The Clean Energy Choice—To Lead or Lag
This month a group of 50 clean energy CEOs, investors and executives from New England traveled to Washington D.C. to deliver a common message to our leaders in the nation’s capitol: comprehensive energy and climate legislation is critical for building the clean energy economy here in New England and across the United States. The Kerry-Lieberman ‘American Power Act’ has the potential to kick-start our shared vision for the nation’s future. It draws upon many elements of the House’s Waxman-Markey legislation and Senate’s Cantwell-Collins proposal to deliver the market signals that will accelerate private sector investment, speed the transition to a clean, sustainable energy future, and create millions of quality jobs in the U.S. And, as we watch the situation unfold in the Gulf of Mexico and are reminded of our dependency on oil, it couldn’t have come at a more critical juncture.
New England and its business leaders have the ability to effect change. The clean energy sector already includes more than 2,000 Massachusetts companies and 26,000 jobs. It is the fastest growing industry in the region. Clean energy may be the largest opportunity we have ever had to grow new companies, create new jobs and build thriving regional and national economies. However, the clean energy industry in New England is different from its predecessors—textiles, computer hardware and software, Internet business – in scale, timeframes and the amount of investment required.
By now, many of us have heard the numbers. Energy is a $6 trillion global industry that will grow by tens of trillions of dollars during the next 30 years. But clean energy involves capital-intensive manufacturing or projects that produce commodities such as fuel, electricity or clean materials. This combination requires an alignment of policy and public-sector investment with private capital and entrepreneurial activity. The market dictates that company growth and jobs will disproportionally be placed in regions with clear, long-term policies, pricing signals, and a willingness to adopt early.
New England already has some of ingredients to drive private investment. Regional policies such as RGGI (the Regional Greenhouse Gas Initiative), state Renewable Portfolio Standards, advanced building codes, utility energy efficiency programs, and other initiatives have contributed to the growth of the sector. Massachusetts clean energy companies have brought in $1.1 billion in venture capital and private investment deals from 2007-2009, trailing only California, according to Bloomberg New Energy Finance data and a recent Clean Edge report.
Despite our progress, a recent Pew Charitable Trusts study concluded that in 2009, China invested twice as much as the U.S. in clean energy—$34.6 billion versus $18.6 billion. In addition, in relative terms, the UK invested three times more than the United States last year, and 10 other G20 members devoted a greater percentage of GDP to clean energy than the United States in 2009.
Nearly every one of the New England clean energy executives who traveled to Washington shared stories about the difficulty of financing and growing their companies here compared to other parts of the world. Asia, Europe, and even parts of the Middle East offer clean energy companies the opportunity to build their factories and projects faster, at lower cost and with longer-term customer contracts. These executives want to build their companies in the U.S. to serve global markets, but the cost of capital, readiness of markets and the availability of research funding and skilled workforce will ultimately determine how much of their growth will benefit the region.
So where does that leave us? On the verge. Decisions made during the next several years will determine where investments will be made, and these investments will have impact over several decades on a region’s economy and job market.
The creation and growth of clean energy companies in New England can deliver triple bottom-line results, including:
1. New companies and jobs based on next-generation technologies and services.
2. Displacement of imported oil with domestically produced clean energy, reducing our negative trade imbalance, and recycling those expenditures into our regional economy.
3. Mitigation of climate change impacts, improving quality of life for our children and grandchildren.
If we are to realize a clean energy future, we must change the trajectory of public and private sector investments soon or we will find advanced clean energy technologies reaching economies of scale in other parts of the world. We will replace our dependence on imported oil with a dependence on imported wind turbines and solar panels. We will miss out on regional economic growth and jobs.
Changing the trajectory requires the President and U.S. Senate to show leadership and come together on comprehensive climate and energy legislation.
Early-mover advantages are passing us by. New England and U.S. innovation can lead this critically valuable sector, but immediate passage of comprehensive climate and energy legislation is imperative. A price on carbon and a cap on greenhouse gas emissions will unleash a torrent of private sector investment and the resources for federal funding for clean energy R&D and deployment that will impact the scale of this sector for generations.