Enterprises generating wind and solar power are growing fast in Europe, Asia, and the United States. As countries seek to limit fossil fuel emissions that spur global warming, the search for cleaner energy sources is on. Thirty years ago, the wind and solar industries did not exist, but now they are coming into their own, actively nurtured by governments across the globe.
On a good site with convenient access to transmission lines, wind power is highly competitive with power generated from fossil fuels like coal and oil. Texas and Iowa alone have installed over 15,000 megawatts of wind-power generation, equal to the energy that can be generated by fifteen nuclear power plants. In the last couple of years, solar prices have dropped as much as fifty percent, reaching parity with other sources in parts of Europe and the United States. California will soon have solar power capacity equal to several large nuclear power plants.
With all of this good news, why would the leader of a major U.S. party loudly oppose wind and solar power? The Republican Party’s presidential nominee, Mitt Romney, supported green policies when he was governor of Massachusetts, but his platform opposes the continuation of U.S. wind-energy tax credits that have been in place for twenty years; and he promises to cut off loan guarantees that have been critical for the growth of solar power. Romney’s stands are especially surprising given that 81% of wind capacity is in GOP districts, and so are many of the 37,000 jobs that may be lost if the tax credit encouraging wind power is not extended.
Let’s consider why it makes sense for governments to nurture what economists call “infant industries” that promise new profits and socially useful products, and then turn back to the puzzle of today’s Republican Party.
How Governments Help Infant industries Succeed
Historically, governments across the world have helped key industries so they could gain ground in the world economy—a good example is South Korea’s creation of an automobile industry. Recently, both nations and U.S. state governments have fostered renewable energy for national security and environmental reasons, and to create jobs. When homegrown electric power replaces imports of coal, natural gas or oil, then dollars and jobs stay at home. In Iowa, for example, wind-generation creates new jobs, and Iowans send fewer dollars out of state to coal producing regions.
For decades, federal and state-level initiatives have used various tools to nurture America’s solar and wind power industries:
- In the late 1970s, the Carter administration used research and development funding and incentives to encourage startups. By the mid-1990s, America was the world leader in an increasingly cost-effective, competitive industry. Since then, Europe has taken over the technological lead, but U.S. policies have kept our wind and solar companies in the game.
- Wind power production has expanded dramatically, encouraged by state-level renewable energy requirements and the federal tax credit (supported by Iowa Republican Senator Chuck Grassley and other farm-state legislators).
- Solar energy has seen explosive growth, with huge potential markets for American companies. China’s entry in the market has driven down costs and accelerated global deployment. U.S. federal loan guarantees have encouraged investments in solar plants, such as two close to completion in California that combined will produce over 1000 megawatts of power.
Government loan guarantees, until recently garnering strong bipartisan support, are perfectly suited for a technology like utility-scale solar power that is generally competitive in an environment like California, but is still perceived as new and risky by commercial lenders. Like a venture fund, government loan guarantee programs are specifically designed to support a portfolio of risky investments. Most companies will succeed, but a small minority will fail, as did the much-discussed Solyndra venture. The Solyndra loan guarantee originated under Republican President George W. Bush, and as of 2012 the same Department of Energy program has provided a total of thirty-three loan guarantees, only two of which have had loan defaults. Thirty one leading-edge technology companies successfully moved on to private-sector funding, and the funds used to cover the two defaults were much less than Congress originally budgeted.
Why Republicans are Doubling Down on “Drill Baby Drill”
Neither party has been consistent in its energy policies, but today’s Republican Party under Mitt Romney is taking a surprisingly clear stand against successful efforts to encourage wind and solar power as part of America’s overall energy portfolio. Romney’s position is unequivocal: no wind tax credit, no loan guarantees. His position might make sense if it were part of principled opposition to public subsidies of all sorts. But Romney and his fellow Republicans champion billions of dollars in special tax and other incentives for the fossil fuel and nuclear industries.
Current Republican positions can only be understood in bare-knuckled political terms. Grassroots Tea Party activists who deny the reality of climate change and billionaire funders with vested interests in coal and oil profits call the tune, and Romney is catering to them. In turn, these interests are pushing hard, because it may be their last chance to derail rising competition from renewable energy companies – and preserve their industries’ special privileges as environmental protests multiply. Over the last ten years, the major oil companies have earned over a trillion dollars in profit. It takes only a fraction of this tremendous wealth to intervene in elections and lobby politicians to maintain their industries’ subsidies and slow down the growth of the wind and solar industries.
Rewiring the Future—Will America Participate?
Over coming decades, humanity will race to rewire the world with clean energy, to avoid the devastating effects of warming spurred by burning carbon fuels. Europe and Asia will not sit still in the race for technological innovation and new profits. If current GOP and Romney policies prevail, U.S. companies will be severely undercut in the race for an emerging global market worth several trillion dollars. And millions of Americans, especially in the Midwest and West, will lose economic opportunity and face worse droughts and crop losses from climate change.