The Bush Administration and, yes, the Obama Administration, have both acknowledged that coal will continue to be a vital and valuable piece of our energy portfolio. After all, our nation is sitting on 500 years worth of coal – we’re not likely to just ignore it.

But at the same time, the President is focused on diversifying our nation’s energy portfolio. This isn’t designed to kill coal, but rather to increase the production of other types of energy. The strategy is not simply to replace one type of energy for another. At the rate Americans use energy, the reality is that we simply need more energy to power our lives, our communities and our nation.

So let’s be clear — the EPA’s clean-air rules are not designed with the purpose of making coal more costly. They are designed to encourage efficient, sustainable production of new energy resources. By taking away some of the favors that have previously been handed out to the coal industry over the years, the EPA is seeking to level the playing field for other sources of energy like solar and wind. I have a hard time seeing how this is a bad thing. Indeed, isn't the elimination of subsidies and government handouts at the heart of the Tea Party mantra?

So why not level the playing field?

Of course, at the heart of our energy problems is our nation’s voracious appetite for energy. We use it for everything and we rarely even think about it. But it’s time we get energy smart.

While it may not account for much of the decline in coal, energy efficiency programs like Energize New York and Connecticut’s Neighbor To Neighbor Energy Challenge are reducing the amount of energy homeowners require to power their homes thanks to energy efficiency upgrades. Energize New York found that their program alone is capable of saving Northern Westchester residents a total of $52 million in energy bills if one in three homeowners pursue their recommended assessment upgrades. That’s $52 million less going to oil and natural gas companies.

With every small step towards energy efficiency — like reducing phantom load by unplugging devices when they are turned off — industries like coal are taking one small step backwards. I have a hard time seeing this as a bad thing. And as clean energy becomes mainstream — which I assure you, it will — coal will face even larger losses. For an energy resource that is both dirty and finite, this end result is inevitable. We might as well make the transition sooner rather than later.

As a member of the McCain campaign that popularized the “all-of-the-above” slogan, I shudder at the president’s use of the term. While we used the phrase to talk about opening up energy development and innovation in every corner, Obama is trying to pacify disgruntled Americans who are sick of his “anything-but-fossil” energy policies. In a deft re-election tack, the president seems to have figured out that oil & gas development can actually be good politics. Unfortunately, he has yet to discover that it is also good policy.

This administration – contrary to their press releases – has hardly lifted a finger to increase production of oil & gas. In the State of the Union, the president proudly declared that he’d open more than 75 percent of our potential offshore oil and gas resources to development. This is part of Interior’s existing five year offshore leasing program, which comprises fifteen new lease sales in the Gulf and Alaska – fourteen of those sales in areas already being explored and developed under active leases. Moreover, this five year plan largely prohibits the study of offshore resources on the east and west coasts, including an area near Virginia that the Bush administration had slated to open, meaning we’re no closer to understanding what those resources look like. A real transformation in our offshore exploration policy would have opened up new areas to assessments of potentially recoverable resources – not more lease sales in the same areas we’ve been exploring for a generation.

President Obama also promised to open up shale gas development across the country. Shale gas is a fantastic opportunity to redefine the geopolitics of natural gas and create plentiful jobs in this country; a commitment to develop those resources would be meaningful indeed. Unfortunately, the EPA is starting to regulate the hydraulic fracturing process that the industry is using for the first time. EPA has already proposed a Clean Air Act rule requiring costly equipment targeted at drilling rigs, they are conducting research in preparation for new water regulations for those rigs, and they’re moving forward with regulation requiring disclosure of the fluids used while drilling, despite a successful voluntary initiative already underway. Leave it to this administration to find that three new regulations align with a pro-development stance.

Also troubling, but not new, is that the president again proposed to cut subsidies for oil companies to increase incentives for renewables. A true all-of-the-above energy policy wouldn’t penalize one energy source to benefit another. Obama would single out tax credits to oil companies in order to fund expanded subsidies for renewables through more grants, more loan guarantees, and more tax credits than they receive already. Our energy sector would function better, and our nation’s balance sheet would improve, if we equalized the treatment of energy across the board and gave all energy sources fair treatment. More dollars to favored industries interferes with a vibrant, competitive energy market.

I get it. If the president talks enough about his all-of-the-above policies, maybe we’ll forget about his abject failures in advancing the energy game. But more important are the things the president didn’t talk about. He left out all mention of the Keystone pipeline in his State of the Union, knowing it was an unpopular – and damaging – decision. He left out all mention of failed loan guarantees to Solyndra, which his administration approved despite Solyndra’s pitiful business plan. He left out all mention of the threat that EPA regulation has on energy producers and jobs, despite evidence that the compliance burden is unaffordable. He left out all mention of nuclear power. While a boom in shale gas makes the economics of nuclear power uncompetitive at the moment, Obama’s regulatory chokehold on natural gas just might mean a resurgence in the nuclear sector – and electricity prices.

