Mitt Romney has turbo-charged his support for Big Oil by selecting Paul Ryan as his running mate. The House-passed Ryan budget would retain $40 billion in tax breaks over a decade for Big Oil while demanding huge cuts in the budget for innovation and clean energy. In addition, the Romney-Ryan budget would provide $2.3 billion in new tax breaks for the five largest oil companies. Here’s a reprint of a 2011 post that ran after Ryan first introduced his radical plan.

House Budget Committee Chair Paul Ryan’s (R-Wis.) proposed fiscal year 2012 budget resolution [PDF] is a backward-looking plan that would benefit Big Oil companies at the expense of middle-class Americans. It retains $40 billion in Big Oil tax loopholes while completely eliminating investments in the clean energy technologies of the future that are essential for long-term economic growth.

This budget would lock Americans into paying high, volatile energy prices. It would ensure that millions of clean energy jobs are created overseas — not here in the United States. It is a path backward to Bush-Cheney Big Oil energy policies that cost jobs and harm American competitiveness. In short, the Ryan plan ensures that we lose the high-stakes competition for the $2 trillion worldwide cleantech market.

Ryan claims in an April 5 Wall Street Journal op-ed that his plan “rolls back expensive handouts for uncompetitive sources of energy, calling instead for a free and open marketplace for energy development, innovation and exploration.” This is false. Ryan’s proposal actually violates his assertion in two ways. It maintains wasteful subsidies for Big Oil, while cutting valuable investments in the clean energy technologies of the future.

Let’s consider each of these in turn. First, Ryan’s plan would continue “welfare” for Big Oil companies. Ryan was asked several times in a recent interview whether his plan would “eliminate tax breaks for Big Oil,” but he refused to answer. Evading an uncomfortable question was his acknowledgment that his budget hatchet leaves Big Oil tax breaks untouched. This is consistent with his recent vote to keep Big Oil tax loopholes as part of the FY 2011 spending bill, while cutting education, medical research, and cleantech investments.

In addition to receiving $40 billion of unnecessary tax breaks, Big Oil does not pay its fair share of royalties for oil and gas produced from publicly owned waters. The Government Accountability Office estimates that a loophole in a 1990s oil-and-gas law could deprive the treasury of $53 billion in lost royalties. In February, the House Republicans overwhelmingly voted against recovering these royalties. Although Ryan’s budget claims that it “stops spending money the government doesn’t have,” it does nothing to recoup these forgone funds. This is another gift for Big Oil, paid for by middle-class taxpayers who must suffer the consequences of other steep spending cuts.

The proposed budget resolution doesn’t just contain billions of dollars of welfare for Big Oil. It would also slash investments in the research, development, and deployment of the clean energy technologies of the future. It would cut clean energy investments by more than half for FY 2011, by two-thirds for FY 2013, and by 90 percent in 2014 to just $1 billion. This will take us back to the miserly clean energy budgets of President George W. Bush.

The proposed budget would weaken the economy and increase the deficit by disinvesting in long-term economic growth the cleantech sector fosters. For instance, the electric vehicles of the future will require advanced batteries, and the American economy will benefit if those batteries are made here. The federal government invested seed money beginning in 2009 to launch such an industry here. Former Michigan Gov. Jennifer Granholm (D) observed that federal policies on batteries alone “have attracted 17 [battery] companies who are projected to create 63,000 jobs.”

But Ryan’s budget will nearly eliminate funding for this and other R&D programs that can lead to advances in battery technology. It also eliminates loan guarantees that can help manufacturing plants get built in the United States, and ignores investments to build a battery-charging infrastructure essential to expand the market for electric vehicles and reduce oil use.

Much of the Department of Energy’s spending on clean energy programs leverages significant private investment. This varies by program, of course, and is roughly linked to the product development cycle.

For example, the Advanced Research Projects Agency-Energy, or ARPA-E, program gives relatively small grants to companies doing early research into advanced technologies. This leverages a small amount of private investment in the short term, but sets the companies up to attract larger private investments later on. ARPA-E tries to link companies that have received grants with private venture capital investors. Yet funding for this program was eliminated by the House-passed budget for the remainder of FY 2011, and will likely be excluded by the Ryan budget as well.

At the other end of the spectrum, the Department of Energy loan-guarantee program leverages significant private investment. It provides financing to help companies grow new technologies to commercial scale. Since borrowers are very likely to pay back loans, this generates significant private investment from both banks and equity investors. The amount varies by project, but on average, $1 in government spending yields $13 in private investment [PDF], which helps generate economic growth. The House-passed spending bill eliminated this vital program for the remainder of FY 2011, and it will likely be eliminated when the details of Ryan’s proposal are made public. Only in a Big Oil budget would spending $1 to generate $13 more in economic activity be called an “expensive handout.”

These investments spark economic growth, including more jobs and local development. The Boston Globe reported that Massachusetts cleantech companies received $20 million in federal funds that “raised nearly five times as much — $95 million — from private investors. The money has helped create several dozen jobs, expand offices, and lay the groundwork for new manufacturing as the companies begin testing technologies on ever-larger scales.”

