Prizes for Progress with a Caveat: DOE Offers $3 Million Incentive

Posted on February 15, 2018 by Irma S. Russell

The U.S. Department of Energy (DOE) recently announced a $3 million prize competition for solar energy manufacturing innovations.  The American Made Solar Prize, seeks to encourage innovation in solar manufacturing in the private sector.  Given the urgency of the threat of climate disruption, incentives for a green energy industry are definitely a good thing.  

In 2017 the U.S. Global Change Research Program Climate Science Special Report reported key findings, including stronger evidence of “rapid, human-caused warming of the global atmosphere and ocean,” and observable changes in the planet have made the scientific consensus about climate disruption clear as glaciers shrink, oceans and rivers warm, and coast lines recede.  A draft report by agencies such as NASA and the National Oceanic and Atmospheric Administration released late last year states that the world “has warmed by about 1.6 degrees Fahrenheit over the past 150 years and that human activity is the primary cause for that warming.”   It seems clear that rewards for innovation to combat climate disruption are worth the effort and worth the money if they produce progress in sustainable energy.  Despite such promise, however, DOE and community oversight groups should use caution in this new prize enterprise. 

Entrepreneurs have a played a dramatic role in historic energy discoveries of the past.  For example, the discovery and development of fossil fuel was driven by the private energy sector.  A recent example is the rocket launch by Elon Musk in February or 2018.  Likewise, DOE’s laboratories, university researchers and other energy researchers have a proven track record of progress in energy research.  Moreover, private investment seems posed to spur renewable energy technologies.  Venture capital investments needed to take ideas and turn them into marketplace reality seem likely to support private innovations, particularly when those innovations have the endorsement of the DOE. These factors suggest optimism about the result of this prize and others like it. 

So what’s the caution and why?  In an article forthcoming in the UMKC Law Review Green Economy Symposium later this spring, I survey current-day green economy sector jobs and other efforts to build markets to help encourage sustainable practices.  The article describes natural incentives to promote an all-hands-on-deck approach to addressing climate disruption and argues for the use of ex post rewards for innovations, like the award now offered by DOE.  Caution: it won’t work toward environmentally positive outcomes if, rather than creating incentives for real innovation, it is an excuse for a give-away. 

However, Concerns that ex ante rewards may confer unfair benefits to inventors turns a blind eye to the risks accompanying the failure to attract innovations to solve the global climate problem and other environmental problems.  Government support should encourage the progress that a modern-day Edison, Tesla or Jonas Salk might make with true break-through advances.  In such cases, governments should mobilize to support inventions even when the government did not foresee such developments.

The possibility that the reward program will advance new and robust solar energy manufacturing innovations makes it worth pursuing.  The risk, however, that the program will fail to advance the science of solar energy is real. It is again that some wasted funding is likely.  And distinguishing between an incentive for innovation and a reward for being part of the energy structure can be difficult.   For example, last year Secretary of Energy Rick Perry announced payments to nuclear and coal companies for their status as sources of power based on the rationale that such payments serve as insurance against a compromise of the energy grid in the future.  The plan did not include payments to renewable energy companies, however, causing some to speculate that the payments had a political purpose rather than the stated purpose of insuring an uninterrupted energy supply. 

The answer to whether the DOE program is worth pursuing hinges not on the ultimate result but on the good faith nature of the incentive and the effectiveness of the efforts of those monitoring the implementation of the reward.    The use of government incentives, including prizes, presents a potentially fertile avenue for progress.  While risks exist, the possibility of progress is alluring.  So long as the rewards serve to stimulate new ideas rather than simply rewarding existing players to continue business as usual, the expenditures are justifiable and, ultimately, justified because of the possibility of new.   Discovering innovation that moves the country toward a carbon-neutral economy is a goal worth funding – even when the success of such research is not assured.  In fact, this is the nature of research itself.  

Oregon as Center of Green Energy?

