The Green New Deal contains impossible objectives that could never be translated into actionable policy solutions. This should surprise no one.
It is, however, igniting a long-overdue frenzy surrounding energy and clean technology infrastructure policy that hasn’t existed in over a decade.
Responsible lawmakers from both sides of the aisle should focus on the aspects of clean energy and climate that can garner bipartisan support. Two areas where we know Republicans are willing to lead and work with Democrats are clean technology infrastructure and innovation.
To be successful, policymakers must incorporate lessons learned, expand effective programs and develop tactical policy solutions that overcome market barriers. Additionally, any policy that does not actively work to “crowd in” private capital is neither replicable/scalable nor sustainable, and puts the United States at risk of losing the most imperative global race yet.
The United States innovates around clean technologies unlike any other country in the world, but we can do better when it comes to commercializing them. As a result, many fail, while many others flee to more welcoming foreign jurisdictions or ownership. As a result, in a decade, we could find ourselves importing most of our energy technology and at the mercy of foreign actors.
As experts at the intersection of federal policy, finance and energy technology, we’ve identified a handful of cost-effective policy solutions that can fill the existing market gaps necessary to facilitate billions of dollars in private investment that is necessary to address climate disasters and commercialize energy technology struggling to overcome the infamous “valley of death.”
Without precluding the need or desirability of additional policies, we propose the following.
Risk Reduction: Technology efficacy insurance has been used to great effect on a limited basis in the private market for emerging technologies to reduce risks and allows companies with maturing technologies to share risk and leverage the financial strength of the government in a low-cost manner. Most notably, it assures buyers/users and investors of new tech (and in a project context debt and equity) of minimum performance/warranty/service requirements.
In this instance, by reinsuring in the private market, government doesn’t have to absorb all risk or pick “winners or losers.” Instead, it acts as a facilitator and partner while the private sector acts as a reality check on a particular risk set and familiarizes itself with new technologies. The federal government should scale it exponentially.
Demand Catalysis: Aggregated government procurement leverages the power of the world’s largest consumer of technology, goods and services to a limited and responsible degree that can play a catalytic role in driving adoption, achieving scale and lowering cost. While the federal government should not be the only or largest buyer for a prolonged period, this structure has proven that successful commercialization of alternative energy can be done in the United States as it has in other countries.
Contracting Solutions: One of the main impediments to deployment of large-scale clean energy projects producing commodities is long-term feedstock and offtake contracting certainty. While the need for contracted revenue is understandable, it mustn’t stand in the way of the construction of large, labor-intensive, job-creating and economically viable manufacturing facilities in the United States.
Requiring such is equivalent to demanding prospective homeowners to fully contract jobs for 10 years prior to the government or financial institutions providing financing. And if this were the case, very few would be able to purchase a home. Public-private policy solutions integrating insurance, U.S. exports and hedging are available and should be developed to close this gap.
Filling Policy Gaps: Last year, the bipartisan IMPACT for Energy Actwas introduced in both the House and Senate. The proposed legislation established a Department of Energy Foundation, a low-cost nonprofit modeled on the success of similar foundations at the National Institutes of Health, the United States Department of Agriculture, the National Aeronautics and Space Administration, and other agencies. The DOE Foundation would focus on the unique challenges of the energy industry and engage with the private sector to raise funds that support the creation, development and commercialization of innovative technologies.
Naysayers who do not understand the painstaking complexities of energy technology deployment look to one or two aspects of the proposed foundation and label it as duplicative or wasteful government spending. However, more low-cost government solutions to overcome some of the remaining obstacles to market must be developed for the United States to be at the forefront of the global effort to address climate change. Developing an external foundation with an independent board that can facilitate direct partnerships between and among government, industry and the financial markets — in a manner that government officials cannot — is not duplicative but instead critical.
We can waste more time arguing about what we don’t agree on, or we can find common ground and advance pragmatic solutions. These proposals are both bipartisan and actionable — something we don’t see much of in this town.
Taite McDonald is partner and head of the Government Energy Finance group at Holland & Knight.
Thomas King is managing partner of CrossRiver Capital LLC.
Heather Reams is the executive director of Citizens for Responsible Energy Solutions.