Ryan’s proposed budget also disregards the economic benefits of a clean energy future to middle-class families. In addition to creating new industries and jobs, clean energy sources that rely on homegrown wind, solar, geothermal energy, or efficiency will insulate Americans from rising and volatile energy prices.

An innovation-based economy requires government support for scientific research, development, and deployment. Such investments create domestic manufacturing jobs producing new cleantech products. Without federal investments in innovation and cleantech start-up companies, it is very difficult to create a supply chain of related jobs that provide essential goods and services for these new technologies. Meanwhile our competitors invest heavily in the development of their cleantech industries. China, for instance, invests $12 billion monthly in its wind, solar, and other renewable clean energy projects. The Ryan budget’s cutbacks in innovation investments condemn Americans to a future where new job creation happens overseas rather than at home.

The Ryan budget undermines our economy in another way. It goes backward by continuing to allow harmful, costly pollution. Its attacks on “environmental regulations” ignore their economic benefit. The Environmental Protection Agency, for instance, determined that the Clean Air Act has generated $20 in benefits for every $1 in cleanup costs — a return on investment that would make Warren Buffet proud.

Paul Ryan’s proposed budget resolution would keep Big Oil fat and happy while condemning the rest of us to high energy prices, job losses to other nations, and air pollution. Rather than foster innovation and economic growth like President Obama’s proposed budget, it is a path to perdition.

A version of this article originally appeared on Climate Progress.

Do anti-clean energy senators have any idea what Americans want? If Thursday morning’s hearing on the Clean Energy Standard (CES) Act of 2012 is any guide, they don’t. The truth is that Americans support a clean energy target for this country. Senators should listen to the American public and pass this bill.

Let’s start at the beginning. In her opening remarks, Sen. Lisa Murkowski (R-Alaska) asked, “To me, the biggest question … is whether Americans really want a CES?”

If that’s the biggest question, then it’s time for the Senate to pass the Clean Energy Standard Act, because the American people want more clean energy.

According to the Pew Research Center, a majority of Americans think that developing clean energy sources should be a bigger priority than expanding oil and coal production. This is exactly what a CES would do. The Energy Information Administration (EIA) testified Thursday [PDF] that the Clean Energy Standard Act would lead to increased electricity generation from all low-carbon sources of power, including renewables, nuclear, and natural gas. While the exact mix of those resources is impossible to predict, wind and solar power increase dramatically in every scenario the EIA has analyzed.

That wasn’t the end of Murkowski’s misunderstanding of what the American people want. She went on to say to the witnesses, “I think this is where the consuming public is coming from: If this is going to save me money, let’s talk about it; if it’s not, let’s not talk about it.”

In fact, that’s not where the consuming public is coming from. Researchers from Harvard and Yale have found that Americans would be willing to pay an extra $162 per year to get 80 percent of their electricity from clean sources. Conveniently, that’s exactly what the CES would do, so we know that Murkowski’s presumption about what the public wants is wrong. It’s also important to remember that while the EIA predicts small electricity rate increases from the CES, Center for American Progress’ analysis of state renewable energy standards shows that there’s no evidence that these policies increase rates.

Unfortunately, Murkowski’s thinking is stopping the Senate from passing this common-sense legislation that would clean our air, help prevent catastrophic climate change, and drive investment that can reinvigorate our economy.

Some senators are siding with the American people, though. Sen. Jeff Bingaman (D-N.M.), who originally introduced this proposal and is leading the fight for a CES, understands why this bill is critical. His opening statement is a welcome contrast to Murkowski’s:

The purpose of the Clean Energy Standard is to establish a national standard for electricity to make sure that we leverage the clean resources we have today and provide a continuing incentive to develop the cheaper, cleaner energy technologies of the future. By design, it would drive continued diversity in our sources of energy, and it would also allow every region to deploy clean energy using resources appropriate to that region. The Clean Energy Standard does this in a way that is intended to support home-grown innovation and manufacturing, and keep America competitive in the global clean energy economy.

Using cheaper, clean energy technologies to support innovation and manufacturing is something that everyone should get behind. That’s why the Center for American Progress (CAP) has supported this bill from the start. As Kate Gordon, CAP’s vice president for energy policy, said when the bill was first introduced:

Sen. Jeff Bingaman’s (D-N.M.) proposal would be a tremendous contribution to the United States’ clean energy economy. By prioritizing low-carbon energy sources, a clean energy standard would drive investments in renewable energy and other low-carbon energy infrastructure that will put Americans back to work while also improving our air quality and reducing the likelihood of catastrophic climate change. This bill will also create stable demand that’s critical for growing our domestic clean energy manufacturing base, and will help spur new innovations in the low-carbon energy technologies of the future.

There are legitimate policy questions about the design of this bill. It would be good to find a way to include more support for energy efficiency, although there are technical challenges with treating efficiency as a resource just like power generation. And Duke Energy explained Thursday [PDF] why it’s afraid that the CES could lead to overreliance on natural gas. These issues can and should be dealt with while still supporting the bill.

The Clean Energy Standard Act is not just good policy, it’s good politics.

Cross-posted from Climate Progress.

Take a deep breath, because what I’m about to tell you may be shocking: Loan guarantees for energy have been successful, cost-effective investments.

