As long-time advocates of moving the United States to clean energy, we would be thrilled if either thesis was correct. Unfortunately, new analyses on the state of renewables in 2011 and venture investment show how far the United States has left to go.

The National Renewable Energy Labs just released its look at renewable energy deployment from 2000-2010. There’s a lot of good news. Solar and wind generation have spread more quickly than the Honey Badger video. The cost — particularly of solar photovoltaic — is dropping so fast that it is beginning to close in on parity with coal and natural gas-generated electricity. But as Grist’s own David Roberts reported, the combination of few clean energy options in the South and conservative opposition in Washington means that existing renewables are not going to replace fossil fuels anytime soon.

The clean energy blog Secret Formula by venture capital investor Matthew Nordan also crunched the numbers on venture capital investment and found that there is a lot less money for start-ups seeking seed or early stage funding. As Third Way also explained in our report, if you’re a company that’s getting close to commercialization or an IPO, this shift in capital is okay. There are more venture and private equity firms looking to help you build factories, ramp up production and grow. But if you’re an entrepreneur with the possible answer to utility-scale energy storage or tidal power generation, there’s far less money out there than three years ago. As Secret Formula warns, “there may be insufficient Seed/Series A capital available to fund new cleantech enterprises.”

What does all this mean?

Clean energy advocates need to acknowledge the challenges we face as well as our significant gains. As the United States’ current electricity generation mix shows, we have an enormous distance left to travel to transform our country’s energy system. We cannot do this by overpromising and underperforming with our existing technologies and financing structures. Instead, let’s all recognize that there is still work to get done and work together to start correcting these problems. 

The criticisms of investing in clean energy ignore that our nation is on an unsustainable energy path and that for our economy, national security, public health and, yes, environmental interests, we must diversify our energy portfolio. Our nation’s energy infrastructure today is essentially reliant on coal, oil and natural gas — three natural resources that are in dramatically increasing demand around the world. This has nothing to do with peak oil. The world is racing headlong into a bidding war for energy. The only entity both able and empowered to halt the march is the federal government.

Today, the United States relies on coal and natural gas to generate over 69 percent of our electricity and oil for almost 100 percent of our transportation fuels. Hopefully, the energy crunch in electricity will be mitigated by the massive natural gas deposits the U.S. can now extract from shale rock. But relying on any one energy source is a risky bet to play, especially in a global economy where other markets already pay three times as much as we do for the same commodity. Recent data by AT Kearney, an energy consulting firm, suggests that world natural gas prices will increase by 40 percent by 2014. The Energy Information Administration projects coal use to increase 30 percent over the next 20 years.

A New York Times article warns that our national energy projects “will also require ratepayers to pay billions of dollars more for electricity for as long as two decades.” But what it fails to mention is that, thanks to global energy demand and commodity prices, the growth curve of our electricity prices will dwarf the costs of these projects. Put simply, if we do nothing, the hardworking American population is going to be paying more to turn on lights, air conditioning, and their cars — potentially much more than if those clean energy projects are built.

There is another option. Instead of continuing to over-leverage fossil fuels, we can diversify our portfolio by investing in innovations that will bring down the price of clean energy technologies so that American businesses and consumers have more options. This is where those tax dollars come into play. We cannot allow our economic, security, and environmental interests to remain hinged to energy products that are in high demand and necessitate a price premium to remain tethered to them. Perhaps paying now for the research that could result in technologies that reduce our reliance on the commodities market is not such a bad idea after all.

With fewer clean energy advocates in the Senate and a Republican-controlled House, prospects for reform would appear even dimmer for 2011. But with energy use increasing, new power plants being put on the drawing board and China aggressively pursuing clean energy and its $2 trillion payday, the United States cannot sit on the sidelines another two years.

There is a way to get energy reform back on the right path. Conveniently, it also helps overcome market failures in the United States that are restraining the deployment of clean energy, including solar, wind, waste-to-energy and nuclear power: a Clean Energy Standard (CES).

This could reduce pollution, provide utilities the certainty they need to build new wind, solar and, in some circumstances, nuclear power, and create new jobs. As important, it would create a disincentive to build new coal plants. This idea has growing bipartisan support in parts of the country, the South and Midwest, which have shown the most opposition to previous proposal.

A CES that does not pre-empt tougher existing state energy standards helps encourage clean energy in every region of the country without creating a one-size-fits-all solution to a complex problem. It avoids picking technological winners and losers. It also can get results. An analysis by Resources for the Future determined that a CES could actually achieve most of the carbon emissions reductions of a Renewable Energy Standard, but at just 68 percent of the cost.

That’s why Energy Secretary Stephen Chu voiced support for a CES at a Third Way event on the future of nuclear power in December. It’s why we are coming out in favor of the idea today.

