A rational policy for America’s energy future requires that an increasing fraction of U.S. electrical generation be powered by cleaner energy sources, such as traditional renewable technologies, high efficiency gas turbines, advanced nuclear power and advanced coal power with carbon capture and storage. An energy policy that encourages investments in a diverse portfolio of advanced energy technology need not be a budget buster.

President Obama and some Members of Congress have proposed a performance standard for U.S. electricity generation that would unleash the power of the marketplace to meet the challenge of building America’s energy future. Instead of dictating specific energy technology solutions, a clean energy standard lets utilities, power generators and state and local regulatory authorities choose the best technologies to meet their local circumstances, while meeting the national goal of modernizing America’s energy infrastructure.

Utilities have many options to meet this new standard. The costs of high efficiency low-emission combined cycle natural gas power plants are already highly competitive. Costs for other advanced energy technologies, such as wind, solar and cleaner coal power, keep dropping and will drop further as volume ramps up.

Congress authorized loan guarantee programs for nuclear power and other advanced energy technologies. While funds for loan guarantees are included in the federal budget, the actual cost to taxpayers is very low. Increasing the number and size of loan guarantees, and better administering the program to reduce delays, is another low-cost way to kick-start America’s energy future, spur private-sector investment and create new jobs. The U.S. Export-Import Bank (EXIM) offers a proven test case. EXIM loan guarantees expand U.S. technology manufacturing capacity and exports and return hundreds of millions of dollars to the Treasury each year. Such programs spur U.S. job creation and economic growth while promoting clean energy AND reducing federal deficits.

America doesn’t have to bust the budget on an advanced energy policy. But we do have to get started. We’re ready to go at GE Energy.

(These comments were submitted by Maureen Gorsen, partner at Alston & Bird LLP.)

Public policy debates about how best to stimulate innovation to a clean energy future need to move beyond a focus on how much money the government should spend and on what R&D or promising technologies it should spend that government money. Public policy debates should also include consideration of the necessary preconditions for an explosive growth in technological innovation, and what policies help or hinder those preconditions.

As far back as some of our earliest and most heralded inventions as a species, such as our invention of the wheel and written language, one can see that where there are more people interacting more frequently (e.g., trade, war, freedom of population to migrate) there is more invention. Human resource is the most valuable wealth of a nation and its ingenuity carries with it the most promises for a clean energy future.

Freedom and opportunity for human talent and creativity to interact, to own and to prosper are key. It's no accident that technology innovations flourish in areas with large pools of people with science educations in Massachusetts, Research Triangle, and Silicon Valley. Public policies should focus on expanding opportunities for science education, immigration to the United States, and ensuring that creative ideas can move easily from universities, and government funded R&D to new for profit businesses.

We've been spending a lot of taxpayer money on clean energy technologies - yet our economy still runs primarily on fossil fuels. The innovation needed for the clean energy future we are dreaming of requires many more years of patient investigation, and some thrilling moments of inspiration.

Often, in their eagerness to get to the "fun stuff" of handing out money, public leaders neglect the importance of creating a favorable investment and innovation environment. For instance, nearly every clean technology project in California is being held up by lawsuits and regulatory red tape. In addition to policies designed to build human capacity for invention and encourage mobility of labor and human talent, President Obama should focus public policies that reduce barriers to entry to new technologies and encourage creative destruction.

As expected, deficit reduction plays a large part in President Obama’s budget proposal, released earlier in the week. In line with predictions, this includes slashing the Low-Income Home Energy Assistance Program’s (LIHEAP) funding nearly in half, from $5.1 billion to $2.57 billion.

This is a real negative for many people who are struggling to make ends meet, and who will have one less source of support. But another downside is that this move passes up on an opportunity to implement a long-term strategy for more sustainable energy use that will also benefit the low-income recipients of LIHEAP aid.

In its current form, LIHEAP distributes energy and fuel vouchers on a means tested basis. This works like a gift card you can use only at one place: your utilities company. It keeps the heat on, but also reduces incentives for energy efficiency because unused vouchers are simply wasted.

