Busting the Myth of the “Clean-Tech Crash”

Over the past few months, we’ve heard growing speculation about the coming “crash” in the clean-tech sector.  Wired published a widely-read piece, “Why the Clean Tech Boom Went Bust,” The New Republic attempted to write Secretary Chu’s obituary, and some analysts expressed understandable concern about the depletion of Recovery Act funds and expiring tax credits.

Now the data is in, and it’s telling a much different story.  Last year, VC investment in U.S. clean-tech companies reached a record high of $4.3 billion, according to PricewaterhouseCoopers and the National Venture Capital Association, and total global investment in clean energy reached a record $260 billion, according to Bloomberg New Energy Finance.  And despite bankruptcies like Solyndra and Evergreen Solar, the U.S. reclaimed the top spot for global clean energy investment, attracting $56 billion compared to $47.4 billion by China.

For the full story, see Walter Frick’s latest in BostInno, “There is No Cleantech Venture Bust, Sorry Wired,” and ongoing analysis from The Cleantech Group.

Some advocates and pundits hoped the “clean-tech crash” story would serve as a productive wake-up call to ramp up federal investments and reform existing subsidies.  Unfortunately, it has had the opposite effect, pouring more fuel on the Solyndra firestorm, creating misguided perceptions of clean energy as a “failed” industry unworthy of public support, and encouraging some fossil fuel-backed groups to invest millions of dollars in anti-cleantech campaign ads.

Does the federal government need to further optimize its investments in the sector?  Absolutely.  But the time has come to bust the “clean-tech crash” myth and tell the public the truth: the clean energy industry is experiencing robust growth, and with strengthened public-private partnerships to further unleash our innovative and manufacturing capacity, the U.S. is positioned to lead the world in this multi-trillion dollar market opportunity.


Can conservatives support federal research budgets even in tough budgetary times? (For example, advanced energy research.)

Here’s President Reagan delivering a national address in 1988 (emphasis added):

“Federal funding for science is in jeopardy because of budget constraints. That’s why it’s my duty as President to draw its importance to your attention and that of Congress.

…The remarkable thing is that although basic research does not begin with a particular practical goal, when you look at the results over the years, it ends up being one of the most practical things government does… Major industries, including television, communications, and computer industries, couldn’t be where they are today without developments that began with this basic research.

…one thing is certain: If we don’t explore, others will, and we’ll fall behind. This is why I’ve urged Congress to devote more money to research. After taking out inflation, today’s government research expenditures are 58 percent greater than the expenditures of a decade ago. It is an indispensable investment in America’s future.

Some say that we can’t afford it, that we’re too strapped for cash. Well, leadership means making hard choices, even in an election year. We’ve put our research budget under a microscope and looked for quality and cost effectiveness. We’ve put together the best program for the taxpayers’ dollars. After all, the American tradition of hope is one we can’t afford to forget.”

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By Teryn Norris and Kevin Hsu

In a new article for Foreign Affairs, “Globalizing the Energy Revolution: How to Really Win the Clean-Energy Race” (subscript. req’d), Michael Levi and colleagues at the Council on Foreign Relations argue that the world is “woefully underspending on clean-energy innovation” and needs to pursue a new international strategy:

“Clean energy is almost always more expensive than energy from fossil fuels, and often by a big margin… Yet the world is woefully underspending on clean-energy innovation… the IEA estimated that the world would need to spend an average of $51-$100 billion each year to support the research, development, and demonstration of clean-energy technologies. Current public spending is a mere $10 billion annually… The shortfall is staggering.”

What should be done?  First, the developed world needs to ramp up its efforts. “Major scientific advances are still most likely to occur in the developed world, alongside much of the work necessary to commercialize clean-energy technologies and the capital required to support those efforts,” they write.  U.S. strategy should include two basic element: first, incentives to create a larger domestic market to drive both deployment and indirect innovation; and second, direct government support for clean energy innovation through research, development, and demonstration.


Can Federal Investment Reduce the Budget Deficit?

Erskine Bowles and Alan Simpson, Co-Chairs of the National Commission on Fiscal Responsibility and Reform

Erskine Bowles and Alan Simpson, Co-Chairs of the National Commission on Fiscal Responsibility and Reform

David Leonhardt — one of the country’s leading economic reporters at the New York Times — has a new article, ”One Way to Trim Deficit: Cultivate Growth,” which calls for increased federal investment in science, technology, and education as one of “the best ways to promote growth” and a primary strategy to reduce the budget deficit. He reports:

“If the economy grew one half of a percentage point faster than forecast each year over the next two decades — no easy feat, to be fair — the country would have to do roughly 40 to 50 percent less deficit-cutting than it now appears…

Even more important than the next couple of years is the second part of a pro-growth strategy: the long term. A good deficit plan doesn’t simply make across-the-board cuts for years on end. It cuts funding for programs that do not spur economic growth and increases funding for those relatively few that do…

Beyond tax reform, both [proposed] deficit plans mention the importance of making investments that will lead to future growth. In particular, the Bowles-Simpson plan calls for a gradual 15-cents-a-gallon increase in the federal gasoline tax to pay for highways, mass transit and other projects. The plans also urge the government to prioritize education and science.

