We need a system of cooperative public-private infrastructure financing, a national infrastructure bank. But we also need to use that fabric of cooperative investment and output to foster specific areas of major improvement to our national economy. The model could be replicated across the world, but the US is uniquely positioned to deploy this solution and to vastly improve its chances of restoring vibrancy to the wider middle class by doing so.
Two parallel projects are necessary to make the infrastructure redevelopment and economic recovery strategy a success:
- a renewable energy infrastructure bank – to help target some of the wider funding options to the project of building a sustainable, smart energy economy, free of the massive externalized costs of carbon-based fuels
- an economic opportunity bank – to aggressively, specifically and persistently direct funds to businesses that are hiring, building capacity at the community level, and restoring real wage gains to the middle class
The first is our topic here: a national renewable energy infrastructure bank. To build such a bank, we would need to first establish how a cooperative public-private infrastructure financing scheme would work. Ideally, it needs to work much like an investment bank, where individual investors see visible gains, but money is kept in the pot for a long enough period of time to produce gain across the full spectrum of investor contributions.
In other words, there has to be commitment to the project, and that shared commitment of resources will yield shared substantial gains to all parties. In the area of clean energy investment, this is possibly much easier than with other types of infrastructure investment, because the industry is entering into a period of massive, and necessary, prolonged expansion. Big investors understand that big investment will help to secure that prolonged expansion.
If Congress acts to incentivize this investment, massive amounts of private-sector capital will flow to clean energy resources. There are three reasons why this will happen:
- Fossil fuels carry with them massive production costs that have long been externalized; the economy can no longer afford to continue such a strategy.
- Clean energy technologies offer a major opportunity for prolonged expansion of business value, as information technologies have shown over the last 30 years.
- There are literally hundreds of billions of dollars of private capital sitting on the sidelines, waiting for directional certainty that fossil fuels cannot provide.
So, how to structure such an operation? The renewable energy infrastructure bank would need the following to reach its full potential:
- A national price signal or clear set of incentives to direct investment to clean energy
- An investment strategy that looks at best practices, value to community, prospects for building aggregate demand, and structural resiliency
- A focus on job-creation, skilled retraining, and positive value feedback loops that favor consumers
- A legislative charter that sets forth priorities favorable to public-sector, private-sector and start-up investors alike
- A model for redirecting funding when key elements of a project require support or restructuring
- A focus on rewarding institutions, individuals and investors who do cutting-edge R&D that is practicable, 100% carbon-emissions-free and scalable
- Short-, medium- and long-term investment strategies for building, optimizing and utilizing the smart grid
Suggestions for deployment:
- Implement a national carbon fee and dividend policy, to correct market failures in the pricing of carbon, return control of the energy economy to households and incentivize major private capital investment in the rapidly expanding clean tech sector
- Identify, build or support and expand, focus facilities in cities and regions across the country, to operate as cooperative laboratories of R&D, start-up incubators, and investment engines (examples might be Brooklyn Navy Yard or Philadelphia Navy Yard, or the Fab Labs project)
- Motivate scalability planning for distributed clean energy production projects, to ensure sustained investment opportunities, and optimized overlap between community-building, job-creation and investment strategies, for higher overall cost efficiency
- Ensure legal support for avoiding corrosive business models, favoring generative ones, to ensure Investment flows to the new technologies and collaborative strategies that build future prosperity, not to extraction-oriented investments
- Reward rapid ramping up of high-efficiency clean energy tech, because this will build structural resiliency, favor the highest-value market-healing technologies, and help to revive the middle class
We can begin doing this nationally tomorrow, if:
- We focus first on wind and solar, due to their naturally occurring US domestic supply far outstripping total demand and all possible demand growth
- We commit to decentralizing innovation, influence and income-growth in the energy sector, so community and regional economies are empowered by the transition
- We recognize the need to fully develop leading-edge infrastructure at all levels
- We identify and elevate the pioneers who already know how to motivate and execute this transition
- We charter public-private partnerships to manage investment flows to stakeholder-defined initiatives
The clean energy economy is coming, and to fully enable its expansion, the US needs to flex the muscle necessry to turn the ship of state, to wrest from entrenched industries and financial investment patterns rooted more in extraction than in generative payoff the ability to decide what comes next. There is nothing beyond clean and renewable in terms of energy production and distribution, except the work of achieving the most advanced efficiency gains and making robust power generation an ever more ephemeral affair, at an ever faster rate.
To lead in that new economy, we need to be the first to build its value.
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Originally published October 12, 2011, at ProjectQuipu.net
The Poet Economist 