Criticizing President Obama for “remain[ing] enthusiastic about massive government investment in green energy,” Fox News' Bill O'Reilly claimed that “the feds have not been able to make progress in the green area despite spending many, many billions of dollars.” In fact, federal policy has driven improvements in energy efficiency and rapid growth in clean technology.
Federal Policy Has Spurred Clean Tech Boom, Efficiency Improvements
O'Reilly Claims “The Feds Have Not Been Able To Make Progress In The Green Area.” On the June 6 edition of his Fox News show, Bill O'Reilly said “The President also remains enthusiastic about massive government investment in green energy,” adding “Time after time after time green energy investments proved to be unworthy. The goal is worthy. But for whatever reason, the feds have not been able to make progress in the green area despite spending many, many billions of dollars.” [Fox News, The O'Reilly Factor, 6/6/12]
Report: U.S. Clean Tech Has Grown Rapidly “Due In Large Part To A Substantial Increase In Federal Investment.” In an April 2012 report, energy policy experts at the Breakthrough Institute, Brookings Institution, and World Resources Institute noted that federal support has driven a recent expansion in US clean tech sectors. The report warned that federal support “is now poised to decline precipitously ... raising the possibility of market turmoil ahead,” and recommended policy reforms to provide more stable and effective incentives. From the analysis:
In recent years, US clean energy technology (“clean tech”) sectors have grown rapidly, despite the economic turmoil gripping the nation. By the end of 2010, installed wind power capacity in the United States stood 60 percent above 2008 levels, while solar power capacity had increased 120 percent over the same period. The United States regained global market share in advanced battery and vehicle segments, and construction commenced on the first new US nuclear reactors in decades. Robust expansion can be observed across virtually all segments of the clean tech sector, with total employment across clean technology segments growing 11.8 percent from 2007 to 2010, a period when overall US employment was stagnant (Figure 1). US renewable energy and energy efficiency segments alone attracted $48 billion in investment in 2011, up 42 percent from 2010 and over twice as high as 2009 levels. This recent expansion of clean tech segments is due in large part to a substantial increase in federal investment and policy support.
Though current subsidies could be better optimized to drive innovation (see discussion in Part 3), many clean tech companies have nonetheless achieved significant technology improvements in recent years, often with the assistance of these federal programs. Federal support for clean energy technologies has fostered market competition and improvements in technology and/or manufacturing efficiencies in areas like advanced batteries and vehicles, solar panels, and wind turbines, and other technologies. [Breakthrough Institute, Brookings Institution, World Resources Institute, April 2012]
Cost of Solar Panels Has Dropped Significantly And Solar Installations Have Soared. The following chart from ScientificAmerican.com shows how the cost of solar photovoltaics has dropped since 1980:
The following chart from the Solar Energy Industries Association shows solar electric capacity installations through 2010:
[SEIA, accessed 6/8/12]
U.S. Wind Power Capacity Has Expanded Considerably. The following animation from the Department of Energy shows the growth of installed wind capacity in the U.S. since 1999:
[Department of Energy, accessed 6/8/12]
Wind Turbine Manufacturing Has Grown 12-Fold. A letter from over 350 coalition members including the National Association of Manufacturers, the American Farm Bureau Federation, and the Edison Electric Institute states that “US wind turbine manufacturing has grown 12-fold” since 2005 and “costs have been reduced over 90% since 1980”:
Equipped with the PTC [Production Tax Credit], the wind energy industry has contributed impressively to U.S. economic development. Since 2005, the wind industry has spurred more than $60 billion of investment. Today, over 400 facilities across 43 states manufacture for the wind energy industry. US wind turbine manufacturing has grown 12-fold - 60% of a wind turbine's value is now produced here in America, as compared to 25% prior to 2005. Further, costs have been reduced over 90% since 1980, recently driven by a surge in game changing technological advances. In the last four years, wind energy has provided 35% of all new U.S. power capacity.
