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How About A Sane Energy Policy Mr. Obamney?

It’s Presidential Election year.  Ergo, time to discuss our 40 year whacked out excuse for an energy policy.  Royally botched up by every President since, umm?

Objectives:

Make US energy supply cheap for the US consumer and industry, fast growing and profitable for the American energy sector, clean, widely available and reliable, and secure, diversified, environmentally friendly and safe for all of us.

or

Cheap, Clean, Reliable, Secure, Energy

 

An Energy Policy that leaves us more efficient than our competitors

An Energy Policy that leaves us with more and more diversified, supply than our competitors

An Energy Policy that leaves us more reliable than our competitors

An Energy Policy that makes us healthier and cleaner than our competitors

An Energy Policy that makes us able to develop adopt new technologies faster than our competitors

An Energy Policy that makes it easy for industry to sell technology, energy, and raw materials to our competitors

An Energy Policy that keeps $ home.

A Sane Energy policy

 

Think more drilling, less regulation on supply, lower tariffs, more investment in R&D, tighter CAFE and energy efficiency standards, simpler and larger subsidies for new technologies, less regulation on infrastructure project development.

 

A couple of key action items:

  • Support the development of new marginal options for fuel supply, and support options that improve balance of payments, whether EVs ethanol, solar et al
  • Make crude oil, refined products, Gas, LNG and coal easy to import and export
  • Drive energy efficiency like a wedge deep in our economy
  • Support expansion and modernization of gas, electric, and transport infrastructure
  • Support long term R&D in both oil & gas, electric power, and renewables
  • Reduce time to develop and bring online new projects of any type (yes that means pipelines, solar and wind plants, offshore drilling, fracking and transmission lines).
  • Support policies and technology that enable  linking of energy markets
  • Challenge the OPEC cartel like we do EVERY OTHER cartel and break the back of our supply contraints
  • Support the export of our energy industry engineering, services and manufacturing  sectors overseas
  • Incorporate energy access into the core of our trade policy
  • Support deregulation of power markets
  • Support long term improvement in environmental and safety standards
  • Broadly support significant per unit market subsidies for alternatives like PV, wind, biofuels, fracking as they approach competitiveness

Or we could do it the other way:

  • Leave ourselves locked into single sources of supply in a screwy regulated market that involves sending massive checks to countries who’s governments don’t like us because that’s the way we did it in the 50s?
  • Keep massive direct subsidies to darling sectors so the darling sectors can fight each other to keep their subsidies instead of cutting costs?
  • Keep a mashup of state and federal regulatory, carbon and environmental standards making it virtually impossible to change infrastructure when new technology comes around?
  • Promote deregulation in Texas, and screw the consumer in every other market?
  • Every time there’s a crisis, we can shoot the industry messenger in the head, stop work, and subsidize something.
  • Continue the Cold War policy of appeasing OPEC so they can keep us under their thumb for another 30 years
  • And drop a few billion here and there on pet pork projects

Come on guys, stop the politics, let’s get something rational going.  Oh wait, it’s an election year.  Damn.

And in the meantime how about making energy taxes (a MASSIVE chunk of your gasoline and power prices) variable, so they go DOWN when prices go up.  Then at least the government’s pocket book has an incentive to control cost, even if they’re incompetent at putting together a policy that does so.

Rethinking the Role of Government in Cleantech

Another year, another wringing of the hands over tax credits and incentives for clean technology.

Lobbyists and vendors in the U.S. are once again singing the blues, calling for continued and expanding government investments in clean technology. At the same time, political challengers continue their Solyndra hootenanny, raking the current administration for how it spent hundreds of millions of taxpayer dollars.

One can’t help but wonder whether it’s time for a different tune when it comes to government involvement in cleantech.

Perhaps conversations about policy support should be less about giving more taxpayer money to prop up the space, and more about elected officials setting long term market stability and enabling the private sector to deploy capital to assume risk in cleantech.

Why? First, some background…

Down with incentives
Every time U.S. tax credits for renewable energy development come up for renewal, the cleantech sector cringes at having to once again “play chicken” with whichever administration is incumbent at the time.