It would make more sense to encourage energy efficiency by moving from a voucher system to one based more closely on cash rebates, or which at least gave recipients some flexibility to use assistance for purposes other than electricity or fuel. To the extent that people need to spend the voucher on energy, they could. But they could be given other options, like using excess vouchers to purchase energy efficient fixtures and appliances, pay for weatherization, or bank them for future use on big ticket items.

LIHEAP operates as a block grant distributed to all fifty states, which individually determine the conditions for administration without any federal oversight. In most cases, LIHEAP assistance does not go directly to eligible candidates; instead, direct payments are made through the LIHEAP agency to the local utility company. This system doesn’t give an opportunity or incentive to use the assistance on improving energy efficiency.

Moving from a voucher system to one based on cash rebates or conditional grants could increase the bang that individuals receive for each LIHEAP buck. Individuals receiving funds could use a portion to lower their utility bills, but could also use the funds to reduce their long-term energy costs, making them able to stretch each dollar of aid further in the future.

The government could also augment the LIHEAP program by working with banks and utility companies to provide consumers with upfront capital for upgrades such as weatherization through loans structured around energy savings.

It’s been shown that energy efficiency pays off. But without making institutional changes to provide the information and capital to create a sustainable impact on energy consumption in low-income households, the government will continue to waste money subsidizing energy costs that could be avoided.

And so if President Obama cuts LIHEAP without implementing reforms on the program, he’ll be missing out on a chance to save money in his budget without leaving people out in the cold.

The Obama administration’s FY 2012 budget is all about arguing—perhaps somewhat rhetorically given political realities—the role of investments in growth even despite the imperative for austerity. Such tradeoffs are everywhere in the budget. And yet, in no domain are those twin stances more sharply set out than in the Energy Department (DOE) outline, which proposes a classic “cut-to-invest” strategy to maintain progress on key imperatives when retrenchment appears likely.

The investment side of the ledger maintains the Obama administration’s steady commitment to unleashing an innovation-driven clean energy revolution.

Overall, the new budget request proposes growing the DOE budget (see a detailed press release and Sec. Chu’s presentation and PowerPoint here and here) by a substantial 12 percent over FY 2010 spending levels, and it would importantly continue the Obama administration’s push to bolster the nation’s inadequate research, development, and deployment investments in clean energy.

On this front, RD&D accounts would increase by fully one-third (to about $8 billion) driven by a series of robust moves. For example, the outline would increase funding of the DOE’s Office of Science to $5.4 billion, on course to meet the President’s long-term commitment to double the budgets of key research agencies. It would also double the funding of the Advanced Research Projects Agency—Energy (ARPA-E), which has already begun to produce disruptive innovations, to $550 million. And in addition, the new budget calls for creating three more Energy Innovation Hubs (focused on batteries, smart grid, and critical materials) for fomenting technological collaboration among universities, the private sector, and government labs to solve big challenges in critical areas at a cost of roughly $66 million. These institutes somewhat reflect a concept developed by my group at the Metropolitan Policy Program at Brookings in a major 2009 paper, and would bring to six the number of the nation’s hubs.

Beyond these innovation investments, the administration is looking to increase spending for renewable energy and energy efficiency programs at DOE by nearly $1 billion, or 44 percent, over FY 2010 levels. Likewise, the budget proposes to spend $588 million for advanced vehicle technologies—an increase of 88 percent above current funding levels. This would include an interesting new effort to reward communities that invest in electric vehicles and infrastructure and remove regulatory barriers through a $200 million grant program, modeled after the Education Department’s successful Race to the Top program.

