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Government Contracting (GovCon) Publication from the Fairfax County Chamber of Commerce, December 2006

It’s about time!

The Federal government is responding aggressively to the demand for reduced dependency on foreign oil, cleaner air and new choices at the pump–or no pump at all. Plug-in hybrids, solar power, wind farms, hydrogen and bio-fuels are all part of the new Federal budget priority and billions in investments to grow a U.S. alternative energy industry that will blunt the sticker shock of rising gas prices and put the brakes on global warming.

This is an exciting time to be in the business of alternative energy. The Federal government is finally funding what the public has long demanded–cleaner, greener, domestically produced energy that makes us less reliant on vulnerable sources of imported oil.

This financial commitment offers a rare opportunity for U.S. industry to take advantage of the global demand for alternative energy solutions, and sets the stage for the long term transition to the hydrogen economy.

Why alternative energy, and why now?

The global demand for energy is expected to soar, growing by 50 percent by 2020 and 71 percent by 2030, fueled by economic growth in rapidly developing countries such as China and India. Meeting the power needs of the developing world will have huge economic and geopolitical consequences.

While fossil fuels are expected to still be a major source of energy for the near term, the fact that much of this oil is imported from politically unstable regions of the world, and contributes to global warming, adds even more pressure to develop domestic sources of clean, renewable energy. Hydrogen fuel cells, biofuels, wind and solar energy are among the technologies being developed and commercialized to increase the country’s use of domestic renewables.

Of course, the move to alternative energy is not without its challenges. For example, using hydrogen to fuel vehicles for a 300 mile driving range presents numerous technical challenges related to hydrogen fuel storage, vehicle weight, and cost, as well as the establishment of an entirely new hydrogen fueling infrastructure for use by the masses. Wind farms have raised concerns about dangers to bird life and landscape aesthetic issues. Solar energy and bio-fuels are still more expensive than their conventional energy counterparts, though their relative costs are decreasing.

Nevertheless, significant technological advances during the past several years, coupled with rising oil prices, have made alternative energy technologies much more cost competitive with energy produced from fossil fuels, and have helped move domestically-produced clean, renewable energy from a good idea to a Federal policy priority. The government is getting serious about alternative energy, and our energy future is taking a new direction.

Billions in Federal financial support is now available for a diverse set of activities related to developing, commercializing, and deploying alternative energy—from basic and applied research to business plan development, research centers, purchase and installation of renewable energy systems and production facilities, or converting fueling property to alternative fuels.

Several key Federal policies are directing new attention—and billions of dollars—to alternative energy, including:

  • President Bush’s Advanced Energy Initiative
  • President Bush’s Hydrogen Fuel Initiative
  • Energy Policy Act of 2005
  • FreedomCar

For example, the Energy Policy Act alone authorizes more than $7 billion–that’s billion– in alternative energy research, development, and commercialization during fiscal years 2006 through 2010, and represents the first comprehensive energy policy in a decade. The President’s budget and annual Congressional appropriations have generally tracked with these large authorizations.

The Energy Policy Act includes: consumer tax credits for hybrid and fuel cell vehicles, new investments for developing and producing alternative energy technologies, such as biomass and solar, and greater efforts to develop fuel cell and hydrogen-based energy technologies for vehicle, portable, and stationary applications as well as commercial and residential electric power generation.

Support for alternative energy technology also is likely to remain strong—or increase—throughout the remainder of the Bush Administration. As the Democrats prepare for their Congressional leadership in both the House and the Senate, they have announced their “New Direction for America” with goals that include achieving energy independence by 2020, and a commitment to invest in alternative energy ranging from geothermal to clean coal, solar, wind and flex-fuel vehicle technology and manufacturing.

The new Speaker of the House Nancy Pelosi said: “[President Bush’s] budget fails to provide adequate funding. Democrats pledge to invest in the development of clean, sustainable energy alternatives, such as bio-based fuels, as well as new engine technologies for flex-fuel, hybrid, and bio-diesel cars and trucks. We intend America to be energy independent—within 10 years.”

One of the Democrats’ key proposals is to create a new agency within the Department of Energy, modeled after the highly successful Defense Advanced Research Projects Agency (DARPA), to develop high-risk, high-reward, revolutionary energy technologies. Creation of a new agency focused exclusively on development and commercialization of alternative energy technologies would dramatically increase the focus and impact of current Federal efforts. While funding an e-DARPA would be difficult given the current budget deficit, the continued need to pay for the Iraq war, and Democratic pledges to offset any new spending with corresponding spending reductions, the proposal does enjoy some level of bipartisan support, and likely will receive serious consideration in the 110 th Congress.

In short, while reducing U.S. dependence on imported oil remains a long term policy goal, even more Federal funds are likely to flow into alternative energy in the next few years.