Cleantech & Obama: Round 2

green footprint Illustration by Victor Ngai
Illustration by Victor Ngai

The 2012 election season proved just how much Americans support cleantech. Case in point: Solyndra. After the solar manufacturer went bankrupt in September 2011, renewable energy became an election-year flashpoint. Because the Obama administration had put so much stock into the cleantech sector as a job creator and economic driver, the failure of a high-profile solar firm that received substantial backing from the government was a perfect opportunity for opponents to attack the president.

Over the proceeding months, as a handful of other government-backed companies failed, Republicans looking to unseat the president crafted their message: Supporting cleantech was the definition of “crony capitalism” and a threat to the free market.

In the six months leading up to the presidential election, outside groups promoting fossil fuels and casting doubts about clean energy spent $153 million on television ads. But it didn’t work. In spite of the spending bonanza, exit polling showed that voters were just as bullish on cleantech as ever. The president kept his job, as did almost every member of Congress who was attacked for supporting the clean energy stimulus. And the cleantech sector breathed a collective sigh of relief that the White House was still occupied by an ally.

“We saw the American public willing to go another round of four more years of investments in clean energy and four more years of seriousness about climate change,” said Michael Brune, executive director of the Sierra Club, in a press conference the day after the election. “This is a big win.”

Boosted by voter support and his personal belief in the value of clean technologies, President Obama will undoubtedly make the sector a priority. But the second round of support will likely be much different from the first. If the president’s first term was defined by a grandiose stimulus package and high-flying rhetoric about building a clean economy, the second term will likely be defined by executive actions rolled out with much less fanfare – but with a decidedly positive impact.

“I actually spend a lot of time explaining to different groups just how much Obama has done with his executive authority,” says Scott Sklar, president of The Stella Group, a clean energy services firm. “I think these will be the big drivers going forward.”

Indeed, across a range of sectors – advanced automobiles, renewable energy, energy efficiency and the smart grid – the administration is wielding its authority.

In August 2012, the White House finalized fuel standards requiring that light trucks and cars get an average 54.5 miles per gallon by 2020. All the major auto manufacturers and unions got behind the targets, saying they would drive billions of dollars in new manufacturing investments and help spur tens of thousands of new jobs.

Those new efficiency requirements – combined with existing tax incentives for electric vehicles, Department of Energy programs for new EV charging stations, and continued investments in next-generation automotive manufacturing supported by the stimulus package – will ensure steady progress in cleaning up the nation’s auto fleet. The White House estimates these policies will leverage as much as $50 billion in next-generation vehicles in the coming decades.

“If we’re going to meet the CAFE (fuel economy) standards, it’s going to require a lot of hybridization – efficient vehicles, hybrid technologies for vehicles and then of course to all-electric. That’s a major area of opportunity,” says Ron Pernick, managing director of cleantech research firm Clean Edge.

One of the Obama administration’s other big moves has been to finalize new rules on mercury, air toxics and carbon emissions for power plants through the Environmental Protection Agency (EPA).

Like fuel economy standards, new EPA rules will help propel the transition toward distributed renewable energy, efficiency and greater penetration of natural gas. They will also encourage a greater build-out of new pollution controls on existing coal plants, potentially creating thousands of jobs. According to conservative EPA figures, new regulations for mercury and air toxics will support 31,000 new construction jobs and 9,000 long-term operations jobs in the utility sector.

Under the Obama administration, electricity generation from wind and solar nearly doubled while consumption of coal-fired electricity fell about 14 per cent in 2012 alone. Although this drop was due largely to power plants switching to natural gas, the legal and regulatory factors supported by the Obama administration will play a strong role in speeding the shift to cleaner electricity.

And it’s not just wind and solar. In 2012, President Obama issued an executive order to procure 40 gigawatts of combined heat and power projects over the next decade, an efficiency initiative that could result in a doubling of existing capacity and up to $80 billion in new industrial manufacturing investments.

The other piece to this transition is how to manage all the new clean energy facilities coming online. The administration is rolling out some unique programs to help build upon $4.5 billion in smart grid investments through the stimulus.

In 2011, the White House released a comprehensive policy framework for building a 21st century grid, which offers a blueprint for what the administration plans to do in the next term. These include maintaining R&D programs for new technologies, encouraging new interoperability standards for grid communications technologies, and developing open-data programs so consumers can see their electricity usage.

These standards will build on the 15.5 million smart meters likely to be installed by 2014. “You think about Superstorm Sandy and about how woefully inadequate our grid is today,” says Pernick. “This utility of the future concept and the emboldened grid are very important. We still think that’s one area of big opportunities in the next administration.”

Expect more large-scale grid investments, too. The Federal Energy Regulatory Commission just finalized Order 1000, a rule that will require transmission planners to consider state renewable energy standards when building new lines. Bloomberg analysts say the policy will “turbocharge” a next-generation grid and help support more than $100 billion in new transmission investments by 2022.

Moving forward, the military will be one of the biggest forces pulling all of these programs together. The Interior Department and Department of Defense recently signed a memorandum of understanding that would open up 16 million acres of land for wind, solar and geothermal projects to power military bases. In 2012, the Army solicited $7 billion in contracts for renewable energy projects – part of a broader effort to expand on-site generation and develop distributed micro-grids for military bases. And the military is investing $510 million over three years to develop cellulosic and algae-based biofuels for its so-called Great Green Fleet.

“We’re seeing some pretty ambitious stuff,” says Sklar. “Whether it’s the new fuel standards, the military’s commitment or all the federal procurement programs, the administration is making some interesting plays.

Of course, there will be enormous political and market-based challenges across the board.

The balance of power in Congress is unchanged, making passage of any comprehensive legislation benefiting the industry unlikely. In addition, prominent free-market groups are working to repeal state-level efficiency, renewable energy and smart growth programs around the country.

At the same time, the energy market is undergoing immense change. The boom in unconventional oil and gas will continue to challenge the renewable energy market; solar and advanced battery manufacturers will likely continue to struggle due to pricing pressures; and consumer demand for clean technologies will be shaky along with the sluggish economy.

But those forces are not enough to stop the growth of cleantech, a sector that has become a central piece of global economic competitiveness, military planning and corporate strategy. With the Obama administration firmly behind the industry and much of the election-year fighting in the past, the next four years will bring a range of new opportunities for cleantech companies operating in the U.S.

Says Sklar: “I believe the country has reaffirmed its commitment to this sector in all its forms.”

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