By Peter Madden and Polly Ghazi
The wind of change is sweeping America – literally. Take Texas. Synonymous with the nation’s oil boom era, for the past century its wealth has been powered by gushing geysers and giant oil companies. But green gold is now competing with black, as Texas establishes itself as a powerhouse of wind energy.
And the Lone Star State is not alone. During 2008, the US wind industry almost doubled in size, reaching 25,369MW, and passing Germany as the world leader. Across 30 states, from heartland Minnesota, Iowa and Kansas to the crowded northeast seaboard, giant wind farms are becoming an accepted part of the landscape.
Nor does this clean energy revolution end with wind. America’s solar power sector has tripled in size since 2000. And with a dozen large concentrating solar power (CSP) plants under construction around the country, the industry aims to provide half of all new electricity generation by 2025.
Investors, meanwhile, are betting on a cleantech future. Bucking the recession, venture capital investments in cleantech soared to a record $7.6 billion in 2008, double the 2007 tally, with solar and algae-based biofuels among the big winners. “Only a few years ago, cleantech was barely a sector at all,” says Joel Makower, Editor of GreenBiz.com, in The State of Green Business 2009 report. “Now it represents 20% of the entire venture capital asset class.”
It’s not just start-ups and VCs. Some of the country’s household name corporations are also jumping on the bandwagon. General Electric is now the biggest wind turbine manufacturer in the US, and the fifth biggest worldwide. Duke Energy, a Fortune 500 coal company which has not exactly been the darling of the green movement in the past, has built nine wind farms around the country and is planning more. And the likes of Ford, General Motors and Chrysler are racing to produce the first mass market electric cars [see ‘Spark plug’]. All of a sudden, corporate America seems to be surging towards a new frontier of innovation.
So just what is generating all this enthusiasm? Can it reach critical mass? And does President Obama’s outspoken advocacy of clean energy and climate action really mean America is poised to lead the world down the sunrise path?
The first question is easiest to answer. The relentless rise of concerns over energy security, peak oil and looming carbon curbs, means cleantech is both smart business and smart policy.
Many of America’s leading corporations now see a clean energy future as inevitable – and they want to be sure to have a share in it. Take the list of companies supporting a ‘cap and trade’ approach to regulating carbon. It reads like a litany of corporate America: GE, Dow Chemical, Duke Energy, Shell, BP America, Ford, General Motors… They have lined up alongside the green lobby in a titanic PR battle with the coal industry and the Republican Party, who claim a carbon cap will cost jobs and raise energy bills.
A second ingredient feeding green industry growth has been the steady trickle of action at state level. In the absence of federal leadership under President Bush, many states quietly took steps to facilitate cleantech development, drawn by its potential to generate jobs and reduce fossil fuel dependence. They typically did so through a mix of carrots (tax breaks, and grants for energy efficiency and clean energy projects) and sticks (mandatory targets for renewable generation, and regional cap and trade programmes). Now such efforts are starting to bear fruit.
In Massachusetts, for example. Here, a solar rebate programme launched a year ago is pouring $22 million into 539 new photovoltaic projects. Combined with a Green Jobs Act, which provides taxpayer funding for R&D, business start-ups and workforce development, this has spurred a quadrupling in statewide solar installation contractors – from less than 50 a year ago to nearly 200 today. One company, Evergreen Solar, has taken on 700 new staff alone. Massachusetts has now set itself a target of becoming a green industries hub, with 250MW of solar generation by 2017 and 2,000MW of installed wind power capacity by 2020 – up from a mere 7MW at present.
Philip Giudice, Commissioner for the state’s Department of Energy Resources, makes it all sound very simple. “We created market opportunities, and companies responded. Some are regular electrical contractors who expanded their business model [to include solar or wind]. Others are contractors that used to build people’s porches and now also install solar panels. It’s the natural evolution of emerging markets, and it’s very exciting.”
A third key factor powering America’s green enthusiasm is long overdue federal action, boosted by Obama’s characteristic clarion call to action. “The choice we face is not between saving our environment and saving our economy”, he said. “It’s a choice between prosperity and decline. The nation that leads the world in creating new sources of clean energy will be the nation that leads the 21st century global economy.”
Fighting talk, which prodded Congress into allocating $112 billion of economic stimulus spending to green programmes (compared with a meagre $2 billion spent by Britain). By 2017, nearly $20 billion in tax incentives will be poured into the wind and solar industries, along with $54 billion into direct support for energy technology schemes. A large chunk of the latter will be spent improving the country’s ageing electricity grid to support renewable energy transmission and electric cars.
Investors have particularly welcomed the rollout of federal loan guarantees for green energy projects. “These should provide a real starting gun to get renewable schemes, which have been stalled by the credit crisis, off the ground all over the country,” said Jennifer von Bismarck, President of renewables financier Towpath Partners.
Introduced with less fanfare – and less cost – a second presidential initiative may prove almost as effective. By 2016, national fuel economy standards will be raised significantly to 35.5 miles a gallon, forcing the car industry further down the road to leaner, cleaner vehicles. According to the White House, the greenhouse gas savings will be equivalent to taking 177 million cars off the road.
