New Budget Reflects Inefficient Energy Priorities

An editorial in today's New York Times praising the energy priorities included in the President's latest budget is little more than a rubber stamp of a set of policies in serious need of rethinking. The goals the Times espouses, of "reducing America’s dependence on foreign oil and giving American workers a fighting chance in the global competition for clean-energy jobs", are perfectly fine; however, what's entirely absent is any critical assessment of whether the expensive programs they chose to highlight will contribute meaningfully to accomplishing them.

Start with the reauthorization of Treasury cash grants for renewable energy projects. A quick review of the Treasury's own tracking spreadsheet shows that 77% of the $10.4 billion awarded since 2009 under this program went to projects employing wind turbines, a mostly mature technology, half the value of which goes to offshore manufacturers, based on the American Wind Energy Association's own assessment. If the goal is putting Americans to work producing wind power hardware, this is a grossly inefficient way to do it. Moreover, this temporary program was instituted to fill the gap created when the market for "tax equity"--private transactions that exchange current cash for future tax credits--dried up during the financial crisis. Tax equity investors have recently been returning to the market, but they can't readily compete with free money from the Treasury Department. In other words, at this late date the Treasury cash grants are a solution to a problem that their continuation would help perpetuate.

Then there's the matter of the wind production tax credit, which I looked at in some detail recently. While I agree that it's neither fair nor appropriate to drop the industry off a cliff by allowing this benefit to expire all at once, it is high time that the 20-year-old tax credit for wind power be reduced to account for the maturity of onshore wind technology, and then gradually phased out on a firm schedule. The Times makes no mention of any of this.

It's also important to understand that whatever the technologies covered by these two programs may contribute to reducing greenhouse gas emissions, they don't save a barrel of imported oil, because the US generates less than 1% of our electricity from oil, and much of that in island or other remote locations that can't easily get reliable electricity through other means. That makes it doubly ironic that the only "subsidies" the Times opposes are the current tax benefits for oil and gas companies, arguably the only program mentioned in their editorial that actually does help reduce US imports of foreign oil.

The President's 2013 budget, which has little chance of adoption as proposed, includes a number of other energy provisions. Some of them are very worthy, including increased support for energy R&D that is too risky or long-term for industry to undertake on its own. However, it also includes an extension of the loan guarantee program that gave us Solyndra--a program that should not be renewed without much stronger oversight than the DOE has provided to date, beyond just hiring a "chief risk officer". It also mentions "enhancements to the existing electric vehicle tax incentive", a $7,500 per vehicle credit that benefits mostly higher-income taxpayers and does little to reduce either emissions or oil imports. What I don't see in these proposals is any recognition that many of the programs they seek to extend or expand have either outlived their usefulness or fallen short of delivering the benefits on which they were originally justified, and that every dollar spent inefficiently in this manner adds to our $1.3 trillion deficit, the necessary narrowing of which keeps getting pushed ever further into the future. The administration's latest energy priorities would have us spending as though it were still 2006.

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The Battle to Extend Wind Incentives

With the end of the year approaching, the annual Congressional debate over extending a variety of expiring federal tax credits and other benefits is gearing up again. Few of these measures are as high-profile as the payroll tax cut, but each has a vocal constituency, including renewable energy. The American Wind Energy Association (AWEA) has launched a major effort seeking inclusion of the Production Tax Credit (PTC) for wind power in this year's "tax extenders" package. That might seem premature, since the PTC won't expire until the end of 2012, until you realize that eligibility for the stimulus-funded Treasury renewable energy grants for which many wind project developers have opted over the PTC ends in a few weeks with little chance of a further extension. However, before simply tacking another year (or four!) onto a tax credit that began nearly 20 years ago, Congress should answer two basic questions: Is this still the most effective way to promote renewables like wind, and does wind power now require subsidies at all?

I don't blame AWEA for tackling this issue early, since the US wind industry has experienced significant volatility when previous PTC expirations went down to the wire, and in several cases lapsed for up to a year. At the same time, taxpayers deserve a more compelling rationale for continuing to subsidize wind power than the one now being offered. The "green jobs" argument is wearing thin, post-Solyndra, and it has become increasingly evident that helping to create a market for renewable energy technologies is a necessary but not sufficient condition to establishing a sustainable, globally competitive renewable energy manufacturing industry. Although more of the wind power value chain is now produced in the US than previously, too much of each wind subsidy dollar still goes offshore for this to be deemed an efficient way to boost to US jobs and manufacturing without reform.