If we didn’t need jobs, maybe Obama’s energy agenda could be mistaken as harmless folly. But we need a new domestic energy game that is truly all-of-the-above, pushing both development of our vast natural resources and innovation of the technologies that will fuel us tomorrow. The president’s empty promises are a guarantee for partisanship and gridlock in Washington – and limited progress in American energy.

Policy makers and consumers alike support clean energy, but there is little doubt our clean energy future is at a crossroads. The path forward must be paved with greater competition in energy markets.

When policy makers opened retail electricity markets to competition, one of the benefits was the advent of marketers offering "green" power. The power of competition to promote clean energy was also evident in the wholesale power markets. Today, the competitive wholesale regional power markets contain almost 80 percent of installed wind power generation, while those same areas represent about 40 percent of our country's wind energy potential. It seems clear that renewable companies are attracted to the regional markets.

Breaking down barriers to market entry by innovators and investment offers the most effective avenue to America's clean energy future, and protects consumers from bearing the costs of failed investment decisions. In markets, the cost of clean energy innovation is borne by investors, not consumers.

Break down the barriers to competitive entry by technology innovators and we can unlock the smart grid and market forces to drive incredible gains in energy efficiency while providing real value to consumers. The smart grid promises to bring the incredible innovation we've experienced in the telecom sector to the electricity sector. But it won't happen as long as continued monopoly regulatory protections erect barriers to market entry by technology innovators.

In sum, unleashing market forces lowers entry barriers and provide clear price signals will promote clean energy innovation while protecting consumers from bearing the costs of failed investment decisions.

The recent Third Way report on the lack of venture capital funding for clean energy technologies is eye-opening and troubling. There are three main points I draw from it.

1. This period of under-investment in clean tech is a reaction to a period of over-investment. The market has punished investors for betting on policies that did not materialize and too many technologies that were not mature enough to bring to market.

That sting of unfulfilled promises, as well as the downturn in the wider economy, has led to this period of under-investment. But, for clean energy entrepreneurs, like myself, these developments are not entirely a bad thing. The companies that can survive and thrive in this moment will be the best bets for clean technologies, products, and services that can be brought to scale in the next decade.

2. The government should not be in the business of subsidizing any energy technology. The answer is not to substitute the lack of private capital investment with government investment. Federal dollars for core research are essential, but the government should not put itself in the position of betting on particular technologies or picking winners and losers in the clean energy space – that track record is spotty at best.

As Jigar Shah, the CEO of the Carbon War Room, argued recently, cutting all energy subsidies, including the permanent subsidies for mature industries like coal, natural gas, oil and ethanol, would save the US $380B and would create a fairer playing field for clean technologies.

3. Regulatory uncertainty hurts clean energy investment. Conservatives are right when they argue that regulatory uncertainty has made it hard for entrepreneurs to develop new technologies and for investors to support fledgling clean energy companies. But they are wrong when they argue that getting rid of the rules is the answer. We need smarter regulations to ensure that we incentivize investments in clean, affordable, and reliable power.

My company, Opower, works in the utility sector, one of the most highly regulated industries in the U.S. Most Americans have only one choice when deciding what power company to use – and those near-monopolies necessitate broad regulation. And, regulation has not been a bad thing for the utility industry, but it needs to be reformed to get rid of perverse incentives that actually penalize utilities for investing in cleaner and more affordable power. The question has to be: do we have the right rules? And the answer often is: we don’t.

One set of regulations that has had great success at the state level is Energy Efficiency Resource Standards (EERS). These rules set annual energy efficiency targets for utilities and encourage them to reduce energy consumption through cost-effective energy efficiency programs. EERS change the incentives for utilities, driving them invest in efficiency programs instead of unnecessary generation because it is typically cheaper to save a marginal kilowatt of electricity than to generate and transmit it.

To date, 26 states have implemented these standards, including Texas, Indiana, Minnesota, Michigan and North Carolina. Ninety percent of these states are meeting their efficiency goals – and many are far exceeding them.

The success of our company has largely been spurred by EERS. We now work with over 60 utilities, including 9 of the 10 largest in the U.S., to deliver energy savings reports to residential households. In 4 years we have grown to over 230 employees and that growth will continue. Through our home energy reports, we have saved customers almost $6o million on their energy bills.

