 to get a better sense of the “status, prevalence, quality, and gaps in education and workforce development relevant to energy technologies.”  The results will likely highlight what has become an astonishing truth, America is not preparing its students for one of the largest growth industries of the future.  This reality is well documented, just this year a report by the National Science Board pointed out that, “the United States has fallen from one of the top countries in terms of its ratio of natural science and engineering degrees to the college-age population to near the bottom of the 23 countries for which data are available.”

The emerging workforce and STEM education gaps, if not addressed, will jeopardize America’s ability to compete in a clean-energy economy. That is why earlier this year AEL strongly supported RE-ENERGYSE, a proposal to increase federal funding for education in clean-energy related fields by $74 million for universities, community and technical colleges, and K-12 schools.  It is also why 107 student body presidents signed a letter asking congress to pass the legislation.  Unfortunately RE-ENERGYSE was not passed and problem has not gone away, but is good to see the DOE continuing to lead the charge for an educated clean-energy workforce.

“If you care about fostering prosperity in poor places while limiting the buildup of greenhouse gases in the globe’s shared atmosphere, it’s time to recognize the technology imperative that lies behind the world’s entwined climate and energy challenges… Without greatly intensified work to advance and disseminate energy choices that don’t come with heat-trapping emissions, there’s no smooth path as human populations and appetites crest in the next two generations.”

As an example of what the next agenda might look like, Revkin republishes our op-ed from last week at the National Journal Energy Expert Blog.  In the article, we argued that the United States must quickly pivot from pollution regulation to an aggressive clean energy competitiveness and innovation agenda, including robust and targeted federal support for clean energy research and innovation, manufacturing, and domestic market demand, as well as infrastructure, education, and industry cluster formation.

This builds on the ongoing leadership of groups like Breakthrough Institute, Brookings Metro Policy Center, ITIF, Third Way, American Energy Innovation Council, Bipartisan Policy Center, and others who are helping define a new and robust energy and climate agenda.  We encourage you to follow their work in the months ahead, as well as Andrew Revkin’s commentary at Dot Earth.

“The exceptionally talented students selected as graduate fellows are part of our nation’s next generation of scientific and technical leaders,” said Secretary Chu. “This investment in the training of scientists and engineers is part of the Administration’s continued effort to ensure that America has the scientific and engineering workforce we need to secure our energy future and our continued economic competitiveness.”

The goal of the fellowship program is to encourage students to pursue graduate degrees in physics, chemistry, biology, mathematics, engineering, and environmental and computer sciences—fields that will prepare students for careers that can make significant contributions in discovery-driven science and science for national needs in energy and the environment.

The goal of the program is to strengthen the nation’s scientific workforce, which is currently at serious risk, especially in the energy sector.  The National Science Board reports that science and engineering make up only about one-third of U.S. bachelor’s degrees, compared to 63 percent in Japan, 53 percent in China, and 51 percent in Singapore.  This step to address the problem was made possible by $12.5 million from the American Recovery and Reinvestment Act.

Through China’s Energy Law and the coming 12^th Five-Year Energy Development Plan, the nation has proven that it intends to lead on both the economic and renewable energy front. China has already surpassed the U.S. as the largest investor in clean energy in 2009. Bloomberg Businessweek also reported that China may spend about 5 trillion RMB ($738 billion) more in the next decade developing cleaner sources of energy.  If the plan gets approved successfully by the State Council, some analysts predict an annual increase of 1.5 billion RMB ($220 million) in clean energy production value and the creation of 15 million jobs.

When China recently updated its Renewable Energy Law to include the 15-year Science and Technology Development Plan, it launched talent development programs across the nation and opened 16 new clean energy R&D centers. By taking such action, China sent out a stable signal to local governments as well as domestic and foreign companies, which will attract more private investment and further foster China’s clean energy cluster development.  The Washington Post cited China’s foreign investment in the first six months of the year as having rose 19.6 percent to $51.4 billion, after a 14.3 percent increase in the first five months. China’s sustained investments have attracted the world’s biggest energy companies and venture capitalists. A few of the most prominent examples of this are:

• Warren Buffett’s $232 million investment in BYD Co..
• GE’s first wind power equipment assemble factory.
• Goldman Sachs’ investment in local solar water heaters.
• First Solar Inc. is about to build the world’s biggest solar power project on 25 square miles of China’s northern grasslands.
• American Primafuel is planning to invest in biofuel soon.
• China and Germany also signed a EUR124 million pact to encourage emissions reductions and energy saving by businesses.
• Spanish Wind Power giant Gamesa announced to invest in a wind power engine manufacturing in China Jilin in mid-2011.
• Denmark’s Vestas Wind Systems plans to invest $350 million in its Tianjin, China-based subsidiary as it responds to growing demand in China for its turbines. The list continues.

