This is part I of a two-part series. Part II will run tomorrow. Another year, another wringing of the hands over tax credits andincentives for clean technology. Lobbyists and vendors in the U.S. |
are once again singing the blues , calling for continued and expanding government investments inclean technology. At the same time, political challengers continuetheir Solyndra hootenanny , raking the current administration for how it spent hundreds ofmillions of taxpayer dollars. One can t help but wonder whether it s time for a different tunewhen it comes to government involvement in cleantech. Perhaps conversations about policy support should be less aboutgiving more taxpayer money to prop up the space, and more aboutelected officials setting long term market stability and enablingthe private sector to deploy capital to assume risk in cleantech. Why? First, some background Down with incentives Every time US tax credits for renewable energy development come upfor renewal, the cleantech sector cringes at having to once again play chicken with whichever administration is incumbent at thetime.
The U.S. Production Tax Credit (PTC), which provides a 2.2-cent perkilowatt-hour benefit for the first ten years of a renewable energyfacility's operation, was born in 1992. But it s had ahardscrabble life, clinging to life support after seven one andtwo-year extensions bestowed alternately by Republican andDemocratic Congresses. Neither major American party has beenwilling to show long term incentive support for renewable energy. The PTC for incremental hydro, wave and tidal energy, geothermal,MSW, and bioenergy was extended until the end of 2013.
But theproduction tax credit for wind expires at the end of 2012. Andthat s got wind lobby groups girding up. In a recent statement,American Wind Energy Association (AWEA) CEO Denise Bode cited astudy suggesting Congressional inaction on the PTC will kill 37,000 American jobs, shutter plants and cancel billionsof dollars in private investment . The same study suggested extending the wind PTC could allow the industry to grow to 100,000 jobs in just four years.
Expect this battle to simmer all summer. The unpredictability around cleantech incentives is taking itstoll. The US is hitting a brick wall with the cessation ofbenefits, remarked John Carson, CEO of Alterra Power, on thesubject at a recent cleantech investment conference I co-chaired in Toronto . He wasn t happy, and do you blame him? Nobody likes living handto mouth. But that s what happens when you rely on credits andincentives like the PTC or its loved and loathed counterpart in theU.S., the Investment Tax Credit (ITC).
And then there are the cleantech subsidies provided by the AmericanRecovery and Reinvestment Act of 2009 (ARRA), which are now windingdown. If it feels that clean technology vendors and lobbyists arespending an undue amount of energy and resources chasing suchsubsidies worldwide, they likely are. Up with mandates and standards Rather than funding and administering subsidies to help the cleanand green tech sectors find their footing, a case could be madethat governments should focus on passing aggressive policymandates, standards and codes. Instead of using taxpayer money to make technology bets, regionaland national governments could focus on passing laws, includingbroad brush stroke ones like the renewable portfolio standards inthe U.S. that mandate a certain percentage of power from renewablesources by certain dates, and then step back and let the privatesector figure out how to deliver.
Or mandate change moregranularly for example, that coal power plants need to meetcertain efficiency or emissions standards by certain dates, and,again, let the private sector figure out how. (Ironically, if therewere more public support to actually clean up coal power instead ofsimply disingenuously parroting, beginning in 2008, that there s no such thing as clean coal , throwing up our hands because environmental ads told us that clean coal doesn t exist today and that translated into political will and a mandate cleanercoal power could exist today. Yes, there d be a penalty on the nameplate capacityof plants output, but there d also be billions saved in healthcare costs. But we digress.) Taxpayers should take their politicians to task for trying to playventure capitalist, i.e.
by investing their money in trying to pickwinners (a la Solyndra) in complicated markets. Professionalventure capitalists themselves, who focus on their game full-time,barely pick one winner in 10 investments. Tomorrow I will discuss the drawbacks of incentives, whatgovernments can and should be doing, and cities as test beds ofpolicy innovation. A former managing director of the Cleantech Group, Dallas Kachan isnow managing partner of Kachan & Co. , a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto andVancouver.
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