America is clearly in a period of uncertainty and under-investment in the clean energy space. But massive government spending on clean energy is neither politically feasible nor desirable. Instead, government needs modernize the rules of the game: if we have regulatory structures that cure perverse incentives and factor in negative externalities, private capital will flow to a broad spectrum of clean energy technologies that will create jobs, enhance American competitiveness, and clean our air.

The clean energy industry in the United States is indeed poised for crisis, as the bulk of the nation’s major federal clean energy support programs are now scheduled to expire. The lapse of the Section 1705 DOE Loan Guarantee Program, which provided the now-infamous Solyndra loan guarantee, is just the beginning. Over 2011-2014, the federal government will sunset the Production Tax Credit and the Section 1603 Treasury Grants supporting wind and other renewable electricity sources, the Volumetric Ethanol Excise Tax Credit, and the remaining clean energy investments under the Recovery Act. In total, nearly 70% of federal clean energy policies and programs will expire by 2014, according to a forthcoming report from the Breakthrough Institute.

Absent timely action by federal policymakers, the coming mass-expiration of federal clean energy policies and investments virtually guarantees that the boom-times of recent years will give way to an industry bust. In the perilous and challenging journey from basic research to full commercial deployment of nascent energy technologies, several pervasive market barriers require limited but direct public policies to accelerate advanced energy innovation and commercialization. Faced with the collapse of current federal clean energy policies, however imperfect they currently are, private investors will be left largely incapable of picking up the slack on their own.

The institutional, technological, and financial barriers facing advanced energy entrepreneurs are numerous. An early-stage finance gap known as the “Technological Valley of Death” immediately faces promising energy ventures emerging from breakthrough research and seeking risk-tolerant investors to prove their concept can succeed beyond the lab. This challenge has only grown in recent years, as venture capital investments begin to shift towards later-stage, lower-risk ventures. As this gap in private finance grows, the targeted public investments of the Advanced Research Projects Agency-Energy (ARPA-E) and the Small Business Innovation Research (SBIR) program become increasingly important. Expanded federal support for state and regional clean energy cluster development could further address this Technological Valley of Death.

Clean energy finance challenges do not fade after developing a successful technology pilot and strong business plan, however. A second “Commercialization Valley of Death” plagues technologies that have already demonstrated proof of concept but still require large capital infusions to demonstrate that their design and manufacturing processes can succeed as a full-scale power plant or manufacturing facility. The hundreds of millions of dollars or more in financing often required to overcome this Commercialization Valley of Death outstrips the funds of typical venture capitalists, yet the remaining technology and management risks associated with as-yet-unproven advanced energy technologies also exceeds the tolerance of conventional project finance or equity investors.

Absent targeted policy, the dearth of risk-tolerant private capital represented by these two Clean Energy Valleys of Death effectively prevents many potentially game-changing advanced energy technologies from ever making it into the marketplace. As a result, conventional fossil energy technologies are insulated from new competitors, impeding the development of clean, affordable, and reliable domestic energy sources.

Securing the future of American clean tech requires a stable and efficient policy platform that accelerates and rewards advanced energy innovation, commercialization, and improvement. In a report released last week by the Breakthrough Institute, we offer several recommendations for “Bridging the Clean Energy Valleys of Death” and unlocking American energy innovation and entrepreneurship. In particular, Congress should cease the political circus around the collapse of Solyndra and focus in on the key lessons to be learned from the experience to date of the DOE loan guarantee programs. We recommend replacing the troubled Loan Programs Office with a Clean Energy Deployment Administration (CEDA), a new flexible, independent financial entity targeted to help American energy entrepreneurs bridge the Commercialization Valley of Death (more here). Establishing a National Clean Energy Testbeds (N-CET) program could also put America’s vast public lands to work driving the development and demonstration of emerging energy technologies (more here).

Furthermore, to fully avert the coming clean energy crash, policymakers must re-think and re-design America’s current (and expiring) deployment policies to both demand and reward innovation. Markets for early-stage advanced energy technologies are fundamentally created and shaped by public policies, from tax credits to deployment mandates and pervasive regulations. Special care must be taken to design and optimize these policy-supported markets to provide the right incentives for continual improvement in the price and performance of advanced energy technologies, putting these clean energy sources on a rapid path to subsidy independence. Such a strategy would leverage limited taxpayer dollars to the highest degree possible and unlock the private activity and investment required to drive the widespread deployment of innovative and cost-competitive clean energy technologies.

As America’s current, haphazard collection of clean energy policies begin to collapse in the years ahead, policymakers and industry alike will face a clear and urgent challenge: remaking U.S. clean energy policy to effectively unlock critical private capital, demand and reward price- and performance-improving innovations, and provide a predictable and efficient framework for America’s clean energy entrepreneurs and investors.

