Betting On Clean Energy
Before 2010, the U.S. ranked first in total clean energy investments, was tops in attractiveness for renewable energy investment, and led the world in overall patents filed. No more.
China has surpassed the United States in all of these metrics. Our country is sitting on the sidelines as the equivalent of 16% of our GDP is up for grabs.
Our latest fact sheet arms you with the data on China’s efforts to become the lead innovator and target of investment in energy technology. READ IT HERE: thirdway.org/publications/416
The real question we should ask about Solyndra is, “When did Americans stop tolerating risk?”
Loan guarantees inherently carry risk. If they didn’t, the loans wouldn’t need guarantors. The U.S. Department of Energy’s program was designed specifically to fund cutting-edge innovations that could not secure sufficient private capital. That’s the way to help potentially breakthrough technologies get off the ground without picking specific winners and losers. The expectation is that a handful of these companies might succeed spectacularly and that some of these companies would fail. This risk was explicitly built into the program by Congress and the Bush Administration at its inception.
Solyndra is an example of the downside of investing in risk. But let’s not make more of the company’s failure than is really there. The loan guarantees to Solyndra make up less than 2 percent of the total Department of Energy program. This is out of a total of 18 loan guarantees to 14 companies. The wisdom of investing in a portfolio of companies is that the risk is spread out so that the program can tolerate the failure of any given investment. That is what is happening.
Does the company’s bankruptcy merit closer scrutiny? Absolutely. We have to learn from our mistakes. But does this mean DOE should eliminate all financing for renewable energy? Not if the United States wants to continue to develop potentially market-changing technology. This is an example of the kind of creative destruction—the case when weaker business models fail and companies are overtaken by stronger ones with new technologies or innovations—that drives the economy. The condemnations of loan guarantees as intolerable risk are contrary to the fundamentals of capitalism and more than 100 years of American economic success driven by government investment in emerging technologies.
Cheap capital from China only makes the need for loan guarantees, or another form of government-financed capital for emerging technologies, even greater. We have to invest more in clean energy—not less—if we want to compete with the Chinese for the $2.3 trillion global clean energy market. China has twice as many initiatives to boost clean-tech development at the federal level than the U.S. It now leads the world as both the largest source of, and destination for, clean energy investment. China is beating us at our own game—the risk and reward of investing in innovative new companies and the ability to make a profit when an idea pans out is a foundation of capitalism.
Since when did China become better capitalists than the United States?