Senate Democrats Unveil Plan for “Winning the Future”

On 02.17.11, In News, By Daniel Goldfarb

Senate Democrats have adopted the principles and rhetoric set forth in Obama’s State of the Union Adress in their new “Winning the Future” plan. Senate Majority Leader Harry Reid yesterday released his caucus’ plan to simultaneously cut spending and increase targeted investments in order to “out-build, out-innovate, and out-educate the rest of the world, so that the jobs and industries of our time will take root in America.“

In the face of Republican attacks on Obama’s budget proposal, Senate Democrats have produced a twenty point plan broken up into four focuses: “Deficit Reduction,” “Out-Innovate,” “Out-Build,” and “Out-Educate.” The strategy focuses on expanding and extending already existing successful initiatives such as the Advanced Energy Manufacturing Tax Credit (48C), the R&D Tax Credit, the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.

Also put forth are some new programs that have been previously proposed, the most notable example being the Clean Energy Deployment Administration (CEDA). CEDA has long been touted as an efficient way to bring clean energy technologies to market, helping them to avoid the “valley of death.” Other new itiatives would include an “America builds” bond program as well as a transportation authorization bill.

While Senate Democrats’ support of Obama’s innovation agenda is highly encouraging, it is yet to be seen what will be able to make it out of a House bent on deep spending cuts. Regardless, it is good to see an emerging consensus forming around policies that aim to stimulate innovation and American competitiveness.

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Cutting Fossil Fuel Subsidies: Third Time’s the Charm?

On 02.14.11, In News, By Noah Fisher

In the recent State of the Union Address, President Obama called for an end to oil and gas subsidies, the third time he has done so since taking office in 2009.  The President’s FY 2012 budget, submitted today, includes the elimination of nearly $4 billion of incentives annually for the oil, gas and coal industries. Unfortunately, all previous attempts to reduce or eliminate these incentives have met the same fate: bipartisan opposition and heavy lobbying from fossil fuel groups. In spite of the uphill nature of the battle, the President hopes that current demand for reduced spending will result in a different outcome.

In addition to competing with the large dollar discrepancy between industry incentives, most renewable energy subsidies face annual reauthorization debates in Congress, whereas fossil fuels have for years been expressly written into law.  For example, the extremely successful 1603 Cash Grant faced serious opposition during the lame duck session of the 111th Congress, and only finally garnered inclusion as a compromise among politicians. On the other hand, fossil fuel subsidies face no annual scrutiny, flying under the rader of the public. The short-term authorization of renewable energy subsidies leads to market and price instability, making fossil fuels a more sure bet for investors.

Unsurprisingly, the oil and gas industry contends that the subsidies actually go in the other direction: from fossil fuel companies to the federal government, in the form of taxes and royalties. Other industry members claim the elimination of subsidies will reduce investment and slow down vital domestic exploration. Secretary of the Interior Ken Salazar, however, disagrees with the industry’s assertion:

“All you have to do is look at record profits in the oil and gas world over the last several years and, in my view, you’re going to continue to see a great interest in oil and gas because it’s an essential part of our economy today…I think the oil and gas industry will do just fine.”

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To Cut or Invest: A Timely Debate

On 02.07.11, In News, By Daniel Goldfarb

Screen shot 2011-02-07 at 5.40.55 PMRecently, a debate has been raging between those who want government to cut spending and those who want it to invest in the future. Today, ITIF and The Breakthrough Institute brought together the leading voices on both sides of the spectrum at a debate entitled, “Cut or Invest: What’s the Best Way to Grow Our Economy?” With Robert Atkinson of ITIF and Fred Block of Breakthrough Institute supporting investment and David Kreutzer of the Heritage Foundation and Jerry Taylor of the Cato Institute supporting spending cuts, the debate illuminated the sharp differences that will have to be overcome to achieve forward looking energy policy.