If Americans want their entrepreneurs, manufacturers, researchers, contractors, and investors to share in the largest and most important growth sector of the 21st century global economy, then we can waste no more time before optimizing and executing smart, effective public policy support for advanced energy technologies.

Jesse Jenkins is Policy Director and Alex Trembath is Policy Associate with the Breakthrough Institute’s Energy and Climate Program.

If clean energy is headed for a crisis in America, it will be a crisis of our own making. Wind energy is humming along right now, creating one of the fastest growing manufacturing sectors and accounting for more than a third of all new electric generating capacity across the U.S.

The key to that growth is the stability of the federal Production Tax Credit (PTC). Congress now has a chance to extend that key incentive for wind and avert this crisis before it ever happens.

It’s clear that the PTC, which was intended to stimulate demand for wind power and help the wind industry drive its cost of energy down through increased volume, manufacturing efficiency, and competition, is succeeding.

Due to continuing technological innovation, wind energy costs have fallen below the costs of most new conventional sources, and are close to cost-competitive with new natural gas generation, even at today’s unsustainably low natural gas prices.

Wind-generated electricity is an especially good deal right now for consumers.

For example, Alabama Power, a subsidiary of the Southern Company (a major electric utility), just saved its customers money by signing a purchase agreement for wind power. According to the utility’s staff, "The delivered price of energy from the wind facility is expected to be lower than the cost the Company would incur to produce that energy from its own resource (i.e. below the Company’s avoided costs), with the resulting energy savings flowing directly to the Company’s customers." [Alabama Public Service Commission filing, Sept. 9, 2011, http://bit.ly/vnlHzI]

And a new study by the Lawrence Berkeley National Laboratory finds U.S. wind turbines have come down in cost by a third since 2008 [October 2011]. Reasons include innovative technology, stable tax policy, and a sharp increase in U.S.-based manufacturing -- which is creating good jobs.

Another report, from London-based Bloomberg New Energy Finance (BNEF) said land-based wind farms will be "fully competitive" with conventional electricity sources by 2016. BNEF said it sees the cost of electricity from land-based wind turbines declining 12 percent by 2016 "thanks to a mix of lower‐cost equipment and gains in output efficiency," adding, "The best wind farms in the world already produce power as economically as coal, gas and nuclear 
generators; the average wind farm will be fully competitive by 2016."

BNEF lead wind analyst Justin Wu added, "The public perception of wind power tends to be that it is environmentally friendly, but expensive and intermittent. That is out of date in the best locations, where generation is already cost‐competitive with fossil fuel electricity, and that will be the case for the majority of new onshore turbines installed worldwide by 2016.”

This is why extending the PTC to 2016 is so important.

The PTC has been supported on a bipartisan basis in the past, and continues to receive support from both sides of the aisle today. Recently, a bill to extend it for four more years, H.R. 3307, the "American Energy Production Tax Credit Extension Act," was introduced by Congressmen Dave Reichert (R-Wash.) and Earl Blumenauer (D-Ore.). H.R. 3307 deserves the wholehearted support of every member of Congress. It will deliver tremendous benefits to our state and nation.

Urgent action on this legislation is needed. With the threat of the PTC coming to an end, the companies that build wind farms are not making plans and American manufacturers are not receiving orders. Job layoffs have started already. The wind industry is facing the recurrence of the boom-bust cycle it has seen in previous years when the PTC was allowed to expire briefly before being renewed by Congress. In the years following expiration, installations of new wind turbines dropped between 73% and 93%, and many jobs were lost. Such a dramatic drop in business is hard on companies and workers and their families at the best of times, but it will be a very punishing blow in the current economy.

As families across our country struggle with unemployment, and as businesses are cutting back just to survive, it’s past time for Congress to focus its ideas and efforts on proposals that will create jobs and get our economy moving again. Extending this key tax incentive for wind and other forms of renewable energy generation is one of the best ways to spur economic development and create the good jobs we need.

A vote for a PTC extension is a vote for growing clean, homegrown, affordable energy resources and badly needed new American manufacturing jobs.

While America's clean-energy industry is not facing a “crisis,” there certainly needs to be more meaningful change to ensure that this industry grows and thrives. It is important to promote a free-market that supports and encourages innovation.

Federal involvement with these efforts is ideal, but there is no singular approach to regulate the different forms of renewable energy under one umbrella.

Renewable energy is, by its nature, somewhat decentralized. In other words, what might be a viable path in one state, such as solar energy in Hawaii or wind power in Iowa, may not be the right choice in another market. Try as they might, a one-size fits all approach mandated by Congress cannot change weather patterns or geologic activity. However, the Federal government can play a beneficial role to support the market. One way to incentivize the market is for Congress to pass legislation offering greater state-level control of incentives.