In order to address the first question I posed, concerning the continued suitability of the PTC, it's important to understand how it works and how it compares to other renewable energy incentives. The current PTC provides wind project owners (or the parties to whom the tax benefit has been sold via a "tax equity swap") with an income tax credit of 2.2 cents per kilowatt-hour (kWh) of electricity actually generated and sold from the completed facility. Based on recent estimates of the levelized cost of electricity from unsubsidized wind power, that's over 20% of a typical wind farm's production cost. It's also equivalent to more than half of this year's average wellhead price of natural gas--a far larger subsidy per BTU than the controversial tax benefits currently provided to oil & gas firms.

The best thing about the PTC is that it is entirely outcome-based. You only receive the benefit when your project is completed, brought online, and as power is sold to customers. Mess up any of those steps and you get zilch. Put your project in a location with poor wind resource or limited access to transmission, and you won't get nearly as much tax benefit. So from that standpoint--ignoring the green jobs angle that arose mainly from expediency when the financial crisis and recession hit--we are getting what we pay for: actual low-emission energy. The structure of the PTC has cash-flow implications that are viewed as a problem by many wind developers but might be regarded as a useful feature by taxpayers. Smaller developers, in particular, have greater difficulty financing projects when the incentive must be deferred until after start-up, or they may lack sufficient taxable income to take full advantage of the credit. They complain about the need to transact swaps with bankers and other investors to realize the subsidy sooner, at a cost. But perhaps it's not such a bad thing for companies that small to have to convince an experienced third party that their project is really viable.

There are many alternatives to the PTC, including the 30% Investment Tax Credit (ITC), the same one received by solar and other technologies. The stimulus bill extended the ITC as an option for wind and allowed the Treasury Department to pay it as a cash grant, rather than waiting for subsequent tax filings. This certainly put money in the hands of wind developers much quicker--$7.6 billion since 2009 including $3.3 billion so far this year--and it has the added benefit of automatically scaling down as the cost of the technology falls. The solar feed-in tariffs favored in Europe didn't have such a feature, with the result that countries have had to cut them numerous times, but only after the fat tariffs gave birth to a huge export-oriented solar manufacturing industry in Asia. Similar competition is now emerging in the wind industry.

The main problem with the ITC is that when viewed from an outcomes perspective, which really gets to the question of effectiveness, the outcome being promoted is construction, rather than energy production. You would get the same tax credit for a project with the best wind resource as for one with the worst. (This has also led to a lot of solar installations in places that would never otherwise have been considered.) So of the two main policy tools the federal government has used to subsidize renewable electricity, the PTC is probably more cost-effective in delivering the result we should really want, which is more renewable energy. As it is, even with rapid growth over the last decade, wind accounted for just 2.8% of our power generation this year through August.

That brings us to the bigger question of whether wind should be subsidized at all after the current PTC term expires. I get emails practically every day from folks who have serious concerns about the health and environmental impacts of power, as well as its cost- and emissions-reduction effectiveness. Even if we ascribed all of these concerns to NIMBYism, it doesn't change the fact that the wind PTC, complete with annual inflation adjustment, is providing the same level of incentive as it did when the technology was much less mature and cost many times what it does today; AWEA cites wind costs having fallen by 90% since 1980. Other factors have also changed in the last twenty years. A majority of US states--and most of those with attractive wind resources--now have in place Renewable Portfolio Standards requiring utilities to include increasing proportions of renewable power in their supply. These mandates create a similar redundancy as the one between the ethanol blenders credit, which is also due to expire 12/31/11, and the biofuel mandates of the federal Renewable Fuels Standard. In the absence of the PTC, the state RPS system should provide a safety net--and more--for the industry.

There are two other key factors missing from AWEA's arguments for extending the PTC. The first is the economy, which is the main reason that US electricity demand has not been growing at a rate that would support large generating capacity expansions of any kind. New wind installations have been anemic for the last two years, in spite of last year's extension of the Treasury grants. Moreover, wind must now compete with the explosion of domestic natural gas production from shale, which when used in combined cycle gas turbines produces cheaper electricity than wind, with low emissions of the air pollutants that are of the greatest concern to most Americans, while still beating coal-fired power hands down on greenhouse gases.

