Energy secretary makes case for federal support for innovation.

• Author: Best, Allen
• Position: ENERGY - Steven Chu

AFTER RESPONDING TO CRITICS IN CONGRESS ABOUT THE $534 MILLION LOAN TO bankrupt Solyndra, Energy Secretary Stephen Chu flew to Colorado in November to make the case for an active federal hand in energy innovation. His prime witness: PrimeStar Solar, a homegrown manufacturer of solar-film technology developed in a federal laboratory and then nudged into the marketplace with a small federal loan.

[ILLUSTRATION OMITTED]

"The public and private sectors can, and should, work together to make sure clean energy technologies are invented in America, made in America and sold around the world," said Chu, still wearing safety goggles after touring PrimeStar's existing factory in Arvada.

As for the Solyndra bankruptcy, he called it "truly unfortunate," but would not admit more. Development of technology, he said, has "inherent risk," a phrase he and other Department of Energy officials have used often in describing the federal loan programs begun in the Bush administration and continued by the Obama administration.

But critics drew a different conclusion, challenging the federal government's competence in picking energy technology winners. "In Obamaland, department secretaries run the economy, baby! They swim in a pile of balance sheets -- creating, funding and managing America's future, one company at a time," Wall Street Journal columnist Kimberley A. Strassel wrote.

The sharp comments were part of a broader, long-running debate about energy subsidies. Solar, wind and other so-called clean energy sectors clearly are benefiting from subsidies such as production-tax credits, federal loans and renewable portfolio standards. But oil, gas and coal producers have also benefited from paternalistic tax policies. Who has benefited the most? It partly depends upon assumptions. For example, should the cost of deploying the U.S. Navy's Fifth Fleet to the Persian Gulf be counted as a subsidy for oil?

Taking a long view, Nancy Pfund and Ben Healey of DBL, Investors concluded that all emerging technologies have benefited from subsidies. "Energy innovation has driven America's growth since before the 13 colonies came together to form the United States, and government support has driven their innovation for nearly as long," they write in a paper titled "What Would Jefferson Do?" They conclude that comparing support given to technologies during their early, emerging phases is most instructive. In that case, the federal commitment to oil and gas was five times greater...