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Leaving $2.3 Trillion on the Table: The House GOP's Budget Walks Away from Clean Energy's Economic Jackpot

Josh Freed's picture
Third way

Joshua Freed directs the Clean Energy Program at Third Way. He focuses on the policies and strategies needed to bring about clean energy reform and to address climate change. Prior to joining...

  • Member since 2018
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  • May 16, 2011
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The United States is engaged in a fierce global economic competition to capture a share of the $2.3 trillion clean energy market. For the countries that seize this moment, clean energy will translate into new economic growth and businesses and a large share of the 20.4 million new jobs the sector is anticipated to create by 2030. Winning this race, however, requires significant public-private partnerships and investment in clean energy deployment and innovation. The 2012 House Republican budget proposal does the opposite. It eviscerates the very investments the United States needs to succeed.

As a center-left organization that has aggressively called for putting everything, including entitlements and revenue, on the table to tackle the debt, we believe that the country needs to make tough choices. But we can and must address the deficit in a serious way while also strengthening long-term U.S. economic growth. That requires smart investments in innovation, education and infrastructure.

Instead of rising to the twin challenges of reducing the debt and increasing American competitiveness in the global clean energy race, the House Republican budget raises a white flag. That’s because it eliminates the smart public investments the private sector needs to make up for market failures that are starving it of capital; slashes the basic government research that is the foundation of clean energy innovation; and gives up on the next generation of entrepreneurs by ending science, math and engineering education programs.

We are already seeing the consequences of starving American clean energy entrepreneurs and innovators of investment. The United States now ranks ninth in terms of clean energy investment as a percentage of GDP. Over a five-year period from 2005-2010, the U.S. does not even crack the top ten of the nations with the fastest growing clean energy industries. Whether it’s number of IPOs, top 10 largest IPOs or number of international patent applications, the U.S. is already falling behind.

The reality is that energy is a capital-intensive endeavor. Power plants are large and expensive and new technologies take a long time to develop and require significant upfront capital to deploy. This has been the case with new industries and new technologies for the last hundred years. It makes it extremely difficult for the private sector, on its own, to sufficiently invest in all of the needed clean energy research and development. American industries, as a whole, spend 2.6% of their revenue on research and development. In energy, that is only 0.23% for both clean and conventional research.

The House Republican budget says it wants to “promot[e] policy rooted in innovation and the entrepreneurial strength of American business.”

But the entrepreneurs and innovators the budget claims to support, and even some Republicans outside of Congress, view the House Republican proposal with alarm. As Joseph Laia, the CEO of Miasole, a manufacturer of thin-film solar panels, explained, “Labor is not the issue, it isn’t over regulation…I get no help from the federal government. There’s really not a compelling way to get capital investment in the U.S. to grow my business.”

Former House Speaker Newt Gingrich also advocates continued government investment in clean energy innovation. He describes the House Republican cuts as akin to trying to save money by eliminating oil changes for your car. It might save money in the short-term, but it will cost a lot more when it results in a destroyed engine.

If the CEO of an American company faced similar circumstances to what the U.S. faces today, the solution would be simple. He or she would go to his board and shareholders with a plan to both cut unnecessary spending and invest in new product development and promising markets. If that CEO instead went to the board with a plan that cut everything, eliminating any hope for growth and recovery, he or she would be fired.

Clean energy innovation is that market seeking new products. The House Republican budget cuts where it should be investing.

American businesses can win a large share of the $2.3 trillion clean energy market. We have the best minds, the best innovators and the best companies in the world. But we will not win it if Congress adopts a budget that cuts off investment in new technologies and the skilled new workers companies need. For the last 100 years, public investment in private sector innovation led to the American century. The last thing we can afford is an end to that now.

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Paul O's picture
Paul O on May 17, 2011

Can you please be more specific in:

1) Exactly what Clean Energy technology are we walking away from? 

2) Exactly what Jobs are going to be created?

 

Are  we are talking about Manufacturing Turbines, Electric Cables, and Solar Reflectors? Does anyone even know exactly what the clean technologies we are supposed to be investing in are?

As I see it, if there are new breakthroughs in photovoltaics then, YES we should invest in that, but nobody it seems wants to be specific on where we should be spending the money, they just want us to spend money.

Paul O's picture
Paul O on May 17, 2011

What would the Government equivalent be for an honest to goodness Business Plan? If we are to spend trillions, I demand to know what precisely we want to spend it on, rather than taking it by faith.

Geoffrey Styles's picture
Geoffrey Styles on May 19, 2011

The best way to capture our share of that market is not to focus maximizing deployment in the US, where energy growth has stagnated or turned negative and renewables must compete with cheap gas, but on ensuring that US manufacturers can compete in the markets where total energy demand is growing rapidly, mainly in the developing world.  Yes, deployment here helps create a market, but it’s a market that US firms currently don’t even dominate at home. 

Sam Carana's picture
Sam Carana on May 20, 2011

Good post, Josh. Also see my post America can win the clean energy race.

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