Without a fully funded, federal alternative energy policy, the U.S. risks squandering the potential of a powerful economic engine and will continue to depend on foreign energy resources
It's been a year since Al Gore's An Inconvenient Truth packed theaters and won an Oscar. And a good year it has been for the green movement. Venture capital firms poured a record $2.6 billion into clean tech startups in the first three quarters of 2007. Meanwhile, the green buzz has only grown louder. This year, green building construction starts are projected to reach $12 billion. And both Senator Hillary Clinton and Senator Barack Obama have made a greener economy a key plank in their Presidential campaigns.
It's enough to make you believe an optimistic report that estimates the green economy could produce as many as 40 million jobs and $4.53 trillion in annual revenue by 2030. To put those numbers in perspective, consider this: In 2006, according to a November report commissioned by the American Solar Energy Society (hardly a disinterested body), companies in renewable energy and energy efficiency industries accounted for 8.5 million jobs and generated $970 billion in revenues. The report based that scenario on "aggressive, sustained public policies at the federal and state level during the next two decades." (It also included growth scenarios based on current government spending levels and on a moderate increase.)
Despite the undeniable green momentum, a $4 trillion-plus U.S. green economy is far from likely—even in 22 years—because there simply is no "aggressive, sustained" federal policy. The federal government has failed to create and adequately fund the programs that would make the U.S. a world leader. And that's what the government should be trying to do, for reasons that go far beyond rising carbon levels. The U.S. risks falling way behind other countries in the development of green technologies. On its current course, this country could trade oil dependence for reliance on alternative energy products built by other nations already far ahead of it.
State and Local Leadership
"The need to reinvent, retrofit, and reboot the entire nation is the biggest economic opportunity in a generation," says Van Jones, director of the Oakland (Calif.)-based nonprofit Green for All, an organization that aims simultaneously to fight poverty and help the environment by creating green jobs for people from disadvantaged communities. But it's an opportunity that's not being seized in Washington. "We have all this work that needs to be done, and we have all these people who need work," Jones says. Moreover, he points out, many of the jobs considered "green" can't easily be outsourced: "You can't put a house that needs to be weatherized on a boat to China."
To be sure, state and local governments have made some progress getting green projects rolling at a regional level. In 2005, Gamesa Corporación Tecnológica (GCTAF.PK), a Spanish wind turbine manufacturer, opened a manufacturing plant—the first of four—in Fairless Hill, Pa., on a 20-acre site that had once been home to U.S. Steel. In a region hard hit by the decline of the steel industry, Gamesa has created more than 1,000 new jobs. Pennsylvania Governor Ed Rendell had worked hard to woo Gamesa to his state, offering a $9.31 million in tax credits, grants, and loans.
"Gamesa was just the first. We've attracted 8 to 10 major alternative energy companies to the Commonwealth in the past three years," says Katie McGinty, secretary of the state's Environmental Protection Dept. "Clean energy has become a major growth sector for our economy."
At the local level, the Apollo Alliance, a nonprofit advocacy group, teamed up with leaders in Los Angeles to audit and retrofit hundreds of city buildings. Its backers say the Los Angeles initiative is saving the city up to $10 million in energy costs per year while at the same time establishing a Green Career Ladder Training Program to connect low-income residents to jobs created by the investment. A similar training program in the city of Oakland, developed by Jones' Green for All, was approved in the summer of 2007 but has yet to get started. [See also Switching to Green-Collar Jobs (BusinessWeek.com, 1/10/08)]
Private Equity Isn't Enough
The efforts by state and local governments and a handful of advocacy groups to stimulate green-collar jobs is only part of the story. Venture capitalists are making significant investments in the companies that will develop the technologies behind the green economy. Take San Jose (Calif.)-based Nanosolar, which has raised $75 million in funding from four venture capital firms. Nanosolar shipped its first photovoltaic panels in December, 2007, and says that the first 18 months of its capacity has already been booked for sales to Germany.
While persuading foreign companies like Gamesa to set up manufacturing operations in the U.S. is great for the national economy, homegrown companies that can become world leaders can make an even bigger impact.
Silicon Valley didn't become a global tech leader thanks to private equity alone. From the funding of the Arpanet, the granddaddy of the Internet, to research and development tax credits, the federal government helped the technology industry grow. The green economy envisioned by the ASES report will never be realized unless the government takes a similar approach. Despite condemning "America's addiction to oil" and promoting the importance of alternative energies in his State of the Union addresses, President Bush has consistently failed to follow through on his promises to fund for alternative energy research. He's generous with the green rhetoric, just not with actual greenbacks.
"Every robust energy technology has existed because of government support and tax subsidies," says Joel Makower, editor of GreenBiz.com. "But there hasn't been the appetite [in Washington] to do that for clean energies."
It's not that Washington has done nothing to promote the green economy. In June, 2007, Representative Hilda Solis (D-Calif.) introduced a Green Jobs Act that provided $125 million in funding to establish national and state job training programs to address a shortage of workers in green industries, and the measure was included in the energy bill passed in December. And then there are green jobs initiatives proposed by the Democratic Presidential hopefuls.
"A Narrow Window of Opportunity"
These efforts aren't enough. Denmark is a leader in the wind power industry, producing nearly half of the wind turbines used around the world. Japan has long been a global leader in solar power. Abu Dhabi is building a special economic zone for the advanced energy industry. The U.S. alternative energy industry doesn't just have to grow, it has to grow fast if it wants to catch today's global leaders. "It's a narrow window of opportunity," says Jerome Ringo, executive director of the Apollo Alliance. "Because other countries have moved ahead, we cannot afford to not respond."
David Nissen, director of the Program in International Energy Management and Policy at Columbia University, is optimistic that the next administration will respond. "The states and the business community are way, way ahead of [the Bush] Administration on this. But in the next administration, whether it's [John] McCain or one of the Democrats, something serious is going to happen," he predicts.
Makower, too, is hopeful. "We lead in technology patents and the entrepreneurial knowhow, so I don't think that the game is over yet," he says.
It's not over, but the federal government needs to take meaningful action, matching the bottom-up efforts of state and local governments, activists, and venture capitalists. If it doesn't, it won't just mean jobs lost. Even worse, today's dependence on foreign oil will transform into tomorrow's dependence on foreign alternative energy technologies.