VX2010 Panel: ‘How Successful are Government Initiatives in Driving the Alternative Energy Marketplace?’

Mutsuyoshi Nishimura

Last January, Clean and Green Technology leaders from around the world gathered in L.A. for VX2010: The VERDEXCHANGE Green Marketmakers Conference. The quality and value of the presentations are apparent in the following excerpts from the internationally-focused panel, “How Successful Are Government Initiatives in Driving the Alternative Energy Marketplace?”, which featured Vicky Sharpe, president and CEO of Sustainable Development Technology Canada; Hans Josef-Fell, member of German Parliament and spokesman for energy and technology policy for the Parliamentary Group Alliance; and Mutsuyoshi Nishimura, Special Advisor to the Prime Minister’s Cabinet and former special envoy of the government of Japan for climate change.

Vicky Sharpe, president and CEO, Sustainable Development Technology Canada: Governments can be extremely successful. However, they do need the mobilization of brains—the innovation and private capital side of the equation—to make it happen.

SDTC is a strange creature; it is a hybrid organization created by the government of Canada as a policy instrument to deliver on Canada’s commitment to climate change and clean air requirements. The government was creative enough to see that when you look at the environment, you don’t silo it into different pieces. We have a mandate that protects all elements of our natural capital: clean water, clean land, clean air, and climate change. We do so by operating in a private sector mind set while we run the organization at arms-length from the government to carry out their policy requirements. We do that by funding the development and demonstration of technologies in real world situations. We take them out of the lab and de-risk them by funding projects that prove out their performance in a way that is relevant to the marketplace. By doing that, we accelerate not only the number of technologies getting to market, but also the timing.

We have two funds. One is the SD Tech Fund, which is a broad-ranging clean tech fund that takes technologies from an enormous number of markets: transportation, forestry, pulp paper, waste management, oil and gas, power production, and how we use energy. We just announced a recent round of funding. We have $464 million of public money that has been leveraged with over $1.1 billion of private sector money. That combines for $1.6 billion into the 184 technology solutions that we have in our portfolio at the moment. That enables people to act. When government regulates and pushes forward the marketplace, you tend to have industry pushback and say, “We can’t do that.” Technology is an enabler. What it allows then is for industry to say, “Okay, if I use this technology, then I can progress.” That is something that is proving to be a very powerful tool as the government works with industry and end users of energy to change the landscape in Canada.

We have a second fund, the NextGen Biofuels Fund, which aims exclusively at using cellulosic or non-food feedstocks for the production of renewable fuels and heating oils that will address our renewable portfolio standard in Canada. This fund is more like a project finance structure, whereas the other fund is more like a venture cap structure—different ways, different players.

I can commend to you that Canada has a significant critical mass of clean technology companies and developers. We have over 5,000 organizations in our database. There are groupings of expertise across the country—clusters of strength. Not surprisingly, you will see the power generation and renewables and also some of the hydrogen areas on the West Coast in British Columbia. Canada, in Alberta, is the leader in northern gas exploration, in conventional as well as non-conventional sources. Moving across to Ontario, which is the center of the automotive market, expertise centers on transportation and also how we use energy. Like a smaller version of L.A., it is an urban center that needs to reduce its energy and carbon footprints. There is a lot of expertise in biological conversion processes in Quebec. They have delivered a number of energy-from-waste technologies.

The way that you move forward in any jurisdiction, as was said in the World Economic Forum statement, is with consistency, and it needs to be tailored to the particular applications the market has in mind. Governments play a role in creating demand-pull; feed-in tariffs are certainly a very clear and powerful way of doing that. The debates in Europe that FITs are the best way to go have ended. We have seen an example in Ontario where we have seen companies move to that location to bid for the renewable power contracts that we want because we put in place a very high level of commitment to incentives and long-term power purchase agreements.

I mentioned also earlier public procurement through governments, municipal, statewide, and also national. That is a very powerful way of creating long-term markets, along with standards and regulations. As we used to say in the old days of energy efficiency, “You take the dogs out of the market,” and you make winners by creating forward-looking, high-demand standards that they must meet. On the supply push side, governments work extensively around innovation incentives, whether grants, the kind of thing that SDTC does, or helping the private sector move forward with investment tax treatments. The trade side of things is very important as we move into this global marketplace.

There are, frankly, perverse subsidies. Government needs to look at where it is currently supporting industries that are now more mature; they may have needed support before but do no longer. Tax policy and regulation, which are significant supports for the oil industry, could easily be shifted sideways and moved to greener technologies with a need to build up capability. They were successful before, but they do need to change.

The other message that we heard both from Mary [Nichols] and Karen [Douglas] is that if you provide an incentive as a government, and you take that incentive away, you will destroy a market because companies will be looking at non-optimum investment. You need to be consistent and then you will get the return in the amount of investments from the private sector and the creation of jobs.

The message is very clear that the international markets for our products and brains are significant now as you see green stimulus across the world, and regions are playing a very powerful market opportunity for us. We can create jobs that way. Consistent application of government policy has resulted in great jobs creation. You can get more money, value, and jobs out of insulating homes than you can out of more conventional technologies.

Governments absolutely need to move forward with a more aggressive pursuit of what are not initially vote-getting approaches, but they need to be involved. The private sector needs to step up to the plate and be more green oriented. A price for carbon will help us deliver that because it will help us focus our minds.

Hans Josef-Fell
Hans Josef-Fell
Hans Josef-Fell, Member of German Parliament; Spokesman for Energy and Technology Policy for the Parliamentary Group Alliance:
Renewable energies in Germany have gone through an astonishing expansion over the past ten years, which has been surprising to many analysts. The basis for this new industrial revolution is a result of various political laws, the feed-in tariff law especially. At its center stands the principle of primacy of renewable energy and feed-in tariffs.