Where all this leaves us depends on your priorities. If your main focus is on reducing greenhouse gas emissions and you see renewable power as a key strategy, then in the absence of a price on carbon you might support extending the PTC for at least a little longer. If you are concerned about climate change but more worried in the short term about the deficit, then letting the PTC lapse next year and relying on state RPS quotas to put a floor under wind looks reasonable. If boosting US cleantech manufacturing is your aim, you should prefer a more direct incentive than the PTC. And if your main worry is oil imports, then the PTC is irrelevant, since the US gets less than 1% of its electricity from burning oil, and most of that in remote and back-up power roles that wind can't easily fill. On balance, if after considering all the alternatives the Congress decides to extend the Production Tax Credit, it should be for an explicitly final period, at no more than the 1.1 cent/kWh rate that technologies like marine, hydropower and waste-to-energy now receive, and without the annual inflation adjustment that undermines the incentive to continue reducing costs.

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Could Competition and Low Demand Stall Wind Power's Growth?

In the last week I've seen reports that two of the biggest wind power developers in the world, Spain's Iberdrola Renovables and Portugal's EDP Renovaveis, plan to reduce their wind power investments in the US for at least the next couple of years. That's significant because these two firms together accounted for just under a third of the 5,115 MW of new wind turbines installed in the US last year. This isn't for lack of opportunities or incentives, but for some very old-fashioned reasons: low demand and competition from other energy sources. It's an important reminder that renewable energy can't just be viewed as a set of technologies; they are also businesses, and as such are subject to the normal ups and downs of the market. It also highlights the limitations of government incentives.

Wind power had been on a tear in the US as recently as 2009, when a record 10,010 MW of turbines were installed, extending an enviable 5-year run of 40% average annual growth in wind capacity. Last year that growth slowed to 15% as new installations fell by half. That occurred in spite of the federal stimulus program that converted tax credits for renewable energy projects into up-front cash grants, paying $ 3.5 billion to wind developers out of a total of $4.2 billion expended in 2010. Although eligibility for that benefit was due to expire on 12/31/10, it was subsequently extended through 2011 under December's "lame duck" tax legislation, largely on the strength of arguments that it would keep wind and other renewables growing at a brisk pace. What happened?

At least two major factors related to the business environment are weighing on wind development, as well as another factor unique to renewables. First, electricity demand that was depressed by the recession is apparently still at least 1% below pre-crisis levels. That doesn't sound like much, but the difference is roughly equivalent to the entire amount of electricity generated from wind power in 2008. As a result, utilities have become less keen to sign long-term offtake agreements, or "power purchase agreements" (PPAs), with new wind farms. Both EDP and Iberdrola cited this problem in reference to their 2011 plans.

Wind power also faces strong competition from cheap natural gas, as you've probably heard many times by now. Despite some resistance to shale drilling in states like New York, there's every indication that US gas output will continue to expand. Last year the US produced more natural gas than in any year since 1973, and the end of this boom is not in sight. Although advocates may claim that wind is now cost-competitive with gas, that remains a best-case analysis for locations with excellent wind resources and good access to transmission. Natural gas at $5 per million BTUs yields electricity at 5¢/kWh from a combined-cycle gas turbine. That sets a pretty tough bar for wind, especially when gas turbines can produce power on-demand, 24/7, while wind turbines generate power an average of 30% of the time, intermittently.

Unexpectedly, wind power may also be facing competition from solar power. In a recent interview the CEO of NRG Energy Inc., a large power generator, pointed to the greater opportunities for innovation in solar, compared to wind. The cost of installed photovoltaic modules, particularly in utility-scale applications, has fallen much faster in recent years than the cost of wind turbines. That's not to say that power from solar is cheaper than from wind, but solar is starting to look like a better investment for utilities, which have been signing PPAs with solar project developers in droves. It's also noteworthy that for the first time last year more solar power was installed in Europe than new wind power, by a healthy margin.

It's probably premature to conclude that the US wind boom has ended, and that wind capacity is now likely to grow at lower, more normal rates in the future, compared to its extraordinary past performance. This could just be a lull, as the enormous additions of the last few years are absorbed into a power grid that is still modernizing and remains a long way from the smart grid that will be needed to accommodate much larger contributions from intermittent renewables of all types. At the same time, it's worth noting that government incentives can't eliminate every obstacle that renewables face, and that arguments that the Treasury cash grants in lieu of tax credits should be extended beyond 2011 should be assessed with much more critical judgment than was possible in the scramble of a lame duck Congressional session.

