Third Way Perspectives
May 1st, 2013
Comprehensive tax reform is long overdue, but it’s also going to be difficult and may not happen during this, or even the next, session of Congress. In the meantime, we can’t hold up other tax code fixes, especially in vital areas, such as energy. The MLP Parity Act, a fix to our unequal tax code, shouldn’t be delayed just because it doesn’t fix all of the problems with our current tax code.
As it stands now, the government is implicitly telling investors what to invest their money in. Master limited partnerships are attractive investments, passing profits through to investors without being taxed at a corporate level. This appealing financial structure draws in more capital and lowers the cost of capital for projects owned by an MLP. Unfortunately, under our current tax code, qualifying projects are generally oil and gas related – pipelines, extraction, refining or exploration – excluding many types of energy, from biomass to nuclear to wind. As a result, a project such as a wind farm is less attractive to investors and must offer a higher return than a comparable natural gas project.
This bias in the tax code unfairly picks energy winners and losers, incentivizing the types of energy projects that were common in 1981 when master limited partnerships were first created. Although our fuel supply has changed, the tax code has not, leaving clean energy out of the investment pool. While it may not fix all the inequity in our arcane and complex tax code, the MLP Parity Act is a much needed first step towards an even playing field for our energy future.
This piece was originally featured in National Journal.
November 2nd, 2012
Everyone from Mayor Bloomberg and Businessweek to Bill Clinton and LA Times are linking Hurricane Sandy to climate change. Do we know for certain that this highly destructive hurricane is the result of climate change?
The short answer is: we don’t. There will always be contrary opinions, but when we look across all the weather events of the past 10, 20, or 50 years, the trend is clear. Climate is the average of weather over a period of time, and we’re seeing 100-year floods occurring every 3-20 years. We’re seeing each year become one of the hottest years on record. And we’re seeing more severe droughts more frequently. This has contributed to a rise in sea level across the East Coast, which makes cities like New York and destinations like the Jersey Shore more prone to flooding when storms do hit.
Why should you care? Read the rest of this entry »
October 16th, 2012
American advanced battery manufacturer A123 filed for Chapter 11 bankruptcy protection this morning. In Washington, this is going to be spun as yet another failed DOE loan recipient, an example of why the government shouldn’t be picking winners and losers, and a technology that couldn’t succeed without government support. In the business world, though, it’s merely a once-$2 billion company that struggled to overcome an expensive product recall and cash crunch. Companies fail all the time, but it doesn’t mean the technology is a failure.
August 29th, 2012
Over the past year, American clean energy companies have found themselves in the often-unwanted spotlight of Congress. If you only paid attention to what was being said in Washington, you’d think that the entire clean energy sector was going belly up. Fortunately, that’s not the case. The solar sector is booming, with rooftop installers raising capital and growing sales exponentially. New electric vehicles from Toyota, Ford, and BMW will soon join Tesla, Chevrolet, and Nissan in showrooms across the US. Wind power accounted for 1/3 of new electricity generation added in the US in the past year. And even an energy storage company cited by Congressional critics as an example of the failure of federal clean energy policy is on the comeback.
The return of Beacon Power from bankruptcy is important to understand for people interested in the clean energy sector. Beacon Power provides energy storage by spinning massive flywheels, a technology that’s been proven for centuries. In our modern grid, though, flywheel energy storage provides the ability to quickly provide power, stabilizing the grid during peak demand while more generation, like natural gas plants, is brought on line. While flywheels weren’t generally used for grid scale storage before Beacon Power, the company was offering what the grid needed as more wind and solar were added to our energy mix. The Department of Energy agreed, giving it a $43 million loan guarantee. Read the rest of this entry »
June 26th, 2012
Like the change of the seasons, recent headlines have again declared the death of venture capital investments in clean tech. This is nothing new. We warned of a decline in early stage venture investment in November 2011. The reality that clean tech is not the Internet has firmly settled over Silicon Valley, Cambridge, Massachusetts, and other centers of venture capital. Despite this revelation from some outside the sector, as clean tech investor Rob Day recently noted, much is going right in clean energy right now. We’re seeing an era of booming U.S. solar. Installation of wind turbines in the U.S. was up 52% from 2012. Tesla launched sales of its Model S sedan. We may be getting closer to a game changer in battery technology.
Progress in clean energy, however, reinforces that clean energy is fundamentally different than the Internet business. Solar has to compete with coal; Google had to compete with your local library. Entering a big, established market can be great – there’s obviously demand. It also means, however, that a new company has to offer a better or much less expensive product than what already exists. In energy, that often doesn’t mean the best technology, but instead comes down to best economics. As with anything new, costs are certainly falling in solar, wind, and other clean energy technologies as we gain experience, but it can be an expensive, long wait. In the VC world, 10 years is too long to realize a return and $500 million is too much to risk on one company. Especially in a market with Instagram and Zynga, it’s just not reasonable to expect VCs to take the long, large risks.
So, what then?
While there is certainly some private capital still in cleantech, it can’t be relied on to shoulder all the risk of our clean energy future; alternative paths of technology development and commercialization are vital. Whether it’s incentivizing investment with new tax treatments, government loan programs, public-private partnerships, or completely novel approaches, some of the best minds are hard at work on finding solutions. With entrepreneurs figuring out the hard technology problems to make clean energy a reality, the capital will find a way to follow.
June 13th, 2012
Whether it’s desire for more talk time or longer electric vehicle trips, a paper in Nature this week has a potential solution: lithium-air batteries. While the concept of lithium air batteries isn’t new, past research showed big limitations with both lifetime, often lasting only a few cycles, and ability to charge quickly. With new materials, Korean researchers may have found a solution to both of those problems, opening up this technology for the track to commercialization. Read the rest of this entry »