Wind turbines in action" (UN Photo/EskinderDebebe)
NEW YORK– The relationship between governments and the financial sector is often controversial; consider the recent backlash against questionable campaign financing and government bailouts of prominent investment banks. However, those focused on a green future can find the positive aspects of public-private dealings, as governments open doors to large and potentially lucrative investments in green technology.
“The future looks green”. This statement might mean one of two things to a venture capitalist: a) they will see great returns, or b) the future of the mega-profitable energy sector is in green technology. Luckily for the investors, both of these points may be true. It actually seems like there is an upside for both wealthy investors and the planet.However, it is a little too soon to make that conclusion definitively.
As reported by Ernst & Young, firms in the green sector raised nearly $1.2 billion in funding in the third quarter of 2011, a 73% increase from the year before, even while investment has scaled back in many other sectors.
The American government has ensured that these investments continue to flow with the Department of Energy’s loan program for renewable energy projects, giving substantial support to private companies in the green energy sector. The Los Angeles Times reported that the Santa Monica company,SolarReserve raised $15 million in the third quarter of 2011, $27 million in October and secured a whopping $737 million loan from the Department of Energy in December. It’s safe to say the US government is providing peace of mind to private investors who are interested in firms that are perhaps ‘too green to fail’.
The reality of the statistics above is that large investments are not going to green technology and renewable energy in order to save the environment, but rather because they could be wildly profitable when governments provide financial incentives to produce clean energy. This process of state support, as we can see, has already begun.But as we have also seen, big money does not always mean big results.
In some cases, large government subsidies have caused new wind energy companies to jump headfirst into the industry, pushing the science or ethics of new projects to the side. In 2009, the provincial government in Ontario, Canada, put forth extraordinary subsidies for wind-energy companies to erect turbines on rural land through legislation entitled the ‘Green Energy Act’.
The Canadian Auditor-General reviewed the performance of this program at the end of 2011, finding that the province will lose twice as many jobs as it gains in green energy due to higher energy prices and job losses in the non-subsidized energy sector, and that taxpayers will be paying $2.6 billion more per year to pay for the heavy subsidies in green energy. This is paired with the reality that the government may have acted too soon, with widespread claims that the wind energy is inefficiently suited for the current grid.
“Despite the Ontario government’s rush to introduce wind farms across the province, wind energy is an ineffective strategy for achieving carbon emission reductions in the fight against global warming,” claims Ontario resident and energy expertSilvanaSangiuliano. “Wind generates power only intermittently, and every megawatt of installed wind or solar power must be backed up by an equivalent megawatt of nuclear, coal, natural gas, or hydroelectric generating capacity”.
For better or for worse, the green sector is attracting big money. This could be a positive thing, as the wealth and industry of the western world finds encouragement to create a sustainable future. The guidance and regulation however must come from the public sector, as private companies can reasonably be expected to follow financial rather than environmental profits. Hundreds of millions or even billions of dollars in loans and subsidies are sure to attract investors. It is up to the governments to match subsidies with strategy, and ensure that policies to attract investment are socially and environmentally feasible.