That’s the message from Herb Allison, former national finance chairman for John McCain, who led a team of accountants and auditors in conducting an independent analysis of the Department of Energy’s (DOE) Loan Guarantee Program. Allison and his team found that, despite the hysteria around Solyndra, this program will cost $2 billion less than initially expected.

Today, the White House released Allison’s review. It includes an analysis of every loan guarantee issued from DOE, as well as recommendations for managing this portfolio of guarantees going forward. This independent review was requested by the White House in late 2011, to make sure that the DOE loan guarantee portfolio was cost-effective for taxpayers.

The Allison review confirms what we already know, thanks to the Congressional Research Service (CRS) [PDF] and Bloomberg Government. Instead of looking at individual investments, CRS examined the entire DOE portfolio, and concluded that the overwhelming majority of the portfolio was in electrical generation projects, which DOE structured to have very low risk. Bloomberg Government took that a step forward, and concluded that the media’s incessant focus on Solyndra was “not proportional to its impact.”

There are multiple reasons why the risks to taxpayers from this program are so low. First, most of the guarantees went to support projects that have very secure contracts to sell their power to investment-grade rated utilities. Allison and his team of independent auditors endorsed the methodology that DOE initially used to evaluate these types of projects, writing, “The Independent Consultant used the same Nine Criteria as did DOE because, in the opinion of the Independent Consultant, they comprise the salient factors for evaluating the credits and are substantially similar to the criteria that would be employed by private sector credit analysts for these types of loans.”

Second, even in the event that something does go wrong with an investment, there is almost always someone willing to buy the project at a discount. For example, Beacon Power declared bankruptcy after getting a loan guarantee for $43 million. But this wasn’t a $43 million loss for taxpayers, because Rockland Capital agreed to buy the project for $30.5 million. Obviously, this is not the perfect outcome, but it helps to understand why Beacon’s bankruptcy won’t cost taxpayers the full amount of the guarantee.

Allison’s report includes two types of accounting methods. One is the method mandated by the Federal Credit Reform Act (FCRA) of 1990, which instructs DOE to record these guarantees in the budget at their expected cost to the government. The other is a method called “fair value” reporting, which would attempt to force guarantees to be recorded in the budget at the market value of these guarantees in the private market. “Fair value” reporting of costs is simply an accounting gimmick designed to artificially — and arbitrarily — increase the cost of credit programs, which will have the effect of limiting the government’s ability to extend valuable loans and loan guarantees.

“Fair value” reporting is nothing more than a tool to limit the role that government plays in making higher education affordable for students, helping manufacturers export their goods, and keeping middle-class families in their homes. DOE rightly calculated costs based on the methodology prescribed by the Federal Credit Reform Act, which has been the law of the land since 1990. Doing anything else other than following FCRA would have been not just a mistake, but also illegal.

Why the Loan Guarantee Program exists

It’s important to remember why the Loan Guarantee Program exists. Innovative companies — key to our future competitiveness and economic prosperity — risk getting caught in the “Valley of Death,” where nascent but promising companies often languish as they strive to accumulate the necessary funds. Bringing new clean energy technologies to commercial scale for the first time can require hundreds of millions, even billions, of dollars, and private investors are either unable to fund projects that require this much capital, as is the case with many venture capitalists, or are unwilling to lend money to projects that use first-of-a-kind technology not fully proven at commercial scale, as is the case with most banks. The Loan Guarantee Program brought companies across the “Valley of Death” by providing these businesses with loan guarantees that made it possible to raise the necessary capital and jump-start the economy.

By fixing the “Valley of Death” problem, DOE has allowed extremely important projects to move forward, including the world’s largest wind farm, the first commercial cellulosic ethanol plant, and the country’s largest concentrating solar power project. In total, the program will support nearly 40 projects, which will employ 60,000 people.

The Loan Guarantee Program helped America compete in the global economy. In 2011, the United States invested more in renewable energy than any other country in the world, helping us capture our share of this trillion-dollar opportunity. Why were we able to do this? As Michael Liebreich, CEO of Bloomberg New Energy Finance, puts it: “The news that the U.S. jumped back into the lead in clean energy investment last year will reassure those who worried that it was falling behind other countries. However, before anyone in Washington celebrates too much, the U.S. figure was achieved thanks in large part to support initiatives such as the federal loan guarantee program and a Treasury grant program which have now expired.”

In short, the DOE Loan Guarantee Program is helping to move our country forward, and it’s doing it by responsibly managing taxpayer money. When DOE issued these guarantees, they expected that they would cost the government more than $5 billion. At their most recent internal analysis, DOE concluded that the loans were performing better than expected, and that they would not cost less than $3 billion. Allison and his team of independent consultants found that even DOE’s most recent projection was too high, and that the guarantees would only cost $2.7 billion.

To put that in perspective, the fossil-fuel industry got a whopping $70 billion in government subsidies [PDF] from 2002 to 2008. Many of these subsidies have been in place for nearly 100 years. The nuclear industry, too, has benefited from billions of dollars in subsidies — including loan guarantees — over the last half-century.

