Navigant Research Blog

Can America Avoid a Cleantech Collapse?

Richard Martin — April 19, 2012

In a sharply worded analysis that will cause fear and trembling in the U.S. cleantech industry, a group of three research and policy organizations have produced a report saying that a cleantech collapse is imminent in this country unless subsidies, incentives, and federal policies are extended and reformed.  Entitled “Beyond Boom & Bust,” the lengthy report from the Brookings Institution, the Breakthrough Institute, and the World Resources Institute argues that, according to many indicators, the cleantech sectors have achieved remarkable successes over the last half decade: “Renewable energy generation doubled from 2006 to 2011, the first new nuclear plants in decades are under construction, and prices for solar, wind and other clean energy technologies have fallen while employment in those sectors has risen by 70,000 jobs even during a deep recession.”

Unfortunately those gains are not enough to create a self-sustaining and thriving cleantech industry: “Despite this recent success, however, nearly all clean tech segments in the United States remain reliant on production and deployment subsidies and other supportive policies to gain an expanding foothold in today’s energy markets. Now, many of these subsidies and policies are poised to expire—with substantial implications for the clean tech industry.”

On both the glowing-success and the looming-chasm side, this echoes many of the themes we at Pike Research have been pointing out over the last year, including in this blog on the so-called cleantech bust.  The cleantech subsidies provided by the American Recovery and Reinvestment Act of 2009 (ARRA), which are now winding down, are not only the target of withering scorn from the opponents of President Obama, but also generally tend to be viewed differently than fossil fuel subsidies, which have been around so long as to have become an accepted feature of the energy landscape.

Whatever your political or economic point of view, though, there’s one fact that is incontestable: the United States stands to fall far behind other nations in its commitment to new energy technology and new business models for generating and supplying energy.  The “cleantech gap” is especially worrisome when it comes to China, which is shaping up to be both an economic and military revival to the United States in this century.  But a quick scan of Pike Research blogs turns up this theme repeatedly, whether it’s Denmark pledging to move to 100% renewable energy by 2050, smart grid development in Germany,  green data centers in Iceland, the United Kingdom becoming a leader in offshore wind power, or the European Union’s ambitious “20/20/20” initiative, which could impose stiff costs to businesses in the short run but is nevertheless an achievement in long-term, non-partisan policy thinking that the U.S. seems structurally incapable of today.

The “Beyond Boom & Bust” report makes several policy recommendations for avoiding the possible decimation of America’s cleantech industry, including “Reforming energy deployment subsidies and policies to reward technology improvement and cost declines,” and “Strengthen the U.S. energy innovation system to make clean energy cheap.”  Unfortunately those are the kind of sweeping ideals that tend to gather dust on policy makers’ shelves.  And the economic boom being powered, in some regions of the country, by cheap natural gas (which I cover in the current issue of Fortune) makes investment in clean energy technology an even more courageous effort.  A bipartisan energy bill that puts in place a far-sighted vision for the future of energy seems, more than ever, like a pipe dream.

There are small signs, though, that at least at the state level, politicians and businesspeople are waking up to the danger of letting the cleantech achievements slide off a cliff.  There’s nothing like the loss of tens of thousands of jobs and the erosion of national economic competitiveness to grab people’s attention.

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