Secretary Chu: The Government’s Role in the Future of Renewables

Midway through the week at the 2012 World Renewable Energy Forum, Secretary Steven Chu of the United States Department of Energy and Santiago Seage, CEO of Abengoa Solar spoke during the plenary session titled, “Government and Industry: Driving the Clean Energy Transition.” Even though there are many threats today to the expansion of the renewable energy (RE) market, inexpensive natural gas being one of those threats, I came away from this plenary session with reason for optimism. Governments can play the role in RE expansion, not through endless subsidies, but through strategic investments in key areas.

Secretary Chu speaking at WREF 2012

Mr. Seage, the CEO of a $6 billion dollar global solar technology company, drove the point home that it’s time that government and industry realize the free market is unable to solve our energy problems by itself. In addition, he said that the volatility of energy prices is compounding our energy problems and global governments can intervene to create consistency and predictability so RE businesses can thrive. Perhaps the most proactive thing this global businessman said was that energy prices need to reflect the cost of CO2 emissions and other environmental costs. Seage said, “We cannot continue living without a price on something that has a price.” Assessing the true environmental costs and impact of using carbon is critical to the success of the renewables industry.

Secretary Chu spoke next and described some of the innovative ways the U.S. Department of Energy enables the RE market, not just because it is the proper thing to do for the environment but because it also makes economic sense. The Nobel prize winning scientist began with a review of the current climate science and referenced four different studies by NASA Goddard Institute for Space Studies,National Oceanic and Atmospheric Administration, HadCRU, and Berkeley. All four studies say that over the last 200 years the average annual land temperature has been increasing. Without a doubt, Sec. Chu said, greenhouse gases (GHGs) are preventing heat from escaping out of the Earth’s atmosphere thereby warming surface temperatures and changing the climate. So what can we do?

The good news, Sec. Chu said, was that the cost of doing something about climate change is going down every year. The question is no longer if clean energy will become competitive with conventional forms of energy, it is a matter of when it will happen. The Department of Energy’s (DOE’s) SunShot Initiative has the lofty goal of reducing the costs of solar energy systems by 75% before 2020. President Obama’s intent with the SunShot Initiative is to position the U.S. as a leader in the clean energy economy by unleashing research and development to drive down prices. So far, it seems to be working. In 2004, the cost to install a solar system was $8 per watt. In 2010, the cost was down to $4 per watt. Mr. Seage and Sec. Chu both touted the benefits of governments investing in RE research and development to help strengthen the RE market.

Sec. Chu also reminded us that most of the good fortune for the RE industry in the United States was due to the American Recovery Act funds and that the DOE is already thinking about life after the Recovery Act. Some of the things they’re focusing on include:

• Asking Congress for an extension of the Wind Tax Credit.
• Investing in research, development, and deployment to drive down costs of RE.
• Lowering the cost of capital so investment becomes less risky. This can happen by broadening the pool of investors and diversifying their investments in clean energy.
• Working to coordinate REs with transmission and distribution, fossil fuel reserves, and energy storage. If we don’t do this today and when prices plunge the tech will be there but we can’t deploy because the system isn’t ready.
• Continuing to increase energy efficiency in our buildings and appliances.

Sec. Chu reminded us that the solutions to climate change will be economical and that it’s possible to have energy in a cleaner way. There’s also a huge market opportunity for developing clean technologies and exporting them around the world. The Secretary also left us with this question: “would you rather be a buyer or seller of RE technologies to the rest of the world?” I know my answer. What’s yours?

For another prospective and more details on Secretary Chu’s presentation, check out Andrew Michler’s article on Inhabitat.

Cross-posted at the 2012 World Renewable Energy Forum blog.