How the Government Is Lowballing Investments in Clean Energy

The federal government could shut down over $1.6 billion in cuts to clean-energy programs. Most of the proposed cuts come from a fuel efficiency program, but House Republicans also targeted the loan program that backed Solyndra, the dysfunction solar company that’s cast dispersion over the rest of the industry. Congress didn’t need Solyndra to give it an excuse to slash funding for the clean-energy industry, though. This latest hit only underlines the government’s lack of enthusiasm for any energy project involving the words “clean” or “renewable."

Take, for example, the Advanced Research Projects Agency-Energy. Inspired by the innovation-driving, internet-creating Defense Advanced Research Projects Agency, ARPA-E invests in game-changing energy technology, like electric-vehicle batteries that could lower the cost of driving from St. Louis to Chicago to less than $5. Independent organizations, both liberal and conservative, have recommended the agency receive funding on the order of $1 billion. Yet the Obama administration's funding proposals have come in far lower than that, and Congress has low-balled the agency further. In March, Arun Majumdar, who heads ARPA-E, requested $650 million for the 2012 fiscal year. The House's version of the energy appropriations bill allocated $180 million to the organization.

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That’s not the type of funding the federal government gives to projects it actually cares about. "What was DARPA's first appropriated budget in 1962? It was $246 million in 1962 dollars," Majumdar, the head of ARPA-E said at a recent PopTech event. In inflation-adjusted dollars, that's about $1.8 billion, or 10 times the current allocation.

"We are in some difficult times," Majumdar said. “We will make the best use of the dollars we are appropriated."

But federal funding for renewable energy is so scant that the industry is receiving less government support than oil and gas did during the Depression, when funding levels for that industry reached their nadir, according to a new study (PDF).

The study by DBL Investors, a venture capital firm that invests in clean tech, shows that governmental grumpiness about funding energy projects is a new phenomenon. The authors compared government subsidies for nuclear, oil and gas, and renewables over the first 15 years in which those industries received federal support. In inflation-adjusted dollars, oil and gas received about four times as much money as renewables, while nuclear energy received about eight times as much, according to the company’s research.

If renewable energy is to succeed, the federal government needs to support it, not slash its funding at every opportunity. But the government isn't the only sector at fault. The American Energy Innovation Council, a group of business leaders that includes Bill Gates and Norman Augustine, the former CEO of Lockheed Martin, argues that the private sector doesn't pour the money it should into research and development for technologies that could bring enormous gains to society as a whole. In part, they say, firms under-invest in energy because "it is difficult for any individual firm to monetize all the benefits of these types of investments" — once one group of researchers makes a leap forward, they can't keep a tight enough hold on the technology to reap the financial windfall that should be coming their way.

But for the country as whole, investment in energy have always paid off. As the AEIC puts it, “Supporting innovation is an investment, not a cost.”

Photo via (cc) Flickr user Tamsin Slater