While the Loan Guarantee Program has undoubtedly been cost-effective for taxpayers, it would be a shame not to learn any lessons about the program’s management. Allison and his team of independent consultants recommend several actions, such as refining oversight boards and filling certain job vacancies. Congress should act on these lessons when creating a Clean Energy Deployment Administration (CEDA), which would also be a cost-effective investment program. In fact, CEDA would be a stronger program than the DOE Loan Guarantee Program, with more independence from the political process, a fuller set of financial tools at its disposal, and the ability to view its investments as a comprehensive portfolio.

Allison’s independent review tells us everything we need to know about the DOE Loan Guarantee Program: It’s a good deal for taxpayers, and DOE staff have avoided exposing taxpayers to unacceptable risks. Now, Congress should focus on finding new ways to replicate the success of this program to put Americans back to work.

Imagine if we could create jobs, increase renewable energy generation, improve air quality across the country, and reduce our carbon dioxide pollution — all at effectively zero cost to our economy. Wouldn’t that be great? Well, the Energy Information Administration (EIA) just informed us that we can do all of these things, by adopting a strong national clean energy standard.

If you were to believe the hyperbole from the fossil fuel advocates, you would think that a clean energy standard would ruin the United States. For example, the Heritage Foundation recently declared that a similar policy “would be bad for families, bad for business, and bad for the economy.” As I said at the time, Heritage was simply building a straw man that isn’t even a serious clean energy proposal, and they weren’t actually modeling our electricity system.

Fortunately, we now have an accurate study of a real clean energy standard proposal, and the EIA has given us some insight into how this policy could benefit our country. In response to a request from Sen. Jeff Bingaman (D-N.M.), EIA modeled a proposal to get 80 percent of our country’s power from low-carbon and zero-carbon sources. They allow all generation resources to qualify, and weight them based on actual carbon emissions (roughly, that means that natural gas only gets half of the clean energy credits of wind or solar power, for instance). EIA also models several different cases to identify the effects of specific policy choices, like including a cap on program costs or exempting some utilities from compliance.

Here are the top line findings:

• Under the Bingaman clean energy standard, electricity generation from renewable resources like wind, solar, and biomass are almost twice as high as the business-as-usual case.
• The clean energy standard reduces annual carbon emissions from the power sector by 43 percent by 2035.
• GDP growth is virtually unchanged with a clean energy standard; America’s GDP would grow at 2.67 percent from 2009 to 2035. Without a clean energy standard, GDP would grow at 2.69 percent over the same time period. (See chart below.)
• Including a cap on the price for clean energy credits and pairing the clean energy standard with strong energy efficiency standards significantly reduces the impact on electricity prices.

These findings are not a surprise to those of us who know that clean energy is the best way to power our future. The Center for American Progress has previously advocated a strong clean energy standard with many of the same features as Bingaman’s proposal. But it also has a few important differences. Earlier this year, we laid out five characteristics that would define a successful clean energy standard:

1. It must generate new, long-lasting jobs and grow the economy.
2. It must effectively spur development and deployment of renewable energy and energy efficiency technologies.
3. It must account for regional diversity in resources and electricity markets.
4. It must be simple and transparent, and minimize costs.
5. It must provide a floor, not a ceiling, for clean energy, strengthening and building on existing state leadership.

To reach these goals, our clean energy standard proposal includes policy tools like different clean energy requirements for different regions (accounting for regional diversity) and a tiered system that sets a specific target for certain renewable energy and energy efficiency targets, so that natural gas doesn’t dominate new investments.

Spreading benefits across the country is critical. The EIA’s analysis finds that economic stimulus from the new infrastructure investments needed to shift our power system essentially balances out any cost to the economy from rising electricity prices. But EIA finds that power price impacts vary across the country, and it’s important that places with increasing prices also see increasing stimulative investments.

EIA’s analysis confirms that Bingaman’s proposal is a serious step in the right direction. The United States would benefit if Congress moved forward with a clean energy standard.

Government loans create American jobs and help small businesses get off the ground.

This year, hundreds of small businesses will expand operations with money borrowed from the government. Thousands of 18-year-olds will pay their freshman-year tuition with money borrowed from the government. Farmers will plant crops using money borrowed from the government. And countless communities in developing countries will clean their water with American-made products, or distribute life-saving American-made medications, which they will buy with money borrowed from the government.

But, according to the Heritage Foundation, the bankruptcy of one company renders all of this irrelevant. In an interview that aired Tuesday on E&E TV’s OnPoint program, Heritage senior policy analyst David Kreutzer offers this outlandish answer:

Monica Trauzzi: Under what circumstances, then, should the government be giving loans?

David Kreutzer: I don’t think the government should be giving loans. That should not be a business … They’ve proven over and over that they’re not good at this …

In fact, the government has a strong track record of running loan and loan guarantee programs. The Export-Import Bank, for instance, issues loans and guarantees to borrowers in foreign countries, so that they can buy American-made goods. Not only does Ex-Im support job creation across the U.S., but it actually makes money for American taxpayers. Each year, Ex-Im returns money to the Treasury because it brings in more than it spends.

Or take the Small Business Administration, which provides low-cost loans to growing American companies. SBA’s support has helped Nike, Apple, and FedEx grow into global powerhouses.