The U.S. Production Tax Credit (PTC), which provides a 2.2-cent per kilowatt-hour benefit for the first ten years of a renewable energy facility’s operation, was born in 1992. But it’s had a hardscrabble life, clinging to life support after seven one and two-year extensions bestowed alternately by Republican and Democratic Congresses. Neither major American party has been willing 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 the production tax credit for wind expires at the end of 2012. And that’s got wind lobby groups girding up. In a recent statement, American Wind Energy Association (AWEA) CEO Denise Bode cited a study suggesting Congressional inaction on the PTC “will kill 37,000 American jobs, shutter plants and cancel billions of 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 its toll. “The U.S. is hitting a brick wall with the cessation of benefits,” remarked John Carson, CEO of Alterra Power, on the subject at a recent cleantech investment conference I co-chaired in Toronto. He wasn’t happy, and do you blame him? Nobody likes living hand to mouth. But that’s what happens when you rely on credits and incentives like the PTC or its loved and loathed counterpart in the U.S., the Investment Tax Credit (ITC).

And then there are the cleantech subsidies provided by the American Recovery and Reinvestment Act of 2009 (ARRA), which are now winding down.

If it feels that clean technology vendors and lobbyists are spending an undue amount of energy and resources chasing such subsidies worldwide, they likely are.

Up with mandates and standards
Rather than funding and administering subsidies to help the clean and green tech sectors find their footing, a case could be made that governments should focus on passing aggressive policy mandates, standards and codes.

Instead of using taxpayer money to make technology bets, regional and national governments could focus on passing laws, including broad brush stroke ones like the renewable portfolio standards in the U.S. that mandate a certain percentage of power from renewable sources by certain dates, and then step back and let the private sector figure out how to deliver. Or mandate change more granularly—for example, that coal power plants need to meet certain efficiency or emissions standards by certain dates, and, again, let the private sector figure out how. (Ironically, if there were more public support to actually clean up coal power instead of simply disingenuously parroting, beginning in 2008, that “there’s no such thing as clean coal” and throwing up our hands because environmental ads told us “clean coal doesn’t exist today”—and if that translated into political will and a mandate—cleaner coal power could exist today. Yes, there’d be a penalty on the nameplate capacity of plants’ output, but there’d also be billions saved in health care costs. But we digress.)

Taxpayers should take their politicians to task for trying to play venture capitalist, i.e. by investing their money in trying to pick winners (a la Solyndra) in complicated markets. Professional venture capitalists themselves, who focus on their game full-time, barely pick one winner in 10 investments.

Drawbacks of incentives
How could government grants, loans, tax credits and other subsidies possibly be bad in cleantech? Free money is good, right? Here’s a list of drawbacks to these incentives, some of them not as obvious as others:

  • They can go away and cause market disruption – to wit, the points earlier in this article.
  • The existence of loans and grants silences critics – Few speak out against pots of free money, because they might want or need to dip into them in the future.
  • Incentives favor only those willing to apply for them – and therefore are often missed by companies working on disruptive, fast-moving tech, or who are focused on taking care of customers’ needs.
  • Criteria are often too narrowly defined – Criteria for incentives often favor certain technology (solar photovoltaic over other solar, or ethanol over other biofuels), and as a result, lock out other legitimate but different approaches.
  • Picking winners means designating losers – Recipients of government grants or loan guarantees get capital and an associated halo of being an anointed company. Those that don’t are comparatively disadvantaged.
  • Not the best track record – Incentives go to companies best staffed to apply for and lobby for them. And those aren’t necessarily the companies that could use the capital the most effectively, e.g. to compete in world markets, or create the most jobs.

What governments could and should be doing
In the cleantech research and consulting we do worldwide at Kachan & Co., we’ve come to believe that governments are best focused on activities to create large and sustained markets for clean technology products and services.

Doing so gives assurance to private investors that there will be continued demand for their investments—one of the most important prerequisites to get venture capital, limited partners and other institutional investors to write large checks.

Given that objective, governments should, in our opinion, pursue:

  • Setting mandates and standards – e.g. the amount of power generated from renewable sources, new targets for fuel efficiency, green building or other dimensions.
  • Improving codes and other regulations – making building codes more stringent could drive energy efficiency, green building and smart grid investment.
  • Building the talent pool
  • Stabilizing the economy
  • Fostering political stability
  • Commitment to infrastructure projects – including water, transportation and grid.
  • Building showcase projects – regions wanting to foster local cleantech can do as Abu Dhabi has done with itsMasdar initiativeas Saudi Arabia is now doing with solar, or as China has done with hundreds of green development zones; in doing so, all three of these countries have sent strong signals to large corporations and investors that they view clean technology as strategic.
  • Rolling back so-called perverse government subsidy support today of the fossil fuel industry, including direct and indirect subsidies.

