In a State of the Union address that focused like a laser beam on the U.S. economy, President Obama last night called on Congress to slash federal spending but invest more in developing cleaner sources of energy.
"This is our generation's Sputnik moment," the president told a joint session of Congress.
The Space Race analogy has been a handy White House tool for galvanizing support from entrepreneurs and companies interested in renewable energy. For much of his first two years, Obama had cloaked an appeal for legislation aimed at cutting industrial greenhouse gas emissions across the economy in a push to create jobs in the wind and solar power industries.
But today, the climate legislation is dead, and there is almost zero chance of a resurrection anytime soon.
With Republicans wielding greater influence on Capitol Hill, Obama last night dragged his energy and climate agenda toward the center. In that context, it became about reinventing the American economy and creating jobs in a more competitive world. It also meant reaching out to every corner of the energy industry except for oil.
"The competition for jobs is real. But this shouldn't discourage us," Obama said. "It should challenge us."
Obama proposed doubling, to 80 percent, the share of electricity generated from "clean energy" sources by 2035. Under a White House plan that must pass Congress, new standards for electricity generators would incentivize investments in renewable resources, nuclear power, natural gas, and in technology that strips carbon dioxide emissions from coal-fired power plants. In theory, those investments would translate into U.S. jobs.
Nudging lawmakers, Obama said, "Clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they're selling."
Obama proposed a five-year freeze on discretionary spending to slash $400 billion from the federal deficit, and he proposed corporate tax reforms. But he warned against overreaching on spending cuts, particularly in research and development.
'Clean energy,' an expanding term
Obama signaled a different approach to energy earlier this month, when he visited a General Electric plant in Schenectady, New York. There, alongside GE CEO Jeffrey Immelt, who Obama recently tapped to lead an advisory panel on job creation, the president toured GE's expanding campus. Inside the giant factory hangers, GE produces wind turbines and electric batteries, but also natural gas turbines and gasification technology for coal plants.
That day, the White House made it a point to highlight GE's $750 million contract to build steam and natural gas turbines for India's Reliance Power.
A former official in the George W. Bush administration said yesterday, on the condition of anonymity, that it sent a subtle signal to some in energy circles that the scope of "clean energy," as defined by Obama, is expanding.
Arno Harris, CEO of Recurrent Energy, a San Francisco-based solar project developer, came to Washington this week to meet with other clean energy business executives and financiers. Yesterday afternoon, as the White House started leaking tidbits of information about Obama's upcoming speech, Harris said he hoped the president would reach out to spend-thrift members of Congress but keep the focus on zero-emissions renewable technology.
"The key mission for me coming out here was to figure out what's a viable political strategy that can be connected to a meaningful policy," Harris told ClimateWire. "We need to remind everybody here in Washington that renewable energy isn't a partisan issue."
Harris and other CEOs of renewable energy companies are slowly coalescing around a more politically palatable "clean energy' standard. Utilities would be required to generate a certain percentage of electricity from fuels and technology that release less carbon dioxide than standard coal-burning power plants.
Yet that policy direction is a far cry from what advocates for a federal standard tied to renewable energy alone had envisioned. Suddenly, nuclear power and natural gas are folded under the same federal incentive designed to help a nascent industry.
"We need to make the tent bigger," Harris said, "and I think it's about welcoming the contribution that some of those other technologies can make."
Widening the field for non-renewable energy sources, including for the fossil fuel natural gas and unproven "clean coal" technology, is undoubtedly a shift toward moderation and a political challenge for supporters on the left, Harris said.
Bringing the gas lobby into the debate
David Crane, chief executive of NRG Energy, the Princeton, New Jersey-based power generator, said before Obama's address that Americans aren't opposed to the "green" movement. "But in the immediate wake of the Great Recession, the American people have lost faith in the government's ability to fairly and effectively implement any complicated policy," Crane said.
"So that's what caused the great anxiety about what many of us would have to admit was very complicated legislation," he said, referring to the cap-and-trade bill that passed in the House in 2009.
Crane pointed to a handful of political realities. First, he contends that members of the 2011-12 Congress lack the will to aggressively pursue a "clean economy" agenda. Second, there's an energized and empowered minority that believes it's in its political interest to harm the environmental movement. Thirdly, he noted, the government is deeply in debt, so he expects grants, subsidies and tax benefits for cleaner energy sources to be phased out.
A clean energy standard that kicks in until 2025, Crane offered, could be preceded by a federal renewable portfolio standard that starts in 2015. "It gives the wind and solar business basically 10 years to catch up," he said. "Given that the pipeline of cash, credits and tax benefits is going to come to an end, it's critically important to keep the progress going."
To bring the natural gas lobby into the debate, the NRG chief said as an interim step before 2050, the federal government could fashion policy that incentivizes the repowering of old coal-burning power plants to natural gas. "That would make a meaningful reduction in the country's carbon reductions by the year 2020," he said.
Analysts at Clearview Energy Partners, led by Kevin Book, predicted in a note to clients before the speech that "post-election political divisions will leave little room for grand designs."
Noting that Obama had predicted last year that energy policy stood the best chance in "bite-sized chunks," the Clearview analysts said they're looking for the White House to continue expanding its definition of clean energy. "Instead of an overriding vision," said the note, "we will be watching for further signposts toward compromise regarding coal-fired power plants, a potential anchor for an energy bill."
Michael Levi, a senior fellow at the Council on Foreign Relations, said in a blog posted shortly after the address that Obama's latest plan appears more ambitious than a Senate climate bill that Democratic leaders pulled from consideration in July.
Under a business-as-usual scenario, according to Levi, 55 percent of U.S. electricity in 2035 would be generated from lower emissions sources. The Senate proposal, negotiated by Sens. John Kerry (D-Mass.), Joseph Lieberman (I-Conn.) and Lindsey Graham (R-S.C.), increased that share to 74 percent. "The goal that Obama proposed tonight is considerably more ambitious," Levi said.
"The amount of clean energy deployed to meet the Obama goal would be far greater than it would have been under the sort of utility-only cap-and-trade scheme that was being bandied about last spring," Levi wrote. "This is not trivial."
The U.S. Chamber of Commerce, one of the president's toughest critics, applauded Obama's focus on U.S. competitiveness. "America must move swiftly to create millions of jobs, unshackle entrepreneurs and small businesses, and restore America's economic leadership around the global, or we will be left behind," said President and CEO Thomas Donohue.
Click here to watch E&ETV's post-speech coverage.