Take Illinois-based Leeco Steel, which makes 3-inch-thick steel plates for the towers of wind turbines. The company moved into the field in 2005, taking advantage of a federal tax deduction for wind-power companies based on the kilowatts of electricity they produce. Although the credit—worth about $1.5 billion per year—has been extended several times since, it expires at the end of the year, and lawmakers appear ready to let it die this time. The company expects to survive, but only as a shell of its former self. “Unfortunately, it’s what we live off of,” said John Purcell, who runs Leeco’s wind-power division. “It’s definitely going to impact us in an enormous way financially.”
Pushing for a one-year extension, Purcell and other wind-power firms sent executives to lobby lawmakers in February. The overwhelming response: We want to help you, but we can’t. Wind-industry advocates had hoped to roll a tax-credit extension into the payroll-tax-cut bill or the surface-transportation legislation, yet they failed on both fronts. If the credit expires, many analysts expect clean-energy firms to shrink dramatically or close down. That would put the U.S. at a steep competitive disadvantage in relation to China, the UAE, and other nations that use government money to ignite their clean-tech sector.
A rare bright spot for the United States is the solar-power industry. A 30 percent federal tax incentive to subsidize the installation of residential and commercial solar systems will continue through the end of 2016. But the money for the program—less than $50 million per year—is so small that it merits only a footnote in the federal budget (the Joint Committee on Taxation doesn’t even bother fully scoring it). And even that tiny credit has an uncertain future. “Solar incentives are temporary. Even those that are longer term are set to expire,” said Susan Wise, who works for San Francisco-based residential solar-energy company SunRun. “Other energy industries, like fossil fuels, enjoy permanent subsidies that offer the industry a greater sense of stability.”
The differences are stark. A 2011 report by Management Information Services, a consulting firm, found that U.S. fossil-fuel firms received $594 billion in government tax credits, research money, and other incentives over the past 60 years, with roughly two-thirds of that going to the oil industry. (Clean-tech companies got $244 billion; excluding nuclear, just $171 billion.) Those kinds of built-in advantages aren’t going away any time soon. Several presidents, including Obama, have asked Congress to end oil and gas subsidies, to no avail.
Persian Gulf countries face no such political or financial constraints on their alternative-energy ambitions. The UAE and its neighbors take in hundreds of billions of dollars per year from oil sales, so they can easily afford to fund clean-energy programs. Because they are monarchies, their policies don’t need public or legislative support. And they have a long history of direct state investment in, and ownership of, the energy economy—something that is anathema to many laissez-faire Americans.
Yet an even more fundamental difference underlies the contrasting approaches taken by the United States and the Gulf nations: sheer need. The economies of the UAE and its neighbors depend solely on petroleum and other fossil-fuel exports, but ours does not. The U.S. would certainly benefit by replacing expensive foreign oil with cheaper renewable energy, but our future isn’t as tightly bound to oil. The Gulf’s Arabs got religion because they had to; Americans haven’t.
SEEING THE LIGHT
Thousands of miles from Washington, in his heavily air-conditioned office here, Sultan al-Jaber would politely beg to differ with those clinging to the status quo. Jaber, the managing director and CEO of the entire Masdar initiative, says that climate change is real and that the oil-consuming world has to face up to the fact that it will eventually tap out petroleum supplies. Jaber earned his Ph.D. in England and his M.B.A. at the University of Southern California. He believes that his country’s oil reserves will last for decades and are in no immediate danger of running out. Still, he said, his government is preparing for the day when it will have no more oil to sell. “Oil is the only source of energy that will decrease over time,” Jaber said. “Renewable energy is the only source of energy which will increase over time.”
Masdar, which is owned and funded by the Abu Dhabi government, is the nerve center for the UAE’s push into renewable energy. The Masdar Institute located here has partnered with the Massachusetts Institute of Technology to offer graduate programs in alternative energy; some of its 200 students, mostly from Gulf and Asian countries, spend up to a year in Boston as part of their academic work. Fred Moavenzadeh, who has taught at MIT for decades, runs Masdar’s educational programming. He says that the institute’s resources allow him to do research that would be nearly impossible in the United States. “Let’s say you wanted to test how smart grids work in small cities,” Moavenzadeh says, leaning over the desk in his cavernous office. “In the U.S., it would take five years to line up funding and get regulatory permission. Here, you can do it in five months.”