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.

There’s a lot of people going to solar companies to work because it’s a really exciting industry. It’s growing so much in California, so it’s attracting some of the best and brightest. I’ve told all of my staff that they have to sign 10-year contracts to work for me but so far most of them have stayed because it’s a really exciting time to be in government, to be able to run the largest solar program in the country.

In 2002, California established its Renewable Portfolio Standard Program “…with the goal of increasing the percentage of renewable energy in the state’s electricity mix to 20 percent by 2017.” Then the Energy Commission bumped the deadline up to 2010, and the 2004 Energy Report Update further recommended increasing the target to 33 percent by 2020.

Whatever the deadline, numerous incentives and rebate programs funded by the state and utility ratepayers are fueling an explosion of solar.  Sterkel says it’s growing at a rate of 40-50% a year.

But installing solar is still not cheap. Even now, all the solar in California adds up to 350 MW (one big power plant generates about 500 MW).

In part, that’s because most of the people taking advantage of the subsidies are residential utility customers, and most of those are installing systems of 4 KWs. That’s not a bad thing, per se.  Any kilowatt that home doesn’t siphon off of the grid is a kilowatt that can be used elsewhere. But slow and steady is a little too slow and a little to steady for some. Never mind that California is way ahead of other US states.  That just makes it easier to compare us to other countries, like Germany and Spain, that have invested even more in solar.

There’s no argument it takes subsidies to make solar financial feasible.  The question for advocates and regulators alike is how much subsidy helps solar thrive without spurring a ratepayer revolt? And how long should those subsidies last?  A report from McKinsey & Co. concludes:

“…regulators must adjust incentive structures over time and phase them out when grid parity is reached.”

Grid parity is the point at which there’s no difference between the price of solar and the market price for (less environmentally preferable) “brown power.”
Sterkel says:

(That) is the point at which everybody gets solar. Just like there was a moment when everyone got a cell phone and everyone got a car. And this year, we’ve already installed more megawatts than we did in all of 2007, and we’re not even all the way through the year. The policies are all pushing towards solar. The businesses are growing. The venture capital is here. You know, all signs point to “yes” for solar here in California.

That’s even though incentive levels in California have been dropping.
Where’s it all going?  Some say we could see a repeat of the 1980s, when oil prices tanked after spiking and green energy projects went “poof.”  It took them well over a decade to begin the long, slow climb back to economic and political viability.  Oil prices appeared to be sliding after a long, hot summer in 2008–until yesterday, anyway.  But green advocates say they won’t be caught out in the cold this time around. That’s because renewable energy advocates can point public attention to something that goes well beyond consumer price protection: climate change.

Rachael Myrow hosts The California Report. She reported on rooftop solar installations for Climate Watch on September 23, 2008. Listen to her story here.