Or consider Chrysler and General Motors. Both companies borrowed money from the government to avoid catastrophic bankruptcies that would have reverberated throughout the economy, and both companies have paid back their loans in full.

Most relevant to Kreutzer’s argument, though, is the Department of Energy’s Loan Guarantee Program. Although Kreutzer derides it as a “bad way to allocate capital,” there’s no evidence backing up his claim that “we’re going to get bad projects … at the expense of taxpayers.” In fact, the Loan Guarantee Program has backed dozens of innovative projects that will ultimately be strong investments for taxpayers.

While all the attention has been on Solyndra, DOE has enabled what will be the first commercial cellulosic ethanol plant in the U.S., the largest wind farm in the world, some of the largest solar arrays in the world, and the first nuclear power plant built in the U.S. in a generation. Best of all, DOE’s guarantees will create more than 60,000 jobs all across the country, and will move us along the path to a lower carbon future.

But Kreutzer ignores these benefits, and simply says, “The lesson here is that the political process is a bad way to allocate capital, because they allocate it according to political rates of return and not economic rates of return. We’re going to get investment where we shouldn’t have investment or we’re going to be subsidizing investment that would take place anyway and give firms additional profit at the expense of taxpayers.”

As a matter of ideological purity, this is all well and good. But as a matter of energy policy, it’s silly.

Markets allocate capital in response to a set of market conditions, some of which are created by government. Among these conditions, our government currently gives more than $4 billion a year in subsidies to the fossil fuel industry. Worse, we allow these companies to send millions of tons of carbon dioxide into air free of charge, even though the cost to society of this pollution is billions of dollars. And we’ve been providing this leg up to the fossil fuel industry for at least 90 years [PDF].

The federal government has an impressive track record of making critical investments in small business, education, agriculture, and manufacturing, all of which have improved our country. The DOE Loan Guarantee Program is yet another success story in this long line.

It sure would be nice if members of Congress actually listened to the Congressional Budget Office (CBO). If they did, they would learn what we’ve known for quite some time: Shifting to cleaner electricity generation is an affordable and effective way to reduce carbon emissions.

The CBO just released a summary [PDF] of seven different types of standards from a variety of sources. The summary uniformly finds that either an renewable energy standard (renewables alone) or a clean energy standard (some combination of renewables, natural gas, nuclear, and carbon capture and storage) will reduce carbon emissions, and that any price impacts to consumers will be minimal. Some consumers may even pay lower utility bills.

The report does acknowledge that some regions could see price increases. You can bet that some people will jump all over this and claim that clean energy mandates drive up rates. But let’s put the figures into perspective.

Only one out of seven scenarios sees a price increase of more than 5 percent by 2030. At the same time, in five of the seven scenarios, at least one region of the country is projected to see lower electricity prices.

Virtually all price impacts are between plus or minus 5 percent, which is extremely small compared to other expected price impacts. For example, a price increase of 1 percent would be overwhelmed by any change in the price of natural gas generation or in a regulated utility’s allowable rate of return. Electric rates for all consumers will change by 2030, and virtually none of that change would be because of a clean energy standard.

The CBO report also discusses the best ways to make clean energy standards more cost-effective for consumers. While the CBO isn’t in the business of making recommendations, it’s clear that these will be a key part of designing a successful clean energy standard (CES). In fact, that’s why the Center for American Progress (CAP) included these cost-effective measures in our CES proposal [PDF]. Specifically, CBO’s report validates these aspects of our proposal:

• Allowing utilities to use energy efficiency to meet part of the standard reduces compliance costs. Obviously, accounting for energy efficiency can be challenging, and this aspect of a CES needs to be properly designed, but it’s important to include the most cost-effective emission reduction measures possible.

• A federal CES should complement existing state standards, and utilities should be able to use clean energy credits from state programs to meet a federal standard.
• Different regions of the country have different clean energy resources, and should be given flexibility to use the least-cost resources available.
• Clean energy credits should be tradable.
• The timing of interim targets should be flexible and gradual, so that utilities have sufficient time to develop the most cost-effective resources.

CBO’s report points to the need for more modeling of specific clean energy standard proposals. All of the studies in this report differ from serious policy proposals in significant ways. Specifically:

• A study that doesn’t allow for all clean energy sources (including wind, solar, biomass, geothermal, hydropower, nuclear, and natural gas, to name a few) is unnecessarily imposing false constraints that will only increase the costs of compliance.
• Studies that have less ambitious targets than 80 percent clean power will project fewer benefits, especially in terms of reduced carbon emissions.
• CAP’s clean energy standard proposal includes a tiered approach, in which utilities should meet 35 percent of their target with renewables and energy efficiency. Ignoring energy efficiency will lead to exaggerated costs of compliance, and ignoring specific targets for renewables will underestimate deployment of the most economically beneficial technologies.
• Non-utility generators — like industrial facilities that use biomass or combined heat and power — need to be included in any modeling. These facilities are key parts of the electricity system and their actions will lower the costs of compliance by contributing to a liquid trading market, especially in the southeast.

