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Michael Moynihan

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Winning the Future

Posted: 01/27/11 06:03 PM ET

The vision President Obama laid out in his State of the Union -- future forward and focused on winning the clean energy race through innovation, freeing business to compete and investing in research and education -- was spot on. So was the parallel he drew to Sputnik. For the United States is not necessarily ahead in clean technology. Although we have developed some of the most exciting clean technologies on the horizon -- in thin film solar, phosphate technology battery storage and algae-based bio-fuels -- by many measures we are behind. China leads us in manufacturing solar panels and wind turbines, Germany is ahead of us in solar deployment and Denmark is way ahead in integrating wind. None of these leads occurred as dramatically as the Soviets launching a satellite into space. But they are no less indicative of the challenge we face. In short, clean technology is not like computer technology where we initially led and then other countries worked their way up the value chain, eventually moving the jobs -- making phones and computers overseas. In the case of clean technology, we are starting out behind If we are to lead the world in these critical future technologies, it is vital that we raise our game in order to leapfrog the competition. The proposal the president laid out can help us get there. But only if we collectively succeed in carrying it out.

Part of how we can lead the clean energy economy is to create a level playing field for new sources of energy. The president's proposal to place clean energy on an even footing with fossil fuel energy is the right way to proceed. To be clear, it is neither rare nor wrong that the US has historically subsidized oil and gas exploration. Energy like food is a strategic commodity. Virtually all countries subsidize it -- developed countries on the producer side and developing countries like China with subsidies for consumption -- to lower gasoline prices for consumers. During the 19th and 20th centuries, those subsidies served us well.

What is wrong, however, is subsidizing one form of energy -- oil and gas -- at the expense of new clean technologies. We need to put clean technologies on an even playing field lest they lose out to incumbent fuel sources, especially those we purchase from abroad. All one needs to do to see what our foreign oil bill is costing us is to look at the gleaming new cities that have gone up in the Gulf states -- and look at our decaying rods and bridges by comparison.

Second, as the president said, we need to invest in R&D. However, we are fortunate to already have a great deal of technology under development in our labs. The challenge in the US context is to move technology beyond the development stage to commercialization. Because energy is capital intensive and business models live or die based on the price of oil which is set by a cartel, making capital available to start-ups to help them bridge the "valley of death" together with guarantees on large projects is critical here. If there was one problem with the ARRA bill, it tended to give out large amounts of money to huge companies. We would get a lot more value from giving many small grants out to entrepreneurs and start-ups.

Third, as we did after Sputnik, we need to mobilize our country to improve math and science education. Math and science are neglected at even the best public schools in the US. We need a full court press to raise our mathematical and scientific literacy.

Fourth, we need to rethink energy regulation. Much of the entire clean energy project resolves around the electricity sector. Yet the electricity sector is still dominated by regulated monopolies that under the US rate of return system are strongly disincented from investing in technology at all.

On Monday of this week, I moderated a discussion on energy regulation at the Clean Economy Network Summit with about 40 clean energy leaders and government energy officials. What emerged from our discussion was that American utilities -- the dominant players in the industry -- receive no reward for taking risk. Whereas in Italy, utilities have already put smart meters in 100% of homes -- because the savings make good business sense -- in the US, even subsidies in ARRA have not overcome resistance created by the system from implementing this new technology. Current rules forbid utilities from taking risk and block entrepreneurs from implementing clean, smart enegy solutions that would be profitable today. With better rules in place, we would already be seeing the Googles and Ebays of clean tech emerge. But rules today forbid companies from sharing power in an industrial park. They forbid a Wal-mart from sharing energy efficiency with a Sam's club across the street. Even critical government facilities must buy their power through a meter from a local utility. We need a complete overhaul of the regulatory framework if we are to meet the President's challenge. That is why NPI's Electricity 2.0 Initiative will soon be unveiling our proposal for the Green Lane -- a lane on the electricity highway to which every clean producer will have an open on ramp -- that will allow clean electrons to go from any point to any point on the US network -- without running into a host of barriers and redtape.

All of these changes will take government action -- not to prescribe the energy future -- but rather to free entrepreneurs and American businesses -- to combine ideas, capital and knowhow to build and win the clean energy future. The bi-partisan cooperation evident in mixed seating during last night's speech is a good sign that such cooperation and progress are possible.

This coming Monday, January 31, Senator Bingaman, a long time leader on energy issues and Chairman of the Senate Energy Natural Resources Committee will join me and others at NDN and the New Policy Institute to discuss his vision for the energy future and thoughts on legislation this coming year. Joining him will be former Alaskan governor Tony Knowles and other energy and technology leaders as we discuss a roadmap to the clean energy future.

There is much work to do this coming year, but it is work that cannot be postponed if we are to create a policy environment that will enable America in the president's words, to win the future.