So where will the money come from for these new efforts? It comes from the “cut” part of the “cut-to-invest” playbook, which seeks to finance needed new investments by slashing lower-priority or retrograde present spending. (The budget’s cuts are detailed here). Along these lines, the 2012 budget would raise more than $4 billion a year by slashing the budget of the DOE’s Office of Fossil Energy and cutting billions of dollars’ worth of questionable subsidies of fossil fuels. Some $418 million would come from reducing the fossil fuel office’s budget by 45 percent. Meanwhile, some $3.6 billion would result from phasing out illogical credits and deductions for various oil, gas and coal activities in accordance with President Obama’s agreement at the G-20 Summit in Pittsburgh to phase out subsidies for fossil fuels so that the country can transition to a 21st century energy economy. The net effect: By cutting hundreds of millions of dollars of provisions that in effect subsidize dirty energy the nation will be able to discipline the growth of the Energy Department budget while paying for significant new investments to make clean energy cheap.

In that sense, the 2012 DOE budget proposal stands out as an augury of where energy department budget policy needs to go in the absence of new revenue from a comprehensive carbon pricing system. Without said revenue, whether from a carbon tax or a cap-and-trade system, the costs of essential investments will need to be “internalized” on the energy sector. And that will require reform of DOE and the subsidy system.

As budget proposals from President Obama and members of Congress emerge, Applied Materials continues to support strong policy initiatives that prioritize clean technology investment today and in the long-term, paving the way for a competitive clean tech industry in the U.S. and greener environment. By investing in clean energy and making our technology industry more competitive, the government can foster the creation of American jobs and help make the United States more competitive globally.

As members of Congress and the President debate budget recommendations, we hope they will consider tomorrow’s energy needs and take a long term view. The Departments of Energy and Defense have taken positive first steps toward the use of clean energy on a large scale and we hope that future budgets continue to push for and allow for this trend to continue. As the largest land and building owner in the country, ensuring the government is more efficient and that government property is used in a smarter, renewable way is crucial.

Applied Materials applauds the roles government agencies including the Departments of Energy and Defense are playing increasing their use of renewable energy sources and implementing energy efficient technology and President Obama’s budget will allow them to continue to lead our country in the right direction. It is this type of public commitment, coupled with private sector innovation and development that will nurture and grow tomorrow’s next great industry.

A few weeks ago, President Obama laid out a vision to keep America competitive in a rapidly evolving global marketplace. The Administration’s budget delivers on that vision, helping to lay the groundwork for a level playing field that allows solar energy to compete with traditional fossil energy sources that have received substantial support from the federal government for decade after decade.
This budget is a smart investment for the American taxpayer. If this budget is enacted, I expect the solar industry to more than double in 2012, creating tens of thousands of good-paying solar energy jobs. Already, the U.S. solar industry employs nearly 100,000 Americans in all 50 states. That number is expected to increase by 26 percent in 2011, with companies expecting to add nearly 24,000 new jobs. This growth rate is significantly higher than the expected three percent net job loss in fossil fuel power generation and the economy-wide expectation of two percent growth over the same period. And as the industry grows, our costs continue to decline helping to make solar the best economic choice for taxpayers across the country. The President’s budget makes a targeted investment in the Department of Energy Loan Guarantee Program, adding $200 million to spur development of utility-scale solar and solar manufacturing facilities. The budget also extends the highly successful 1603 Treasury Program for one year. This program has been critical for solar power development, both large and small, while the financial markets have been slow to recover. After securing a hard-fought extension through 2011 during the lame duck session, we are pleased to see that the program remains a top priority for the President. Finally, the Administration’s budget includes smart investments in clean energy research – including a near doubling of solar energy technology funding – that will go a long way in achieving the new Sputnik moment President Obama envisioned in his State of the Union Address. We applaud this bold investment in America’s future and urge Congress to swiftly pass this budget and keep solar working for America.

With the economy still struggling to recover from the worst recession in my lifetime, I am stunned that the House leadership appears willing to seemingly wield the budget axe so indiscriminately. If ever there were a time in our nation’s economic history that we need to “get it right” on national policies and funding priorities, it is today. Of course we have to cut spending, of course we need to address our deficit, but it should be intuitive to every policy maker on Capitol Hill that we need surgical strikes.

The enormous cuts that the House has proposed in the current fiscal year’s budget for energy efficiency and other clean energy work are “chump change” in terms of overall government spending and won’t make any meaningful difference to our current deficit situation. Theywill, however, rob American families today of savings in avoided energy costs, serve to “dry up” private sector investments in these technologies that are being stimulated by federal funding and, indeed, may help to consign us to the “back of the pack” in terms of the global race to economic dominance in the energy sector for decades to come.