This is important for clean energy advocates and climate hawks not just because there will be more renewable generation and less pollution in the air. It shows that we can get votes and win policy victories. That is what gets noticed in Washington, DC and in state capitals around the country. Policy successes, even smaller national ones, are replicated and expanded. As important, a CES victory would help push back against efforts by opponents of clean energy and climate to marginalize reform.

Is it perfect? No.

Will it single-handedly spur the transition from conventional fuels to clean energy? Of course not.

A CES, however, will make a real difference in encouraging utilities to build more renewable and other clean power. It will help the US compete in the enormous global clean energy market. It will reduce pollution. It’s a win for the sector, the environment and the country. That more than anything is what we need.

Imagine a program that turns a relatively small initial investment into billions of dollars of U.S. economic growth, thousands of new Americans jobs, and groundbreaking technologies that change the way we use energy in this country and around the world. It would be a darling of innovators, the private sector, and policymakers. Sounds impossible for such a little program to generate such big results? Just like the little engine in the children’s story that pulled the train over the mountain, the U.S. has a small venture that could generate big results. It’s called the Advanced Research Projects Agency – Energy, or simply ARPA-E.

But instead of being hailed, ARPA-E is about to be given the bureaucratic equivalent of a death sentence, and all because Congress has failed to pass a budget for 2011. Instead of a real budget, Congress will direct agencies to continue with the same amount of money they received last year. That means ARPA-E’s funding effectively dries up.

ARPA-E was created in 2007 to spur innovation in new groundbreaking technologies to set the United States apart from the rest of the world as a leader in the new clean energy economy. It is modeled after DARPA, the defense research agency responsible for the internet, Global Positioning Systems (GPS), and unmanned aerial vehicles. DARPA did all of this with a small, rotating staff of experts and minimal funding. ARPA-E is assembling a similarly nimble team of scientists, engineers, and innovators to make a big impact with a small budget.

We are competing against the rest of the world for a piece of the $2,000,000,000,000 (yes, that’s two trillion dollars) clean energy market. China is investing $738 billion over the next 10 years to beat us to the market with cheap, clean energy technologies. We cannot afford to stand still even in a wretched economy. It’s true federal funding is extremely tight but at its initial funding level of $388 million, ARPA-E has the potential to create wealth and prosperity. The next generation of battery technologies for electric vehicles, carbon capture technologies for coal-fired power plants, and new liquid transportation fuels that use microorganisms instead of petroleum and biomass to convert carbon dioxide back into liquid fuels. Any one of these technologies could change the way the world uses energy. Any one of these technologies could give birth to new companies and create thousands of jobs. Any one of these technologies could provide the necessary push for investment in the U.S. clean energy market that is just waiting to explode.

This little program that could create the energy world’s equivalent of GPS or the internet may not be around much longer. Congress has less than three months to fund ARPA-E. Eliminating funding for ARPA-E would be tantamount to the engines in the children’s story that refused to pull the broken down train, ceding billions of dollars in economic growth to China, South Korea, and Japan.

There should not even be a question as to whether the U.S. thinks we can continue to support this crucial venture in the coming years. ARPA-E is a vehicle that can and will unleash innovation in groundbreaking technologies and help push us over top of the clean energy market — we just need to believe in ourselves.

The transition to clean energy will inevitably have the same effect. While many communities will immediately prosper from new solar and wind plants or advanced battery production, others will initially lose jobs and even businesses or industries. Yet these same communities that might suffer during the transition, particularly those in the industrial Northeast and Midwest and rural South and Plains, could capitalize on clean energy. They just don’t have access to the economic tools to do it on their own. That is why Third Way worked with Rep. Dan Maffei (D-N.Y.) to develop Clean Energy Business Zones (CBiZ).

CBiZ recognizes that the private sector and particularly small businesses — not government — are in the best position to create new jobs. It creates specific incentives for these businesses to locate in areas that have skilled workers or a modern infrastructure but have lost jobs or been economically disadvantaged by the change from conventional to clean energy. This will help spur growth in areas that too often in the past missed the economic benefits of innovation.

Make no mistake, this is not just about creating the next Microsoft or securing a massive wind turbine factory. In places like Rep. Maffei’s Syracuse-area Congressional District it could also mean the difference for a contractor who wants to expand his building efficiency business or allow a researcher to hire the staff she needs to manufacture a new type of LED lighting.

This program would be modeled on the successful Empowerment Zone program, but would be distinct and would focus specifically on helping communities take advantage of clean energy. The zones would provide businesses substantial financial incentives to build such sectors including employment tax credits, increased business expense deductions, and favored capital gains treatment.

America has led virtually every technological revolution of the past century. We’ll do it again with clean energy. But we have the opportunity to make sure that communities that missed out on the economic booms of past transformations don’t miss out yet again. The CBiZ program is one important tool we can use to help American business grow where growth is needed most.