Role of Government

An Analysis of the Brookings Institution’s “Beyond Boom & Bust: Putting Clean Tech on a Path to Subsidy Independence.”

“Beyond Boom & Bust” argues that the lack of proper US energy policy will cause domestic alternative/renewable energy companies to falter and possibly fail. The paper addresses the history and evolution of the clean-energy technology business sector from its early “tech-boom” to its current heavily subsidized state. Also discussed are the influences of different energy sectors on the modern domestic economy. The authors argue that current US energy policies will not drive down costs for consumers and do not promote technological and business innovation in the clean-energy sector. Reforms promoting policy, economic, and technological advancement are proposed and the importance of innovation is stressed.

The paper addresses and describes how many of the current problems in the renewable energy sector arose, and suggests how to treat and cure the problems. It uses statistics, research data, mathematical analysis, economic/policy analysis, and studies actual industry cases/situations. It also provides much of the data used in those analyses. The article states:

“Many of today’s existing subsidies and clean energy programs, after all, are poorly optimized, characterized by a boom and bust cycle of aid and withdrawal, or in need of thorough revision thanks to either recent progress in the price and performance of subsidized technologies or the mounting fiscal burden imposed by some programs.”

Key recommendations regarding new energy policies include: establishing a competitive market; encouraging cost reductions and performance improvements; and provision of sufficient business certainty. Deployment policies should develop market opportunities for advanced clean energy technologies while fostering competition between technology firms and should also create market incentives and structures that demand and reward continual improvement in technological performance and cost-efficiency. While deployment incentives should be temporary, they must still provide sufficient reliability and endurance to adequately support private firms and investors in the short run.

The authors of this paper come from the Brookings Institution, the Breakthrough Institute, and World Resources Institute; three internationally recognized public-policy research organizations. The authors are established individuals within their respective field and their backgrounds and current occupations keep them directly informed and involved within the modern clean-tech industry. If the paper has any bias, it is towards driving energy policy reformation to advance the current economic, technological, and scientific states of the industry (ultimately bolstering America’s market power, technological prestige, national security, and domestic economy). The authors are interested in doing what is necessary to ensure that the clean-tech sector grows and expands sustainably. Though they are very intelligent and understand the importance of other economic sectors, they are likely to promote benefits and improvements for alternative energy policy and business at the potential expense of other industries and sectors. The arguments posed are very valid, but it could be noted that the jobs created by and the resources allocated to the development of alternative energies would have to be procured by harming and potentially crippling other sectors; supporting alternative energies could cannibalize older, established forms of energy (which could then be counter-argued as a positive step away from environmental harm, reliance on foreign energy resources, and potentially outdated technologies).

At Rothschild Financial, we are researching the procurement tools and contract characteristics that will best provide the certainty investors need to stimulate innovation, drive down their capital costs as well as costs for consumers, and how these tools and mechanisms can be properly implemented.

The study, “Beyond Boom & Bust” can be read at the Brookings Institution’s website and can be downloaded in PDF format.

Check our website frequently or follow Rothschild Financial on Twitter here for updates on progress and descriptions of our findings.

Jenkins, Jesse, et al. “Beyond Boom & Bust: Putting Clean Tech on a Path to Subsidy Independence.” Brookings Institute. Brookings Institute, 18 April 2012. Web. 16 July 2012.

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