Funding for clean tech is plummeting. But there may be a way to get the industry on a path toward total independence from government.
Last year, the clean tech industry was on a roll. Solar was booming. Wind was expanding. Electric cars were rolling out onto the street. Regular cars were starting to use gas more efficiently. Biofuel companies were edging away from corn.
That success was in large part due to the support the federal government had thrown behind clean tech. The federal government is set to spend $150.8 billion on clean tech from 2009 to 2014, three times as much as it threw the sector between 2002 and 2008, according to a new report from a triad of think tanks. But that money is going away. Funding this year is at $16.1 billion, down from $44.3 billion in 2009, and is on pace to dwindle to next to nothing. Here’s the dramatic visual, courtesy of the report from the Brooking Institution, World Resources Institute and The Breakthrough Institute:
Even without considering stimulus spending, federal funding for clean tech is being cut almost in half —47 percent—between last year and this one. And it’s on pace to plummet even further in the next couple of years.
“You see this broad reset of federal policy towards clean tech,” says Mark Muro, a senior fellow at the Brookings Institute. Without further action from Washington, an array of programs that have been supporting the sector are going to disappear. Many of these programs are simply expiring, but it’s more difficult for politicians to renew these programs after the political hammering the solar industry took over Solyndra, for example.
Without these government supports, the boom in clean tech will slow down, then shrivel to nothing. That's already happened in the wind industry: Installation of wind farms dipped when subsidies dried up, and industry experts are predicting that same pattern will hold next year, with the amount of new wind energy dropping to a quarter of 2012 levels.
The good news, the report concludes, is that there is a way for clean tech to wriggle free from this cycle of booms and busts tied to the whims of the federal government. The authors suggest moving toward policies that won’t just ensure clean tech projects get built, but will help ensure they’re getting cheaper and more effective.
One proposal is to draw down federal subsidies for clean tech projects they inch closer to competing on price alone. But to motivate the industry to work hard to make the technology cheaper, they also suggest eliminating subsidies from technologies that can’t cut costs and may never be able to compete on their own.
Rethinking how the government underwrites specific projects is just one piece of their plan, though: The authors also call for increasing government support for innovative research and for competitive grants to regional technology clusters. “Deployment policy alone doesn't get you a domestic sector that's internationally competitive,” says Letha Tawney, a senior associate at WRI, pointing out that wountries we think of as clean tech behemoths, like China and Germany, are also supporting innovation within the industry to spur growth. “You need to have both pieces working in tandem in order to accomplish that."
The end goal is to allow wind and solar to compete with natural gas—or electric cars with gas-powered ones—without the need for any government support. These technologies can’t stand on their own quite yet, which isn’t surprising: Wind and solar are competing against the oil and gas industry, which has enjoyed years of support for developing innovative technologies and infrastructure, while biofuels and electric vehicles are going up against a transportation system that’s centered on gas-powered cars for decades.
“There's an awful lot of fossil fuel support that needs to be reckoned with as well,” says Muro, the Brookings fellow. “Dozens and dozens and dozens of years of subsidy investments do suggest we have an unlevel playing field.”
There’s little worry that the oil or gas or coal industry would fall behind in the absence of government support. Without some sort of rethinking of the relationship to government funding, that's a real risk for clean tech.