Google is backing it. So is Warren Buffett,
America’s most-watched investor. GE, one of the world’s biggest manufacturers,
is too.
Each of
these corporate icons is placing big bets and hundreds of millions of dollars
on a future powered by wind and solar power. Apple just joined them, announcing plans to
power its main U.S. data center in Maiden, North Carolina, entirely with
renewable energy by the end of this year. So why - yet again - are pundits
making dire warnings about prospects for renewable energy?
The
answer is that the clean tech industry is at a critical crossroads.
On the
one hand, wind and solar power are
close to cost competitiveness with fossil fuels in many parts of the world—
including the southwestern United States. In recent years, the cost of wind
turbines and solar panels has plummeted, fuelling worldwide demand for
renewables and leading to double-digit growth. The sector’s mid- to long-term
future is very bright. For example, the latest industry analysis
by McKinsey & Co.finds that solar PV deployment could increase 50-fold
between 2005 and 2020, rivaling the growth rate for natural gas.
On the
other hand wind and solar power, still fledgling industries, face the imminent
loss of the very government subsidies that have been driving their growth and
cost reductions in both the U.S. and Europe. These policy shifts risk stalling
progress toward cost competitiveness at the 11th hour.
A
recent report, “Beyond Boom
and Bust: Putting Clean Tech on a Path to Subsidy Independence,” by
authors at the World
Resources Institute, the Breakthrough
Institute, and the Brookings
Institution, highlights the scale of the subsidy blow to the U.S. industry.
(See Forbes’ coverage of the report, here.)
The authors find that U.S. federal support for clean energy technology, dropped
nearly 50 percent from 2011 to 2012 alone, and could plummet a whopping 75
percent from 2009 through 2014. If Congress fails to renew the wind power
production tax credit (PTC), set to expire in December, this would undercut the
U.S. turbine market, endangering tens of thousands of jobs.
Despite
these set-backs, some major corporate players are willing to ride out the
turbulence, confident in clean tech’s long-term viability:
-
MidAmerican
Energy Holdings Company, a Berkshire Hathaway subsidiary, has
committed $6 billion to become the largest generator of wind energy
among regulated U.S. utilities.
-
Google has invested more
than $915 million in clean energy projects, including 20-year agreements to
purchase power from wind energy developers in Iowa and Oklahoma, where it has
large, energy-guzzling data centers. The tech giant has also launched Google
Energy , a utility subsidiary that sells renewables-generated
electricity to the grid.
-
GE,
already one of the world’s leading wind turbine manufacturers, announced in
October 2011 that it would build a $300 million solar panel factory in Aurora,
Colorado, which will make latest generation thin film panels from 2013.
Not
every investor, however, has the deep pockets and long-term focus of Google,
Berkshire Hathaway, and GE. As clean tech subsidies potentially expire in the
U.S., other investors are choosing to sit on the sidelines. Ominously, according
to Bloomberg New Energy Finance, investment in new wind farms, solar parks
and other renewable projects globally fell to $27 billion in the first quarter
of 2012, a three-year low. Investors are waiting to see how countries set solar
subsidies in an era of austerity, and which solar companies will survive the
current round of consolidations and mergers. They are also closely watching and
what the U.S. does about renewing subsidies, particularly the production tax
credit. All this volatility makes it difficult for them to plan and act.
The
answer to this predicament is for the U.S. to accelerate the renewables
industry’s cost competitiveness with fossil fuels. As “Beyond Boom and Bust”
argues, Congress should extend clean energy subsidies to calm investors, while
making it clear that they will decline over time. Just last week, President
Obama urged
Congress to extend the production tax credit at a wind plant in Iowa.
Supporting
clean tech while it matures is a reasonable investment for taxpayers. The
recent furor over the industry’s future has been fanned by those who dismiss
renewables as a “failed experiment.” This attitude willfully ignores the
history of energy innovation and the progress in price and performance these
technologies have already made. Many of these voices also support subsidies for
fossil fuels, which has benefited from a century of government assistance.
Driving
investment in clean energy is good for business and the environment, and can
help the United States maintain a foothold in an expanding global market. Many
business leaders are putting big bets on the table. It is time for America’s
policymakers to match their faith and build a bridge to the coming clean tech
future.
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