Somewhere between invention and commercialization, there's a desolate place where new technologies go to die alone. It's called the Valley of Death, and it's littered with the decaying corpses of technologies that never get to realize their potential.

Aside from the lack of long-term policy support, The Valley of Death is the single biggest threat to the progress of the renewable energy industry. This is the place where a technology is too capital intensive for a venture capital firm to continue investing, but too risky for a project financier to bring it to scale.

The trend is particularly bad in the immature-but-capital-hungry cellulosic ethanol, concentrating solar power and waste-to-energy sectors.

“Until we close this gap, we won't be able to identify the technologies that will allow renewables to take a quantum leap,” says Eliot Jamison, the author of a new report examining the problem. ::continue::

In June, two reports were issued on the Valley of Death at the same time. One was from Jamison's organization, the California Clean Energy Fund. The other was put together by Bloomberg New Energy Finance and the Clean Energy Group. Both reports came to the same conclusion: Without bridging the Valley, the renewable energy industry won't innovate fast enough to consistently compete with conventional energies.

The reports were released at last week's Renewable Energy Finance Forum in New York City.

After consecutive years of high growth, renewables are facing an uphill battle. The sluggish economy, low fossil energy prices and the absence of a strong federal policy in favor of clean energy are reducing demand for renewable fuels and electricity. The current generation of technologies – while still dropping in cost and price – are becoming less competitive in some markets.

And with large reserves of shale gas being tapped in the U.S., natural gas prices will likely stay low for many years to come. The renewable energy industry has to be able to compete with steadily low natural gas prices. In order to do that, companies need to work overtime to bring the next generation of technologies to market.

Everyone in the industry talks about the need to innovate – to focus on R&D and drive down the cost of renewables. The problem is, most firms that are financing projects don't want to touch a new technology until it's been proven in the marketplace. Because many of them are investing money from pension funds, university endowments and state-worker retirement accounts, they are simply not set up to make such risky investments. Utilities don't want to be guinea pigs for new technologies either.

“The people who have the capital for large-scale asset-based project financing are not structured...to take substantial amounts of technology risk,” says CalCEF's Jamison.

So what is a fledgling industry based on technological innovation to do?

While both reports on the Valley of Death were written independently, they came to the same conclusions about how to fix the problem. There are dozens of possible solutions, but three stood out.

The first is a Reverse Auction Mechanism for emerging technologies. A state government could set up a program specifically for early-stage technologies, in which developers bid for long-term, fixed-price contracts supported either by ratepayers or a public body. The program would be capped at a certain level in order to control the amount of risk utilities take on. It's kind of like a feed-in tariff, with rates dictated by the bids.

The second solution borrows from the playbook of the insurance industry. With the backing of the government, commercial insurers could agree to back emerging energy technologies. This “efficacy insurance” is similar to programs found in areas with high flood or earthquake risk. With support of the government, these insurance companies only need to pay out so much when something catastrophic happens.

The third solution, called the Clean Energy Deployment Agency, is similar to a loan-guarantee program. This is a federal public-private investment fund designed to finance projects with debt, loan guarantees or even equity. This initiative is currently being considered in Congress. (And if lawmakers are serious about creating a clean energy future, they would be wise to pass it).

These are not the only solutions. Nor are they designed to work alone. In order to build a sturdy bridge across the Valley of Death, we need implement a variety of bold, creative ideas, says Ken Locklin of the Clean Energy Group.

“This is not a challenge that is addressed with a single effort,” he says. “You have to be able to tackle it in an institutional way.”

Here in the U.S., we are great at innovating. We often take bold steps to incubate early stage technologies. But we still haven't created a framework that will help us realize the benefits of that risk taking. Without addressing the problem head-on, too many technologies will be left to rot on the lonely, dusty road through the Valley of Death.