China’s comprehensive technology-based investment strategy has been attracting private investment in a way that leads to clean energy cluster formation. Besides the Baoding, Jiangsu and Tianjin provinces  described in the Breakthrough Institute and ITIF report “Rising Tigers and Sleeping Giants”, there are multiple other emerging clean energy clusters. Nanyang City in Henan Province is emerging as a new energy cluster for photovoltaics and bio-fuels, with an estimated vale of 100 billion RMB ($14.7 billion) by 2015 and Hanneng Shuangliu is another green-tech center with an estimated sales revenue of 70 billion RMB ($10.3 billion) from solar power, 20 billion ($2.94 billion) from nuclear power and 10 billion ($1.47 billion) from wind power by 2017. Shizuishan, originally as a big coal city, decided to switch to solar power industries and will reach 40 billion RMB ($5.88 billion) value of production by 2015 and 100 billion ($14.7 billion) by 2020. Not to mention Dezhou, “the biggest solar energy production base in the world.”

The National Journal has published our response to how America can remain competitive in the clean energy industry after the collapse of comprehensive climate legislation in Congress.  The article is part of a special energy expert series called “Can The U.S. Keep Up In Clean Energy Race?” including contributions from the Chairman of Sierra Club, CEO of the American Wind Energy Association, CEO of the George C. Marshall Institute, Director of Policy at the Brookings Institution, and others.

How America Can Lead the Clean Energy Race

NationalJournal.com | August 3rd, 2010

This comment was submitted by Teryn Norris, president, of Americans for Energy Leadership, and Daniel Goldfarb, program director of the organization.

U.S. economic leadership is at a crossroads. Recent outlooks suggest we may experience long-term stagnation and unemployment comparable to Japan’s lost decade. Yet while we have suffered an economic crisis produced by our own financial sector – losing millions of jobs, trillions in economic output, and further damaging our industrial base – China has largely shrugged off the global recession with high levels of growth and self-financed stimulus, all while purchasing billions of Treasury bills to finance our own deficit.

Meanwhile, as Breakthrough Institute and ITIF documented in “Rising Tigers, Sleeping Giant,” China and other nations are establishing dominance in one of the largest growth industries of the century. According to World Economic Forum, the global clean energy market will reach $450 billion annually by 2012 and $600 billion by 2020. Full market potential for clean energy products is much larger, with one analysis estimating Chinese market potential alone at $500 billion to $1 trillion. No wonder President Obama declared in the State of the Union, “The nation that leads the clean-energy economy will be the nation that leads the global economy.”

The United States must quickly pursue a new growth agenda, and clean energy technology offers one of our greatest opportunities. For over a decade, the primary goal of U.S. climate and clean energy advocates has been to establish a strong carbon pollution cap. This agenda is dead for the foreseeable future, and precious time has been wasted. The United States must quickly pivot from pollution regulation to an aggressive clean energy competitiveness and innovation agenda, and we can begin with new leadership in the next Congress.

Securing our competitiveness in this sector requires a comprehensive industrial development strategy (see our report, “The Power to Compete”), including robust and targeted federal support for clean energy research and innovation, manufacturing, and domestic market demand, as well as infrastructure, education, and industry cluster formation. This is necessary for a range of technologies, including but not limited to onshore and offshore wind, solar PV and thermal, advanced geothermal, hybrid and electric vehicles and batteries, carbon capture and storage, nuclear, smart-grid, and high-speed rail.

Fortunately, this approach includes several incremental, actionable components that can garner greater support than comprehensive and controversial cap and trade. The first is research, development, and demonstration (RD&D), which is necessary to invent new clean energy technologies, components, and manufacturing processes; improve the cost and performance of existing technologies and processes; and demonstrate proof of concept for advanced and higher-risk systems. The next Congress can start by increasing federal clean energy RD&D to at least $15-20 billion per year and making the R&D tax credit permanent. This target represents a growing bipartisan consensus and contrasts with the $30 billion federal budget for health research and $80 billion for military R&D, and only $3-5 billion for energy R&D today.

