Craig Miller/KQED

Government policies and subsidies that support clean-tech are phasing out over the next two years. That could be disastrous for the industry, though it doesn’t have to be, according to a new report from the Brookings Metropolitan Policy Program. In 2009 when federal support was peaking, the industry received $44.3 billion. But the report, entitled Beyond Boom and Bust: Putting Clean Tech On a Path To Subsidy Independence [PDF], projects that by 2014, federal subsidies will have dropped to $11 billion.

“Undeniably, there’s a massive reset before us,” Mark Muro, a senior fellow at Brookings and one of the report’s authors, said this morning on KQED’s Forum radio program. Muro and the other authors examined 92 programs that provide policy or financial support to the clean-tech industry. Of those, 61 have pre-set expiration dates and, unless extended, will no longer be in place by the end of 2014.

Muro and Jesse Jenkins, director of energy and climate policy at The Breakthrough Institute, highlighted the need for both the federal government and the states to continue to support innovation in clean-tech.

“The challenge we face now is how do we get (clean-tech companies) from adolescence to full adulthood,” Jenkins said. “We are at this key inflection point both in the industry’s growth, and in the direction of federal funding.”

And the path forward won’t be easy. “The unfortunate thing is it comes at a time of substantial green backlash,” Muro said. “And an absolutely grinding fiscal circumstance that is real and is going to require massive belt-tightening in Washington.”

Two examples in California underscore the issues. Fremont-based solar firm Solyndra went bankrupt last year, after receiving a federal loan guarantee. And just last week, Oakland-based BrightSource Energy postponed becoming a publicly-held company.

Joseph Desmond, senior vice president of government affairs and communications for BrightSource, and also a guest on Forum this morning, played down any connection with the industry’s murky future.

“With respect to the IPO withdrawal, that was really a function of where the market was at the time,” he said, explaining the Dow Jones and S&P had fallen, and the volatility index was up. “All of these factors come to where you have to make a decision. The good news is, we’re able to make that withdrawal from a position of strength.” Desmond said BrightSource still has strong investors and other financing options.

Jenkins said the best thing for the industry would be for the government to agree on a “managed approach” to drawing down funding — one that would allow the new companies and technologies “time and support, and really demands from them that they continue to drive down the price and improve the performance of their products to compete on price with fossil fuel.”

To listen to the hour-long show on the topic, visit the Forum website.

Tesla Motors

Production on Tesla's Model X begins in 2013.

On February 8^th, Tesla Motors CEO, Elon Musk, unveiled the company’s latest electric car: The Model X. Probably the sleekest and sexiest SUV you’ve ever seen, and also the priciest. But what’s most remarkable — beyond the falcon wings — is that the car will be manufactured here in the Golden State, at the former NUMMI plant in Fremont.

Why did Tesla choose to locate its headquarters and manufacturing in the high-priced San Francisco Bay Area? Was it linked to the state’s ambitious clean energy targets and policies? The new rules approved last month by the California Air Resources Board require automakers to produce 1.4 million zero-emission cars for the California market by 2025, and are part of the aggressive goal of reducing the state’s emissions 80% by 2050.

Tesla spokesperson Khobi Brooklyn eschewed policy explanations and told me, “We wanted to build our cars in California, not only creating jobs in the U.S., but also California specifically.” She cited Silicon Valley as “an incredibly rich pool of talent” and said that purchasing an existing car manufacturing facility saved money and time in preparing for car production. I’ve no doubt the California sales tax rebates on capital equipment purchasing (estimated at $20 Million) helped too.

California’s Governor Jerry Brown attended the Model X unveiling, and basked in the Tesla limelight. He was obviously delighted to be part of some good news from the Golden State for a change. “We can work our way out of our mess with creativity, openness and the kind of spirit that’s willing to take risks,” he said to the rowdy audience of Tesla groupies.

Clean Energy, Really?

Two big advantages of electric vehicles, often touted by such green groupies is their cleanness and the efficiency of the electric motor: 88% compared to the 20-25% range for a traditional gas powered engines. But if the electricity for EV’s is coming from the grid and the grid energy is “dirty” (i.e. fueled by coal fired power stations) then why is it better for the environment?

Tesla Motors

Tesla CEO Elon Musk says his long-term plan is to build a Tesla with mass appeal for a lower price.

Elon Musk addressed the question at last week’s launch and asserted that driving an electric car in California and drawing power from the grid produces only a quarter of the CO2 emissions of a gasoline car. This is thanks in large part to California’s adherence to ambitious renewable energy standards, which require 33% of our energy to come from clean renewable sources by 2020. So electric car owners in California can drive with a wee bit of the green-goodness factor.

But before we Californians pat ourselves on the backs, think of Vermont, where almost 100% of energy from the grid is renewable. Driving your EV on grid electricity in the Green Mountain State produces almost zero emissions. So let’s save the backslapping for now. We’ve some way to go.

Except, of course, for California drivers who install home solar panels and use solar to power their electric cars. You might see their green halos glow if you look closely next time you’re on Highway 280.

