Americans pride themselves on being global leaders in innovation. So why is the nation lagging behind China and Germany on renewable energy?
How the U.S. Can Be Effective
Updated September 21, 2011, 05:42 PM
Lisa Margonelli, is the director of the Energy Policy Initiative at New America Foundation. She is the author of "Oil on the Brain: Petroleum's Long Strange Trip to Your Tank" and published the Energy Trap.
The world will need 50 percent more energy by 2035. To compete in the world economy and generate manufacturing jobs in the coming decades, the United States needs to both nurture a green economy and reduce our reliance on fossil fuels. By comparison to other government energy investments, Solyndra's failure is more symbolic than fatal. Taxpayers have lost far more money to previous government bets on risky energy projects. Chief among them is nuclear power, which depends on hundreds of millions in government subsidies. Moreover, the risk of default on nuclear loans has been estimated at around 50 percent.
The U.S. government really needs to address our competitive disadvantage in the green space -- namely, that energy is cheaper here than in many industrialized countries.
Taxpayers should shy away from directly investing in energy production. Our real strengths are supporting basic research and fostering an active private venture capital community. Recently, the government has been abandoning its support of basic research in favor of playing venture capitalist with loans. The government runs a great risk of becoming “the lender of last resort” and supporting projects too risky for banks or venture capitalists.
For China, the calculus of subsidizing green industries is quite different, and that alone should warn U.S. policy makers away from trying to subsidize these technologies -- and consequently, jobs -- into existence. China’s one-party government has the political will and financial resources to effectively create millions of jobs, which helps to stabilize the society. Heavy subsidies, low labor costs and a desire to increase market share make it possible for Chinese producers to export products at very low prices. If we try to create industries simply through selective subsidies, the U.S. will lose the game of chicken with China. Instead, we need to do what we do well -- create innovative technology, business models and marketing platforms.
The U.S. government really needs to address our competitive disadvantage in the green space -- namely, that energy is cheaper here than in many industrialized countries. According to the Energy Information Administration, the U.S. economy needs 27 percent more energy to produce a dollar of G.D.P. than do the economies of Europe or Japan.
What that means is that when energy prices are high, we pay through the nose: By the end of the year, Americans will have paid nearly half a trillion dollars for gasoline in 2011 -- more than $100 billion more than we paid in 2010. Cycles of punishingly high prices, and the public perception that energy should be too cheap to notice, mean that energy efficient and low-carbon products in the U.S. -- from cars, to turbines that can generate power from factory exhaust, to innovative home furnaces that are also electrical generators -- have far dimmer prospects in our marketplaces than they do abroad.
Rather than financing big energy producers and concepts, the government should make many smaller loans to the consumers of these products to stimulate a market, while reducing our energy dependence. At the same time, American manufacturers need to change their sights from competing for government loans to competing for consumers’ dollars.
MORE ESSAYS FOLLOW IN THE LINK ABOVE.