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Infographic: Betting on Clean Energy

Third Way, a leading center-left think tank in Washington, DC, has created a useful infographic called “Betting on Clean Energy” that paints a stark picture of clean energy investment in China versus the United States in 2009.  It reflects the findings of numerous reports over the past year, including “Rising Tigers, Sleeping Giant” and others that we’ve reported on here (click for larger version):


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Beyond Drilling Regulation

Solar Public LandsIf America’s need to reform the regulation of oil drilling wasn’t clear enough already, Thursday’s oil rig explosion made that reality painfully clear.  But while the debate closes in on the issue of oversight for off shore drilling, the more fundamental questions of how we can move towards a clean energy economy cannot be pushed aside.

As long as fossil fuel based technologies dominate the news cycles and federal attention, low-carbon energy sources will remain secondary.  While the Bureau of Land Management has had well noted trouble overseeing oil gas and mining leases in recent years, few have paid attention to its failure to distribute land for solar power generation.  This is a tale of incompetence, lack of focus, and general wastefulness. The Associated Press reports that millions of acres in America’s south west, one of the world’s most promising solar regions, lay barren after federal lands were distributed for the purpose of building solar farms:

“Congress in 2005 gave the Interior Department a deadline: approve 10,000 megawatts, or about five million homes’ worth during peak hours, of renewable energy on public lands by 2015. Reaching that goal was left to the BLM, which oversees federal land and knows oil, gas and mining leases but is new to solar.” (more…)


The Energy Debate with Bill Gates

Update Sept 2: Bill Gates has responded at Dot Earth

Andrew Revkin is hosting an interesting discussion at New York Times Dot Earth right now on energy innovation policy.  It began with a post about Bill Gates’ recent interview with MIT Technology Review, which focused primarily on energy, and a rebuke from one commentator,  Richard Rosen, in “A Challenge to Bill Gates on Energy Research.”  Revkin encouraged discussion in an email to several experts, and this was my initial contribution.  Bill Gates is apparently offering a response at Dot Earth tomorrow, so stay tuned:

The White House recently released its report on how ARRA is promoting innovation, particularly in solar PV, batteries, and DNA sequencing.  ”Near-term improvements will be able to cut the cost of solar power in half, as second generation thin-film solar panels such as the rapidly emerging CIGS and Cd-Te technologies compete with ever improving traditional silicon-based panels,” the report noted. “Beyond that, breakthrough technologies could make solar as cheap as new fossil fuel plants without government incentives.”

This assertion stands in direct contrast to one of Richard Rosen’s most basic assumptions, which is that it is thermodynamically infeasible for low-carbon electric generation technology to provide electricity as cheap or cheaper than coal-fired power plants.  Secretary Chu’s own assessment that we need several Nobel-caliber level breakthroughs to make low-carbon energy cheap enough to compete also stands in contrast.  I think we can assume that Secretary Chu understands the second law of thermodynamics! (As well as Dr. Holdren and his team, for that matter, who I’m sure played an important role in the White House report).


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As America Stalls, Competitors Advance

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

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: (more…)


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.

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. (more…)

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Oil executives testifying before Congress in May.

Oil executives testifying before Congress in May.

Reporting on BP’s imbroglio in the Gulf of Mexico, Peter Coy of Businessweek finds that energy companies are neglecting long-term investments in research and development at the price of technological breakthroughs:

“Energy companies worldwide are far less science-oriented than one might expect from an industry that is heavily dependent on technology for safety and profit. In the U.S., energy companies’ spending on research, development, and deployment amounts to just 0.3 percent of sales. That’s barely more than a tenth what the auto industry spends as a share of sales and is dwarfed by the pharmaceutical industry, which spends nearly 19 percent of sales.”

He goes on to ponder the shortcomings of public investments in innovation:

“But government R&D spending on energy has been scarce, too. It was less than 0.03 percent of U.S. gross domestic product as of 2007, about one-third the share in Japan. The dearth of investment in energy R&D helps explain why the world is still getting its energy by punching holes in the sea floor rather than from safer, renewable sources such as the sun and the wind.”