Top 10 Cleantech Subsidies and Policies (and the Biggest Losers) – Ranked By Impact

We all know energy is global, and as much policy driven as technology driven.

We have a quote, in energy, there are no disruptive technologies, just disruptive policies and economic shocks that make some technologies look disruptive after the fact.  In reality, there is disruptive technology in energy, it just takes a long long time.  And a lot of policy help.

We’ve ranked what we consider the seminal programs, policies and subsidies globally in cleantech that did the helping.  The industry makers.  We gave points for anchoring industries and market leading companies, points for catalyzing impact, points for “return on investment”, points for current market share, and causing fundamental shifts in scale, points for anchoring key technology development, points for industries that succeeded, points for industries with the brightest futures.  It ends heavy on solar, heavy on wind, heavy on ethanol.  No surprise, as that’s where the money’s come in.

1.  German PV Feed-in Tariff – More than anything else, allowed the scaling of the solar industry, built a home market and a home manufacturing base, and basically created the technology leader, First Solar.

2. Japanese Solar Rebate Program – The first big thing in solar, created the solar industry in the mid 90s, and anchored both the Japanese market, as well as the first generation of solar manufacturers.

3. California RPS – The anchor and pioneer renewable portfolio standard in the US, major driver of the first large scale, utility grade  wind and solar markets.

4. US Investment Tax Credit for Solar – Combined with the state renewable portfolio standards, created true grid scale solar.

5. Brazilian ethanol program – Do we really need to say why? Decades of concerted long term support created an industry, kept tens of billions in dollars domestic.  One half of the global biofuels industry.  And the cost leader.

6. US Corn ethanol combination of MTBE shift, blender’s, and import tariffs – Anchored the second largest global biofuels market, catalyzed the multi-billion explosion in venture capital into biofuels, and tens of billions into ethanol plants.  Obliterated the need for farm subsidies.  A cheap subsidy on a per unit basis compared to its impact holding down retail prices at the pump, and diverted billions of dollars from OPEC into the American heartland.

7. 11th 5 Year Plan  – Leads to Chinese leadership in global wind power production and solar manufacturing.  All we can say is, wow!  If we viewed these policies as having created more global technology leaders, or if success in solar was not so dominated by exports to markets created by other policies, and if wind was more pioneering and less fast follower, this rank could be an easy #1, so watch this space.

8. US Production Tax Credit – Anchored the US wind sector, the first major wind power market, and still #2.

9. California Solar Rebate Program & New Jersey SREC program – Taken together with the RPS’, two bulwarks of the only real solar markets created in the US yet.

10. EU Emission Trading Scheme and Kyoto Protocol Clean Development Mechanisms – Anchored finance for the Chinese wind sector, and $10s of Billions in investment in clean energy.  If the succeeding COPs had extended it, this would be an easy #1 or 2, as it is, barely makes the cut.


Honorable mention

Combination of US gas deregulations 20 years ago and US mineral rights ownership policy – as the only country where the citizens own the mineral rights under their land, there’s a reason fracking/directional drilling technology driving shale gas started here.  And a reason after 100 years the oil & gas industry still comes to the US for technology.  Shale gas in the US pays more in taxes than the US solar industry has in revenues.  But as old policies and with more indirect than direct causal effects, these fall to honorable mention.

Texas Power Deregulation – A huge anchor to wind power growth in the US.  There’s a reason Texas has so much wind power.  But without having catalyzed change in power across the nation, only makes honorable mention.

US DOE Solar Programs – A myriad of programs over decades, some that worked, some that didn’t.  Taken in aggregate, solar PV exists because of US government R&D support.

US CAFE standards – Still the major driver of automotive energy use globally, but most the shifts occurred before the “clean tech area”.

US Clean Air Act – Still the major driver of the environmental sector in industry, but most the shifts occurred before the “clean tech area”.

California product energy efficiency standards – Catalyzed massive shifts in product globally, but most the shifts occurred before the “clean tech area”.

Global lighting standards /regulations – Hard for us to highlight one, but as a group, just barely missed the cut, in part because lighting is a smaller portion of the energy bill than transport fuel or generation.


Biggest Flops

US Hydrogen Highway and myriad associated fuel cell R&D programs.  c. $1 Bil/year  in government R&D subsidies for lots of years,  and 10 years later maybe $500 mm / year worth of global product sales, and no profitable companies.

Italian, Greek, and Spanish Feed in Tariffs – Expensive me too copycats, made a lot of German, US, Japanese and Chinese and bankers rich, did not make a lasting impact on anything.

California AB-32 Cap and Trade – Late, slow, small underwhelming, instead of a lighthouse, an outlier.

REGGI – See AB 32

US DOE Loan Guarantee Program – Billion dollar boondoggle.  If it was about focusing investment to creating market leading companies, it didn’t.  If it was about creating jobs, the price per job is, well, it’s horrendous.

US Nuclear Energy Policy/Program – Decades, massive chunks of the DOE budget and no real technology advances so far in my lifetime?  Come on people.  Underperforming since the Berlin Wall fell at the least!


Ohio: Open for Advanced Energy Business

by Richard T. Stuebi

I’ve been waiting a long time to write this blog….

On May 1, Governor Ted Strickland signed into a law an energy bill SB 221, which includes an advanced energy portfolio standard (AEPS) that finally puts Ohio in the advanced energy game.

