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The Global Race for Sustainable Energy - The U.S Needs to Get Back on Track

By Sandip Sen, Managing Director & Global Head of Alternative Energy at Citigroup

There is a global race for sustainable energy development underway and it would appear that the U.S. is satisfied being a mere spectator. Driven by global concerns about climate change and the universal objective of energy security, global policy-making is expected to continue to encourage investment in the renewable energy industry. A generational change is afoot and it is critical that the U.S. stay in the race.

More than 96 countries have national policy targets or comprehensive energy plans. In addition to being a planning tool, these plans incentivize renewable energy development. This list includes economic powers such as Germany and Japan as well as developing nations like Moldova and Tanzania. Astonishingly, The United States is absent from this list.

China continues to hit milestones and via its Five-Year Plans, is seemingly challenging itself and the rest of the world by setting ambitious long-term targets. The most recent Five-Year Plan sets an unofficial target of 150 - 200 GW of renewable generation capacity by 2020. In comparison, the U.S. has yet to adopt a comprehensive energy policy. Helpful mechanisms like the production tax credits have been allowed to expire; the cash grant will expire at the end of this year; and the logjam in congress has all but eliminated any chance of a federal energy policy initiative in the near term. In the global context, this situation is embarrassing and unacceptable. The U.S. cannot just stand by and watch the parade go by. The U.S. must get back in the race and it must craft a plan to be a leader. The world expects this. In this regard, the country's elected officials must adopt, as an immediate priority, the establishment of a comprehensive energy plan.

The plan should incentivize the deployment of renewables via supportive and consistent policies. It should also promote technological innovation via grants and/or guarantees. The plan should also seek to level the playing field for both fossil-based industries and alternative energy providers. For renewables to ultimately constitute a meaningful percentage of the power generation mix, they need to be cost competitive with existing generation technologies. This parity is only achievable if renewable energy technologies are manufactured and deployed in scale. This requires investment from both the private sector and the public sector.

Before surrendering to the recent criticisms of federal incentives for developing renewable energy - like the DOE's loan guarantee program - it is essential to examine the facts. The goal of the loan guarantee program is to enable the commercialization of new technology. Like any investment in something new and unproven, there exists the risk of failure. The loan to Solyndra, which has received much publicity, represents just 2.0% of the total loans issued under the DOE loan guarantee program. While a post-mortem of the Solyndra situation is arguably warranted, it is equally important to acknowledge the benefits that the program has bestowed on other companies and projects. The federal support has resulted in much-needed job creation and it has enabled the start of commercialization of many new technologies. The effectiveness of the loan guarantee program should be judged by the performance of the entire portfolio and not the success or failure of one individual investment. If the U.S. is serious about developing long-term sustainable energy sources - and it cannot afford to not be serious - it should be accelerating support for these types of programs instead of dismantling them.

As it has throughout the course of history - on all important matters -  the U.S. must show leadership in this critical area. It must lead by example and it must work to ensure a sustainable energy future. If policy-makers continues to avoid their duty of formulating a long-term energy plan, the U.S. will find itself in a race we cannot win.

*The views expressed in this piece are those of Sandip Sen, not those of Citi.

Sandip Sen is the Global Head of Citi's Alternative Energy Group.

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