All projects should be held to certain base-level standards of feasibility and financial controls as well as periodic external review to prevent Solyndra-like recurrences.

At BlueStar, we see deregulated energy markets as the driving force behind the eventual success of renewable-energy industries. Like any industry, regulatory certainty is necessary not only for the formulation of longer-term business plans but also for continued access to the credit markets. The current state of the credit markets, as well as regulatory and political uncertainty, can create unnecessary risks that either makes credit very expensive or unavailable.

Moving forward, the renewable energy market needs greater support and more room to grow to meet future demands and ultimately to create a stronger, more viable foundation for America’s renewable energy sources.

To see where renewable energy and energy efficiency programs and support are going in the US, it's important to know where they have come from. There is a lot of misinformation about the track US policy has been on, and the public often assumes -- incorrectly -- that renewable energy has been the beneficiary of generous federal support for decades. Just the opposite has been true. Let's briefly visit some key points about energy policies of the past.

According to the non-partisan Congressional Research Service (CRS): "For more than half a century, federal energy tax policy focused almost exclusively on increasing domestic oil and gas reserves and production. There were no tax incentives promoting renewable energy or energy efficiency." During the past Century, only for a brief period from 1978 to the early 80s were residential and commercial credits put in place for renewable energy technologies. (CRS: Energy Tax Expenditures: Current Status and Historical Perspectives, May 2, 2011.)

Research spending has been no less imbalanced than the federal government's tax policies. Between 1948 and 2007, over 50% of all federal research spending went to nuclear energy alone. Fossil fuel research came in second at 25%. For 60 years, the federal research agenda was focused on nuclear and fossil energy. More recently, spending on nuclear and fossil energy research still ranked #1 and #2 and together received two-thirds of federal research funds in the period between 1978-2007. (CRS: Renewable Energy R&D Funding History, April 9, 2008.)

It's important to recognize that prior to1978, federal policies predominantly favored and supported fossil fuel and nuclear power development. Since then, there has only been a brief period of heightened support for renewables which came at the end of the Carter's Administration. But, this support was fairly quickly undone during the Reagan Administration which cut back renewable research programs and let tax credits expire or be removed.

So, it has been relatively unusual for the renewable energy industries to have had federal incentives in place for, more or less, a continuous period since 2005. In the Energy Policy Act of 2005, one of the most significant provisions extended the federal production tax credit (PTC) for several years and expanded the scope of the PTC to cover all renewable technologies, including geothermal power.

The Energy Policy Act of 2005 had broad bi-partisan support. Not only were its primary House and Senate sponsors Republicans (Rep. Barton and Sen. Domenici), but the bill was signed into law by President George W. Bush. Since passage of this law, we have seen a steady increase in geothermal (and other renewable) projects under development. This growth is expected to continue until the credit expires, which for geothermal projects means the end of 2013.

The question is what will happen when the current tax credits expire? With a project lead time of four years or more, we are already seeing geothermal projects diverge into two tracks -- those trying to meet the deadline of being in-service by January 2014, and those that cannot. The former are moving on a fast track, the latter are slowing to a crawl.

But it's not all bad news. Recently, there has been an important expression of bi-partisan support to extend renewable tax credits. Rep. David Reichert (R-WA) has introduced legislation in the House to extend the tax credits for all renewable technologies through 2016. That legislation, H.R. 3307, currently has a bi-partisan group of 14 co-sponsors.

“Extending this long-standing tax incentive will leverage private investment to bring proven energy projects online, bolster domestic manufacturing, and reduce electricity costs for businesses and families,” said Rep. Reichert. “Renewable energy resources play an important and increasing role in America’s total energy supply and reducing our reliance on foreign energy resources controlled by hostile nations. The certainty this bipartisan bill will provide can further spur growth in this vital sector, increase economic development, and create jobs.”

So is clean energy headed for crisis? Well, since it's the Holiday Season, can I suggest we need the ghost of energy policies past to visit with some Members of Congress. It is their action or inaction that will decide whether we learn from history or repeat it. They need to clearly see the history of federal incentives and recognize the consequences of past mistakes.

In the late 70s and early 80s, nascent renewable industries were developing in the US in response to the OPEC oil embargo and federal renewable energy initiatives. But they were knocked-out by the one-two punch of low fossil fuel prices and disappearing federal incentives that quickly followed. As a result, roughly two decades was lost in developing and deploying these technologies. And, during those two decades, the US’s dependence on foreign sources of fossil fuels grew, the US’s balance of payments ran a staggering deficit in part to pay for imported energy, the US economy lagged due to a lack of new investment and innovation in energy technology, and carbon dioxide and other greenhouse gas concentrations have grown to the point that today's severe weather events are extracting a terrible price for our national complacence about fossil fuel use.

