By Margaret M. Welsh and Michael D. Stein
During President Obama’s 2012 State of the Union Address—An America Built to Last, Mr. President addressed the need for continued federal investments in clean energy technologies in the United States. He alluded to the infamous Solyndra loan controversy by declaring:
[P]ayoffs on these public investments don’t always come right away. Some technologies don’t pan out; some companies fail. But I will not walk away from the promise of clean energy. . . . I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here.
As most people know by now, Solyndra, a solar energy start-up, received $535 million in loan guarantees from the federal government. On September 1, 2011, Solyndra declared bankruptcy. One reason speculated for Solyndra’s failure was the decrease in price and market infiltration from China of a solar panel technology not manufactured by Solyndra.
Solyndra’s failure raises larger concerns about the U.S.’s ability to compete with foreign countries for clean technology market share. In fact, studies have shown that China’s market share of the world’s solar cells have increased from six percent in 2005 to more than fifty percent today. The U.S.’s drop in market share of world solar cells to five percent rightfully concerns energy policy leaders because the solar power industry is expected to produce a quarter of the world’s electricity within four decades. This could lead to about $3 trillion in lost opportunities to manufacture domestic solar panels if theU.S.cannot remain competitive with foreign countries.
In Mr. President’s State of the Union Address, he analogized the long-term federal investment and the recent decreased price in natural gas to the clean technology industry. He suggested that similar long-term government support would help to keep America’s clean technology industry competing with foreign countries.
And by the way, it was public research dollars, over the course of thirty years that helped develop the technologies to extract all this natural gas out of shale rock—reminding us that Government support is critical in helping businesses get new energy ideas off the ground.
While natural gas extraction from shale (including practices of hydraulic fracturing) remains controversial, currently the U.S. is one of the world’s largest natural gas suppliers. In addition, the price of natural gas in the U.S. has dropped to $3 dollars per thousand cubic feet compared to approximately $13 dollars per thousand cubic feet in 2008.
Proponents of federal funding for renewable energy investments argue that similar long-term funding is needed to remain competitive with foreign companies. It is no coincidence thatChina’s solar cell market share increased after the Chinese government extended a $30 billion line of credit to domestic solar manufacturers. In addition, proponents suggest that incentives are needed to attract solar manufacturers to the United States. Without incentives and federal investments, solar companies might build plants in other foreign countries like Germany and China which often provide tax, finance, and construction support. Further, they suggest that one company’s failure should not taint the federal loan guarantees for clean technology companies, such as it did with SolarCity where the Department of Energy withdrew its $275 million loan guarantee in September 2011.
However, critics are skeptical that federal renewable investments will be beneficial long-term. Not only will the U.S. potentially not match the federal support of other countries, but they suggest that the renewable energy industry cannot compete with the natural gas industry in the United States. Skeptics argue that the long-term federal investment in natural gas that Mr. President noted in his State of the Union Address might have actually decreased the price of natural gas to a point where the financial incentives to invest in renewables have dwindled.
Thus, President Obama’s State of the Union raised an interesting paradox. Will the domestic renewable energy industry benefit in the same way as the natural gas industry from federal investments or has previous federal funding in the natural gas industry reduced the incentives to invest in renewable energy? We don’t have an answer for this question today. But, if the global clean technology industry continues to grow as expected, energy policy leaders in the U.S. are right to try to find some way to throw America’s hat in the rink to compete for trillions of dollars in market share.
Stay tuned for more blog posts on this issue and other renewable energy law topics.
Juliet Eilperin, Why the Clean Tech Boom Went Bust, Wired, Jan. 20, 2012, http://www.wired.com/magazine/2012/01/ff_solyndra/all/1.
Andy Kerr, Solyndra & the Fate of Clean-Energy Loans, Home Power, Feb.–Mar. 2012, at 14–15, http://www.homepower.com/article/?file=HP147_pg14_NewsandNotes.
Key Facts: Solyndra Solar, U.S. Dep’t of Energy, http://energy.gov/key-facts-solyndra-solar (last visited Jan. 27, 2012).