Here’s a situation that has the makings of an environmental Catch 22: Green energy startups need money to help get their businesses off the ground. The government has been providing them with subsidies, and the startups have used that assistance as leverage to court private investors in the hopes of eventually freeing themselves from a dependency on subsidies.
But it looks like this tidy little system is about to come apart.
“Green energy startups are feeling the sting of rejection by investors concerned about falling energy prices and the future of government support,” CNN reported today. “The boom in natural gas has hurt the competitiveness of alternative energy. And proposed budget cuts would force the government to dial back support of wind farms, solar panel manufacturers, ethanol producers and makers of alternative fuel cars.”
CNN quotes Rosa McCormick, managing director of Wild Basin Investments in Austin, Texas, as saying that solar panel makers are suffering the most because U.S. companies can't lower prices enough to compete with solar panels imported from China where the government provides big subsidies. "The bottom fell out of that market," McCormick said. "No one wants to touch that. It's toxic from an investor point of view."
The Chinese apparently disagree, since Fox News reported this morning that, “China’s government has ruled that U.S. government support to six American solar and wind power projects violates free trade rules, adding to strains between Beijing and its trading partners over renewable energy.”
The story goes on to say, “The Chinese probe was launched last November two weeks after Washington said it would investigate whether Beijing is inappropriately subsidizing its own makers of solar panels, allowing them to flood the U.S. market with low-priced products and hurt American competitors.”
And speaking of the Chinese, they’re also apparently in on the boom in natural gas that’s hurting the alternative energy industry. The Guardian reports today that “Royal Dutch Shell plans to spend at least $1 billion a year exploiting China's potentially vast resources of shale gas, the firm's top China executive has said, in an aggressive strategy to expand in the world's biggest energy market.”
Back in the U.S., the news isn’t much better for wind farms and ethanol producers. CNN noted, “A federal tax credit that pays 30% of costs for new wind farms is set to expire at the end of this year. If Congress doesn't renew it, new turbine construction could 'dramatically slow,’ according to a recent Energy Department report.”
And this year’s drought and the subsequent rise in the price of corn is leading to calls to review the government’s mandate requiring that ethanol be blended into gasoline. “Bob Calcaterra, managing director of St. Louis-based StartUp Midwest Management, is avoiding investments tied to the ethanol industry. There's too much reliance on government assistance, and there's no telling how long that will last,” said CNN.
To paraphrase Rosa McCormick, this all sounds like a pretty toxic situation.
Do you think the government should reassure investors that its support for the alternative energy industry will continue, or do you think the subsidies should end? Let us know in the comments.
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Lawrence Karol is a writer and editor who lives with his dog, Mike. He is a former Gourmet staffer and enjoys writing about design, food, travel and lots of other stuff. @WriteEditDream | Email Lawrence | TakePart.com