Cities as test beds of policy innovation
Interestingly, cities are emerging as petri dishes of progressive cleantech policy, and are increasingly where such innovation is taking place.

For instance, Barcelona has established that large companies need to create as much as 30% of their power from solar thermal technologies. The city of Berkeley, California pioneered what is now known as Property Assessed Clean Energy (PACE) financing, wherein property owners are able to pay for energy efficiency and renewable energy improvements on their property taxes. This month, Phoenix, Arizona introduced what it calls the largest city-sponsored residential solar financing program in the U.S. And New York City is taking the lead in residential demand response by trialing a program to curtail the consumption of 10,000 room air conditioners at times of high demand.

Given the world’s current financial malaise, and especially in light the Occupy momentum globally, I’m surprised more folks aren’t questioning how their governments spend their money in cleantech. Because, as described above, there are other arguably more effective ways elected officials can help usher in a cleaner, greener future than throwing around billions in incentives.

After all, how much fun would a pristine planet be if we’re all destitute because governments have crumbled under crushing debt?

This article was originally published here. Reposted by permission.

 

A former managing director of the Cleantech Group, Dallas Kachan is now managing partner of Kachan & Co., a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto and Vancouver. The company publishes research on clean technology companies and future trends, offers consulting services to large corporations, governments and cleantech vendors, and connects cleantech companies with investors through its Hello Cleantech™ programs. Kachan staff have been covering, publishing about and helping propel clean technology since 2006. Details at www.kachan.com. Dallas is also executive director of the Clean Mining Alliance.

APEC Aftermath – 2 steps forward or 1 step back?

by Nick Bruse

Well, its been a big week here in Australia terms of both international and domestic politics with the ending of the APEC summit and the recent pre-election opinion polls being released today showing a further drop in support for John Howard’s re-election.

The papers here are wrapping up on the outcomes of the APEC summit, and the biggest aspect being reported about is the decisions or lack of specific decisions made around Climate Change.
Those in the community who were wanting specific targets set or caps agreed to had to go home disappointed, and its been quoted that perhaps their expectations where too high for this event.
Ive taken a few of the comments from the press and added my own thoughts to this. Here’s the link to the full Sydney Declaration on Climate Change and Energy

1. Each country has agreed that climate change is a problem and needs to be addressed. This builds momentum before a series of international meetings on climate change being hosted by the US later this month and the next UN climate meeting in Bali in December.

Well its nice to get a stake in the ground…only took 10 years plus of hammering.

2. The declaration sets out tangible responses on protecting forests and improving energy technology. Australia has offered $30m to an Indonesian forestry initiative to prevent deforestation. With the goal of increasing forest cover in the region by at least 20 million hectares of all types of forests by 2020.

Deforestation is probably one of the most critical issues in terms of loss of habitat, because once its gone it takes a significant period to return to its original state. Also with climate change putting pressures on habitats, the removal of migration corridors means that when a habitat changes, species are unable to move which increases the possibility of extinctions.
But are we trying to continue Australia’s historic approach to emissions reduction by advising our neighbours to do the same? My concern here is that Australia has stabilised most of its emissions since 1990 through a reduction in land clearing, not through industry action.

3. We also saw the increasing negotiations regarding the US led global nuclear energy partnership which which aims to expand the safe use of nuclear technology.

What can you say, of course this is going to continue, its all to obvious when Australia has rich supplies in uranium, big business and governments that will benefit from the rewards and you probably need less than a 100 lines of excel spreadsheet to model the economic model. But can you blame a government that sees in the next 20 years the cost of providing healthcare to an aging population, paying for infrastructure and and keeping those budget surpluses do anything different?

4. Other positives were that the goals are to reduce energy intensity by at least 25 percent by 2030 from the 2005 level.

This is certainly a step in the right direction, but probably no where near enough what is required. Take for instance the built environment. In a recent study by Deacon University in Australia, they determined over a 3 year study that the built environment demands 40-50% of global energy, consumes 40% of non-renewable resources, generates 40% of landfill waste and uses 30% of fresh water reserves. The good news, 33% of energy related CO2 emissions are generated by energy use, 29% of that can be cut by existing tech by 2020 (new scientist August) . So there’s a 10% reduction right there, by 2020, and most of these initiatives can be done with paybacks of around 2-5 years.