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High Coal Prices Bode Well for Renewables

I don't pretend to follow the coal market to any great extent. No one can keep track of everything. However, as I was reading an article in today's Wall St. Journal on the impact of the current Australian flooding on US coal exports, and another in the Financial Times concerning the implications of the timing of the floods for annual coal contract pricing, the dots seemed to connect. It struck me that all other things being equal, higher coal prices ought to be positive for natural gas, the main substitute for coal in electric power generation, while also giving renewable power a shot in the arm. That couldn't come at a better time for US wind power developers and the wind turbine manufacturers that supply them, many of whom are coming off a bad year.

As the Journal points out, the Australian state of Queensland is the leading exporter of the coal used in making steel. With much of Queensland under water, US coal exporters are finding a ready market for their output, with exports expected to surge by 10% this year. Although metallurgical coal represents a different segment of the market than the thermal coal that goes into power plants, the internationally-traded market for the latter has also tightened considerably, with prices well above $100 per ton, and apparently above their 2008 record levels. Nor is this solely the result of the Australian floods. Despite coal having fallen into disfavor in the US, its global fundamentals remain strong, supported by robust economic growth in developing countries that rely on it as a source of cheap and reliable power generation. China's coal demand has nearly tripled since 2000.

The first beneficiary of higher coal prices ought to be natural gas. The competition between gas and coal is complex, depending on the interaction between demand and available generating capacity in regional power markets. However, between 2007 and the most recent 12 months for which EIA data are available, the overall share of gas in US power generation increased from 21.6% to 23.7%--even as total electricity demand declined by about 2%--while coal's share fell from 48.5% to 45.4%. Much of this shift has been facilitated by the effect of expanding natural gas production on the price of gas into the power sector. The total share of non-hydro renewable power also grew during this interval, from 2.5% to 3.8%, even though intermittent sources like wind and solar power are likelier to compete head-to-head with gas-fired generation, rather than coal. So if renewables were taking share from gas, as a result of federal renewable energy incentives and state renewable portfolio standards, then gas was taking even more share from coal.

Today's high coal prices ought to support the continuation of that dynamic. While more expensive coal might not lead directly to the construction of more wind farms, it should certainly push up prices for baseload and mid-load electricity, making gas more competitive in those segments. That ought to boost gas prices, in turn making renewables more competitive with gas. Add in the return of some of the electricity demand that disappeared during the recession and developers of wind and solar projects should see increased interest from utilities in signing long-term power purchase agreements (PPA) for their output. The lag in PPA interest and weak financing environment were big factors in last year's lull in US wind turbine installations, which appear to have been the lowest since at least 2007, at roughly half the record level set the previous year.

That disappointing performance came in spite of the industry's receiving $3.2 billion in Treasury renewable energy cash grants, which were extended with much fanfare for another year as part of the lame duck tax compromise. Anyone expecting the extension of these incentives to lead to a surge of wind turbine installations this year was paying too much attention to their own PR; the best the industry could realistically have hoped for in the extension was to avoid falling off a cliff. However, if coal prices remain strong for the balance of the year and the economy continues on its current pace of recovery or improves on it, then the combination of all these factors just might contribute to a healthy rebound for wind.

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The Incredible Shrinking Energy Bill

When legislation is introduced in the US Congress, most of the discussion typically concerns its specific provisions. Sometimes, as in the case of the "public option" absent from the final healthcare bill, notable omissions vie for attention. However, in the case of this year's greatly-diminished energy bill released this week by Senator Reid (D-NV), most of the controversy seems to be focused on its long list of missing elements, including but not limited to cap & trade, a national renewable energy standard for electricity, and extensions for various expiring renewable energy incentives. That's not to say that what's left doesn't deserve careful scrutiny, particularly provisions affecting offshore oil and gas drilling. But compared to the energy bill that might have been, this draft looks like a pitiful remnant, even at 409 pages.

Although I can appreciate the frustration of those who expected Congress finally to enact cap & trade this year, I find the convoluted tactical arguments and finger-pointing over its failure to reach consensus on this issue to be mostly "inside baseball" rationalization. The clues adequately explaining its omission from the current bill are on display in the bill's title, "The Clean Energy Jobs and Oil Company Accountability Act of 2010". In other words, what happened to cap & trade this year was the recession and the oil spill. The former made the country less receptive to what is at its core a substantial new tax, while the latter scuttled the best chance for a bi-partisan "grand compromise" based on swapping expanded access to US off-limits oil and gas resources for stronger emissions regulations. Even though the taxation underlying cap & trade is intended to recognize a serious unpriced externality of our energy economy, it still represents a significant redistribution of wealth from energy producers and consumers to the government and the purposes for which the government chooses to spend the proceeds: at best a zero-sum game with frictional losses, and at worst--insert Waxman-Markey--a monumentally-distorting boondoggle.