President Obama has it right in his budget, in my opinion, with respect to federal funding and programs for energy efficiency. He recognizes that investment in energy efficiency saves American consumers and businesses big money in avoided energy costs. He knows that making our economy more efficient makes us less dependent on foreign sources of energy and more competitive in the global marketplace. And he knows that investments in energy efficiency help us preserve our national energy and water resources and protect our environment.

And, perhaps most important to the current world marketplace, he knows that the economic winners in the race to a clean energy future will be those countries that invest not only in research, but also in demonstration and deployment of emerging technologies.

As energy efficiency advocates, we at the Alliance to Save Energy, believe that the administration’s FY 2012 budget proposal will allow us, as a nation, to scale-up energy efficiency deployment and unleash the potential of these technologies and services to help drive the economic recovery we all long for and, importantly, to help those American families and businesses struggling today to lower their energy costs.

For example, Obama’s proposed new Better Buildings Initiative (BBI) would prompt energy efficiency upgrades to commercial buildings that are projected to save building owners and operators roughly $40 billion each year for the next decade; and the BBI’s financial incentives would encourage municipalities all over the country to make upgrades as well. The budget proposal also would double investment in a program for cutting-edge energy research to spur innovations in energy technology.

In his State of the Union address, President Obama called for an end to tax credits and write-offs for the oil and gas industry. As with his previous two budgets, the proposal will certainly be met with much opposition on Capitol Hill from both Republicans and Democrats. But, if Washington is truly looking to get control of federal spending, our elected officials should insist that the President eliminate subsidies across the entire energy sector.

While Obama attempts to purvey to the American people that oil and gas producers are the only beneficiaries of federal subsidies, now would be the opportunity to draw attention to the boatloads of taxpayer dollars that are thrown at politically-favored renewable companies that continue to produce a negligible amount of energy for our country. Tax credits for ethanol, grants equivalent to 30 percent of the project value for wind and solar projects, loan guarantees for alternative energy and transmission projects, and similar subsidies are just a few examples.

As for whether or not President Obama’s proposed investments (read: spending) will be enough to spur the ‘green economy,’ history gives us the answer. Since Richard Nixon, every president has brought grand proposals for energy independence to their State of the Union address. With non-hydro renewable energy sources still providing less than 6 percent of America’s energy consumption, we can see clearly that each president failed in his attempt to centrally plan an energy economy that relied on expensive, intermittent, unreliable energy. Seeing that renewable technologies still face these same impediments of cost and unreliability, there is no reason to think that President Obama’s call for 80 percent renewable energy consumption by 2035 is any more meaningful than President Carter’s call for 20 percent solar energy consumption by 2000.

Eliminating direct and indirect subsidies across the board for energy producers would promote the only reasonable, sustainable energy plan that our federal government can provide: a level playing field.

As with every other sector of the economy, energy companies should be vulnerable to competition and new technologies instead of being cushioned by government favoritism. Increased government protection, which President Obama is proposing for renewable companies, inevitably leads to complacency and corruption. Instead of playing favorites through the grant-making and tax-writing process, the government should let American companies compete in the free-market, where the American consumer is king.

The energy budget proposal put forward by the Obama Administration accepts the flawed premise that encouraging clean energy innovation is a costly enterprise requiring substantial government investment. This premise is wrong for two reasons. First, government R&D grants are not a particularly effective way to encourage the innovation and diffusion of cost-effective clean energy technologies. Second, policy measures that will encourage innovatio nand diffusion are not particularly expensive.

If the Administration is serious about encouraging the development of a new generation of clean energy technologies that can power the American economy, it needs to focus more on creating incentives and reducing barriers to the development and deployment of such technologies, and less on doling out federal dollars. Among other things, the Administration should accelerate its efforts to remove regulatory and other barriers to the deployment of alternative energy technologies, ranging from nuclear to offshore wind to tidal power, all of which have been hampered by excessive regulatory obstacles and NIMBYism. This could help free up more creative energies without costing taxpayers a dime.