Frustratingly, none of the studies CBO includes look at actual policy proposals. Whereas the president has proposed getting 80 percent of the country’s power from a diverse mix of low-carbon sources, the studies in the CBO report are based on meeting much lower targets with much smaller sets of technologies. Inevitably, this means that CBO has underestimated the benefits and overestimated the costs of actual CES proposals.

We often talk about electric rates as if the only thing that goes into determining them is the power source. In some sense, this is right: If a utility’s power costs go up, and nothing else changes, the price they charge consumers will likely eventually go up.

But, this understanding doesn’t fully appreciate the role of rate design in determining what the rate will be. When utilities — and utility regulators — design an electricity rate, they make numerous decisions that impact the price that consumers will ultimately pay, regardless of power source. Ignoring these other decisions can lead to lazy thinking about rate impacts, which can ultimately lead to poor decision making.

For example, the standard canard is that “renewables make rates go up.” Depending on the particular circumstances of any one utility, it may or may not be true that renewables are more expensive than fossil fuels (although the conventional wisdom that renewables are more expensive is almost certainly overstated). Directly linking this to the final rate impact, though, ignores all of the other things that go into electric rates.

We can look across the ocean to see some examples of how different design decisions impact rates. The European Union has modern electricity markets and their electric power system is similar to the United States’ in many ways. But, European households not only pay higher prices for power than the United States, but the prices vary dramatically across Europe. This is not just because they have different generation profiles (although this may play a role), but is also because they have different rate designs.

Here’s a chart showing the rates that residential consumers pay for electricity in Europe and the United States. The chart shows the rate that a consumer pays if they use either 3,500 or 7,500 kilowatt-hours of electricity per year. The European rates were converted into dollars using a 1.5 USD to 1 EUR exchange rate. (For comparison’s sake, I’ve included the United States, where the average consumer uses over 11,000 kilowatt-hours per year. This data is not differentiated by consumption level.)

There are at least two interesting things here. First, you’ll see that every country has higher rates than the average residential rate in the United States. Second, you’ll see that in some countries, rates go down as you use more power, but in other countries, the rates actually go up as you use more power. Since the simplest electric rates are made up of a fixed charge (to cover the fixed costs of the power system) and a per-kilowatt-hour charge (to cover the variable cost of generating power), it makes sense that average rates would decline with higher usage (because the fixed costs are spread over more kilowatt-hours). This is the case in most places in Europe. But in Italy, the Netherlands, Slovakia, Sweden, and Greece, bigger users pay more for power, which is an indication that they have a rate system that encourages efficiency. This is a choice that they’ve made, and a rate impact that is unrelated to their generation source.

Then, we also can look at data about how electric rates in various European cities [PDF] are driven by taxes and distribution charges; that is, the things that aren’t strictly driven by power generation. (Again, I’ve included the United States for comparison’s sake, but I only have data for the rate with all of the charges, not just power.)

Here we see just how much taxes and distribution charges drive rates. A consumer in Copenhagen, for instance, pays more than 40 cents per kilowatt-hour for electricity, but less than 10 cents of that is related to actually generating power. In London the effect is much smaller. So, even though London’s power is more expensive, their consumers pay lower overall rates. This is another example of a rate impact that is unrelated to the generation source.

We should be skeptical when anyone attributes their electric rates to the type of power they use. And, we should be just as skeptical when someone tells us that our rates will necessarily go up because of the type of generation we use, ignoring all of the other choices that utility executives, elected officials, and regulators make in determining a rate.

Note: This post builds off of a column last week that compared electric rates around the world. Regrettably, some of the data from that column contained errors, as several commenters pointed out. Most problematic, some of the data points were based on published tariffs and were not comparable to each other. While these errors do not negate my basic argument, I apologize for the mistakes and confusion, and appreciate the feedback.

Rep. Paul Ryan.Photo: Gage Skidmore

House Budget Committee Chair Paul Ryan’s (R-Wis.) proposed fiscal year 2012 budget resolution is a backward-looking plan that would benefit Big Oil companies at the expense of middle-class Americans. It retains $40 billion in Big Oil tax loopholes while completely eliminating investments in the clean energy technologies of the future that are essential for long-term economic growth.

This budget would lock Americans into paying high, volatile energy prices. It would ensure that millions of clean energy jobs are created oversees — not here in the United States. It is a path backward to Bush-Cheney Big Oil energy policies that cost jobs and harm American competitiveness. In short, the Ryan plan ensures that we lose the high-stakes competition for the $2 trillion worldwide cleantech market.

Ryan claims in an April 4 Wall Street Journal op-ed that his plan “rolls back expensive handouts for uncompetitive sources of energy, calling instead for a free and open marketplace for energy development, innovation and exploration.” This is false. Ryan’s proposal actually violates his assertion in two ways. It maintains wasteful subsidies for Big Oil, while cutting valuable investments in the clean energy technologies of the future.

Let’s consider each of these in turn. First, Ryan’s plan would continue “welfare” for Big Oil companies. Ryan was asked several times in a recent interview whether his plan would “eliminate tax breaks for Big Oil,” but he refused to answer. Evading an uncomfortable question was his acknowledgment that his budget hatchet leaves Big Oil tax breaks untouched. This is consistent with his recent vote to keep Big Oil tax loopholes as part of the FY 2011 spending bill, while cutting education, medical research, and cleantech investments.