The tariff is designed to provide alternatives to investors. These points were crucial to me in drafting the feed-in tariff law in 1999, which was then adopted in 2000 by the German Bundestag. One can see the momentum of the industrial growth by looking at the targets. In 2000 the asset growth targeted by the law—from 6 percent renewable share of electricity in 2000 to 12 percent in 2010—was considered to be unrealistic and unattainable. In 2009, already 16 percent of the share had been reached. Maintaining the current growth rates, in 2020 Germany will create about 50 percent of its electricity from renewable energy sources. By 2030, 100 percent from renewable energy sources is possible.

At the same time, the expansion of renewable energies increased the energy security of Germany by reducing the expansion of fossil fuel and nuclear resources. Enormous cost to the national economy has been saved...It is not a burden for the people. They have already benefited. In 1998, only 30,000 people were employed in the renewable energy sector, while in 2010 the number has risen to almost 300,000—ten times more. The renewable energy sector has become the most important pillar of the German economy during the current financial and economic crisis, which was also determined by high oil prices—$150 per barrel in 2008. Our experience in Germany demonstrates that protecting the climate by using renewable energies is not a burden, but a stimulus to the economy as well as a cost effective way of reaching energy security with domestic and sustainable energy sources. In addition, national and international struggles over resources are prevented.

Researchers from Stanford and UC Davis recently unveiled a plan to switch entirely to renewable energy by 2030 worldwide. The focal point of this plan is to use the energy of the sun, the wind, and the water. The target of full coverage under renewable energy is, under the right political framework, technologically feasible, reasonable, and doable. A full supply of renewable energy would be the most decisive contribution to global climate protection. It isn’t a conference on climate change with a UN resolution that is needed for such a strategy, only national leadership is needed. This is a great opportunity for industrial leadership for the pioneer countries, alongside many employment prospects in the export sector. With growing mass production, the technologies of renewable energy will become cheaper and cheaper. With the exception of bio-energy, renewable energies do not contain fuel costs, which will make them cheaper in competition to oil, natural gas, and uranium in the coming years.

In contrast, the cost of conventional fuels will rise in the next few years due to the scarcity of resources, which will bring along serious problems. Scientists with the Energy Watch Group and others have already proved that the peak of oil in the world had now passed. In coming years there will be a 3 percent annual decline in the global oil production. Even the conservative International Energy Agency in Paris has warned that the world is facing serious economic problems through the increasing shortage of oil. Since natural gas, coal, and uranium resources are of limited availability, they do not stand a chance to balance the decline of oil. At the same time nuclear security risk is rising. Germany has already recognized this and outlawed nuclear in 2002. Now no political party in Germany supports the construction of new nuclear reactors, but all political parties support renewable energy...

...It would be great if the big targets in California of 33 percent renewable energy by 2020 were achieved or even exceeded. 33 percent renewables is possible with a clear change in the energy and transportation systems. Electric cars and high-speed trains are very important. Germany is interested in staying in contact with businesses in renewable energies and high speed trains. This is also possible with clear political objectives like feed-in tariffs. The entire United States can act on climate protection without a burden on the economy, maybe using the example of Germany in renewable energies. If we put together the political framework for 100 percent renewable energy in Europe, China, and the United States, we can reach climate protection and energy security, prevent conflicts over oil, stop nuclear proliferation, and create rapid economic development with many new employment opportunities. With renewable energies, the world can look forward to a positive future.

Mutsuyoshi Nishimura
Mutsuyoshi Nishimura, Special Advisor to the Prime Minister’s Cabinet; Former Special Envoy of the Government of Japan for Climate Change:
Obviously, the role of government is important in pushing forward alternative energy resources. I have to talk about the Japanese experience. One was very successful, the other one not so successful. The successful one was the national drive that we started in the 1970s, when the global energy crisis visited Japan. The crisis compelled the Japanese government to go for energy efficiency. The government told the Japanese people that we have to conserve, save, and produce more energy. That is the basic message that my government sent around the country. That worked well, and people responded.

The role of government is in providing such vision—a vision for the future. That vision came to produce fruit. As a matter of fact, over 30 years since the 1970s, that national drive ushered the country to the top of the list of the most energy efficient countries. Of course, the government provided a lot of incentives, subsidies, and all sorts of policy measures to get out of the crisis and become an energy efficient country.

The other example that I must talk about frankly is that during the course of the national drive to make the country energy efficient, we decided to stop subsidies to solar energy, which has caused dramatic effect. In those days Japan was the largest solar producer. The end of the subsidies to the solar industry created tremendous effect. Within a matter of several years, Japan fell well behind Germany, Spain, and many other countries. Now we recognize that we have made some mistakes. We are rectifying that. As a matter of fact, last year we decided to reintroduce a feed-in tariff system. The first one wasn’t a genuine feed-in tariff, but a subsidy to help the solar industry. Last year we decided to install a feed-in tariff to boost Japanese industry for solar and renewable energies. The role of the government is important, and the vision is important, and we all learned these lessons so we are moving forward with that conviction. There will be lots of new ideas about policy measures.

One thing we have to learn in government is how to provide the environment and circumstances for private sector enterprises to excel. After all, government is not the key player; business is the key player. The role of government is to provide the incentives, the frameworks, and the policy measures for business to excel. We have a huge assembly of policy measures, and we have experiences. We can build upon all of these past experiences. One of the key issues is whether we should put a price on carbon, either implicit or explicit. If we say government should not pick winners and loser, then we really have to provide them a framework whereby business can excel and go forth. One of the key issues then is for them to have a pricing system so they can make good investment decisions. •••