These strategic federal investments, and those identified below, can be financed through a variety of modest revenue streams, such as offshore drilling royalties, an oil import fee, reduced fossil fuel subsidies, or a small fee on fossil fuel electricity. For example, an “energy security fee” of $3.50 per barrel of imported oil would raise approximately $15 billion annually; reduced fossil fuel subsidies as proposed by the administration could generate upwards of $35 billion over ten years; a utilities electricity fee could raise at least $2 billion annually, as included in the Kerry-Lieberman American Power Act; and royalties on new offshore continental shelf drilling could raise more than $100 billion over twenty years.

The second piece is clean energy manufacturing, which can be a powerful engine for middle-class jobs and wealth creation and is essential for scaling our industry, establishing long-lasting supply chains and clusters, and reducing our trade deficit. The federal government can accomplish this through low-cost financing, tax incentives, technical assistance, and direct investment. Congress can start by extending the 48C advanced manufacturing tax credit, creating a revolving manufacturing loan fund similar to the Investments for Manufacturing Progress and Clean Technology (IMPACT) Act, and leveraging the Department of Commerce’s Manufacturing Extension Partnership.

Third, strong domestic demand will attract leading companies to locate manufacturing, supply chain, and R&D operations at home; accelerate learning-by-doing to achieve improvements in price and performance, as well as manufacturing processes; and incentivize U.S. firms to invest in clean energy technology development and deployment. Even without a carbon price, we can stimulate demand for advanced technologies with direct government procurement, especially through the Department of Defense, and through a clean energy deployment administration, renewable portfolio standard, and targeted feed-in tariffs. Unlike a carbon price, these policies can be designed to favor less-mature technologies and achieve rapid learning curves and economies of scale.

Beyond these three core components, at least three other supportive mechanisms are necessary: enabling infrastructure, education and workforce development, and industry cluster formation. For infrastructure, developing a smart electricity grid is necessary to integrate and manage renewable power; electrical vehicle infrastructure, such as charging stations, is necessary to electrify transportation; and rapid mass transit like high-speed railways is necessary to improve transportation efficiency and reduce reliance on personal vehicles.

Education and workforce development is necessary to replace the currently declining energy workforce, which could experience up to 50 percent retirement rates in the next five or ten years, and to accelerate clean energy research and construction. The next Congress can act by fully appropriating the Department of Energy’s applied science and engineering education proposal, and build upon this with a National Energy Education Act. Finally, explicit policies to develop regional industry clusters is necessary to accelerate clean energy innovation, from basic research to technology commercialization, and to enhance the competitiveness of U.S. manufacturers and suppliers.

The United States has a successful track record of catching up in strategic industries. Decades ago, after trailing Europe in aviation and aerospace, we raced ahead through sustained federal support for aviation technology development. After Sputnik was launched, we invested heavily in education, science, and technology, leading us to win the space race. When Japan took the lead in the semiconductor industry, we formed SEMATECH to reposition ourselves as the global market leader. We can and must do the same today in clean energy, and in the aftermath of cap and trade, there’s not a moment to waste.

The 14 MW solar farm at Nellis Air Force Base in Nevada demonstrates the potential for further energy innovation opportunities within the Department of Defense.

With Congress demurring once again on comprehensive energy innovation reform, creative and practical thinking will be necessary to build America’s clean energy economy. One opportunity often overlooked is to leverage the Department of Defense (DOD), a traditional engine of American innovation,for the task.

Along these lines, the CNA Military Advisory Board today debuted their new report, Powering America’s Economy: Energy Innovation at the Crossroad of National Security Challenges, at an event at the Russell Senate office building. The new report–which foreshadows an upcoming AEL report–explores the growing challenges presented by the close connection between the U.S. energy portfolio and its economic and national security.

As the largest single energy consumer in the nation, the report finds that Department of Defense (DOD) can play a key role in supporting innovation, commercialization, and widespread deployment of clean energy. The report further examines how DOD can harness the leadership characteristics inherent to the military culture, leverage its organizational discipline, and cultivate strategic relationships within the federal interagency network to move America forward in clean energy technology innovation. The briefing–headlined by Sherri Goodman (CNA Senior Vice President), Vice Admiral Dennis McGinn (U.S. Navy Ret.; member of CNA Military Advisory Board), Brigadier General Gerald E. Galloway (U.S. Army Ret.; member of CNA Military Advisory Board), Dr. Dorothy Robyn (Deputy Under Secretary for Installations and Environment, U.S. Department of Defense), and Dr. Henry Kelly (Principal Deputy Assistant Secretary for Energy Efficiency and Renewable Energy, U.S. Department of Energy)–made a case for expanding federal support for energy research, development, demonstration and deployment at the DOD, as well as a more collaborative relationship with the Department of Energy (DOE).