In addition to receiving $40 billion of unnecessary tax breaks, Big Oil does not pay its fair share of royalties for oil and gas produced from publicly owned waters. The Government Accountability Office estimates that a loophole in a 1990s oil-and-gas law could deprive the treasury of $53 billion in lost royalties. In February, the House Republicans overwhelmingly voted against recovering these royalties. Although Ryan’s budget claims that it “stops spending money the government doesn’t have,” it does nothing to recoup these forgone funds. This is another gift for Big Oil, paid for by middle-class taxpayers who must suffer the consequences of other steep spending cuts.

The proposed budget resolution doesn’t just contain billions of dollars of welfare for Big Oil. It would also slash investments in the research, development, and deployment of the clean energy technologies of the future. It would cut clean energy investments by more than half for FY 2011, by two-thirds for FY 2013, and by 90 percent in 2014 to just $1 billion. This will take us back to the miserly clean energy budgets of President Bush.

The proposed budget would weaken the economy and increase the deficit by disinvesting in long-term economic growth the cleantech sector fosters. For instance, the electric vehicles of the future will require advanced batteries, and the American economy will benefit if those batteries are made here. The federal government invested seed money beginning in 2009 to launch such an industry here. Former Gov. Jennifer Granholm (D-Mich.) observed that “just as a result of federal policy on batteries alone … have attracted 17 [battery] companies who are projected to create 63,000 jobs.”

But Ryan’s budget will nearly eliminate funding for this and other R&D programs that can lead to advances to battery technology. It also eliminates loan guarantees that can help manufacturing plants get built in the United States, and ignores investments to build a battery-charging infrastructure essential to expand the market for electric vehicles and reduce oil use.

Much of the Department of Energy’s spending on clean energy programs leverages significant private investment. This varies by program, of course, and is roughly linked to the product development cycle.

For example, the Advanced Research Project Administration-Energy, or ARPA-E, program gives relatively small grants to companies doing early research into advanced technologies. This leverages a small amount of private investment in the short term, but sets the companies up to attract larger private investments later on. ARPA-E tries to link companies that have received grants with private venture capital investors. Yet funding for this program was eliminated by the House passed budget for the remainder of FY 2011, and will likely be excluded by the Ryan budget as well.

At the other end of the spectrum, the Department of Energy loan guarantee program leverages significant private investment. It provides financing to help companies grow new technologies to commercial scale. Since borrowers are very likely to pay back loans, this generates significant private investment from both banks and equity investors. The amount varies by project, but on average, $1 in government spending yields $13 in private investment, which helps generate economic growth. The House-passed spending bill eliminated this vital program for the remainder of FY 2011, and it will likely be eliminated when the details of Ryan’s proposal are made public. Only in a Big Oil budget would spending $1 to generate $13 more in economic activity be called an “expensive handout.”

These investments spark economic growth, including more jobs and local development. The Boston Globe reported that Massachusetts cleantech companies received $20 million in federal funds that “raised nearly five times as much — $95 million — from private investors. The money has helped create several dozen jobs, expand offices, and lay the groundwork for new manufacturing as the companies begin testing technologies on ever-larger scales.”

Rep. Ryan’s proposed budget also disregards the economic benefits of a clean energy future to middle-class families. In addition to creating new industries and jobs, clean energy sources that rely on homegrown wind, solar, geothermal energy, or efficiency will insulate Americans from rising and volatile energy prices.

An innovation-based economy requires government support for scientific research, development, and deployment. Such investments create domestic manufacturing jobs producing new cleantech products. Without federal investments in innovation and cleantech start up companies, it is very difficult to create a supply chain of related jobs that provide essential goods and services for these new technologies. Meanwhile our competitors invest heavily in the development of their cleantech industries. China, for instance, invests $12 billion monthly in its wind, solar, and other renewable clean energy projects. The Ryan budget’s cutbacks in innovation investments condemn Americans to a future where new job creation happens overseas rather than at home.

The Ryan budget undermines our economy in another way. It goes backward by continuing to allow harmful, costly pollution. Its attacks on “environmental regulations” ignore their economic benefit. The Environmental Protection Agency, for instance, determined that the Clean Air Act has generated $20 in benefits for every $1 in cleanup costs — a return on investment that would make Warren Buffet proud.

Paul Ryan’s proposed budget resolution would keep Big Oil fat and happy while condemning the rest of us to high energy prices, job losses to other nations, and air pollution. Rather than foster innovation and economic growth like President Obama’s proposed budget, it is a path to perdition.

Governments can use policy measures alongside relatively small sums of public money to catalyze the private sector to help developing countries finance their clean energy transition.Photo: Center for American Progress

A new report released today, “Investing in Clean Energy,” from the Center for American Progress and seven other global think tanks that comprise the Global Climate Network, provides a progress report on commitments to clean energy development in several sectors in China, India, Nigeria, and South Africa. Our report estimates the total cost over the next decade for achieving these targets, and then offers recommendations on how best to use public funds that may become available in the creation of a global climate fund to leverage the private capital needed to meet these goals.

