[This is a response to a piece posted to “www.TheEnergyCollective.com” by Matt Stepp of the Information Technology and Innovation Foundation, on Wednesday November 17th, 2010]

In an opinion piece entitled “The Energy Independence Trust: Where’s the Innovation Beef,” Matt Stepp criticizes the Energy Independence Trust proposal of the Coalition for Green Capital (CGC) as too focused on deployment of existing clean energy technologies, and not placing enough emphasis on investment in research and development of innovative technologies. We think he presents a false choice and we at the CGC therefore disagree with this conclusion for two reasons: first, there are institutions that exist and others that have been proposed to focus on breakthrough technologies -- which are admittedly critical to our future; and, second, we believe that existing clean energy generation and energy efficiency businesses need immediate help to prevent their decline and the potential collapse of their supply chains. In short, we believe that the choice between investing in research and development versus deployment at scale is a false choice: any breakthrough technology needs a continuing pipeline of demand that pulls research all the way into commercial installation.  It is surely right to worry about what generating units will be built fifteen years from now.  We think it is equally important to worry about what gets built over the next fifteen years.  The idea of an Energy Independence Trust (EIT) is to make sure the front end of that pipeline -- the here and now -- works. Today, it isn't working.

First, to provide a little more detail: the Coalition for Green Capital is a strong supporter of Senator Bingaman’s Clean Energy Deployment Administration proposal that would expand financing for innovative technologies through an infrastructure based in the Department of Energy. The DOE is well suited to serve the critical purpose of funding the innovative new technologies that are currently a decade or more away, and also to assist in bridging the commercialization gap that these new technologies face when they first reach the market. 

The EIT as proposed is aimed at a very different problem and thus would not compete with Senator Bingaman’s CEDA or other innovative technology proposals for appropriations, but would instead be structured as a non-governmental entity which would be empowered to borrow from the US Treasury (and also receive private charitable contributions) to provide loan guarantees that would back private capital. By guaranteeing these loans to deploy existing clean energy technologies, the EIT would reduce the cost of debt available to these projects, enabling them to achieve grid parity with existing electricity generation. The money would eventually be repaid so as to eventually place no burden on the taxpayer. These projects would be a continuing source of demand for breakthrough technologies as they reach commercial scale.

Second, many wind, sun, and efficiency projects - and indeed most nuclear projects -- right now are in danger of disappearing and perhaps never coming back into existence due to a lack of available, affordable financing. They need low-cost, long-term financing from private lenders backed by EIT loan guarantees. By reducing the cost of up-front capital for these projects, they can achieve price parity with existing generation while not reducing the internal rate of return to investors. These will be low-risk projects, with a lot of additional capacity to add to the electricity grid, all of it produced domestically in the US. In addition, the EIT would provide loan guarantees to back energy efficiency projects, which can have an immediate impact on employment nationwide.

We should not ignore the lessons to be learned from the nuclear industry.  Commercial nuclear reactor technology was developed in the United States, and the first generations of nuclear plants were built by US-based companies using US manufacturing facilities.  In the 30 years that elapsed from the last new order for a nuclear plant and the current round of orders, the US companies in the business, Westinghouse and General Electric, have moved on.  Westinghouse was sold to a Japanese company and GE placed its nuclear operations into a joint venture with a Japanese company.  The nuclear plants that are built in the future will be imported.  We should not visit the same fate on the US renewables industry.

In addition, the wind, sun, nuclear and efficiency projects of today are all also a source of demand for breakthrough technologies of tomorrow.  New commercial projects are the best potential customers for new technologies.  A continuing stream of new projects will provide a base of customers for new technologies as they are developed.  We cannot simply stop and wait until we achieve a breakthrough.  We must continue moving toward a clean energy future and take advantage of new technologies when they become available.  Otherwise, we will replace retired old fossil facilities with new fossil facilities that will have a 40 year life.

Reed Hundt: CEO, Coalition for Green Capital

Ken Berlin: General Counsel, Coalition for Green Capital

Monty Humble: Treasurer, Coalition for Green Capital

Gerry Waldron: Counsel, Coalition for Green Capital

Alex Kragie: Vice President, Coalition for Green Capital

Sarah Davidson: Vice President, Coalition for Green Capital