Congress can set a better course for our future. If Congress adopts the bi-partisan approach of Rep. Reichert and others, we can sustain support for clean energy technologies. Continuing incentives for domestic renewable production will not only help create jobs and produce clean energy in the US, it will also help US firms compete in the new and rapidly growing global renewable energy market. This would help steer our energy direction towards a clean, sustainable energy future, and put our economy on a path towards sustained growth.

The U.S. solar industry is thriving and creating jobs at a time when Americans need them most. Solar has doubled its workforce since 2009 and now employs more than 100,000 Americans at 5,000 companies – mostly small businesses – in all 50 states. The U.S. solar market grew by almost 70 percent in the last year, while the price of solar panels has dropped 30 percent since the beginning of 2010. And the U.S. is a $2 billion net exporter, including a solar trade surplus with China.

Solar is the fastest growing energy sector in the U.S. But like any rising industry, solar must overcome challenges to keep this momentum going. For example, a driving force behind solar’s recent growth – the Treasury Department’s 1603 program – is scheduled to expire on Dec. 31 unless Congress extends it. This program enables a dozen energy industries, not just solar, to take advantage of tax credits that have bipartisan support in Congress.

The 1603 program has been the most effective policy in spurring renewable energy deployment and job growth over the last two years, and Congress should act now to extend it. The program has generated over $21.5 billion in private sector investment to jumpstart more than 22,000 renewable energy projects across the country. This has created tens of thousands of new American jobs.

According to an independent analysis, extending the 1603 program would support 37,000 additional solar jobs and deploy 2,000 additional megawatts of solar capacity – enough to power 400,000 homes – in the next year alone. Allowing the 1603 program to expire would result in higher taxes for thousands of small businesses that are creating jobs.

Another challenge the solar industry has faced is the widespread news coverage of the Solyndra bankruptcy. But polls consistently show that Americans from across the political spectrum overwhelmingly support the development of solar energy and federal incentives for the solar industry, even in surveys conducted after the Solyndra story broke. These polls show that the public recognizes that in any growing industry, some companies will succeed and others will fail.

Despite these challenges, the future is bright for the solar industry. In fact, solar is projected to be the largest source of new electric capacity in America by 2014. With continued innovation, private investment and smart federal policies, solar is headed for continued growth, not crisis.

There are three stories happening in the world of clean energy right now, some not so good, some not so bad. First is the rapid increase in the deployment of existing technologies, particularly solar and wind. Second, as we highlighted in our paper, is the crisis in early stage venture capital investment that hinders future technologies. Third is that while there are real gains to be made from sensible federal policy, the paralysis and poisonous partisanship in Washington make it unlikely that the federal government can build on today’s gains or stop tomorrow’s slide.

The good news is that solar and wind are increasingly cost competitive for electricity, leading to a dramatic increase in clean energy deployment over the last three years. More than 5,000 renewable energy projects, able to power the equivalent of one million homes, have been brought on line. According to the Financial Times and Bloomberg New Energy Finance, solar PV and wind could be cost competitive with conventional energy in the next three years and five years respectively.

The bad news is that venture capital investment in clean tech (the high-risk, high-return, earliest-stage investment that startups get when they’ve only a prototype and a dream) dropped 44% between second quarter 2010 and second quarter 2011. And the venture investment that remains is shifting to later stage investments. This means investors are doubling down on the same companies they’ve already invested in, but they aren’t funding nearly as many new companies. Mature technologies like wind and solar will remain viable. But the next generation of technologies like utility-scale storage, electric vehicles, or tidal power are increasingly likely to be invented, built, and sold by companies in other countries.

Washington could help by extending tax incentives to accelerate the adoption of increasingly cheap solar and wind, passing a clean energy standard that would help both renewables and nuclear energy, and continue investments in new clean energy innovations. Yet it’s unlikely we’ll see any of that. Instead, some Members of Congress, ideologically opposed to government investment, apparently would simply write off a clean energy sector potentially worth $2.3 trillion. One even declared the U.S. “can’t compete” in these sectors and should give up this lucrative market to China. The result is paralysis. It’s a shame, because a report out today, commissioned by USA Today and performed by International Data Corp., found that government investment in clean energy through the stimulus performed markedly better than the stock market: there was a 273% increase in the stock price of the three public companies that took federal money to build next-generation vehicles, a 79% increase for the four leading energy-efficiency companies in the study, and a 54% increase for the companies developing and deploying smart grids. All of these beat the 51% gain in the Standard & Poor's 500-stock index over the same period.