Government Funding

But what of Tesla’s future in the post Solyndra era? In 2009, Tesla received a $465 million loan facility through the U.S. Department of Energy’s Advanced Technology Vehicles Manufacturing program. Tesla’s Khobi Brooklyn confirmed that to date, Tesla has used less than half of this credit line and said the company is on track to begin repaying the loan at the end of this year when production and deliveries ramp up.

Tesla Model S sedans are expected to begin rolling off the Fremont Factory’s production lines this summer, and the Model X begins production in late 2013 with deliveries early 2014.

“California has a manufacturing plant of today but it’s also a plant of the future,” enthused Governor Brown.

National Context

Laurie Yoler, Managing Director at GrowthPoint Technology Partners and an advisor to Tesla, pointed out that Governor Brown’s endorsement of Tesla is important at a time when many in Washington D.C. are questioning energy efficiency investment. “The enthusiasm shown for the Tesla Model X confirms that consumers are eager for new vehicles that are beautiful, high performance and energy efficient,” she added.

Tesla has certainly shattered the golf cart stigma and is blazing the trail for electric vehicles by proving they can be sexier and more powerful than rival European cars, but its sky-high prices dwarf its tiny sales volume. Model S reservations total 8,000 and Model X has received 500 reservations in the week since its unveiling. Obviously, it’s still very much a niche product. Yet Elon Musk’s long-term plan includes a new generation Tesla priced more moderately and targeting higher volumes.

“The world desperately needs sustainable transport,” Musk said at the Model X unveiling last week. “If we don’t solve this problem this century, we are fracked.”

The green groupies may love the Model X, but the world is still waiting for the Tesla X factor: a mass market Tesla.

Solazyme Inc.

A Riverine Command Boat running on a 50/50 blend of algae-based and traditional fuel.

Thirty years ago, the idea of a military-alternative energy partnership might have raised some eyebrows, particularly among solar entrepreneurs here in Northern California. But in the wake of Solyndra’s crash and burn, the Pentagon has become one of clean-tech’s strongest remaining allies in Washington. Leading the charge is Navy Secretary Ray Mabus, whom I interviewed last week for my radio report on KQED’s Quest.

According to a recent study from the Pew Charitable Trust, the military has tripled its investment in technologies like biofuels, solar panels, and electric vehicles over the last four years. Today, it spends $1.2 billion a year on alternative fuels. That amount is expected to reach $2.25 billion by 2015. Mabus says he wants to see the Navy and Marine Corps getting at least half of their fuel from non-fossil fuel sources by 2020.

Right now, clean tech needs all the champions it can get. Last week, Solar City announced it’ll miss out on $275 million in federal loans from the Department of Energy, thanks to the “Solyndra effect.” Some conservative lawmakers have questioned whether the US Government should be investing in alternative energy at all. But Mabus says he’s standing firm on his commitment to clean tech.

How did the US Military become interested in alternative energy?

If you’re a military organization, you look at potential or actual adversaries’ vulnerabilities, and you try to see where they’re vulnerable.You’d better do the same thing for yourself. So we looked at vulnerabilities for the Navy and the Marine Corps, and one of the ones that rose right to the top was our dependence on fossil fuels.

There are several reasons for that. One is that we buy too many fossil fuels from actually or potentially volatile places on Earth. Two is the that worldwide market for fossil fuels is incredibly volatile and vulnerable to price shocks. In the last two years, the price of oil has gone from a low of $72 a barrel to a high of $116, and today it’s at $105. Every time the price of oil goes up a dollar a barrel, it costs the Navy $31 million [per year] in extra fuel costs.

So we’ve had over a billion dollars in additional fuel costs in the last two years. The only place we have to get that is from our readiness account. So fewer flying hours, less training. And we’ve got to find a way to dampen down those sorts of price shocks.

And finally, tactically, if you think about getting a gallon of gas to a marine front-line unit in Afghanistan, it’s incredibly hard and very expensive, both in terms of dollars, but also in terms of lives. For every 50 convoys of gasoline or water – those are the two things we import most into Afghanistan – we lose a marine, either killed or wounded. And that’s too expensive.

It also keeps marines who are guarding these convoys from doing what they’re supposed to do, what they were sent there to do, which is fight, engage, rebuild. So from a big-picture standpoint, there were lots of very compelling reasons why we need to move off fossil fuels to the maximum extent that we can.

I want to ask about Section 526 – the President George W. Bush-era provision that prohibits the federal government — including the military — from buying fuel with a carbon footprint any greater than traditional oil resources. There have been calls from conservative lawmakers to remove the provision. Where do you stand on that?

I think 526 is good law, requiring that any fuels or energy that the military buys be equal to or less in terms of carbon emissions. That’s a good thing to have happen, to lower carbon emissions, greenhouse gas emissions. But it’s not the main reason we’re doing this. It’s a side effect. The main reason we’re doing this is because it makes us better war fighters.