Then there's the missing national renewable electricity standard (RES), which in clear English is a mandate for utilities to obtain a defined and escalating percentage of the electricity they provide customers from selected renewable sources. The American Wind Energy Association (AWEA), the trade association for the US wind industry, sees this as an absolute necessity for their industry to continue growing and was vexed over its exclusion from the current bill--this in spite of the fact that the wind industry's main federal support, the Production Tax Credit, was previously extended through 2012, along with the valuable option to select an Investment Tax Credit instead. I see two practical explanations for this omission, though it's clear from the efforts of AWEA and other groups that it could still find its way back into the bill. First, the RES is really another tax. Instead of being levied on taxpayers by the government, it would be levied by utilities on ratepayers when the costs of the renewable energy projects or the tradeable Renewable Energy Credits they can buy in lieu of buying green power are passed on to their customers. On a more practical level, with 29 states plus the District of Columbia already having equivalent Renewable Portfolio Standards in place, most of the best US wind and solar resources are already covered by such targets. A national RES might not add a lot more of these energy sources, but it certainly would trigger a scramble for the states with limited renewable resources to line up supplies from elsewhere. That might be good for the renewable energy sector, but it's of questionable benefit to a national economy still struggling to emerge from the recession.

Also absent from this draft are the expiring renewable energy incentives highlighted in yesterday's New York Times editorial. These include the $0.45/gal. ethanol blenders' credit, about which I've blogged extensively, and the Treasury renewable energy grants offering up-front cash for the Investment Tax Credits that would otherwise require waiting for next year's tax return--assuming the recipient company had sufficient taxable income to benefit from the entire amount of the credit. These grants look problematic, as I noted last fall, when reports first surfaced that most of the money paid--approaching $2 billion--had gone to non-US firms. As I discussed at the time, this reflects the reality of a wind energy market in which US firms account for less than half of domestic sales, supported by a thoroughly-globalized supply chain, not unlike many other industries. The arguments pro and con too easily reduce to unappealing sound-bites.

That leaves us with what is currently in the bill, which I have so far only had time to skim. It seems to consist mainly of well-intended but overly-politicized efforts--one section is entitled the "Big Oil Bailout Prevention Unlimited Liability Act of 2010--to hold BP accountable for the Gulf Coast oil spill and to address the liability for future spills, while trying to reduce the chances of another one. That sounds like motherhood and apple pie at this point, but as always the devil is in the details; implementing some of these details would leave the US with a much smaller offshore oil capability. That might appeal to environmentalists but would be catastrophic for energy consumers, our trade deficit, and US energy security. And why would you charge the Secretary of Energy with issuing a monthly report, starting in September or October, on the economic and employment impact of a deepwater drilling moratorium that is only intended to last through November? Interestingly, the bill would also establish a Congressional version of the President's oil spill commission, this time with specific technical criteria for appointment to this body. Alternative, compromise versions of the bill's oil provisions are already emerging from within Senator Reid's own party, and with a lot of luck we could end up with measures that would actually make offshore drilling safer and more responsible without killing it--and the roughly 30% of domestic oil production it provides.

In addition to its oil spill provisions, the bill also offers some generous tax credits for converting heavy-duty trucking to natural gas, along the lines of the Pickens proposals I discussed last Friday, plus similar help for vehicle electrification and infrastructure, yet more energy efficiency measures (this time focused on homes), and funding for an old government program to buy up land and waterways for parks and nature preserves. All of this is notionally paid for ("PAYGO") by raising the Oil Spill Liability Trust Fund fee on all the oil produced and used in the US from $0.08 to $0.45 per barrel, which would directly increase the size of the fund to cover future disasters from $1 billion to $5 billion, while indirectly making all the bill's other provisions appear deficit-neutral. The proposed fee increase has the potential to raise an extra $2.5 billion per year.

