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The Corner

How Subsidizing Old Clean Tech Can Stymie New Clean Tech

In an interview with Brad Plumer of Vox, Varun Sivaram, an expert on renewable energy technologies and a fellow at the Council on Foreign Relations, offers a nuanced take on the future of solar power. The interview was prompted by Sivaram’s recent survey, co-authored by Samuel Stranks and Henry Snaith, of how a new material called perovskite might transform the solar sector. And in the course of discussing this new material and the barriers to its widespread adoption, Sivaram makes a number of fascinating observations. For example, while environmentalists often point to fossil-fuel companies as an obstacle to clean tech innovation, Sivaram notes that “first-generation clean energy technologies are standing in the way of the second-generation.” Essentially, silicon-focused companies are scaling up their operations (thanks in part to generous public subsidies), which makes it difficult for new entrants built around more promising technologies to compete. Moreover, investors burned by the failure of clean-tech start-ups earlier this decade are reluctant to take a risk on entirely new technologies. So when Plumer asked Sivaram about how public policy might help make first-generation clean energy technologies a bridge rather than a barrier to second-generation technologies, Sivaram offered the following thought:

[O]ne thing is to be careful about thinking certain policies are technology-neutral when they’re not. Policies like renewable portfolio standards or carbon taxes might sound technology-neutral, but they tend to preference mature technologies that are already on the market.

Sivaram then goes on to make the case for public investment in research and development for promising technologies like perovskite and for public investment in demonstration support, i.e., the phase at which firms try to take technologies from the lab to the stage where they might show a glimmer of commercial promise. With this in mind, Sivaram offers a clever critique of the loan guarantees the Department of Energy has offered to clean-tech firms:

We did have a loan-guarantee model at the Department of Energy that did some of this, but that program was widely criticized. Ironically, it was criticized for two different reasons. Republicans criticized it because a $500 million loan to Solyndra went bad. But those of us who want innovative technologies to succeed criticized it because 80 percent of the loan guarantee money actually went to mature technologies, or tech that weren’t fundamentally disruptive.

Throughout Sivaram’s interview, I was struck by how closely his views resemble those of Jim Manzi in his National Affairs essay on “The New American System.” In that essay, Manzi wrote the following on how the federal government ought to approach research funding:

We should bias basic-research funds not toward those areas that inherently hold the greatest promise, but toward those in which the long-run economic benefits are likely to remain in the United States, because they require the build-up of hard-to-transfer expertise or infrastructure that are likely to generate commercial spin-offs. University and research laboratory rules and the patent system should recognize the long-run desirability of researchers creating private wealth in part through the exploitation of knowledge created by these publicly supported institutions.

More fundamentally, the sweet spot for most government research funding will likely be visionary technology projects, rather than true basic research on one extreme, or commercialization and scale-up on the other.

There is some daylight between Sivaram and Manzi, to be sure. Manzi might be more skeptical of the value of demonstration support, in which the federal government helps shepherd prototypes to the early stages of commercialization. Yet like Manzi, Sivaram maintains that the government’s role should be relatively narrow and focused: concentrate on ambitious technologies that will have significant spillover benefits, and spend only in those areas where private investors are too risk-averse.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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