But having said that, [the reduction in greenhouse gas emissions] is a good side effect. And I think it’s a worthwhile goal.

If 526 were eliminated, wouldn’t the military have a harder time justifying its clean-tech investments? After all, you’d have a domestic, North American source of fossil fuel energy from the tar sands, for example, that you could be taking advantage of.

Well the short answer is I don’t think it would be a harder case to make.

Primarily because whether we even could get all the fossil fuels [we need] from the US and domestically — that’s an iffy proposition. But even if we could, the prices for fossil fuels are set on a worldwide basis. They’re not just set in the United States.

The biggest price shock we’ve had was during the events in Libya, which is a big oil producer, but not the biggest one. The disruption in Libya caused the price of oil worldwide to go up almost $30 a barrel. And so you would still be very susceptible to these price shocks, even if you were getting all your fossil fuel energy from domestically-produced sources.

In the wake of Solyndra, the Department of Energy has been heavily criticized for its investments in clean-tech. What’s different in the way the Department of Defense approaches these decisions? And are you at all concerned that some of that political heat might start focusing on the military?

Secondly, and I’ll speak in terms of this biofuels initiative that the president has passed. We’re doing this in a very deliberate way. We’re doing this in conjunction with a lot of participation by industry. It’s a very competitive process. There’s going to be a long period where we do a lot of due diligence, where we require industry to put up at least dollar-for-dollar, matching us. So [private investors’] money is going to be at least as much and probably more in the game than ours. That’s been our charge and that’s been the way we’re approaching this.

To learn more about the US military’s investments in clean tech, listen to Amy’s Quest radio story:

Gretchen Weber

Gov. Jerry Brown with Washington Gov. Christine Gregoire and Nevada Gov. Brian Sandoval at the National Clean Energy Summit in Las Vegas.

In his keynote address at this week’s National Clean Energy Summit, Vice President Joe Biden said America is at a crossroads when it comes to energy, and that the choice is clear.

“If we shrink from deciding that we’re going to lead in the area of alternative energy, renewable energy, then we will be making the biggest mistake this nation has made in its entire history,” he said.

The Vice President was joined by Energy Secretary Steven Chu, California Governor Jerry Brown, and other political and industry leaders at the summit, which is in its fourth year and is sponsored by several entities, including the Center for American Progress and Nevada Senator Harry Reid.

“If we don’t lead in this new energy technology, we’re going to follow, and I’d hate like hell to be trading the importation of oil, for the importation of new technologies,” said Biden. “Neither is very acceptable.”

Biden said that the last two years, the United States has fallen behind China and Germany in domestic clean energy investments.

In his address, Energy Secretary Steven Chu laid out a road map for the United States, saying that if the nation wants to lead, it needs to invest in research and education. He also recommended creating a clean energy development agency and a federal clean energy standard in order to spur private investments.

In an interview after his speech, Chu said that California’s renewal portfolio standard of 33% by 2020 does just that.

“Manufacturers of wind and solar can actually make this — they know they have a market, that utility companies will actually buy this, and that stimulates investments in those areas,” he said. “The government necessarily has to put money into research, but you also need a market draw, and that market draw is ultimately going to be driven by a price on carbon. But in the meantime, you need things like renewable or clean energy standards for that market draw.”

Governor Jerry Brown told summit-goers that the policy is working for California.

“California’s 33%-by-2020 goal has stimulated real investment, real money is coming in, by the billions, and they know that we’re committed, we’re going to make it happen. If the United States had a similar goal, it would be good.”

Brown said the state granted permits for 5,000 megawatts of new solar and wind power last year alone, with 15 times that amount currently in the permitting process.

(Photo: Craig Miller)

Google is giving a boost to the solar industry today – but not to those large solar farms in the California desert. Nope, the company’s largest clean energy investment to date is going to home solar.

Five years ago, SolarCity was a small, Bay Area start-up. Today, it’s getting a $280 million-dollar investment from one of the most influential players in the game.

“We are very excited,” says Lyndon Rive,  CEO of SolarCity. “It’s a big vote of confidence in SolarCity as well as hopefully a big vote of confidence to the entire market.”

SolarCity’s business is built around installing and financing solar panels for its customers, sparing homeowners the steep up-front costs. That’s been helped recently by falling prices on solar panels.

Rive says the financing has largely been provided by banks thus far. But he’s hopeful Google’s move will bring more corporations into the mix. “If we want to see solar power truly get large-scale and get adoption across almost every home and every business, we need to see the corporations start investing into solar power,” he said.

Residential solar is a new focus for Google. In the past, the company has invested in large-scale wind and solar farms.

“We use energy to power our services and we want that energy to be as clean as possible,” says Parag Chokshi, a spokesperson for Google. He says the company sees small-scale solar as important part of the energy mix — and a good investment.

“We think that supporting the development of this sector will help all of these different technologies get down that cost curve to become cheaper and cheaper over time,”said Chokshi.

The investment will fund between 7,000 and 10,000 new solar installations across the country.