American clean energy innovators and companies are a hearty lot. They’ll be able to survive one more year of uncertainty in the energy sector. The question, of course, is what happens then.

With the American solar industry enjoying nearly 70 percent growth last year and Ernst & Young reporting that venture capital investment in cleantech increased by 73 percent in the third quarter, the main problem facing clean energy isn’t economic, it’s spin.

There are more than 5,500 solar companies operating in America; Solyndra is just one of them. It represents 1.3 percent of the department’s loan guarantee program; its $537 million guarantee is miniscule compared to others, such as the $8.33 billion loan guarantee given to a Georgia nuclear plant. Four Congressional hearings and 186,000 pages of documents have so far revealed no wrong doing.

And yet fossil fuel companies and their allies in Congress have used one company’s bad bet on innovative technology to disparage the entire clean energy sector.

Their efforts have taken hold. More than 6,700 stories have been written about Solyndra in the last 90 days, while only 73 have been written about the nine other new solar manufacturing companies that announced plans in the past six weeks to create more than 3,350 jobs. These solar success stories amount to 1 percent of the coverage devoted to Solyndra.

When you step away from the Solyndra media storm, you realize the facts on the ground confirm that clean energy is flourishing. More than 100,000 people currently work in the solar industry. More than 150,000 Americans currently have jobs making parts for and assembling clean cars—hybrids, electric cars, and other advanced vehicles. The wind industry employs 75,000 Americans. In the past six weeks, more than 100 clean energy companies made 118 announcements that will create tens of thousands of American jobs.

To put these numbers in context, note that over the last five years, oil companies pocketed $500 billion but fired 10,000 people.

The clean energy sector is actually creating jobs, but it still faces tight competition from China and other nations. Five years ago, China didn't make solar panels; now it controls half the global market. China identified solar exports as a national priority, and it has tailored national policies to achieving that goal. Smart incentives here in the U.S—like extending the Renewable Energy Production Tax Credit for starters—would allow our home-grown solar industry to gain a greater competitive advantage, create even more American jobs, and generate even more pollution-free energy.

Meantime, we must fight off one of the biggest threats to America’s clean energy industry: GOP defeatism. Some lawmakers would have us cede the entire $243 billion global clean energy market to China. This might benefit fossil fuel companies happy to thwart competition, but it would hurt American workers and it would be the equivalent of turning our backs on progress.

This is the kind of politics and demagoguery that could push American clean energy into crisis—not the limits of technology or economics. The real question is whether Americans will let the dirty energy producers hijack our future or not.

The anticipated failure of the Deficit Reduction Committee shows why there is a crisis in clean energy. There is a crisis in the U.S. economy, and there is no general agreement in Washington on what direction to take and how to move forward. To achieve energy security, the U.S. needs to pursue a menu of stable policy options over the long term that gives private companies the confidence to invest in alternative energy.

Just six years ago, there was bipartisan support for a comprehensive plan to increase energy security. And as a nation we’ve achieved greater energy security – over the past six years we’ve increased domestic production and reduced consumption of energy, becoming less dependent on foreign oil. There is also progress in developing alternatives to petroleum, including cellulosic biofuels, and many of the largest energy companies have invested significant sums in the endeavor. Several large-scale cellulosic biorefineries have begun to put steel in the ground.

Four projects are currently under construction, including Abengoa Bioenergy in Kansas, INEOS Bio New Planet Energy in Florida, POET Project Liberty in Iowa, and Sapphire Energy in New Mexico. These four projects by themselves will generate $450 million in investment activity and create 1,500 jobs in construction, engineering and ongoing research in the next two years. These are high-quality jobs and economic opportunity that also contribute to our nation’s energy security. But the projects never would have secured the necessary commercial debt financing without federal programs enacted over the past six years to help develop the entire value chain.

Building first of a kind commercial-scale biorefineries requires large amounts of capital, a reliable supply chain of biomass, and open markets. Programs enacted in the 2008 Farm Bill and the 2007 and 2005 Energy bills provide support for private investment and debt financing of each part of that puzzle. The successful projects above each took years of planning, moving through pilot and demonstration stages to test the scale-up of the technology. There are dozens of additional projects that have progressed through these stages on their way to building commercial biorefineries, many supported by one federal program or another.

Large commercial lenders have said in the past that once the first few projects demonstrate success, they will be more likely to help build new ones. But instability in worldwide financial markets could still be an obstacle, and to date Congress has failed to address that instability – in fact, policy indecision contributes to it.

