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You may be able to debate the necessity of subsidies for renewable energies like wind or solar. I'd love to see subsidies help push these energy sources toward grid parity quickly, but I definitely understand the argument that if they can't stand on their own, we shouldn't help them out.
But I don't understand, and can't defend, arguments that we should eliminate subsidies for renewable sources of energy while retaining subsidies for non-renewable energy sources. Are we deliberately trying to test whether global warming is indeed true? Do we enjoy smog, toxins in our water, and importing oil from unfriendly sources? Or are we just proving that the oil industry is so entrenched with the politically powerful that our legislators will do anything to keep the oil industry wealthy?
I would like to think that the first two are rhetorical and sarcastic questions, but after sifting through Paul Ryan's "Path to Prosperity: Restoring America's Promise," the third possibility still troubles me. In an op-ed piece for The Wall Street Journal commenting on the plan, Ryan said he would "roll back expensive handouts for uncompetitive sources of energy, calling instead for a free and open marketplace for energy development, innovation and exploration." If that were true, I would applaud Ryan, as would most of the greentech industry. But Ryan doesn't mention, and even fails to answer in direct questions, why his plan keeps $40 billion in tax loopholes for Big Oil while cutting greentech funding.
Republicans haven't hidden their distaste for anything green, and the market isn't stupid, so you might think that "green" funding would have dried up after Republicans took control of the House of Representatives. After all, if greentech were such an "expensive" energy source, free market investors would never spend money on any energy source that needs subsidies to compete. But following the dollars tells a different story:
- Just yesterday, General Electric (NYSE: GE ) announced that it had both completed the acquisition of Prime Star Solar and achieved a 13% efficient CdTe solar module. This beats First Solar's (Nasdaq: FSLR ) 11.6% efficiency, but there's no word yet on whether GE can also beat First Solar's $0.75 per watt.
- Venture capital investors put a total of $2.6 billion into 115 greentech deals in the first quarter of 2011 alone.
- First Solar announced a new plant in Arizona, and Chinese firms like Trina Solar (NYSE: TSL ) and Yingli Green Energy are expanding their U.S. operations.
If greentech were such a bad idea, why would venture capitalists invest dollars in the sector? Aren't these folks supposed to follow the pulse of the future, betting that huge returns will follow?
In short, the facts tell me that:
- Oil prices are rising.
- Exploration for oil is costly and risky, as the Gulf spill last year demonstrates.
- Nuclear energy is not going anywhere after the Japan disaster.
- Renewable, solar in particular, has seen costs fall rapidly over the last few years.
- Free-market funding is quickly flowing into new "green" companies.
According to these trends, oil is the past, and solar, wind, geothermal, and other renewable sources are the future. Wouldn't we be going backward to leave subsidies for oil intact, but eliminate them for greener energy?
We need to be smarter about greentech
It's true that a few bad deals have tarnished government support for greentech companies. I've even argued that we needed to rethink how we handed out government grants after Evergreen Solar (Nasdaq: ESLR ) and Energy Conversion Devices (Nasdaq: ENER ) decided to shift at least some production to China and Mexico, respectively, after getting federal dollars.
And even advanced battery makers have yet to live up to their promise. But there's no way A123 Systems (Nasdaq: AONE ) or Ener1 (Nasdaq: HEV ) would be where they are today without grants from the government.
I'm not advocating for increased subsidies, or even subsidies at all. A level playing field would be fine. But cutting any subsidies greentech now has while leaving big oil tax benefits in place is disingenuous, contrary to national security interests, and bad for the economy. At this turning point for greentech, we can choose to foster its growth, stand idly by, or stunt its development.
Whether you believe in green energy or not, crippling clean energy technologies' chances for growth by putting them at a disadvantage is a mistake we can't make. Wherever your political interests lie, I hope we can all agree on that.
Let me know your thoughts about Ryan's plan, greentech subsidies, or my thoughts in the comments section below.
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