I was recently down in Launceston, Tasmania, presenting at the Australian Direct Property Group with my colleagues from Thinc Projects on achieving sustainability in the property industry. Most of the activity in the sector around green building is not being driven by the government, but by business now wanting to be seen as being green, and investors and tenants driving the process. So lets hope that government in the coming months can step up to the plate more with assistance and stronger policy in this area.

In all of this, and its outside the scope of today’s blog but its probably worthwhile to step through if you have some time and do your own checking of the declaration against the stabilisation wedges and see what progress is being made. See if you can map out how far we have managed to get from these talks towards the required solutions.


Nick Bruse is runs Strike Consulting, a growth venture consultancy specialising in the cleantech sector and hosts The Cleantech Show, a weekly podcast of interviews with leaders involved in clean technology research, entrepreneurship, commentary and investment.

Asia Pacific Partnership (APP/AP6) commentary

by Nick Bruse

Today I and a small group of people in Melbourne attended a briefing by the Business Council of Sustainable Energy and the Australian Greenhouse office on the Asia Pacific Partnership (APP) on Clean Development. This initiative was established in early 2006 by Australia, Korea, China, India, Japan and the United States.

The APP was proposed by the then Australian Minister for the Environment Senator Ian Campbell on behalf of the Australian Government as an alternative to Kyoto. This gaff was quickly amended by the Prime Minister John Howard to the statement that it presented an complimentary approach and provided a technological pathway to the worlds climate and emissions problems.

Now, 15 months on the APP has only achieved limited levels of success in providing an alternative pathway to achieving emissions reductions and in my view will not be an initiative that will achieve significant reductions in emissions.

Having said that, I do believe that the APP plays an important roll in addressing how governments and industry can work together to address technology transfer and the co-operation issues required to improve the deployment of clean technologies around the world.

The APP consists of 8 taskforces namely:

  • Clean Fossil Energy
  • Renewable Energy and Distributed Generation
  • Power Generation and Transmission
  • Steel
  • Aluminium
  • Cement
  • Coal Mining
  • Building and Appliances

The main failing that i see of the APP is firstly the limited amount of actual funding being placed into the initiative, and secondly the reluctance of the comprising tasksforces to commit to any specific targets. To date the Australian Government should be praised for having already committed A$100m over 5 years, whilst the United states is still going through approvals to provide $26m.

Of the funds committed the Australian Government has placed around $60m into projects already, around $17.5m in renewable energy projects. However when compared to the amount of funding being sunk into clean technology companies, or the capitalization of the carbon market, its a paltry sum.

When examining the goals of the RE and DG taskforce the first thing that jumps out at you is that they are not SMART (Specific, Measurable, Attainable, Realistic and Timely). The 3 goals of the taskforce are:

  1. To accelerate the development of renewable energy and distributed generation over 5 years
  2. To close the remaining gap between the cost of renewable generation and conventional generation
  3. To identify market and policy barriers and implement mechanisms to overcome such barriers to enable partners to achieve their deployment goals

According to John Lende, the Director of RE Partnerships as part of the RE & DG taskforce, it has been a struggle to achieve a level of consensus on such phrases of “5 years”, and members would have preferred a less defined target. In my mind i would question how well you can actually measure the progress achieve according to these goals.

The RE & DG taskforce however has achieved some initial progress in their 3rd meeting in March 2007 in San Diego including the development of 3 new proposals to:

  • Reduce tarrifs on RE technology
  • Develop a level of commonality of framework on emissions trading
  • Improve issues of Intellectual Property rights

All these project i think should be praised as they are essential for supporting clean technology deployment.

My main concern is that the APP by itself will never achieve emissions reductions because it is fundamentally flawed such that it sidelines political will to set targets for emissions reductions, or specific targets for technology adoptions nor implements any sort of market mechanism to price carbon. Our problem today is not that we lack the technologies to start reducing emissions, but we lack political will to affect the change rapidly.

If only we had the luxury that all governments were in agreement to implement across the board emissions reduction programs, and all we had to do was solve were a few issues of cross board technology migration.

For more information on the APP you can access the Australian Government website at www.ap6.gov.au.



Nick Bruse runs Strike Consulting, a growth venture consultancy specialising in the cleantech sector and hosts the cleantech show, a weekly podcast of interviews with leaders involved in clean technology research, entrepreneurship, commentary and investment.