Just finished a very long first day at the Clean Economy Summit in D.C. Lots of cleantech business leaders in attendance, a great crowd.
I've ended up being in more conversations about the current and future role of natural gas than I expected. It's clear that the expected continued low cost of natural gas in this country is going to have major impacts on cleantech markets and policies in the U.S. going forward.
Participants were allocated to roundtables on various topics of interest; my group was tasked with thinking about what an effective clean energy standard (the latest rebranding of a national renewable portfolio standard) might look like. Managers from a wide range of cleantech industries gathered, talking about what would help them out of such a policy.
As per the ground rules of the discussion, I won't talk about what members of the group talked about, but I'll mention some of the points I made:
1. Complexity kills.
If the cleantech community proposes any new energy policies, they'd better be simple. Complex policy proposals are hard to message. They're subject to the various cleantech subsectors fighting each other over spoils that matter only to them, eliminating legislative momentum. And if anything actually gets passed, it creates artificial boundaries, artificial skews to the free market.
2. Rather than ask for more government spending, focus on removing red tape.
Permitting and other approvals require significant effort and create significant obstacles for the implementation of clean energy technologies. And even if such red tape is evenly distributed across all energy projects, the transaction costs end up discriminating against smaller-scale projects, which basically means discriminating mostly against clean energy projects. Before asking for more handouts, the cleantech community should start by asking for harmonization of local permitting and approvals, and a general reduction of government red tape that is standing in the way of clean energy implementation.
3. Natural gas is my litmus test for any new clean energy standard.
If you start from the perspective that natural gas prices are low and are going to continue to stay low, natural gas becomes the market price standard for any new generation project. A lot of the discussion today danced around a couple of critical parameters of any clean energy standard: How high a percentage of the energy generation mix should be "clean energy" (with an inclusive definition including natural gas and some other "cleaner" fuels versus the incumbent mix), and what proportion within that clean energy mix should be allocated to specific technologies like renewables, energy efficiency, and natural gas.
To me, the litmus test is simple. An effective clean energy policy results in increased consumption of all three of renewables, energy efficiency and natural gas compared to the status quo, with enough flexibility that states could achieve their targets without increasing costs for utility customers (by offsetting lower-cost techs with higher-cost emerging techs) if they so choose, and with a dominant role for the free market in choosing specific technologies to implement. If the policy ends up actually reducing the use of natural gas versus business-as-usual, it's skewing the market too much away from the market-making price. If the policy ends up seeing natural gas use expand while renewables and energy efficiency are getting pushed aside, it's not an effective longer-term strategy.
There should be a broad range of fairly simply-designed policies that meet this test -- although the targets may be higher than some politicians are ready to support right now.