The stability of the policies adopted just a short time ago is vital to the continued success of the first few commercial-scale advanced biofuel projects and for opening the door to additional projects. What is at stake is the speed at which innovation is commercialized. The free market is an important source of impetus to be sure. But if we left advanced biofuels development to the free market alone it would occur much more slowly than is desirable from a national, economic and energy security point of view. While the Solyndra situation shows how isolated political considerations can make a mess of any program, the first successful projects demonstrate why policymakers should keep a stable funding policy in place.

Clean energy is not headed for a crisis, but there will be some challenges. This week the Worldwatch REN21 report was released which validated that in 2010 half of the new electric generation coming on line globally was renewable, and even in the US, renewables comprised 25% of new electric generation. Private sector investment exceeded $211 billion globally into the renewable energy industries which matches the recent PEW study cataloging global private sector renewable energy investment at $269 billion.

Aside from the investment tax credits for energy efficiency and many of the renewable energy projects expiring in 2016, only the wind credit is up for expiration in 2012 which is causing some angst within that industry and their investment community. But with Congress likely keeping federal subsidies for petroleum, coal, natural gas, and nuclear - which costs taxpayers a minimum of $39 billion per year, it is unlikely that wind will be on the chopping block.

The market driver for renewable energy is that electric utility costs are increasing, electric power quality (surges, sags and transients) nationally are at an all-time high, and power reliability in the commercial and industrial sector is less tolerated due to thinner profit margins. While lower cost natural gas may negatively impact some of the larger utility-scale renewable energy projects, the facility and building projects will expand, driven by wide consumer acceptance, maturity of products including delivery systems and financing, and a wide breadth of state and local government incentives including system benefit trust funds, tax credits and waivers, and renewable energy portfolio standards.

The Associated Press reported on Congress passing a 400-page, $20 billion, energy bill that “provides a variety of loan and subsidy programs for solar energy, alcohol fuels and energy conservation incentives.” The action was “accompanied by round after round of rousing speeches proclaiming ‘energy independence.’”

That story ran in the summer of 1980.*

More than three decades and hundreds of billions of tax dollars later, D.C. doesn’t have much to show for its relentless “green” energy push. The Solyndra scandal is case in point—a poster child for the unintended consequences of government meddling in the private market. Even in the midst of a national economic crisis, bureaucrats appear unwilling to that energy subsidies, indeed all corporate subsidies, do more harm than good. Just last week when testifying before Congress, U.S. Energy Secretary Steven Chu dismissed criticism of the $535 million failure by “we really have nothing to hide; we have really nothing to be ashamed about.”

The fact is the federal government has spent “nearly $172 billion (in inflation adjusted 2005 US dollars) for the development of advanced energy technologies” since 1961, according to a 2008 Department of Energy report<http://www.wired.com/images_blogs/wiredscience/2009/08/federal-investment-in-energy-rd-2008.pdf>. These kind of programs set up a faulty incentive structure in which companies can find it more profitable to pursue tax breaks and subsidies instead of actual innovation. Serious analyses of government intrusion in the energy market with subsidies have concluded that subsidies create distort investment, inflate prices, and become addictive.

There is a case for government sponsored R&D but not for spending on specific technologies or demonstration projects. If the private sector will not invest its own capital in specific technologies, it’s a safe bet that those are not likely to become commercially viable anytime soon.

Over that same period, the private sector has managed to do what he government cannot: discover new efficiencies for energy. As a result our energy use continues to become cleaner. Carbon intensity—the measure of carbon emissions per unit of GDP—keep declining.

Since 1970, we’ve cut it by more than half. Going back even further, Jesse Ausubel—a senior program director at Rockefeller University—documents that the carbon intensity of the global economy has been declining since the time of Queen Victoria and Abraham Lincoln without an explicit policy to pursue that objective. The natural demand for advances in technology and the development of cities has driven more efficient energy use. And the fuels consumed have shifted from ones that have more carbon molecules to those that have more hydrogen molecules. In the near term, the new and abundant reserves of natural gas here and around the globe will lead to a shift from coal to gas further lowering carbon emissions.

We have every reason to expect advances in technology will continue this trend, leading to lead improvements in energy efficiency and in fuel/combustion systems that have a smaller environmental impact. Cleaner energy technologies will benefit from market driven investments and also from lessons learned by market failures. Failures produce information for others to use in taking new directions and gaining valuable insights. Energy is an essential input to wealth creation which is essential for knowledge creation.

A strong vibrant economy needs abundant and affordable energy, not government-dictated fuels. In spite of subsidizing wind and solar for decades, neither can stand on its own and serve more than niche markets. Energy policy and politics should promote abundance and be mindful of the admonition of that great philosopher Groucho Marx: “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies. That certainly describes the last several decades of U.S. energy policy.

*Source: Associated Press “Congress Sends Carter $20 Billion Synthetic Fuels Plan” Tom Raum, June 26, 1980