With President Obama identifying tackling climate change and advancing sustainable energy as top-tier goals for the country in his inaugural address, what can the government do to improve the business climate for companies in advanced energy? During today's OnPoint, Graham Richard, CEO of Advanced Energy Economy, discusses a new report analyzing the advanced energy sector's market share in the economy and explains what policies he believes should be implemented to encourage growth.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Graham Richard, CEO of Advanced Energy Economy. Graham, thanks for coming on the show.
Graham Richard: Thank you, Monica.
Monica Trauzzi: Graham, in his inaugural address, President Obama highlighted tackling climate change and creating a path towards sustainable energy as two goals that the US should be working towards. How can a better business climate be created for US companies in advanced energy? What's your read on what's missing from the dialogue right now?
Graham Richard: I think there are a couple of things that our members tell us across the country would be helpful. One is to make sure that we continue the positive momentum in states and at the federal level, because the President also said that we cannot cede to other nations the technology that will power new jobs and new industries. And so there's momentum in those states for advanced energy economy, and the same thing at the federal level. So let's not go backward. Let's go forward. We see this as a huge economic opportunity for global leadership. And so that would be the first thing they'd say, and that comes in the form of saying things like let's make sure that the PUCs at the state levels who have a great deal of authority over electric power regulation continue to move toward a portfolio standard that encourages energy. Our partners in Ohio recently, this last year, working with the Ohio legislature, working with the Governor, worked out a new piece of legislation that passed that encouraged the growth of advanced energy economy companies. So the voice of having those business leaders at the table is one of the things that our members are saying. Make sure that you're listening to those who represent a growing and substantial part of the advanced energy economy.
Monica Trauzzi: And you recently released a report analyzing the advanced energy sector's market share in the economy. First, define exactly what you mean by advanced energy, because folks all over town have different definitions.
Graham Richard: We see this as a definition where the innovation that's taking place around energy comes together with what we would call the opportunity for seizing this $1.1 global trillion market, and the report that we talked about, the Pike Research, for the first time sort of establishes based on a revenue analysis with almost 42 subsectors and 7 sectors an estimate of what it would be if we were looking at that innovation economy where energy and new technologies, of course, this includes existing well-known activities, such as wind and solar and biofuels ...
Monica Trauzzi: So, but this is not just about clean energy?
Graham Richard: No. This is beyond that, because we are defining that as all of those technologies that help us move down that pathway the President was talking about, for secure, clean, affordable energy. And that's as a new organization a unifying approach to think about this growth potential. It looks like it could be as much as a 19 percent increase from the 2011 data to the 2012 data within the United States alone, and position us to have companies that can grow and prosper with this global opportunity. Monica, this may be the most significant opportunity we have for the innovation, new business, and global market demand. Almost a 39 percent increase in global energy is predicted by 2030. So our association is working to promote the policies and to encourage the recognition that this is a tremendous economic opportunity for our country.
Monica Trauzzi: So you establish that we saw growth here in the US from 2011 to 2012 in this sector, and that was better than expected. So can one sort of read into that, and does that suggest that the current level of incentives is working, and that the status quo should remain in terms of the types of incentives that the sector is seeing?
Graham Richard: Well, I think we're saying if there are, for instance, tax policy considerations by the Congress and the President in this next six to eight months, we'd like to make sure that the principles of a level playing field, so if you're providing a particular incentive for one form of mature or traditional energy, we ought to look at providing that for the innovation side, for the new businesses that are helping to create real growth and value. We also want to make sure that there's not a reversal of those positions of incentives that are in place, and the regulatory certainty of the climate. There are those that are arguing that all tax incentives for energy should be abated or changed. Our position is that if you're going to save tax dollars and you want to cut back, then that ought to be equally on a level playing field with those mature industries. And in fact, we can make the argument that incentives for the early stage innovation is what we've done well in this country, whether it's in research and development funds, whether it's in tax credits, whether it's in an opportunity to stimulate the early stage funding necessary to get that product to have a lower cost and value, because the commercialization is working. That's been part of the way we've led the world, and we want to see that applied in the energy sector as well.
Monica Trauzzi: You define electricity generation as the largest market. How will that be affected as we start seeing all these coal fired power plants go offline? What's the future of that sector?
Graham Richard: Well, within that sector, when we look at it and define it, we're of course looking at hydropower, we're looking at solar and wind as the principal contributors to that particular sector. We believe that that sector will continue to grow, that there is a great deal of energy savings. A number our companies, a company like say Enernoc or Opower, those companies are working on the energy conservation side in the electric utility side. We also see a lot of innovation that's coming out of the discussions in places like New York, in California, where they're saying, as we look at say the recovery after the hurricane, is there a way to rethink the nature of what the electric utility ought to be in the future, where the innovation technology is a technology that brings the power of innovation from the internet, from broadband, from connectedness, into the energy economy. In my home state of Indiana, there was a small electric utility that was a rural co-op and a rural telephone company. They decided to merge because they were extending fiber optics for different reasons to the same customers. Think of fiber to the farm and think of energy efficiency. Micro grids, smart grids, all of that we believe is also part of the way we will see growth in the electric utility sector.
Monica Trauzzi: There's a growing push behind reorganizing DOE to sort of help spur clean energy innovation and spread the technology around, share it with our global partners. Would that be an effective way for the United States to reach some of these goals that you're talking about? Does DOE need to be restructured?
Graham Richard: Yeah. I'm not so sure, restructuring for me is maybe a less important approach than making sure we get consistency of policy and that we get the opportunity to, again, as I said, have the principles of fairness and a level playing field. There are lots of good initiatives started at DOE. Our members are telling us that the important thing is to make sure that research and development continues, to make sure that if there is a phase out of the tax credits, that it hits all mature industries as well as new, and to make sure that the barriers to entry for innovation, new technologies, and new approaches, that those barriers, that we concentrate on cutting those down and reducing them.
Monica Trauzzi: All right. We're going to end it right there. Thank you for coming on the show. Very interesting.
Graham Richard: Thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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