COVID-19 has disrupted the global economy in a truly unprecedented fashion. This unanticipated interruption to business-as-usual and the near-unstoppable momentum of the economic industry has given the world the once-in-a-lifetime opportunity to take a breather, reevaluate, and redesign our pathway forward. The Global Economic Forum has advocated for using this unique moment to engineer and embrace a “new energy order” and a “great reset.” Europe has designed green stimulus packages that place clean energy at the heart of the continent’s post-corona economic recovery and European Big Oil is transitioning to being Big Energy.
In the United States, while we are so far lagging behind much of the rest of the world in terms of a green recovery (to the extent that companies like McDonalds have directly petitioned Congress to take action on clean energy investment), a green stimulus package is at the heart of the current Presidential race and a major component of Democratic presidential candidate Joe Biden’s platform.
When faced head-on with the future, it is often best practice to base world-building decision making on lessons of the past. The coronavirus may be novel, but the global economic recession is an old hat for this generation. This week, Greentech Media published an article suggesting that the global community look to “lessons from 2009 for a Green Stimulus today” -- the successes as much as the failures of our road to economic recovery a decade ago.
A number of clean energy companies funded through the U.S. Department of Energy’s (DOE) 2009 American Recovery and Reinvestment Act (ARRA)-- “which set out $90 billion for clean energy at the depth of that recession” -- have since gone under. These companies include Tonopah Solar Energy, Solyndra and Abound Solar. But, happily, these bankruptcies are in the minority. “Despite such failures,” writes Greentech Media, “DOE loan guarantee programs for new energy technologies — enacted during the George W. Bush administration — have been a success overall. The DOE has disbursed nearly $30 billion to new and emerging technologies, with overall portfolio losses around just 2.7 percent, which is better than that achieved by most major banks. So far, the government has already received $3.15 billion in interest payments, with less than $1 billion in actual and estimated losses.”
The program’s successes are also far more notable than its failures. Few people have heard of Tonopah Solar Energy, Solyndra, or Abound Solar, but who hasn’t heard of Tesla, one of the program’s greatest success stories? “In the decade since ARRA’s passage, the solar PV space has transformed from a nascent market to an energy-industry powerhouse as installation costs fell about 70 percent.”
The context today is vastly different than it was in 2009, but enough factors of the coming economic recession are the same that the ARRA is being considered by many as a template for a post-pandemic “green stimulus” package. The landscape has changed: solar and wind have matured and outgrown their subsidies, and the looming threat of catastrophic climate change grows closer and more dire every day. But ARRA’s successes and failures can teach us a lot about how to approach a new green stimulus: first and foremost, setting the right expectations.
“The biggest mistake we made with the loan guarantee process through the Recovery Act was failing to set the right expectations,” Boundary Stone Partners’ co-founder and partner Jeff Navin was quoted by Greentech Media. Navin worked at both the Labor Department and the Department of Energy during the Obama administration. “Every loan portfolio at every bank in America has some portion of the portfolio that doesn’t perform,” he continued.
Accepting a small and inevitable margin of failure is integral to a stimulus package being--and being seen as--successful. So while the ARRA wasn’t perfect, it was pretty darn cold, and the U.S. could do much worse than to take a page from the Bush administration’s book and inject some money into clean energy--a hugely promising sector for economic growth and jobs creation as well as planetary health--before it’s too late.
By Haley Zaremba for Oilprice.com
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