Tuesday, 8 May 2012

Failing US clean tech policy

A disturbing new report from the Metropolitan Policy Program at Brookings, shows how US federal support for clean tech is  expected to drop by 75% between 2009 and 2014. This crash scenario is based on the assumption that 62 clean tech support programs currently in place will expire and nothing will replace them. The the American Recovery and Reinvestment Act of 2009 (ARRA) provided a number of initiatives to support clean tech but these initiatives are now coming to an end. A number of additional tax credits and production support policies for clean tech are also now coming to an end. In addition, the boom in natural gas is also having an impact. Natural gas is the marginal fuel source for power generators. With natural gas prices currently between $2  and $3 MMBTUs there is no incentive to invest in large scale renewable projects like wind. For wind projects to be economically viable, natural gas prices need to be around $6 MMBTUs.

Clean tech is a very difficult market space to invest in and make money. The macro drivers of clean tech include climate change, energy security, resource depletion, new technology and green consumers. Government policy can greatly influence these drivers. Climate change seems to be a difficult concept for Washington to address so an energy security argument might be easier. In 2011, US net petroleum imports equaled 8.4 MMbd. Assuming an oil price of $100 per barrel, US net imports totaled $306 billion dollars in 2011. The US Department of Commerce has some interesting charts on how the oil import bill breaks down by household. Using some of this money spent on imported oil to invest in renewable energy seems like a good way to increase US energy security and reduce the dependence on imported oil. The US needs a coherent federal energy policy to address issues like energy security and renewable energy should be part of such policy.

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