Google Wants The Government To Fund Green Tech

Google wants the government to follow it into the “Valley of Death” for clean tech. On Tuesday, Dan Reicher, Google’s director for climate change and energy initiatives, met with other leading technology executives to urge government officials to help fund new companies through one of the riskiest parts of their life cycle—the point when they try to scale a promising prototype into a commercial success. “Our goal is to have a serious impact on the deployment of clean energy technologies,” says Reicher.

Reicher was one of more than a dozen technology executives to attend a luncheon hosted by TechNet, a policy group comprised of executives from Hewlett Packard, Apple, Facebook, venture firm Kleiner, Perkins, Caufield & Byers, and other investors in clean energy and related products, such as electric cars. The event, held in the solar panel covered wing of Colorado Governor Bill Ritter’s mansion, was aimed at getting government to help new green tech companies become viable on a large scale with tax credits for consumer adoption and incentives for research and development.

Members of TechNet argue that the government has hampered the development of alternative energy by making it difficult to apply for certain tax credits for clean tech and providing inconsistent funding for new initiatives. “When they stopped the tax credit for the solar guys, they destroyed the US solar energy industry,” added John Gage, a partner at Kleiner Perkins, an initial investor in Google.

Both Gage and Google are focused on making clean tech companies viable in part because they believe the viability of the planet depends on it. Gage, a close friend of Al Gore, believes that the polar ice caps could melt within five years, warming most of Europe and flooding coastal American cities, if the world can’t significantly reduce its carbon emissions. “This is not trivial, it is a big deal,” says Gage. “It is a lot worse than we realized.”

Both companies also stand to profit handsomely if their investments in green tech pay off. Kleiner Perkins and Google, along with several other venture firms, invested more than $26 million in AltaRock, a geothermal power company that uses the hot rocks beneath the surface of the earth to heat homes and offices. Both Kleiner Perkins and Google are also investing in plug in electric cars, new batteries capable of storing electricity for longer periods of time, and electric grids that can both deliver electricity and receive it from, say, buildings with solar panels on their roofs. “It’s about doing good and making some money,” says Reicher.

Gage says he is investing in green tech, in part, because he believes the government will ultimately tax carbon emissions in order to counter global warming. Doing so, would drive dollars to alternative, carbon neutral, forms of energy.

The Governor’s Mansion was a welcoming environment for such a message. Gov. Ritter’s administration prides itself on its efforts to fuel new forms of green technology and clean tech industries. The state has been a hub for wind power, an industry that has created thousands of new jobs in the state. In March, it became the first state to pass a bill on net metering, which measures the amount of electricity produced by homes and businesses with solar panels or wind turbines and provides them with credits for the excess energy they supply back to the power grid. “For us, renewable energy is about a different energy future and it is also about the economy,” said Ritter during the event.

But not everyone believes that the economy benefits when tax dollars are appropriated to fund new industries. Instead of helping new industries become viable, critics of subsidies argue that they discourage companies from making their products as cheaply and efficiently as possible, keeping them from becoming commercial successes. They also can have unintended consequences, they argue. For example, subsidies provided to corn farmers to develop ethanol are at least partially to blame for the rise in food prices that have lead to crisis in poor countries such as Haiti. The Organization for Economic Cooperation and Development is urging that governments stop funding biofuels. “The current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits,” wrote the OECD in a report released last fall.

Those arguments directly counter calls by Reicher and others for a new administration to return government funding for alternative forms of energy to levels not seen since Jimmy Carter. “Funding dropped under Reagan and came back a little under first president Bush and a little under Clinton,” says Reicher. “The federal government should be more active in funding R&D” for green technology.

Reicher points to the success countries such as Spain and Germany have had in creating their solar energy industry, through tax incentives and subsidies, as a model for the U.S. Spain has set a target of achieving 12% of its power from solar power and other renewable sources by 2010. The country is now a leading manufacturer of solar power, selling as much as 80% of its output to Germany. However, this summer Spain moved to slash its subsidies, by as much as 35%, arguing that growth in the industry has happened at an unsustainable rate.

Still, Reicher believes that the subsidies have helped European countries become leaders in alternative energy industries that the US could have largely owned had the government funded companies in a similar fashion. “I think we have picked a clumsy way of incentivizing clean energy,” says Reicher.

Before it's here, it's on the Bloomberg Terminal.