Hillary Clinton, the Democratic candidate for President, says that the U.S. could be the “clean energy superpower” of the world. Her plan is detailed online and would spur billions in investment from both public and private sources, as well as making infrastructure more resilient and reducing emissions.
Donald Trump, the Republican candidate for President, says that he is a “great supporter of all forms” of energy but that America’s energy policy is a ” catastrophe.” In a 2015 interview with CNN, he said policies to promote clean energy and reduce CO2 emissions would “imperil” jobs and “the lower and middle classes.”
He, like many other critics of federal efforts to promote clean power, sees the failure of Solyndra’s solar company as a wasteful use of taxpayers’ money. You may remember that Solyndra was a solar firm that received a loan guarantee of up to US$535m from the U.S. Government. However, it went bankrupt and defaulted on this loan in 2011.
What can economic research tell us about the potential for government-led industrial policies to create jobs and promote clean energy? We can gain some insight by looking at the American Recovery and Reinvestment Act of 2009 (ARRA), or what became known as the “stimulus packages.” The expansion of renewable energies offers a great opportunity to create new jobs in the manufacturing and construction industries, among others.
Ghosts of Solyndra
The Political Economy Research Institute at the University of Massachusetts Amherst commissioned a study in 2014 called “Green Growth”. In 2011, the Brookings Institution published its report, “Sizing Clean Energy Economy.” These studies found that renewable energy and efficiency industries were engines of job creation and that government support of these industries boosted private investment and sparked economic growth.
Academic research is often ignored or dismissed in public discourse as “failures,” such as the bankruptcy of Solyndra, are used as examples of failed policies for clean energy. Public policies for clean energy have been effective at stimulating growth in this sector and creating new jobs.
The stimulus program funded several utility-scale renewable projects, including the Shepherds Flat Wind Farm. This is one of the largest wind farms in the world. locosteve/flickr, CC BY
First, let’s look at the Department of Energy (DOE) Loan Guarantee Program, which was funded under the stimulus package and provided a Loan to Solyndra for the construction of a factory. This program has been highly successful.
In 2012, it was responsible for the advancement of renewable energy by funding the largest solar photovoltaic project in the world, supporting two of its largest solar thermal projects, and financing the largest wind farm in the world. The losses from Solyndra were only 2 percent of the total portfolio, which is a small percentage when compared with the typical venture capital loss rates, often 40 or 50%.
The losses for American taxpayers are non-existent because the interest on successful loans from the DOE has now exceeded the failures of companies such as Solyndra. By the end of 2014, the DOE received 810 million in interest compared to the $780 million in losses.
Upgrade your infrastructure
How does the government’s spending on clean energy impact our energy system? The American Recovery and Reinvestment Act of 2009, also known as ARRA, was the largest investment ever made in clean energy by the U.S. government. Out of the $800 billion package, approximately $90 billion went to clean energy.
In February 2016, the Council of Economic Advisers, an agency that advises the President on economic policies, released its assessment of the impact of the clean energy provisions of the ARRA. This report is entitled “A Retrospective Analysis of Clean Energy Investments under the Recovery Act.” It shows the distribution of the $90 billion in funding for clean energy.
The stimulus money was used to upgrade energy infrastructure, such as smart meters that are designed for faster readings and quicker restoration of power after an outage.
Around half of the $90 Billion was spent on incentives or matching grants to increase the impact of stimulus. CEA estimates that $46 billion of incentives triggered an additional $150 billion in private and nonfederal expenditures. There was thus a total of $240 billion spent by both the public and private sectors on innovation and development in clean energy, as well as deployment or installation, such as solar panels and smart meters.
These investments have helped improve the energy infrastructure and also put large-scale solar and wind projects on the ground.