Obama's SOTU clean energy wishlist derailed by Congress gridlock

A week is a long time in politics… 52 weeks between state of the union addresses is a lifetime. But progress in creating legislation that will actually help the US economy recover has been proceeding at such an agonisingly glacial pace thanks to the so-called "gridlock" in Congress that last year's appeals by the President to support investment in clean energy have not advanced since last year. 

Many Republican members of Congress are increasingly making it clear that they are not interested in running the country, just running their 44th President out of office – if his policies succeed, then Barack Obama has more chance of winning a second term in office and they will stop at nothing to stop anything that makes the current incumbent look like he might be a competent president.

Pugnacious comments punctuated Obama's usual emollience, which made his plea for Congress to look to the US military on tips on cooperation.

Chinese imports of cheap PV were clearly in the crosshairs when Obama announced the creation of a Trade Enforcement Unit to investigate "unfair trading practices in countries like China," thereby turning up the heat in the trade war started by SolarWorld's legal challenge last year.

"And I will not stand by when our competitors don’t play by the rules. We’ve brought trade cases against China at nearly twice the rate as the last administration –- and it’s made a difference… It’s not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized."

Solyndra was not specifically named. But when Obama acknowledged that public investment in technologies had associated risk - some that paid off, such as shale gas and some that failed - everyone knew he was referring to the Californian thin-film solar company that collapsed last year taking around 535m federal dollars with it.

"Some technologies don’t pan out; some companies fail. But I will not walk away from the promise of clean energy."

He called for an end to fossil fuel subsidies - a vague hope that has not moved on since his last SOTU address. "Pass clean energy tax credits," he urged, before the first and only mention of climate change, over which his tongue slipped to say "flight" rather than fight climate change. The clean energy standard which would create a federal-wide renewable portfolio target for utilities, also got an honourable mention for the second year in a row even as bills in Congress have not inched further forward in the past 12 months.

"We can also spur energy innovation with new incentives. The differences in this chamber may be too deep right now to pass a comprehensive plan to fight climate change. But there’s no reason why Congress shouldn’t at least set a clean energy standard that creates a market for innovation. So far, you haven’t acted.  Well, tonight, I will.  I’m directing my administration to allow the development of clean energy on enough public land to power 3 million homes.  And I’m proud to announce that the Department of Defense, working with us, the world’s largest consumer of energy, will make one of the largest commitments to clean energy in history -– with the Navy purchasing enough capacity to power a quarter of a million homes a year." 

In many ways, that Obama's energy and climate goals have found a more welcome home in the US military comes as no surprise. As with the fuel economy standards introduced last year, executive orders are a useful addition to the political arsenal of the commander in chief. It's a curious trick of America's style of democracy that bypasses Congress… that is where Obama appears to be most effective. The same could be said of his administration's foreign policy - killing Osama Bin Laden tops a long list of successes in the state department thanks to Hilary Clinton, along with withdrawal from Iraq and toppling murderous dictators such as Colonel Gadaffy.

But the Republicans pretend not to be interested in foreign policy to avoid drawing attention to Obama's successes, citing the domestic problems as far more pressing.

But given the freedom to execute his executive role, Obama is clearly more effective without the burden of a Congress that has bound itself to industrial interests such as the Koch brothers et al at the expense of the wider American public. 

Tea Party Republicans mask prejudice and discrimination and obstruct reasonable discourse on everything from energy policy to abortion by citing the constitution, or rather their own appropriated interpretation, with the same religious fervour as Islamic fundamentalists cling to the Koran, or their own warped interpretation, as justification for waging war on the west.

Climate change is just one issue where Republican sceptics make themselves sound ridiculous because their arguments and comments have to stray so far from the facts and the scientific consensus that the rest of the world accepts.

That Republican presidential candidates are now equating "socialism" with "European" makes them sound silly. But these daft comments become more serious when this newly coined synonym passes almost without comment or inquiry by the public or press in the US…  David Cameron, Angela Merkel, Nicolas Sarkozy are all right of centre party leaders who have vowed to cut public spending and allowing sovereign monarchs to remain as heads of state in countries like Spain and the Scandinavian nations, is hardly a "socialist" strategy for organising society.  

During a conversation recently with a VC specialist at a large accounting firm the discussion turned around to Obama's threat to tax "wealth creators" and "wasting money on entitlements". Ah yes, the benefits culture has become a problem in the UK too, I said. To which the reply was: That's right, in Europe, you have socialism there. 


This lazy association through redundant ideologies obstructs discourse. After all, China a country run by a "communist" party has little or no "welfare" state as we would call it in the west, where healthcare payments are based on the extended family's ability to pay. So much for socialism taking care of the poor… if by socialism = European, they mean social equity, then that's a definition I'll live with. But that is a pejorative concept for too many Republicans.