It's not clear whether even this slimmed-down bill can garner enough votes to pass in the Senate, let alone do so before the summer adjournment. In any case I'd expect the version that comes up for a final vote--if it does at all--to look somewhat different than this draft. It would almost certainly grow much longer, a malady that has afflicted all major legislation in recent Congresses. Whether it will actually make a meaningfully-positive impact on the serious energy challenges the US faces remains to be seen.

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Green Energy Competitiveness

As I was catching up on recent op-eds in the New York Times, I was intrigued by one with the snappy title, "Red China, Green China." As the author, an "executive in residence at Columbia Business School," built his case for why the US is falling behind China in clean energy technology, I was hopeful that he'd offer some sensible recommendations for resolving the problems that have made it harder for the US to compete across a whole range of industries, not just cleantech. Unfortunately, two of his three suggestions were focused on measures to ensure a market for clean technology, and the third on R&D for carbon capture and storage. These are worthy goals, but there wasn't a word about making our manufacturing sector more competitive. That blind spot seems to be shared by the Department of Energy, which according to an article in MIT's Technology Review ran out of money for clean energy manufacturing tax credits, but spent more than $3 billion funding renewable energy projects, many of which are being built with imported hardware. If we're serious about competing in a global clean technology race, we've got our priorities backwards.

I must admit that I'm generally skeptical of anything that smacks of industrial policy. Industry has a mixed record at picking technologies in which to invest to create the industries of the future, but government is often worse. For example, does it really make sense to spend taxpayer money helping companies build factories to make batteries for electric vehicles that consumers haven't yet embraced, and that may only capture a small share of the total car market, similar to today's hybrids? However, this might still prove wiser than shoveling money at the deployment of green energy technologies that either don't need much assistance, or that haven't developed sufficiently to meet the needs of the economy.

It might also help to think about our competitiveness in cleantech from the perspective of the entire economy, rather than the usual practice of looking at it in isolation. From that vantage point, the main thing the economy needs from the energy sector is cheap and reliable supplies of the kinds of energy that we use: liquid fuels for transportation, gas for heat, and electricity for nearly everything else. Reliability was licked a long time ago--except for the occasional blackout--and renewables don't bring much to the table in this regard. For several of the most popular forms, such as wind and solar power, it's their weakest suit. As for cost, the price tag on wind capacity has come down significantly over the last couple of decades, and off-peak wind power is sometimes the cheapest supply available. That's still not true for solar, however, though solar thermal and some novel forms of photovoltaic cells have the potential to get there.

It's also important to recall that while we can employ subsidies or mandates to make renewables appear more competitive locally or to require their use, whether competitive or not, that doesn't alter their impact on the global competitiveness of the US economy. If we are embedding expensive energy at the heart of our manufacturing, services, transportation and distribution networks, then that must make us less competitive--unless everyone else is doing the same thing.

We should also be asking to what extent taxpayers (or ratepayers--often the same people) should subsidize the creation of a market for renewables. After all, the market already exists, and most of it is outside the US. The world apparently added 38,343 MW of new wind generating capacity last year, and only 26% of that was installed in the US. Instead of concluding that we should pay or require companies to install more wind turbines in the US, as Mr. Usher suggests in his op-ed, wouldn't it make more sense to help US wind turbine manufacturers become more competitive in the larger global market? That seems like an obvious conclusion, especially when we consider that US manufacturers accounted for less than half of the wind turbine capacity installed here last year, according to data from the American Wind Energy Association, and that the bulk of the Treasury grants issued under the stimulus have gone to non-US firms to develop wind farms equipped mainly with non-US turbines.

Nor would shifting our focus to supporting the production, rather than installation of cleantech hardware lessen the impact of US policy on reducing global greenhouse gas emissions. A wind turbine or solar panel generates emissions-free energy in any country in which it is sited, and it might even reduce more emissions if it were installed in a location where the generation source it backs out is an inefficient coal-fired power plant with minimal pollution controls, rather than an efficient gas turbine, as is often the case here.

Effective policy requires clear thinking. If we want to promote clean energy technology for reasons of job creation and global competitiveness, then shouldn't we focus our efforts where they can have the greatest positive impact on those priorities? Manufacturing is a strong candidate for that point of maximum leverage, while deployment suffers from many drawbacks, including "leakage" and higher costs that get passed on to other sectors of the economy. Whether our best approach to bolstering cleantech manufacturing is to single it out for special treatment or to focus on corporate tax reform and other measures that would help all manufacturing is a subject for another day.

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