Insofar as the federal government needs to encourage the development of alternative energy technologies, it is a grave mistake to increase traditional R&D funding and the federal labs. The federal government should pay for results, not advance taxpayer dollars in the hopes of success. This means, among other things, transferring funds that would have been spent on traditional R&D to technology inducement prizes (as explained in this paper). The federal government should offer substantial financial rewards for successful innovation in the form of prizes. This is a far better deal for the taxpayer, and it would do more to incentivize innovation. First, with prizes, the taxpayer only pays if the innovations are developed. Second, as recent experience with prizes has shown, prize rewards have a multiplier effct, and tend to stimulate private investments in pursuit of the prize that are far greater than the amoutn offered. In other words, creating prizes is a way to increase investment in energy R&D without increasing federal spending or the burden on the taxpayer.

The nation cannot afford to increase federal spending, but there are ways to encourage energy innovation without increasing federal expenditures. These sorts of proposals could provide a way for the Administration and Congress to find common ground.

Recognizing that the U.S. is in a highly constrained budget environment, it is even more critical that our federal investments reflect our nation’s priorities. As policymakers from both sides of the aisle have agreed, establishing real alternatives to foreign oil dependence is critical for U.S. national security and economic competitiveness. Electric drive is an alternative to oil, and electricity is domestically produced and reliable, with increasing benefits over the long term.

For example, the U.S. is currently spending $200 billion on imported foreign oil annually, which represents 40 percent of the U.S. trade deficit. According to the International Energy Agency, oil demand from developing countries will cause prices to average $100 a barrel between now and 2015 and double by 2030. In fact, a recent federal study projected that, with grid management, 73 percent of the light duty fleet could be fueled by electricity without having to add any new generating capacity. The change would displace an estimated 6.2 million barrels of oil a day, about 52 percent of current oil imports.

In his State of the Union address, President Obama emphasized the importance of advancing energy technologies – such as electric vehicles – that not only reduce our dependence on foreign oil, but also increase U.S. economic competitiveness and help clean up the environment. The Administration’s 2012 budget proposal is expected to recommend increased investment in technology innovation and electric drive vehicle deployment. These are not only smart, but also imperative uses of our limited federal funds.

As stated in the 2011 EDTA Action Plan, Driving Forward: an Action Plan for the Electric Drive Era, the federal budget should help the U.S. lead in electric drive technology development, as well as manufacturing for the industry. Public investments that reinforce state and regional deployment of electric drive vehicles and infrastructure will speed the commercial scale adoption of these vehicles.

In addition to advancing state and local efforts, the federal government can also make it easier for consumers and businesses to buy electric drive vehicles and install charging infrastructure. Allowing more consumers to realize the benefit of the tax credit at the time of purchase will speed these vehicles onto the roads. It is also important to ensure that the current credit for recharging infrastructure is extended beyond the end of this year.

While maximizing the immediate benefits of electrification, the federal government should also be leveraging private investment in the next wave of emerging electric drive solutions, including fuel cell vehicles, which will provide additional options for using electricity to displace oil.

Electric drive is a critical solution for achieving our goals for cleaner energy and economic security. The return on investment from electric drive is freedom from dependence on foreign oil, which makes it both a wise and essential federal budget priority.

The 2012 budget presents a perfect chance for President Obama to champion the recommendations of his own National BP Deepwater Horizon Oil Spill Commission. Even in a year when budget cuts are likely, America cannot afford for the government to cut corners where the safety of our workers and the health of our oceans are at stake.

The President should call for an increase in funding for the Bureau of Ocean Energy Management (BOEM), the U.S. Coast Guard and the National Oceanic and Atmospheric Administration (NOAA) to prevent and respond to catastrophic oil spills. The administration has made a great deal of progress on safety regulations and agency reorganization, but more reform and federal funding are critical to ensure adequate environmental planning, industry oversight and spill response research and development.