With the Tea Party’s success in the last election and President Obama’s recent focus on re-investing in America’s innovation capacity, the debate between ‘deficit hawks’ and ‘innovation hawks‘ has dominated recent headlines. Today’s event, much like the larger dialogue, focused on the appropriate role of the government in the economy. In Fred Block’s opening statement, he defined a three point argument that became the focal point for much of the debate:

  1. Most of the necessary deficit reductions will have to come from economic growth – a position shared by conservative as seen in their support for Bush’s tax cuts.
  2. Greatly expanded R&D is critical for the rapid economic growth.
  3. Public investment in R&D, especially in energy, is essential because of market failures.

Much, although not all, of the following disagreement focused on point three. Taylor and Kreutzer argued that the government was ill suited to fund R&D because of the inherent politicization of federal funding. Key to this argument was the idea that the free market is most capable of properly allocating funds to R&D projects.

To this Atkinson contended that “short term capital pressures” force bad decisions on R&D in the private sector.  This response brings to bear an important question: can the financial time lines of companies and financiers properly align with the long term horizons of basic R&D?

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Obama to Penn State: Energy Innovation Key to “Winning the Future”

On 02.03.11, In News, By Daniel Goldfarb

President Obama’s speech at Penn State earlier today was a chance for the administration to laud its energy accomplishments and  further clarify its vision for America’s clean energy transition. The vision, at least that in the speech, was of a federal government that would facilitate innovation and competition to help America “win the future.”

Penn State is a strong example of how federal investment can spur energy innovation. Just last year, a consortium lead by Penn State was awarded $122 million by the DOE’s Energy Innovation Hubs program to research efficient building methods and materials. The consortium will build the hub in the Philidelphia Navy Yard, bringing together scientist, manufacturers, and entrepreneurs. Mark Muro, director of policy at Brookings Metropolitan and one of the nation’s foremost thinkers on hubs and clusters, said of the Penn State proposal the day the DOE announced its funding:

“…a masterstroke. One of multiple truly inventive proposals from around the country, the winning Philadelphia entry epitomizes the power of a new era of smart, region-centered thinking and action about science, innovation, and regional development in America.”

Obama’s speech today reaffirmed the advantages of the DOE’s Energy Innovation Hubs, touting not only the job creation associated with the Penn State project, but its crucial role in a plan to reduce building emissions 20% by 2020 – a plan which could amount to $40 billion a year in savings for businesses. These savings could in turn mean more competitive companies and therefore more money for hiring.

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Kerry Warns of “New Sputnik Moment,” Calls for Bipartisan Investment Strategy

On 01.11.11, In News, By Teryn Norris

Today, Senator John Kerry (D-MA) delivered a major speech in Washington that may be remembered as one of the most important political responses to the Tucson shooting and as a powerful new post-partisan vision for restoring American vitality and leadership in the 21st century.

As Ezra Klein of Washington Post noted, “Frankly, it’s the speech President Obama should be giving.”  In this moment of national reflection, the speech should be read by Americans of all political stripes and serve as a model for Democratic and Republican leaders alike.

In short, Senator Kerry argued that today’s violent and divisive political dialogue — which may or may not have contributed to the event in Tucson — is damaging U.S. global leadership and preventing us from making the critical investments we need to stay prosperous and secure.  Unless Democratic and Republican leaders can wake up and come together around a new agenda for strategic public investments — including infrastructure, technology, research, and education — we will not be able to maintain our place in the world.

“Millions of Americans know we can do better than we’ve done these last bitter years – because our history has proven it time and again. When the Soviets sent the first satellite in history into orbit half a century ago, leaders from both parties rose with a sense of common purpose and resolved that never again would the United States fall behind anyone, anywhere… There were no partisan divisions that blocked the way. With daring and unflagging determination we moved immediately to unprecedented levels of investment in science and technology, engineering and R&D…

We as a people face another Sputnik moment today. And the great question is whether we will meet this moment as Americans did so boldly five decades ago. The decisions we make – or fail to make – in this decade on new energy sources, on education, infrastructure, technology, and research — all of which are going to produce the jobs of the future — and our decisions on deficits and entitlements will without doubt determine whether the United States will continue to lead the world – or be left to follow in the wake of others, on the way to decline, less prosperous in our own land and less secure in the world.”