By 2025, 25% of electricity sold in Ohio must come from “advanced” energy sources, including renewable energy, fuel cells, clean coal powerplants, next-generation nuclear technologies, and energy efficiency. Of this 25%, half (or 12.5%) must come from renewables (primarily wind, solar and biomass), and 0.5% must come from solar energy. Additionally, half of the 25% is directed to come from generation sources located within the state of Ohio. And, by 2025, 22% energy reductions must be achieved by energy efficiency programs.

Critically, unlike previous drafts of the legislation, the energy bill as passed includes a gradual ramp-up of AEPS requirements, beginning as soon as the end of 2009. This means that the advanced energy industry in Ohio can begin to emerge right away, as utilities are required to meet AEPS requirements almost immediately. Also of importance, utilities are subject to penalties for AEPS non-compliance, known as “alternative compliance payments”, whose proceeds will be used to install advanced energy assets that otherwise should have been developed.

The only significant “out” for utilities is the existence of a so-called 3% price cap provision, in which utilities can ask the Public Utilities Commission of Ohio (PUCO) to allow less/later compliance with the AEPS requirements if they can prove that full compliance would increase the costs of wholesale power supply acquisition by more than 3%. Obviously, this will be an area of contention, requiring vigorous and diligent intervention at the PUCO to ensure that the analyses and assumptions used by utilities cannot spuriously claim a significant cost increase associated with advanced energy so as to evade compliance with AEPS requirements. It will be incumbent on those of us promoting an advanced energy industry in Ohio to keep these evaluations honest. Obviously, advanced energy advocates would have preferred no price cap provision, or a provision that was worded more favorably. That said, if the 3% price test is applied fairly, the advanced energy industry is confident that it can work with the language that was ultimately adopted.

Significant pre-existing limitations on “net metering” – the ability for customers to install their own power generation source and sell excess generation back to the grid – were alleviated. This should greatly improve the economics of deploying solar energy, fuel cells, and other forms of so-called “distributed generation” technologies in Ohio.

My colleagues from the legal firm Bricker & Eckler have prepared summaries that provide an excellent overview with more detail on SB 221.

In short, the law represents a major step forward for advanced energy policy in Ohio, and will create a substantial market for advanced energy technologies in our state, thereby helping us build this important industry here. The law does not contain everything we would have wanted, and not all of the wording is exactly as we would have liked, for the interests of advanced energy, I’d score this bill at least a 7 and maybe an 8 on a scale of 1 (poor) to 10 (excellent).

With this law passed, Ohio will now be solidly on the advanced energy map. Advanced energy companies of the world, take heed: Ohio is now open for business. Ohio will be one of the largest regional markets in the U.S. for renewables, which will surely attract the attention of the renewable energy manufacturers and installers to set up operations here, employ people here, and pay taxes here.

The list of people to thank for their contributions towards the passage of this critical legislation for the economic revitalization of Ohio is too long for a short note, but must include the following:

Governor Ted Strickland for firmly inserting the AEPS concept into the energy debates last summer.
The Governor’s Energy Advisor Mark Shanahan and his staff (especially Michael Jung) for insisting that the AEPS could not be jettisoned from the deliberations about overall electricity markets and regulation.
House Speaker Jon Husted for strengthening most of the AEPS provisions that found their way into the final bill.
House Public Utilities Committee Chairman John Hagan and House Alternative Energy Committee Chairman Jim McGregor for holding many hearings on advanced energy topics to ensure that the final bill would be drafted soundly.
Senate President Bill Harris for leading his Senate colleagues to concur unanimously with the bill passed by the House.
Erin Bowser and Amy Gomberg of Environment Ohio for their diligent work in educating lawmakers on the importance of a strong AEPS policy in Ohio.
Terrence O’Donnell of Bricker & Eckler and the members of Ohio Advanced Energy (especially Norm Johnston of McMaster Energy) for expressing the voice of Ohio businesses who see advanced energy as a huge growth opportunity – if Columbus legislators would only create a favorable market environment.
Hans Detweiler of the American Wind Energy Association and Colin Murchie of SunEdison for compellingly portraying the views of the national wind and solar industries and their interests in Ohio – if good policy were to be instituted.
Jack Shaner of the Ohio Environmental Council and Janine Migden-Ostrander and staff of the Ohio Consumers’ Counsel for their tireless advocacy to promote strong energy efficiency standards in the final bill.
Gene Krebs of Greater Ohio for, well, being Gene Krebs: advising anyone who cared to listen on how to navigate the byzantine processes of the Ohio Statehouse, with good humor to boot.
Juanita Haydel and Kamala Jayaraman of ICF Incorporated for producing an excellent analysis of the potential impact of AEPS policy on electricity prices in Ohio.
Ronn Richard, J.T. Mullen, and Bob Eckardt and the grantmaking staff (especially John Mitterholzer) of The Cleveland Foundation for providing me enough latitude to assist in these various efforts in Columbus, and for providing some financial support to some of them too.
Due Amici in Columbus for providing an excellent location for an end-of-day debrief over cocktails – and for serving the cocktails too. (Alas, not gratis.)

Now that the bill is law, the first half of the game is over, and we’re ahead at halftime. The second half of the game will be played at the PUCO, where the intentions of the lawmakers must be codified into fair and workable rules and procedures that cause the advanced energy industry in Ohio to actually come into being. So while this law is essential, in many ways, it is just the beginning. Expect many months, and perhaps years, of activity before the details are fully sorted out in the PUCO.

As I wrote in an editorial in last week’s Crain’s Cleveland Business, the advanced energy community will need to maintain a high level of activity at the PUCO to protect the interests of building this new industry to revitalize Ohio. We’ll be there.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.