Can renewables survive without subsidies? How can the United States change its policy on subsidies to move the industry toward a sustainable, independent path? During today's OnPoint, Letha Tawney, senior associate for innovation and clean technology policy at the World Resources Institute, discusses the new report "Beyond Boom and Bust: Putting Clean Tech on a Path to Subsidy Independence." She also addresses the likelihood of a clean tech market crash.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Letha Tawney, senior associate for Innovation and Clean Technology Policy at the World Resources Institute. Letha, thanks for coming on the show.
Letha Tawney: Thanks so much for having me.
Monica Trauzzi: Letha, you're a lead author on a new report focusing on the boom and bust cycle of clean technology. It's a very interesting concept to be addressing right now because renewables are facing pressures and criticism from all sides here in Washington. Is it possible to get renewables on a sustainable independent path?
Letha Tawney: It is. There's reports from the IA technology roadmaps that show they have room still to drive down price and compete with fossil fuels. McKinsey just brought out a report last week discussing how solar PV is on track with the DOE's SunShot Initiative to be down to a dollar a watt installed systems by 2020, which would make it very competitive with wholesale electricity prices.
Monica Trauzzi: But have these price drops backfired a bit on the industry and made it a bit more difficult for them to stay in business?
Letha Tawney: Well, certainly the industry has gotten more competitive as it's grown. It's going through what is a very natural sort of growth cycle with competitors flooding in and old standbys struggling to keep up. But I think that's a healthy shakeout and I would hope that we would give the industry the time it needs to get the next-the last 10 yards and over the finish line.
Monica Trauzzi: There's a lot of speculation that the clean tech sector is headed for a crash. Is that how you see it as well?
Letha Tawney: I think it's headed for a couple of years of tough times and that's for a bunch of reasons, several global reasons. And in the U.S. there's a very particular and somewhat arbitrary drawdown of federal support across the board for clean tech. So, we document across 92 programs a 75 percent withdrawal in public spending at the federal level on clean tech. And that, because it's fairly arbitrary, it's driven largely by expiration dates written into legislation and not about where the industry is at or where the markets that these industries sell into are at, that will be very difficult for the U.S. clean tech sector to weather. Globally, it's growing rapidly and the indications are we may see a plateau over the next two or three years, but in the long run, it will be a multitrillion dollar industry.
Monica Trauzzi: The argument always goes back to if the industry can't make it on its own, then maybe it's just not a viable one. Maybe these companies don't have viable business models. How long is too long for these tax credits and for government subsidies?
Letha Tawney: Well, historically we have subsidized fossil fuels indefinitely, so current oil and coal industry still have subsidies for mature technologies and, obviously, if we want clean tech to stand on its own two feet, then these industries should as well. The gas boom that we see now was built on the back of 20 years of tax credit for unconventional exploration, as well as significant federal R&D investment in the fracking technology and demonstration in partnership with private companies. So, I think we see wind, for example, the tax credit has been in place since the early '90s. We are getting to the point where they're competitive now with coal, where there's good wind resource and there's good transmission. If we give them a little bit more time and space, they can reach competitiveness with gas as well. So, how do we help them over the last bit?
Monica Trauzzi: So, how do we redefine the way that government is supporting the clean tech sector?
Letha Tawney: I think it's-what we posit in the report is very much around focusing on driving down costs and improving performance. So, rewarding the entrepreneurs, the engineers, the companies that deliver better performance or lower cost the between the project last year and the new project this year. So, around the world what we see is subsidies declining in a progressive way. We see in California, for example, that the support at the state level for solar was built with the vision that as the sector scaled up the subsidy would get smaller. That puts a pressure on the industry. They know that as time passes, that the support they will have will fall and there's benchmarks that they are going to have to meet. That certainty gives them the ability to make the investments they need in innovation. Simultaneously, that needs to be supported with a real investment in innovation, in the innovation system. And this is what our competitors are doing in China, in India, in Germany. They are supporting R&D in both basic science in the lab, but also very applied demonstrations in the field. They are supporting their workforce. They're making sure they're skilled in these technologies. They are supporting their advanced manufacturers and making sure that their manufacturers are squeezing every penny out and have the support they need to improve their equipment lines and those kinds of things. So, it's a two-part strategy; deployment subsidies targeted for driving down costs, but also investments in the innovation system.
Monica Trauzzi: Is this something that could get bipartisan support in Congress?
Letha Tawney: We've had some positive responses. I think the idea that we are not advocating for a permanently subsidized sector is really important. We think the sector, these entrepreneurs have the capability to deliver low-cost, low-carbon power. They just need the time and the space that the fossil fuel sector was given. I think that's a helpful message.
Monica Trauzzi: You mentioned natural gas. How does the natural gas boom and the very low prices we're seeing in the natural gas sector, how does that sort of affect the outlook for renewables, even as we look towards the long term?
Letha Tawney: I think it's very much a U.S. phenomenon at the moment. So, natural gas prices may fall some in Europe, but how much is unclear, how far China will be able to go with natural gas given their energy consumption. In the U.S. natural gas prices are very low. It has moved the bar for cost competitiveness. So, wind, for example, reached cost competitiveness with coal plants, but then the wholesale electricity market has changed for everybody. And now coal is struggling to compete and that raises the stakes for wind. They have to strive that much harder and I think that's part of the challenge. It's not as though the competitors are standing still and some day we will all just have a perfectly even market. Everybody is striving all the time and that's healthy.
Monica Trauzzi: All right, we'll end it right there. Thank you for coming on the show.
Letha Tawney: Thank you so much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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