Yet despite its clear success, the PTC has been allowed to expire frequently and is again set to expire at the end of 2012. Now is not the time to increase taxes on wind energy. The PTC should be extended for at least another four years so that American know-how can keep producing domestic clean energy. [National Association of Manufacturers, 11/17/11]
Clean Energy Jobs Grew More Than Twice As Fast As The Rest Of The Economy Between 2003-2010. According to a Brookings Institution study, clean energy segments (including biofuels, geothermal, solar photovoltaic, solar thermal, wind and others) grew at an average annual rate of 11.1 percent between 2003 and 2010, while the national economy grew by 4.2 percent annually. The report said these segments “added jobs at a torrid pace, albeit from small bases.” [Media Matters, 9/30/11]
Federal Support Has Been Key In Creating American Advanced Battery Industry. From a July 2010 Christian Science Monitor article on “the $2.4 billion the Obama administration has funneled to the advanced battery industry”:
The huge federal investment has single-handedly vaulted the US toward becoming the globe's major supplier of advanced batteries for plug-in vehicles. Government funds have helped to finance 26 of 30 electric-vehicle battery and component plants now under construction - including nine lithium-ion battery manufacturing plants. Four of the nine are expected to be producing batteries by year's end.
By 2012, those 30 factories will have enough capacity to supply 20 percent of the world's advanced vehicle batteries, according to a new report by the US Department of Energy. That share could rise to 40 percent by 2015.
“There's no question this federal investment has given US battery manufacturers a huge push in the right direction,” says Vishal Sapru, industry manager for energy and power systems for Frost & Sullivan, a market research firm. “The funding has contributed significantly to giving the US at least a chance to play in this arena.” [Christian Science Monitor, 7/15/10]
Fuel Economy Standards, Biofuels Have Helped Drive Down Oil Imports. According to the Energy Information Administration, “U.S. dependence on imported oil has dramatically declined since peaking in 2005.” From EIA:
There is no single explanation for the decline in U.S. oil import dependence since 2005. Rather, the trend results from a variety of factors. Chief among those is a significant contraction in consumption. U.S. oil product deliveries declined by 1.7 million barrels per day (bbl/d) to 19.1 bbl/d in 2010, from 20.8 million bbl/d in 2005. This decline partly reflects the downturn in the underlying economy after the financial crisis of 2008. Not surprisingly, demand has bounced back somewhat from a low of 18.8 million bbl/d in 2009, when the U.S. economy bottomed out. But the downward trend in consumption started two years before the 2008 crisis and reflects factors such as changes in efficiency and consumer behavior as well as patterns of economic growth. Shifts in supply patterns, including increases in domestic biofuels production, NGL output and refinery gain, also played an important role in moderating import dependence.
The EIA expects that the moderating trend in U.S. oil-import dependence to go on in the next decade. But the mix of factors responsible for it looks likely to evolve. In particular, EIA projects that continued improvements in energy efficiency, driven in part by tighter fuel economy standards, will prove increasingly important in moderating future demand growth, offsetting the upward impact of economic recovery. [Energy Information Administration, 5/25/11]
National Research Council On Federal Efficiency R&D: “The Benefits Substantially Exceeded Their Costs.” From the National Research Council's July 2001 evaluation of federal investments in energy efficiency R&D dating back to 1978:
DOE made significant contributions over the last 22 years to the well-being of the United States through its energy efficiency programs. These programs led to important realized economic benefits, options for the future, and a bank of scientific knowledge. The benefits substantially exceeded their costs and led to improvements to the economy, the environment, and the energy security of the nation, as indicated below.