Senator Kerry sharply broke with today’s conventional DC wisdom — which says that deficit hawks rule and no new spending will be possible for many years — and made a forceful argument for an investment-centric agenda as a starting point for bipartisan progress on the nation’s grand challenges.  He called on Americans to remember the history of bipartisan leadership and public investment that made the 20th century the American century, and to imagine the possibilities that could be unleashed by a new era of forward-looking investments:

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‘Buy American’ Solar Provision Highlights the Role of Military Procurement

On 01.11.11, In News, By Staff

Guest contribution by Leigh Ewbank

On the heels of filing a complaint with the WTO against China’s subsidies for its domestic wind turbine manufacturers, President Obama signed an appropriations law that requires the Department of Defense to purchase American-made solar panels. The move appears to be the first instance of America leveraging its WTO complaint to boost its clean technology industry, and shows that the US is beginning to take clean energy competitiveness seriously.

Some will argue that the ‘buy American’ provision smacks of hypocrisy—that the administration is as guilty of the same behavior it has criticized China for. Others will argue that the measure counters the Chinese subsidies and is a legitimate way to bolster the US clean energy sector in an uneven playing field. Regardless of your position on the matter, the move shines a spotlight on the role of military procurement.

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The Science Behind Obama’s Legislative “Chunks”

On 01.05.11, In News, Opinion, By David Livingston

Given President Obama’s recent declaration that the new course of energy policy may come in the form of “chunks” rather than comprehensive legislation, we must ask ourselves which chunks to push for first if we want better emission outcomes?  In order to answer this question, it is necessary to better understand the emissions profile of each sector and how these emissions behave over time.

Carbon may be the main culprit, but it works alongside a number of accomplices, each uniquely impacting the climate through distinct “cooling” and/or “warming” effects.  The interactions and lifespans of all these chemical species in the atmosphere determine the severity and longevity of any set of emissions from a given fuel or sector of the economy.  Thus, the end result, referred to in the scientific community as “radiative forcing,” is complexly determined by the sum of parts.  

Luckily, a body of critical but under-appreciated research is emerging from scientists at NASA’s Goddard Institute for Space Studies that addresses these complexities.

In one recent paper, researchers applied a climate model to estimate the impact of thirteen sectors of the economy on the climate in both the short run (2020) and long run (2100).  As noted by climate policy specialist Deborah Gordon in a review of the research, “breaking the massive energy sector into its sub-sectors is the key because each produces a different, complex mixture of direct GHGs and air pollutant precursor emissions.”  Some of these emission species – such as tropospheric ozone and diesel-derived “black carbon” – have exclusively warming effects, while other pollutants – particularly aerosols and sulfates – have a countervailing cooling impact.

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China’s State Grid Announces $1 Billion Investment in Brazil

On 01.03.11, In News, By Elizabeth Campbell

On December 21, 2010, China’s State Grid announced a $1 billion investment in Brazil, buying 7 Brazilian power transmission companies. What is State Grid, why is State Grid investing in Brazil, and why does the investment matter?

What is State Grid?

State Grid is China’s largest transmission and distribution company; according to State Grid, the company provides electricity to 88% of China’s “territory.” State Grid both builds and operates its networks. In 2010, State Grid ranked 8th on the 2010 Global Fortune 500, generating $184.5billion in revenues in the last fiscal year.

While State Grid may seem massive, its predecessor, State Power Corp. (SPC), a remnant of China’s thoroughly planned economy, was even bigger. As Sonal Patel of Power Magazine succinctly puts it, “By the end of 2002, China had dismantled its single, vertically integrated utility—the State Power Corp. (SPC), which by then had 46% of the country’s generating capacity and 90% of transmission capacity—into 11 separate generation, transmission, and service units.” One of those units is State Grid.

Why is State Grid investing in Brazil?

