Last week, the American Energy Innovation Council (AEIC) called for the creation of a new federal financing entity to support the deployment of innovative clean energy technologies, similar to the Clean Energy Deployment Administration, the first national green bank originally proposed in 2009.
The AEIC is a group of 11 corporate leaders, including Bill Gates and John Doerr, with the mission “to foster strong economic growth, create jobs in new industries, and reestablish America’s energy technology leadership through robust public and private investments in the development of world-changing energy technologies.” As a project of the Bipartisan Policy Center, the AEIC advances policies that enjoy broad support and harness the economic opportunity that comes from addressing climate change.
Last week, AEIC issued a new report titled, “Energy Innovation: Support the Full Innovation Lifecycle.” The report takes a refreshing, holistic look at the energy development lifecycle, acknowledging that R&D investment alone is insufficient. And a narrow focus on initial commercial deployments of new technologies is insufficient, as well.
Rather, the public and private sector must work together all the way through deployment to ensure critical technologies can grow to scale as profitable investments for the private sector. As the report says, it “focuses on how lawmakers can continue to support energy innovation R&D while also thinking ahead toward the need for more effective incentives and strategies for commercial-scale demonstration and deployment.”
“[I]t has become increasingly clear that an exclusive focus on early-stage R&D is insufficient. The path from the lab bench to widescale deployment of new energy technologies is long and arduous and can require decades of effort and hundreds of millions, or even billions, of investment dollars. A more comprehensive approach to the full innovation lifecycle—encompassing not only research and development, but also demonstration and deployment—can help ensure the United States remains home, not only to the inventors of tomorrow’s critical energy technologies, but also to the companies that build, manufacture, and export those technologies to the world.”
And one of their nine proposed recommendations for this more holistic approach to energy innovation is to create a new dedicated financing mechanism similar to the Clean Energy Deployment Administration (CEDA) originally proposed and advocated for by CGC in 2009. As the report correctly states,
“Even if the technology has been successfully demonstrated at scale, costs may still be poorly understood and benefits from learning-by-doing may not be fully realized, creating the potential for cost overruns or higher initial costs. If the company developing the new technology is itself new and considered riskier than mature companies, it may not be able to access financing through traditional capital markets.”
In other words, simply proving that a technology works in a commercial application does not lead to rapid and widescale deployment. (Just look at solar PV technology, which is the cheapest new power source in large portions of the country, yet makes up less than 2% of power generation in America.) There are many other barriers that halt the flow of finance even when a technology is low-risk. Innovative applications of new technologies can create just as much of a hindrance to investment as the technology risk itself.
What is the solution according to this group of business leaders? Reviving the idea of CEDA, which, “would have been provided with authority to issue loans, including direct loans, loan guarantees, and other financing options. It also would have had the ability to issue bonds, convertible bonds, and warrants, and would have been allowed to purchase debt securities. An entity of this type could be modeled after other successful federal agencies such as the Export-Import Bank.”
No wonder an organization seeking bipartisan solutions would proposed such an entity. In 2009, CEDA had overwhelming bipartisan support. CEDA was passed by the House Energy & Commerce Committee with a 51-6 bi-partisan vote, and then was passed by the full House. And it was passed by the Senate Energy & Nature Resources Committee with a 15-8 vote. You can read the details here.
The very same House Energy & Commerce Committee today is considering National Climate Bank Act of 2019, which embodies the same principles and approach as CEDA. That Act was included as part of the broader CLEAN Future Act, as well.
So for those looking for bipartisan solutions to climate change that focus on technology innovation and private sector leadership, look no farther than the National Climate Bank.