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How Should the Government Support Alternative Energy Technologies?

An editorial in today’s Washington Post asks, what is the real scandal surrounding the Solyndra loan from the Department of Energy? Most news outlets are focusing on the politics of the deal, trying to score points with different constituencies. The Post editorial instead reflects on whether or not government programs such as the loan guarantee are even the right way to spur activity in alternative energy, or if such loans are even effective in the long run.

There are many good reasons for supporting alternative energy technologies ranging from addressing concerns about climate change, reducing dependence on foreign oil, increasing energy security, and keeping our country competitive and on the cutting edge of technology. Yet, as the Post editorial points out, “history is littered with failed government attempts to back the next big thing.”

The Post made a lot of excellent points as to why the DOE loan program is failing, and that the money could have instead been used to figure out “effective means of limiting carbon emissions or achieving energy security.” However, they give no hint as to what a better solution would be, or how governments should act to support the growth of alternative energy companies. If using taxpayer dollars to support domestic manufacturing companies is not the best way to spur the development of alternative energy technologies, as the editorial posits, then what is the best solution?

It is clear that pure market economics are not the answer, as energy is highly regulated, and incumbent technologies from oil, coal, and nuclear all enjoy government protection or subsidies in some form or another. How else can the government support alternative energy technologies? This is a question facing all sectors alternative energy, not just the fuel cell industry, but in these times of persistent economic uncertainty it’s one we need to address sooner rather than later. First and foremost, government policies need to be open to all technologies, and not support specific industries, in an attempt to pick a winner. Moving forward, we need a portfolio of options, rather than our current limited menu of finite and polluting fossil fuels. Choice is better than chains.

Current subsidies for fossil fuels should be rolled back. Subsidies should drive innovation, not maintain the status quo. Fossil fuel industries are robust, and no longer need government assistance to capture or keep their share of the market (which is considerable). However, alternative energy technologies may require this assistance to level the playing field to compete with entrenched technologies until they can become more mainstream.

So instead of asking “what the real scandal is?” surrounding the Solyndra affair, perhaps we should ask about what is holding back real, effective change in energy policy in the U.S.

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11.18.2011
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  1. November 21, 2011 @ 7:08 pm
    Sarah says...

    Good post!

    I agree — interesting editorial but the reference to “more effective means” is empty. And on what metrics would we judge effectiveness? Very difficult at this stage in the game.

    Supporting manufacturing in the US is very important and the loan guarantee program is just one of DOE’s mechanisms to build clean energy technology manufacturing facilities in the US. The thing is, even at the manufacturing stage, there is risk. And, like Chu alluded to in his testimony, Congress knew there was risk and therefore built in the subsidy.

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