In the Iron Lady biopic of Margaret Thatcher there is a wonderful scene in which Meryl Streep quotes: "Beware of your thoughts, they become your words. Beware of your words, they become your actions. Beware of your actions, they become your habits. Beware of your habits, they become your character. Beware of your character, it becomes your destiny."

Words and their real meaning should matter to everyone, especially politicians, regardless of bias.

The global warming debate is where this lack of interrogation of factual accuracy stands out in the US - it is depicted as if there is still enough weight of evidence to give credence to the doubters. That is just not true and it doesn't matter who says so or how many times, the US is a country where consensus on climate change can be reported as a "revelation" 10 years later than every other nation because it suits politicians and their fossil fuel influencers to obscure and dissemble.

Professor Naomi Oreskes deftly argues in the LA Times that climate change is an issue where "open mindedness" does not apply. It's just one of many issues: it is no longer scientifically acceptable to stay "open minded" on the adverse affects of smoking; nor is it socially acceptable to stay "open minded" about prejudice or discrimination on grounds of colour, gender, religion or sexual orientation. There are some things in life which are so politically or socially unpalatable in a free and fair society that "open mindedness" is inappropriate…

Unlike last year, there was no specific mention of high-speed rail. Last January, Obama boldly said:

"Within 25 years, our goal is to give 80% of Americans access to high-speed rail, which could allow you go places in half the time it takes to travel by car."

In the 12 months since then, not a single piece of HSR track has been laid and its deep controversies have seeded doubt about its viability even among staunch supporters such as Joe Simitian, a Democratic state Senator for Palo Alto, a region not known for its aversion to technology. 

This year, Obama played safe by pledging to reduce redtape on infrastructure projects: 

"Building this new energy future should be just one part of a broader agenda to repair America’s infrastructure."

Clean energy advocates responded positively to Obama's speech last night. But the headwinds of cheap and abundant natural gas, the possible expiration of the Production Tax Credit low and the spectre of China's oversupply of cheap PV - the Solyndra ghost will haunt the solar industry and government support for clean energy for years to come.

Eileen Claussen, president at the Center for Climate and Energy Solutions, which had to remodel itself from the Pew Center on Global Climate Change after Pew Charitable Trusts cuts its purse strings at the end of last year.

"Even if comprehensive legislation remains off the table for now, we can make important progress tackling these challenges piece by piece. C2ES is working with policymakers and stakeholders on ways to expand enhanced oil recovery using captured carbon dioxide – an approach that can boost domestic oil production while reducing greenhouse gas emissions. Similarly, we’re working with automakers, environmentalists and others on a plan for integrating plug-in electric vehicles into the U.S. electrical grid. We look forward to sharing the results of these and other C2ES initiatives aimed at practical solutions to our twin climate and energy challenges."

C2ES is now mostly funded by business, including Entergy, HP, Shell, the Alcoa Foundation, Bank of America, GE, The Energy Foundation, Duke Energy, Rockefeller Brothers Fund. The presence of energy companies among its top donors may explain the interest in advanced fossil fuel technologies such as enhanced oil recovery which aims to maximise the extraction of the resource and does nothing to minimise the effect of burning what comes out of the ground.

At one point the president pointed out Bryan Ritterby, who he tried to present as an ordinary Joe who was laid off …

"Bryan Ritterby was laid off from his job making furniture, he said he worried that at 55, no one would give him a second chance.  But he found work at Energetx, a wind turbine manufacturer in Michigan.  Before the recession, the factory only made luxury yachts.  Today, it’s hiring workers like Bryan…"

But Bitterby is no ordinary born-again American clean energy industry worker. He is representative of many who work in the US wind industry - largely developed with expertise from Europe where policy has created an export market for renewables.

Although Energetx is an American company that has changed course from making yachts in Michigan, if it's not built by GE, wind turbines in the US will be built in factories established by European-based companies: Gamesa, Siemens and Vestas just to name a few. These companies were attracted to the US manufacturing industry partly by the 48C advanced manufacturing tax credit, which as I've reported before, was not taken by GE. However, last night Obama made clear that any future tax credits would favour indigenous companies. Where that leaves the Europeans who have been so involved in developing the US wind industry and creating a manufacturing base remains to be seen.

Aside from being a wishlist of things that will never happen, like the clean energy standard, commentators last night also saw Obama's third SOTU as a stump speech for the presidency. I wonder whether he will make it to a 4th… otherwise Mitt Romney may be required to dig into his own deep pockets for ideas on how to help the economy recover. Perhaps he could pay down some of the US debt from his own savings account?

What industry thinks of the Electricity Market Reform's £200bn bill

Michael Lewis, managing director Europe, of EON Climate and Renewables, welcomed the government's white paper on Electricity Market Reform, in particular the contract for difference which will be set in 2013. But told delegates at the Countdown to 2020 conference in London that utilities could not front up the £200bn of investment required for new generation.  

