Yesterday I began a discussion on the role of government in cleantech. Today, the discussioncontinues below. Drawbacks of incentives How could government grants, loans, tax credits and other subsidiespossibly be bad in cleantech? Free money is good, right? Here s alist of drawbacks to these incentives, some of them not as obviousas others: They can go away and cause market disruption to wit, the pointsearlier in yesterday’s article. The existence of loans and grants silences critics Few speak outagainst pots of free money, because they might want or need to dipinto them in the future.
Incentives favor only those willing to apply for them andtherefore are often missed by companies working on disruptive,fast-moving tech, or who are focused on taking care of customers needs. Criteria are often too narrowly defined Criteria for incentivesoften favor certain technology (solar photovoltaic over othersolar, or ethanol over other biofuels), and as a result, lock outother legitimate but different approaches. Picking winners means designating losers Recipients ofgovernment grants or loan guarantees get capital and an associatedhalo of being an anointed company. Those that don t arecomparatively disadvantaged.
Not the best track record Incentives go to companies beststaffed to apply for and lobby for them. And those aren tnecessarily the companies that could use the capital the mosteffectively, e.g. to compete in world markets, or create the mostjobs. What governments could and should be doing In the cleantech research and consulting we do worldwide at Kachan & Co. , we ve come to believe that governments are best focused onactivities to create large and sustained markets for cleantechnology products and services. Sierra Wireless Router
Doing so gives assurance to private investors that there will becontinued demand for their investments one of the most importantprerequisites to get venture capital, limited partners and otherinstitutional investors to write large checks. Given that objective, governments should, in our opinion, pursue: Setting mandates and standards e.g. the amount of powergenerated from renewable sources, new targets for fuel efficiency,green building or other dimensions. Improving codes and other regulations making building codes morestringent could drive energy efficiency, green building and smartgrid investment. Building the talent pool Stabilizing the economy Fostering political stability Commitment to infrastructure projects including water,transportation and grid. China Android USB PC
Building showcase projects regions wanting to foster localcleantech can do as Abu Dhabi has done with its Masdar initiative , as Saudi Arabia is now doing with solar , or as China has done with hundreds of green development zones; indoing so, all three of these countries have sent strong signals tolarge corporations and investors that they view clean technology asstrategic. Rolling back so-called perverse government subsidy support today ofthe fossil fuel industry, including direct and indirect subsidies. Cities as test beds of policy innovation Interestingly, cities are emerging as petri dishes of progressivecleantech policy, and are increasingly where such innovation istaking place. For instance, Barcelona has established that large companies needto create as much as 30% of their power from solar thermaltechnologies. The city of Berkeley, California pioneered what isnow known as Property Assessed Clean Energy (PACE) financing,wherein property owners are able to pay for energy efficiency andrenewable energy improvements on their property taxes. Huawei Data Cards
This month,Phoenix, Arizona introduced what it calls the largestcity-sponsored residential solar financing program in the U.S. AndNew York City is taking the lead in residential demand response bytrialing a program to curtail the consumption of 10,000 room airconditioners at times of high demand. Given the world s current financial malaise, and especially inlight the Occupy momentum globally, I m surprised more folksaren t questioning how their governments spend their money incleantech. Because, as described above, there are other arguablymore effective ways elected officials can help usher in a cleaner,greener future than throwing around billions in incentives.
After all, how much fun would a pristine planet be if we re alldestitute because governments have crumbled under crushing debt? A former managing director of the Cleantech Group, Dallas Kachan isnow managing partner of Kachan & Co. , a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto andVancouver. This article was reprinted with permission from Kachan & Co.