How to oil the green machine
Sydney Morning Herald
Saturday January 9, 2010
American factories are in line for an energy makeover, reports Anne Davies. FDR transformed the United States of America with a New Deal built on public works and social security. Eisenhower created the interstate highway system that turned the economy and cemented the car as a pillar of American life. Microsoft, Apple, Netscape and Google put the US at the forefront of the information economy.Now Barack Obama wants to transform the nation into a green machine, leading the world in the manufacture of solar panels, wind turbines, electric cars, long-life batteries and technologies to make the electricity grid more efficient.Can the land of the internal combustion engine and the McMansion - where bigger is always better - become a green economy? Can it catch Germany, Denmark, Spain, even China, in fostering green technology? And can America achieve the President's dream without putting a price on carbon?Having weathered a tough year, the venture capitalists of California are roaring back to life - "clean tech" is hot."I am more bullish about this than ever," says Steve Westly, whose Westly Group venture capital firm is backing the electric car company Tesla. "We have seen some stunning innovation in California and in China, but most people don't realise how quickly these technologies are coming."Westly likes to recall that the first mobile phones cost about $3000 and weighed more than 3 kilograms. When solar power is as cheap as conventionally generated electricity - and he says that's not far off - technologies will "go through the ceiling".Tesla's first roadster can reach 100 km/h in 3.9 seconds, but it costs $US101,000 ($110,000). The company is working on a more affordable family car, which Westly believes will take the US car industry by storm.Chevrolet is working on the Volt, a plug-in electric car with a range-extending combustion engine.The Obama Administration used the necessity of economic stimulus to pour money into the industry - and grants and subsidies are starting to flow.Clean energy funds of $US80 billion are available through the Recovery and Reinvestment Act, on top of the $US70 billion that was already available for projects such as retooling the car industry to meet tougher emissions standards and nuclear power.There is new money for low-tech projects like insulating the homes of a million low-income people.But billions of dollars are also flowing to science laboratories, venture capitalists and American factories."Our aim is to set the table, and the private entrepreneurs can make the food and serve it," said a senior White House official of plans to direct some of the survival money that banks repaid the Government to tax credits for green technologies.This would take the total for such technologies to $7.3 billion.The Government says it will now meet its goal of doubling America's renewable energy output in three years and employ half a million workers to build wind turbines, solar panels and components for a "smart" grid that can carry renewable electricity."Green shoots" have already emerged. Newton, Iowa, was the birthplace of the whitegoods maker Maytag, which moved to Mexico in 2007, taking 1800 jobs with it. Now the old Maytag plant is busy making foundations for windmills.But in Pipestone, Minnesota, half the workers at a factory making fibreglass blades for wind turbines lost their jobs to the credit squeeze. Renewables are subject to economic forces, too.Perhaps the best known champion of "cleantech", Al Gore, has put his money where his mouth is. He set up Generation Investments, a sustainable investments fund that opened an office in Australia because it expected local superannuation funds to find its philosophical approach appealing.He also invested some of his fortune in Kleiner, Perkins, Caufield and Byers, a venture capitalist that backed Amazon, Google and Sun Microsystems in the dotcom boom.Kleiner, Perkins became a foundation investor in Ausra, the solar thermal company based on an Australian technology developed by David Mills. It also received foundation investment from Khosla Ventures, set up by the man behind Sun Microsystems, Vinod Khosla."The market is long on short and short on long," Gore wrote in Our Choice. "This short-term orientation has significant negative repercussions for the global economy. If businesses forgo value-creating investments to manage short-term earnings it damages economic viability in the future."The green evangelists are not limited to Californian venture capitalists. As 2 million US manufacturing jobs disappeared over the past two years, strange bedfellows were made.The United Steelworkers union paired with the Sierra Club environmental group to form the Blue Green Alliance and lobby for support for green jobs and industries that manufacturing workers could readily adapt to. Its report Building a Clean Energy Assembly Line was launched by the senator for Ohio, Sherrod Brown, who wants clean energy to revitalise demand for manufacturing in his state.But is this realistic? Sceptics abound at both ends of the political spectrum. Some economists and conservative commentators have seized on a study from the University of King Juan Carlos in Spain. It found the US should expect to lose nine jobs for every four it created, based on the Spanish experience.Subsidising up to 5 million green jobs would therefore cost up to 11 million American jobs, because subsidies push up electricity costs, depressing metallurgy, mining and food processing. The National Renewable Energy Laboratory, part of the Department of Energy, dismissed the Spanish study as irrelevant to American experience.Obama, meanwhile, has been criticised for not doing enough. Naomi Klein, the prominent liberal commentator, recently blasted him for missing the opportunity to create a Green New Deal."Instead, he experimented disastrously with reaching across the aisle to Republicans, low-balling the size of the stimulus and blowing much of it on tax cuts. Sure, he spent some money on weatherisation [of houses], but public transit was inexplicably short-changed while highways that perpetuate car culture won big," she wrote.Perhaps the biggest impediment for the US - and Australia - is reversing many of the fossil fuel subsidies infused in the tax system, and imposing a cost on carbon emissions. A study by the US Environmental Law Institute found that between 2002 and 2008, $US72 billion in subsidies flowed to fossil fuel industries, while renewables got $US29 billion.Obama has begun to reverse that, but he faces strong resistance from entrenched oil interests.Indeed, this year he faces a huge battle convincing his Democrats to support a cap-and-trade scheme that would put a price on carbon.
© 2010 Sydney Morning Herald
