Clean Energy Investors Want Some Level of Certainty

In my quest to understand investors’ reluctance to assert themselves in the renewable energy space, a common theme continues to emerge: uncertainty. Where no one doubts that demand for oil and coal will continue for some time, and that the government subsidies that support them will remain a part of U.S. law, no similar confidence exists that the world will put a premium on clean (versus dirty) energy.

Quite the contrary. The investment and production tax credits that support wind and solar are as mercurial as women’s hem lines. These incentives may exist one year, only to be forcibly removed the next. We have serious presidential candidates who proudly claim that, if elected, they will shut down the Department of Energy and dismantle the Environmental Protection Agency, and many are openly opposed to the entire concept of clean energy – certainly if that requires even an iota of public support.

Given all this, is it any wonder that the formation of investment capital in this space is so feeble? Even in the absence of an active antipathy to renewables, as long as there is no level of certainty for the market for clean energy, investors can be counted to go elsewhere.

So let’s look for a few good ideas that represent potential solutions. Here’s a concept my friend and colleague Steve Hellman, president of Eos Energy Storage, brought up recently:

There is no need for government to pick certain technologies to support; it’s tough to argue that government is wiser than the market in picking winners. Instead, government need only to put a floor on the prices of gasoline and electricity, and then get out of the way and let market forces take over. Steve suggests that the federal government could say, “As of today, there will be a floor of $4 a gallon and $0.15 a kilowatt-hour for electricity. Anything under that, we sweep up as a tax, and apply it against the deficit.” Now, for the first time, investors have a price they can shoot for. They can have confidence that if they can deliver a transportation solution that is more attractive than $4 a gallon gasoline, or an electricity solution that beats $0.15 a kilowatt-hour, they have a position that is guaranteed to be appealing in the marketplace.

That’s a heck of an interesting thought. And it’s revenue-positive; that’s something of a rarity for ideas that support clean energy, isn’t it? I promised him that I’d run this by our readers and ask for comments, so please feel free to let Steve and me know what you think.

In the meanwhile, let’s remember history. For centuries, large, entrenched players have gotten even richer by strategically raising and lowering prices. This was a favorite tool of John D. Rockefeller in the 1920s. When small competitors would start to gain momentum, he’d lower the price of oil, driving them all out of business; when they had all gone belly-up, he’d raise the price to even higher levels, knowing that he’d regained his monopolistic position.

In hindsight, some would regard that kind of market manipulation as unethical, as “dirty pool.” But here the stakes are much higher; the extraction and combustion of fossil fuels no longer threatens just the business aspirations of a few wildcatters, but the health and safety of all seven billion of us here on Earth.

As long as the price of energy can be manipulated to drive the competition out of business, the future of renewables will remain anyone’s guess, as investors will continue to be terrified, and completely unwilling to jump into the game. And on and on we’ll go, until the last ounce of crude is sucked out of the ground, the last lump of coal is burned, and the environment is in ruins.

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