The realized cumulative net economic benefit to the nation of a few advanced technologies to which EE [energy efficiency] was a major contributor in the form of R&D or demonstration were found by the committee to be in the range of $30 billion in 1999 dollars (the calculation considers investments made by DOE and other sponsors, including industry). The benefit dwarfs the approximately $7 billion 1999 dollars of investment in energy efficiency R&D over the history of DOE (22 years). [National Research Council, 7/17/01]
A Comprehensive Energy Policy Would Yield Even More Progress
CBO: Taxing Fossil Fuels Would Be “The Most Direct And Cost-Effective Method.” From a March 2012 issue brief by the nonpartisan Congressional Budget Office on federal support for energy development:
Without government intervention, households and businesses do not have a financial incentive to take into account the environmental damage or other costs to the nation associated with their choices about energy production and consumption. The most direct and cost-effective method for addressing that problem would be to levy a tax on energy sources that reflects the environmental and other costs associated with their production and use. Subsidies (such as tax preferences) for favored technologies can accomplish some of the same goals, but in a less cost-effective way.
Also, unless the government intervenes, the amount of research and development (R&D) that the private sector undertakes is likely to be inefficiently low from society's perspective because firms cannot easily capture the “spillover benefits” that result from it. That is particularly true at the early stages of developing a technology. Such research can create fundamental knowledge that can lead to numerous benefits for society as a whole but not necessarily for the firms that funded that research; thus government funding can be beneficial. [Congressional Budget Office, March 2012]
Report: U.S. Policies Lack Transparency, Longevity And Certainty. From a recent report by Deutsche Bank Climate Change Advisors:
Countries with more 'TLC' - transparency, longevity and certainty - in their climate policy frameworks will attract more investment and will build new, clean industries, technologies and jobs faster than their policy lagging counterparts. This is particularly evident in countries such as Germany and China, who have emerged as global leaders in low carbon technologies and investment in recent years. In stark contrast, a politically divided US Congress and vast budget deficit has resulted in very little significant regulation at the Federal level, with substantial implications for emerging clean technology industries in the US. This climate policy inertia has existed for some time in the US now, with activity on this front largely taking place at the state level. We have long argued that the states must continue to press ahead with climate legislation, but a negative effect of this trend is a patchwork of inconsistent state policies. The net effect is that while Congress stumbles, the US stands to fall behind. [Deutsche Bank, 7/25/11]
Other Nations Benefit From “Comprehensive And Long-Term” Strategy. From a Brookings Institution report:
China now leads the world in clean economy deployment. By the end of 2010 its 103 gigawatts of installed renewable energy generation capacity was more than double that of U.S. installations.
What explains China's success in rapid clean economy build out?
A huge part of the answer has to do with China's ability to channel vast sums of affordable capital into innovative large-scale deployment projects--something that the U.S. continues to struggle with. The numbers speak for themselves. In 2010, China put into place a staggering $54.4 billion in clean energy investments. Of this, asset financing--funding for hard assets like wind farms and solar arrays--accounted for more than $47 billion of the total. By contrast, U.S. private investment in clean energy totaled $34 billion, with just $21 billion or so in asset finance. Now the gap is widening further, with Chinese asset finance investment in Q1 2011 clocking in $10.9 billion as compared to just $2 billion in the United States.
What is China's secret in ensuring deployment finance? China has been inordinately successful in mobilizing large volumes of low-cost capital through its state-owned banks and other financial institutions. Clean energy projects have received preferential access to bank loans at interest rates far below what is available in other countries. Moreover, state-owned enterprises, especially the “Big Five” power companies, have been major investors across a broad range of energy conservation, pollution control, and renewable energy projects. For instance, China Guodian Corporation--one of the Big Five--recently announced a plan to invest $3 billion over the next five years in a variety of clean energy projects, including thermal, wind, natural gas, and biomass power stations in southwest China.
But that is only part of the story. Critical to China's success is its articulation of a comprehensive and long-term state clean energy build out policy that sends clear signals to investors. Through its 12th Five Year Plan, China has identified “new energy” as one among seven “strategic emerging industries” and will invest $760 billion over the next 10 years in this sector alone. A range of complementary policies will guide these investment decisions, including the Renewable Energy Law, national demand-side management regulations, and pilot carbon taxes, among others. China has swiftly made itself a clean energy power, in large part by ensuring the availability of copious, affordable capital at a time it has been short in the United States. [The Brookings Institution, 2011, emphasis added]