He said: "Our balance sheet simply doesn't stretch far enough to deliver these targets. The collective balance sheets of the utility industry doesn't stretch far enough and with the planned or actual closure of the old nuclear plants and newer plants in Germany our balance sheets have been hit. We have to be very clear that the returns are at the right level. The contract for difference will provide that clarity long term. The sooner [it's introduced] the better."

He also welcomed the carbon floor price: "This is a very important piece of the overall Electricity Market Reform proposals. We've seen the carbon price sink to very low levels in the recent past - €7.40 a tonne - that isn't going to incentivise much at all in low carbon generation. The recession has reduced emissions.

"The EU cap has achieved the goal of reducing emission but not incentivised the new investment we need for the longer-term targets, which is why a floor on carbon is essential to provide those long term signals and long term incentives."

But Lewis pointed out concerns about the integration of renewables. Some of these concerns are part of the consultation launched in the technical update published by DECC last week which included plans for a market-based capacity mechanism and a decision that the system operator, the National Grid, should deliver the Feed-in Tariff with Contracts for Difference and the market - a model similar to that operated by California's Independent Systems Operator.

Lewis advocated two separate markets - one for capacity and one for energy: "If you have a very large proportion of intermittent capacity on the system - 30GW-40GW - there will be large periods where prices drop to very low levels. But if you don't have a capacity mechanism you will end up with a very volatile power price with long periods of low prices and short periods of very high prices when capacity has to earn its capital cost through the energy market for a very short period of time.

"By creating two separate markets, one for capacity, one for energy, you create more stable power price planning while ensuring that capacity runs fewer hours and gets the necessary returns."

"£200bn - that's what electricity market has to attract in terms of financing. That's a huge challenge. We're hoping that the figure won't be that high because we've made a commitment to reduce costs - including a 40% reduction in offshore wind by 2015."

Anders Søe-Jensen, president and founder of the offshore division at Vestas made no apologies for the high costs of offshore by saying that the industry was at the start of its innovation/technology cycle. But he warned that although the government target of £100/MWh by 2020 was ambitious, the industry had to bring down costs or it would kill itself.

He said: "Offshore wind is a higher cost energy because we are where we are in the learning curve. And we are all working to bring down the cost of energy. We are at risk but we all have to commit to bringing down costs otherwise we're going to kill our industry."

Vestas was working with Decc and the Crown Estate which issues the seabed permits to lower costs.

But he said the value to the UK economy would go beyond cheaper offshore electricity, pointing to a report from Oxford Economics which said that the industry could create 58,000 new jobs around the UK, many in deprived coastal areas.

Jensen said although Vestas had plans to build a plant at Sheerness that could only happen if the market was created through political and public support. "If the market is here, we will be here," he said. "With the wind resource in the UK, 169GW could be installed that would … make the UK a net exporter of electricity.

"In future, I can imagine a bond market for wind," he said in later comments.

Martin McAdam, chief executive officer of wave power start up, Aquamarine Power, said that creating the marine power industry would require a more fundamental shift back to more domestic manufacturing in the UK.

He said that although he attempted to keep as much of the investment in the Oyster local to the Orkney economy where a prototype was deployed - $4m of a total $20m - it was impossible to order the steel castings anywhere but China.

He said "We need to go way back in terms of where the UK has come from and where it's going. So we saw this huge change under Margaret Thatcher to move from a manufacturing economy to a service economy. There's nothing wrong with services. The financial services are an important part of the economy despite all the turmoil we've seen.

"But if you rely purely on services and you make nothing then you're wholly dependent on imports and that means you have quite an unstable economy. I firmly believe we have to get back to understanding that we can manufacture. A lot of this was driven by ideology at the time - we had a very high unit labour cost in the UK. We were over-unionised. So we talked ourselves out of having a manufacturing base. Siemens in Germany is expanding and they're not saying we're going to make this elsewhere in China. Germany has in the last 10 years increased production in the car industry."

He said there was no reason why the UK couldn't create and export market for marine power in the way it had for offshore oil and gas.

"A quarter of Europe's wave resource is in the UK. It makes a huge amount of sense for the UK to create an industry around these new technologies.

"But to move this industry to the next stage - we need the ecosystem. We need the supply chain to participate. I need other competitors, I need financing solutions. All of that benefit comes because we have an ecosystem that supports the new infrastructure.

So is the £200bn electricity bill worth it?

"£200bn might seem like a lot of money but in the context in the energy that this country requires today and will require in the future it's tiny. If we had to re-create the energy infrastructure in the UK its value is far greater than £200bn."

But, he admitted: "The early days are the hardest."

Hard days may become harder unless it becomes clearer where this £200bn is going to come from.