So what does all this amount to? The US economic juggernaut is undoubtedly greening – but how far and how fast?
Short term, the news is good. Thanks mainly to the dramatic economic slowdown, but also to state and federal green stimuli, US carbon emissions fell by 3% last year and are predicted to fall a further 5% in 2009. This should present an enormous opportunity for the world’s richest country to start the transition toward a low carbon economy.
But hold on. The bulk of the American economy remains resolutely ‘grey’. Almost 90% of US electricity is still supplied by fossil fuels, primarily coal-burning power plants. And while clean energy companies are finally receiving sizeable federal subsidies, so too are the coal plants and other smokestack industries. Unlike the European Union, the US has no carbon cap and trade programme, however flimsy, in place to stimulate green investment. Unlike China, which has set a target of 15% renewable generation by 2020, the US has no national Renewable Energy Standard. Only one of the world’s five largest wind turbine manufacturers is American (General Electric), and only one of the top ten solar panel makers.
“The US is in danger of being left behind in the new global economy,” concludes Jennifer Morgan, Climate and Energy Director at the World Resources Institute (WRI), and she lays the blame squarely on Washington. “Business hates uncertainty, and the Federal Government’s failure to act is holding back US business innovation and leadership.” Jeff Immelt, CEO of General Electric, agrees. “Right now, the US has no long-term market signal to tell companies and consumers that it values low carbon energy. But good policy can flip this dynamic.”
But what form will or should such “good policy” take? The American Clean Energy and Security Act, narrowly approved by the US House of Representatives in June, would reduce US greenhouse gas emissions by 17% by 2020, and 80% by 2050. Based around a cap and trade programme similar to the EU Emissions Trading Scheme, the bill would regulate utilities, coal plants and other outlets accounting for 85% of US greenhouse gases. By putting a price on carbon, says WRI President Jonathan Lash, this would send “a clear market signal… The President’s signature on a cap and trade bill would unleash a flood of investment in, and deployment of, clean energy technologies across the United States”. Or as one seasoned observer put it, could “transform the steady stream of clean energy funding and R&D into a tsunami”.
But prospects for the next steps required to make such a bill law – Senate passage of sister legislation, reconciliation with the House bill and the President’s signature on the dotted line – are looking uncertain at best. A Senate vote may be postponed until 2010.
Should Congress ultimately reject cap and trade, however, the President has a trump card in his back pocket. The Environmental Protection Agency has already laid the groundwork to regulate and cap greenhouse gas emissions as an air pollutant, under the Clean Air Act. While such a move would raise furious cries of foul from Republicans and the coal industry, environmentalists are confident the President will order the EPA to act if he has to.
A critical complement to an emissions cap – and politically easier for either the President or Congress to implement – would be a national Renewable Energy Standard, setting a baseline for the proportion of electricity to be generated renewably. According to the Sierra Club, sourcing 20% of US energy from renewables by 2020 would create 820,000 jobs and generate a whopping $66.7 billion in capital investment.
So will America “lead or lag in the world’s next great global industry, green technology?”, as Jeff Immelt put it in a recent New York Times editorial. Certainly, the groundwork has been laid for US leadership. But will industry and, especially, Government demonstrate the steely political will required to follow through? Will black gold win or green? The jury is still out.
Billions ventured
Leading cleantech recipients of venture capital (VC) investment, 2008:
• concentrating solar power
• ‘thin film’ solar photovoltaics
• next generation biofuels (especially algae-based technologies)
• geothermal and tidal energy
• fuel cell applications.
Atlantic divides
The British have the policies and commitments, says Peter Madden, but the Americans are stealing a march with the action
On this side of the pond, there is also great excitement about the benefits of moving to a low-carbon economy. The Government recently launched its ambitious and interventionist ‘Low Carbon Industrial Strategy’, while Prime Minister Gordon Brown has just promised that “we will create over a quarter of a million new green British jobs”.
Britain has a much firmer policy framework in place than the US. As well as the European Emissions Trading Scheme, the UK has a ‘Low Carbon Transition Plan’ and a Climate Change Act setting firm carbon budgets for the economy as a whole and for individual Government departments. However, despite the blizzard of policy initiatives, rather less is happening on the ground. The credit crunch has turned off the financing tap for many big projects, and this has not been offset by the kind of sizeable green fiscal stimulus package seen in the US. And planning difficulties and delays have stymied major projects and led to big investors putting their money instead into the US and continental Europe. The UK will really have to raise its game to turn the fine words into deeds – and give some substance to Gordon Brown’s recent claim that “we are already global leaders in wind power, green cars, clean coal and carbon capture”.
This piece originally appeared in Green Futures. Green Futures is published by Forum for the Future, one of the leading magazines on environmental solutions and sustainable futures. Its aim is to demonstrate that a sustainable future is both practical and desirable – and can be profitable, too.
Image Credit: MAErtek via Shutterstock, Creative Commons License
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