Posted on February 23, 2009 by Richard Glick

 By: Rick Glick and David Blasher of Davis Wright Tremaine, LLP

Many postings on this site have featured local and regional climate change policy initiatives. Oregon is no exception, but at the center of Governor Ted Kulongoski’s climate change strategy is making the state a hub of green technology development. Thus, the Governor seeks to combine greenhouse gas reductions with economic recovery. To that end, the state has used tax and other incentives to lure foreign clean technology investment to the state. Early signs are positive. The German solar cell company Solar World has recently taken over a stilled chip fabrication plant in the Portland suburbs and Sanyo is opening a solar cell facility in Salem. Vestas American Wind Technology, the largest manufacturer of wind turbines in the world, has announced plans to construct a 400,000 to 600,000 headquarters building near downtown Portland. As Governor Kulongoski declared in his 2009 State of the State address, “There is a green revolution stirring in America, and Oregon is the beating heart of that revolution.” 

 

To this end, the Governor is jockeying Oregon into a favorable position with President Obama's agenda of creating jobs that foster and incorporate sustainable energy projects. In order to maximize funds that Oregon will receive from the federal stimulus package, the Governor has established a state council called the Oregon Way Advisory Group. The Group is comprised of private business leaders and public officials who have an interest in developing sustainable energy proposals that will highlight Oregon’s green expertise. The Governor believes that by developing innovative projects to encourage job creation in green technologies, Oregon will have a leg up in the race for stimulus cash. “This approach will ensure that Oregon remains a leader in the green revolution,” the Governor said.

 

The Governor has proposed a legislative package for the current session that will address green energy and climate issues. Central among the Governor’s endeavors is an expansion of the Business Energy Tax Credit in order to attract new green industries to Oregon. The new green bills in the legislature include the following:

 

·        SB 80 will establish a cap-and-trade system to reduce greenhouse emissions by encouraging innovation and efficiency among Oregon’s industries. 

 

·        SB 79 is designed to increase energy efficiency in buildings by giving performance certificates to business to enable them to monitor efficiency in new and remodeled buildings. The ambitious goal is to reach zero net emissions by 2030, and in so doing, set Oregon as a leader in creating green building techniques.

 

·        SB 168 encourages energy independence of the state government by allowing energy efficiency projects on state lands and buildings, thus helping the state government to operate entirely on renewable power.

 

·        SB 201 is designed to provide an additional $4 million to weatherize and retrofit the homes of 400 low-income families each year, cutting energy costs for families by an average of $314 a year.   

 

·        SB 603 would stop Oregon from building any new dirty coal power plants and would require new power sources to be at least as clean as natural gas plants. 

 

·        HB 2120 will reflect the priority of providing more transportation choices for Oregonians in order to reduce emissions and traffic, to improve health, and to cut gas costs. 

 

·        HB 2121 will encourage the development of solar energy by directing the PUC to integrate up to 17 megawatts of solar energy into Oregon's electricity mix. Oregon launched the nation’s first solar highway at the I-5/I-205 interchange last year. Using Oregon manufacturers for the solar panels and emerging small Oregon businesses to install the solar system will supply jobs and renewable energy today and into the future.

 

·        HB 2180 would create an Oregon Renewable Energy Fund to provide grants to smaller community renewable energy projects. This bill also seeks to expand the Business Energy Tax Credit to provide a fifty percent tax credit for large-scale energy efficiency investments by businesses. The bill will also encourage sustainable bioenergy such as biofuels that do not compete with good supplies. Finally, HB 2180 will give the Oregon Department of Energy the flexibility to adjust tax credit incentives to encourage the development of the next generation of low and zero emission vehicles.

 

·        HB 2181 will give local governments bonding authority to provide loans to residential and business energy efficiency projects.

 

·        HB 2186 authorizes the citizen-comprised Environmental Quality Commission to develop reduction strategies including a low carbon fuel standard and restrictions on the unnecessary idling of trucks and commercial vehicles.

 

Governor Kulongoski views the current economic crisis as an opportunity to embrace sustainable energy projects that will make Oregon a leader in the future of green industries. As the Governor put it, “My message should be unmistakable – and it is the same message I conveyed to business and government leaders in Japan and China: Oregon is open for business. Especially green business.”