Without much of a national debate, the U.S. Department of Energy has launched a major initiative to support solar energy. As of June, it had committed more than $12 billion in loan guarantees to 15 solar projects, some of them manufacturing plants and some of them energy producers. And in July, it has announced loan guarantees of $4.5 billion for First Solar Inc. to build three renewable energy projects in California.
This is an example of the sort of industrial policy that remains hotly controversial, particularly on the Republican side of the aisle. But there is scant comment from the GOP and even the Democratic side of the aisle does not seem to be commenting on it even though it is arguably a solution to create more high-paying jobs. This could be a much smarter type of government involvement in the economy than massive stimulus programs that don’t work.
The most recent action was the $4.5 billion in loan guarantees for First Solar, based in Tempe, Ariz. The company will supply thin-film solar panels, a particular type of solar technology, from a factory in Ohio for two 550-megawatt plants it is building in Riverside and San Luis Obispo, Ca. A third project is a 230-megawatt solar ranch in Antelope Valley.
Earlier, Energy Secretary Steven Chu announced $150 million in loan guarantees to a company in Massachusetts called 1366 Technologies, which has developed a radical new way to make silicon wafers for solar cells at far lower costs. The technology could cut the price of making a solar cell by 40 percent.
The Department also said it was awarding a guarantee of $359 million to Sempra, an energy company, for a photovoltaic generating project in Arizona, and $2 billion in loan guarantees for two California solar projects. (All these announcements are easy to find at http://energy.gov/news.)
Is the government picking winners and losers? Absolutely. It is deciding that the United States must be a player in solar energy and should not be blown away by the Chinese, Japanese, Koreans, Spanish or Germans or anyone else.
I think the government has the power, and the obligation, to undertake this type of strategy across a platform of 12 to 15 key technologies that will define America’s future. And it deserves more attention from both ends of the ideological spectrum–because we need to define a common ground and put even more resources behind this type of activity.
Here are key questions we should be asking:
- Does the Department of Energy have a strategy in terms of the technologies it is picking to support? It seems to be supporting thin-film solar panels, silicon wafers, and photovoltaic solar cells but there is no mention of gallium arsenide.
- Has the selection process been free of political interference or not? Pork barrel politics have no role in smart industrial policy. It appears that interests in Massachusetts, Ohio, Arizona and California are benefitting. That seems credible.
- Has the government picked companies that are likely to make it to profitability? In other words, what percentage of these tens of billions of dollars in loan guarantees will succeed?
- To what extent is the department’s funding geared toward commercialization rather than bleeding-edge research? I argue that the federal government should tilt by 10 percent from basic research to applied research.
- What kind of jobs are being created and how many?
- Can other departments of the federal government learn from what Energy is doing?
If and when we launch this full debate about the nation’s industrial policy, we might be able to craft a coherent response to our economic travails.
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