One of the primary recommendations of the President’s Oil Spill Commission is for the government to provide more funding to train and hire inspectors. Right now there is only an average of one government inspector per every 54 rigs in the Gulf. Congress made progress on this issue last year by passing a Continuing Resolution (CR) during the lame-duck session; however, the CR provided just 20 percent of the funding requested by the Department of Interior, and the authorization is only for one year. President Obama must fill that gap by allocating the full amount that Interior requested.

The President should also use his budget to support a greater role for the Coast Guard in the ice-choked waters of the U.S. Arctic Ocean. We must have real reforms in place and funded before decisions are made to move forward with drilling in this remote area.

To ensure that these changes are permanent, Congress must pass meaningful legislation. As the Deepwater Horizon disaster showed us, the costs of not doing so are too high.

If someone said that they wanted to take money from Google and Facebook and invest it in cold fusion and perpetual motion, most people would think that the person making this proposal was related to Bernie Madoff. It is inconceivable that President Obama is serious about his “clean energy budget.” If he is, he needs some new economic and energy advisors. Of course, with the 2012 election not that far in the future, perhaps he is just pandering to the environmental ideologues in his party.

His proposal would take away two important tax incentives but only from only oil companies. They stay in place for all other companies. (Talk about discrimination!) Penalize successful companies that produce what consumers and the nation needs – energy -- and reward those who are favored politically but don’t produce anything that is commercially viable.

All firms that manufacture in the U.S. are eligible for a tax credit, created to stimulate domestic job creation. All firms that have foreign income on which they have paid taxes are eligible for credit for those taxes in calculating U.S. taxes. Our nation currently has one of the highest corporate tax rates in the world and is one of the few countries to tax worldwide income instead of just the amount generated at home.

The effect of the President’s discriminatory proposals would be to further discourage domestic exploration and production and to unnecessarily increase imports. Given the current unrest in the Middle East, he should be looking at actions that would stimulate domestic oil production to offset imports. With a rational energy policy, the US could easily be on the road to producing somewhere around 2 million barrels a day more than we currently do

Each domestic barrel would be one less imported. Imports would come from more secure sources and less would come from unstable regimes. That increases both economic security and national security.

The second effect is to make international companies like Chevron, Conoco-Phillips, Exxon Mobil, Marathon, and others less competitive in the global search for oil. This is a gift to the Chinese, Russians, Iranians, and Venezuelans, among others -- all nations that have government-supported state-run oil companies which our firms compete against in the search for energy to meet the world’s need. What has never been a level playing field for U.S. companies would become even more uneven under the President’s tax proposal.

One can only conclude that President Obama’s hostility toward oil is clouding his judgment. His own Energy Information Administration projects that we will be using at least as much oil in 2035 as we do today. So, instead of meeting that need with more domestic oil produced with more domestic investment and jobs, we will get it from foreign companies, many of which are our competitors and enemies. That defies logic, common sense, and energy realities.

With the money taken from successful U.S. companies that provide our gasoline, diesel, heating, and jet fuels, he would give it to companies that only survive because they are addicted to feeding at the federal trough. Wind and solar energy have been subsidized for decades and still can’t stand on their own. Ethanol has similarly been subsidized for over 30 years. Corn farmers have been made very rich and now there is a misallocation between corn for food and corn for ethanol with the result being inflation in many food prices.

In 2006, President Bush made a commitment to move to cellulosic ethanol beginning with 250 million gallons coming on line in 2011. The Federal government has spent over $160 on this boondoggle and received less than 6 million gallons according to the Wall Street Journal. And, instead of the two rent-seeking firms creating “green” jobs, one has gone bankrupt and the other is holding on with four employees.

Sound public policy would involve having an energy policy that matched economic and energy realities, that encouraged increased private R&D, focused government R&D on basic research, and eliminate subsidies that have proven so wasteful. In the best of all worlds, there would be no corporate subsidies but in the real world, they should at least be terminated after 5-10 years. Our nation cannot afford to continue the fiscal folly that has created the economic condition in which we now find ourselves.