Before detailing our findings, some history about the global climate fund. One of the items agreed to as part of the Copenhagen Accord at the U.N. climate summit in Denmark last December was a commitment to raise $30 billion from developed countries for “fast start” financing for these projects in developing countries between 2010 and 2012, with the goal of generating $100 billion in new capital annually by 2020. The money would be deployed toward enhanced mitigation of carbon pollution, technology development, and adaptation to a warming world.

The accord stops short, however, of determining the ratio of funds that will be spent on mitigation and adaptation, respectively, and of identifying any specific mechanisms or sources of finance other than “public and private, bilateral and multilateral, including alternative sources.” Later this week, however, a special report from the U.N. Advisory Group on Finance — an informal but high-level group of heads of state, experts, and finance ministers — will provide a more comprehensive look at the instruments that could be used generate these funds.

Our report complements this forthcoming U.N. Advisory Group report by demonstrating that significant amounts of additional funds will be necessary to achieve a successful, global low-carbon transition for long-term climate protection. Private finance is undoubtedly needed. According to the World Bank, additional annual capital costs for mitigation in developing countries will range between $265 billion and $565 billion by 2030. We find that investments in the sectors and countries highlighted in this study must double if current government ambition for renewable energy expansion is to be achieved.

Indeed, excluding China, the average annual investment needed is $15.93 billion, yet the financing gap is around $15.73 billion in India, South Africa, and Nigeria, all of which are currently only investing a tiny fraction of what would be required.

Take India, which is embracing substantial targets to decrease their emissions and shift to a low-carbon growth strategy. The Indian government’s Eleventh Five-Year Plan includes a renewable energy target of 10 percent of total power generation capacity, with 4 percent to 5 percent of the final electricity mix to be achieved by 2012. If these goals are met, then renewable energy would account for approximately 20 percent of the total added energy capacity planned in the 2007 to 2012 period. Toward the same goal, India expects to install 15 gigawatts of additional renewable power capacity by 2012.

The Indian government has allocated $850 million of public finance to support renewable energy under the Eleventh Five-Year Plan, including $16.2 million for wind power demonstration projects and $43.3 million in subsidies to support grid-interactive solar photovoltaic power generation infrastructure. Yet the total capital investment required to achieve the plan’s target of 15 gigawatts of installed renewable electricity by 2012 are likely to be significantly higher.

Using estimates of capital and generation costs calculated by the Indian government’s Integrated Energy Policy-Expert Committee, our report finds that between $9.5 billion and 12.7 billion will be required between 2007 and 2012 if the 2012 target is to be met. This will require leveraging as much as 15 times the budgetary support currently provided by the Indian government in the form of private investment. Follow-up interviews with government officials and clean energy investors in each country participating in our study point to the hurdles and possible solutions needed to build the needed renewable energy infrastructure by tapping private capital. In most countries, the majority of participants suggest that the primary barrier to private sector low-carbon investment was the absence of clear and stable national policies.

Inadequate regulation and standards (South Africa, China), lack of incentive policies (South Africa), the absence of market mechanisms and a price on carbon (China), and failure to implement existing policies (Nigeria) were all cited. Nonetheless, participants in several countries (India, China,) suggest that financial instruments deployed by governments at the national level to date have been quite effective in stimulating private investment in low-carbon energy projects despite limitations in the policies.

The types of instruments that have been successful so far differ depending on a country’s unique circumstances. In India, for example, feed-in tariffs for renewable-sourced energy have been important. In China, requirements on banks to phase out loans to high-carbon emissions sectors have been very effective. Clearly, if the balance of risk and return is acceptable then the private sector will invest. Indeed, participants in the national dialogues held by the various partners in our study suggest there is no lack of enthusiasm or available capital for clean energy. Yet our unequivocal finding is that government intervention will be needed to ensure the private sector’s perception of risk does not exceed its expectation of return.

In effect, clean energy investment requires a public-private partnership. Governments can use policy measures alongside relatively small sums of public money to catalyze private sector participation, enabling government involvement to help reduce the perception of risk, and consequently actual risk, among private sector investors. We propose that governments building the proposed $100 billion climate fund should foster an investment partnership with the private sector. Our report proposes several leveraging mechanisms, such as loan guarantees, subordinated equity investments, and policy insurance, which together could be the basis of this partnership. These tools will help lower costs in two ways.

First, lowering the cost of capital will bring down incremental costs. Developed country government-sourced subsidies and guarantees to help private investors finance clean energy in developing countries will reduce the costs of borrowing. The reason: Cheaper capital i
n most clean energy sectors means lower incremental costs generally.

Second, deployment on a large scale will drive down technology costs. A public-private partnership for clean energy investment should lead to a rapid increase in the pace and scale of deployment, which in turn would lead to technological, technical, and business innovation — learning by doing — and so bring down the currently high relative unit costs of clean energy.

There are some participants in the international climate community who criticize the deliberations of the U.N.’s Advisory Group on Finance because it focuses too much on generating private investment out of public capital. Our report demonstrates that the clean energy investment challenge will only be solved through coordinated public and private effort. This investment challenge is now the world’s greatest innovation challenge.