The United States and Clean Energy Finance
December 17, 2018
While this is good news, the United States is on the brink of losing its competitive edge as a clean energy innovator. Ever since 2011, clean energy investment from the United States has stagnated while countries like China have ramped up spending. In fact, while the United States has been trying to revitalize the coal industry, China has poured billions of dollars into developing cheaper solar panels and installing impressive solar farms. Even though China’s renewable energy industry has been marked with unethical trade practices, it has effectively overtaken the United States as the global leader in renewable energy.
And there are no signs of change in the future. This February, Trump proposed huge budget cuts in clean energy programs, like the Office of Energy Efficiency and Renewable Energy and ARPA-E. Energy program budget cuts totaled to over $1.9 billion from 2017, and the Environmental Protection Agency also saw a 34 percent cut. These proposed cuts are aimed at eliminating vital initiatives that focused on climate change research and clean air quality. Furthermore, while the Trump administration increased spending for infrastructure development, the same did not happen for the environment. In fact, the Trump administration proposed eliminating the entire ARPA-E program, which has been integral towards the development of clean energy technology funding and innovation.
Similar to the Defense Advanced Research Projects Agency (DARPA), ARPA-E was initially started in 2009 during the Obama administration as a way to promote and fund the development of new innovative renewable energy technologies. Before ARPA-E, people were extremely cautious about investing in renewable energy; after all, most of the technologies had not been tested for a mass audience, and investors had to take on immense risk in order to get any type of financial return due to this uncertainty. And while the United States had cutting-edge researchers working on new tech, like more efficient solar cells and utility-scale energy storage, there weren’t enough private capital investors to bring the innovation to scale. Thus, ARPA-E was created to bridge the gap between renewable energy researchers and hesitant investors.
In an effort to dismantle the program, some politicians have heavily criticized funding of ARPA-E as unnecessary. They claim that private capital can be leveraged to meet the development needs of new technologies. (source?) However, a study performed by the Environmental Protection Agency proved otherwise. Even though there have been claims that ARPA-E has not produced any tangible results, the study stated that roughly half of grant recipients have “published results of their research in peer-reviewed journals” and 13 percent have obtained patents for their work. Furthermore, roughly 25% have “received follow-on funding for continued work.” And the study was performed after only six years in existence; typically in this industry, it takes over 10 years to commercialize any type of new technology.
In order for the United States to regain its leadership in clean energy, the government needs to begin reinvesting in the programs that harness technological innovation and bring them to scale. ARPA-E should be given increased funding so that the United States does not fall behind in the development of renewable technology. Given rising competition from China, Germany, and India, the United States is in a precarious position; while research is vital, public funding must be used to stimulate business investment and encourage these technologies to be developed at scale.
In addition to funding ARPA-E, the United States must maintain its current programs, like those in the Office of Energy Efficiency and Renewable Energy, which invests in incremental improvements in existing technologies. While the innovative technologies supported by ARPA-E have the ability to transform the energy landscape, a large proportion of greenhouse gas emissions can be significantly reduced by simply upgrading antiquated infrastructure and retrofitting old buildings.
But this is still not enough. Globally, billions of dollars are still needed to invest in renewable energy in order to meet the goals of the Paris Agreement. With the current administration, investment in clean energy is not looking bright. However, Congress can still put effort into policies that increase public renewable energy spending and create economic incentives for energy efficiency and power savings. And combined with a mobilized private sector, the United States still has the potential to fulfill its commitment towards mitigating climate change and ensuring a clean future.
Student Blog Disclaimer
The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.