US Government Cutting Energy Innovation in the Name of Jobs and Growth

Once again, it looks like progress towards energy efficiency and clean energy development is about to come up against a brick wall. This time that wall is ‘protecting against run-away discretionary spending and helping our economy grow and our businesses create jobs.’ At least that’s what we’re told.

The proposed Continuing Resolution (CR), the bill to fund the government through the end of the 2011 fiscal year, contains cuts that will seriously damage efforts to develop and expand the use of innovative clean energy technologies and energy efficiency.  These cuts will likely reduce U.S. growth in one of the fastest-growing global markets, while reaffirming our negligence in addressing climate change.   

The proposed cuts are far-reaching and deep.  The Department of Energy (DOE) loan guarantee program is in line to receive $1.4 billion less than requested in President’s Obama’s fiscal 2011 budget.  Federal spending on energy efficiency and renewable energy programs will be sliced by $899 million.  DOE’s Office of Science will loose $1.1 billion.  The Office of Electricity Delivery and Energy Reliability will be reduced by $49 million, and the Environmental Protection Agency’s Energy Star program will be cut by $7.4 million.

While it is true that the U.S. needs to address the ballooning deficit, it is hard to grasp how cutting many of these valuable programs will result in economic growth and job creation.  These programs have been instrumental in developing and deploying cutting-edge energy innovations such as battery energy storage and energy-saving window technology that would otherwise not have been able to secure the financial guarantees that are essential for bringing energy innovations to scale. 

Without federal investment or clear policy signals, clean energy technologies face a hesitant market that prefers the status-quo in energy generation, a status quo that is rapidly becoming increasingly unsustainable.  

For example, DOE’s loan guarantee program gives clean energy developers the assurance that if they are unable to repay a loan to a private lender the government will step in and repay the outstanding balance.  To date the program has given out 12 loan guarantees ranging from $16 million to Nordic Windpower USA for the expansion of its assembly plant for wind turbines, to a $1.4 billion loan guarantee to Nissan to produce electric cars and battery packs at its complex in Tennessee.  

According to estimates by the companies the DOE loan program has collectively helped create or save 50,000 jobs across the country.  Companies such as California-based BrightSource Energy, which was awarded a $1.37 billion loan guarantee for construction of the worlds largest solar electricity generating system in the Mojave Desert, will create 1,000 jobs and millions of dollars in employee wages for local communities through its project.

Loan programs such as these stimulate job growth because they provide a line of credit for the developer.  They also create financial certainty for the private investor.  This is important because clean energy technologies require large amounts of capital upfront and tend to take a longer time to develop due to regulatory barriers. 

Ask any investor and he or she will tell you that they look for certainty and stability to minimize the risks in capital-intensive unproven energy technologies.  Mark Fulton, managing director and global head of climate change investment research at Deutsche Bank, laid out the concerns of investors to Congress last year: “Investors need transparency to create understanding and a level-playing field.  Certainty refers to knowing that incentives are financeable and can be trusted in the financial return and are likely to be maintained over the course of the investment,” he said.

Without sufficient government programs to create certainty, private sector investment will be unreliable at best.  The DOE has estimated that taking $1.5 billion out of the loan guarantee program could prevent as much as $24 billion in private sector investment, which would directly impede economic growth and job creation in the U.S.  

DOE’s loan guarantee program is just one example of how federal spending on energy efficiency and clean energy programs helps stimulate investment and development, which results in local manufacturing and construction jobs.  The Office of Electricity Delivery and Energy Reliability works to modernize our national grid making it more efficient, secure and capable of handling new energy sources.  The Energy Star program is maybe the most recognizable of its kind, leading development and promotion of energy efficiency in household products, which saves consumers and small businesses money. 

As members of the U.S. congress seek to cut discretionary spending, they would be well advised to re-examine their line of thinking.  If job growth and long-term economic health are their priorities, then removing money from programs that create jobs and advance clean energy will not achieve the desired effect. 

Reducing spending in the areas of clean energy development and energy efficiency would have detrimental impacts both in the present and in the future as the U.S. seeks to remain a leader in the global economy, which is increasingly being driven by clean energy.

Nicholas Mann is a Legislative Assistant for the Energy and Environment with the Friends Committee on National Legislation in Washington, DC.


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