In one word: profitability. While State Grid is indeed large, it is not necessarily particularly profitable. According to the Fortune Global 500’s numbers, the company generated over $12 billion in profits in FY2008, $665 million in profits in FY2009…and $334 million in profits in FY2010. Those downward trending numbers may simply reflect State Grid’s increasing investments. However, profitability is still a key concern at State Grid: According to a State Grid executive quoted in Caixin, State Grid only considers forgeign projects with expected returns “two to three times” those expected in China. While future profits from the Brazilian venture are unclear, the Brazil investment is expected to generate $110 million in revenues each year.

State Grid’s investment in Brazil may seem curious or undisciplined, given simultaneous headlines detailing critical coal shortages across China causing power shortages. But State Grid internally emphasizes profitability, and learning from international projects may enhance the company’s ability to be profitable later on.

Why does the investment matter?

State Grid’s Brazil-ward foray is not its first venture into foreign assets. Previous investments or cooperation agreements exist with the Philippines, Russia, Mongolia, and Kazakhstan. The Brazilian venture is perhaps indicative of further international investment and outreach, ultimately rooted in boosting profits at home. Profits can be used to rectify domestic issues, such as lack of electricity in some rural areas.

These international ventures seem mutually advantageous, in theory: the host country gets State Grid to perform a service, presumably because of an attractive offering made by State Grid, and State Grid (ideally) makes profits and is advantaged through exposure to learnings that can be applied back home.

The US, however, seems unlikely to engage in such international power generation and transmission agreements — as makes sense, given nervousness about national security (see: cyberspies on the US electrical grid in 2009). This inability to engage at a deeper level leaves the US-China energy dialogue somewhat stalled—limited to the private sector cooperation, government initiated R&D consortia, joint standards development, and assorted quibbles (including those over rare earths). Perhaps some progress, though, is better than none at all.

State Grid’s move may indicate a more broad trend, Chinese public service providers moving overseas to garner profits. Expanding operations overseas has the dual benefit of potential immediate profits and a learning experience in different power systems.  What does it mean if State Grid continues to struggle with profitability? Only time will tell. But, if current investments don’t yield expected returns, look for State Grid to seek new opportunities to boost profits—either at home or abroad.  Either way, any time two of the worlds largest emerging economies make a deal of this scale pertaining to their basic electrical functions, it is worth keeping an eye on.

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Will New Congress Move First on Energy?

On 12.31.10, In News, By Teryn Norris

Politico reported yesterday in “10 to watch: Senators on energy“:

“With Republicans controlling the House and ramping up oversight and investigations of the Obama administration, focus at least initially in the next Congress will be on the Senate to lay a potential pathway for legislative compromise on energy and environmental policy.

“The Senate will set the energy agenda especially at the beginning,” said Paul Bledsoe, a senior adviser with the Bipartisan Policy Center and a former Senate Democratic aide.

“We are going to have a run at energy legislation,” Majority Leader Harry Reid said on CNN on Dec. 22.”

This builds on President Obama’s statement in a press conference on Dec. 22 that he plans to “immediately engage with Republicans” in an attempt to pass an energy bill in 2011.

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EIA Predicts U.S. Emissions to Rise 6% by 2035

On 12.30.10, In News, By Emily McGlynn

EIA’s recently released preview of its Annual Energy Outlook 2011 showcases an updated reference scenario for US energy production and consumption through 2035.  The predictions highlight the complex relationship between the goals of energy independence and renewable deployment. Petroleum and natural gas are now predicted to contribute slightly more to domestic energy production, largely due to updated assumptions about greater availability of domestic shale gas and oil which will coincide with lower prices.

While this is good news for US energy independence, meaning lower reliance on energy imports, it is bad news for renewable energy deployment.  The EIA reduced the outlook for the renewable energy contribution (not including biomass or hydropower) to total energy production for both 2025 and 2035. “Other” renewable energy, including solar, wind, and geothermal, decreased from 4% to 3% of total energy production from the 2010 to the 2011 reports. Biomass and hydropower have slightly increased contributions.

Renewable energy production is still projected to grow by 2.9% per year to eventually have a 14% share by 2035, in part a result of the renewable fuel standards for transport fuels and state-level renewable portfolio standards. Unfortunately this business as usual growth rate is insufficient to counteract the influence of predicted lower petroleum and natural gas prices.

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