Can The Feds Lead Us Out Of The 'valley Of Death'?

by Suzy Khimm | July 17, 2008

The Wall Street Journal ruefully points out that it will take some $3 trillion to realize Al Gore’s plan to end our dependency on carbon-based electricity by 2018. How, exactly, are we going to scrape together that kind of money?

In his speech today, Gore described how “billions of dollars of new investment” have already been flowing into clean energy development, and his organization describes the growing enthusiasm of greentech venture capitalists. But at the heart of Gore’s proposal is how the government should put the foot on the (renewable) gas pedal. We should build a national energy grid, subsidize workers to transition from carbon-based industries--funded, most importantly, by a carbon tax. On the other extreme are the free-marketeers who hope the world will spawn enough prospectors who want to cash in on the clean energy revolution--and who will jump in before the government ever gets its act together. Viva Boone Pickens!

But there are other ways to scale up clean energy investment that we need so desperately. The government itself could stimulate private sector investment, generating investment that is neither bogged down in a political (and bureaucratic) morass nor tied to the whims of private investors. On Tuesday, I attended a Senate committee hearing that examined two bills recently brought to the floor by Senators Bingaman and Domenici--one that would create a securities market for clean energy loans, increasing access to debt-financing for private investors, and another that would create a clean energy investment bank. The main idea is to find ways that the government can help unfetter the massive amount of capital we need to realize any of these clean energy proposals.

According to Dan Reicher from, such federal credit-enhancement tools would help private investors secure loans for higher-risk clean energy initiatives, which banks are still reluctant to support. It would also help move pilot technologies to full commercial-scale operation--and that's the moment at which many when nascent technologies falter, Reicher said in his testimony at the hearing:

In the clean energy technology industry, we call it the "Valley of Death"...Failing to bridge it has cost us serious progress on many clean energy technologies from wind, solar, and geothermal, to biofuels and efficiency.

Given the gloomy outlook of the economy--not to mention the role of unfettered credit markets in the recent meltdown--a government-backed securities market will be a hard sell. Then again, Boone Pickens himself is asking the Feds to help implement his clean energy plan. Even wildcat investors can’t swing it alone--so the money’s gotta come from somewhere.

--Suzy Khimm

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