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67–346—PDF 2010

S. HRG. 111–1046 

CLEAN TECHNOLOGY MANUFACTURING 

COMPETITIVENESS: THE ROLE OF TAX INCENTIVES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY, NATURAL RESOURCES, 

AND INFRASTRUCTURE 

OF THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

MAY 20, 2010 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

BLANCHE L. LINCOLN, Arkansas 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

CHUCK GRASSLEY, Iowa 

ORRIN G. HATCH, Utah 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

JOHN ENSIGN, Nevada 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

RUSSELL SULLIVAN, Staff Director 

KOLAN DAVIS, Republican Staff Director and Chief Counsel 

SUBCOMMITTEE ON ENERGY, NATURAL RESOURCES, AND INFRASTRUCTURE

JEFF BINGAMAN, New Mexico, Chairman 

KENT CONRAD, North Dakota 

JOHN F. KERRY, Massachusetts 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

THOMAS R. CARPER, Delaware 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

JOHN CORNYN, Texas 

ORRIN G. HATCH, Utah 

MICHAEL B. ENZI, Wyoming 

(II) 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Bingaman, Hon. Jeff, a U.S. Senator from New Mexico, chairman, Subcommittee on Energy, Natural Resources, and Competitiveness, Committee 

on Finance ............................................................................................................ 1 

Bunning, Hon. Jim, a U.S. Senator from Kentucky ............................................. 3 

Wyden, Hon. Ron, a U.S. Senator from Oregon .................................................... 4 

Carper, Hon. Thomas R., a U.S. Senator from Delaware ..................................... 5 

WITNESSES 

Mazur, Dr. Mark, Deputy Assistant Secretary for Tax Analysis, Department 

of the Treasury, Washington, DC ....................................................................... 6 

Kelly, Dr. Henry, Principal Deputy Assistant Secretary for Energy Efficiency 

and Renewable Energy, Department of Energy, Washington, DC .................. 8 

Atkinson, Dr. Robert D., president, Information Technology and Innovation 

Foundation, Washington, DC .............................................................................. 18 

Sakoda, Jon, partner, New Enterprise Associates, Chevy Chase, MD ................ 20 

Parks, Douglas, senior vice president for business development and attraction, Michigan Economic Development Corporation, Lansing, MI .................. 22 

Book, Kevin, managing director, ClearView Energy Partners, Washington, 

DC .......................................................................................................................... 24

Harbert, Karen Alderman, president and CEO, Institute for 21st Century 

Energy, U.S. Chamber of Commerce, Washington, DC .................................... 26 

Foster, Dr. J.D., Norman B. Ture senior fellow in the economics of fiscal 

policy, The Heritage Foundation, Washington, DC ........................................... 28 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Atkinson, Dr. Robert D.: 

Testimony .......................................................................................................... 18 

Prepared statement .......................................................................................... 37 

Bingaman, Hon. Jeff: 

Opening statement ........................................................................................... 1 

Book, Kevin: 

Testimony .......................................................................................................... 24 

Prepared statement .......................................................................................... 50 

Bunning, Hon. Jim: 

Opening statement ........................................................................................... 3 

Prepared statement .......................................................................................... 58 

Carper, Hon. Thomas R.: 

Opening statement ........................................................................................... 5 

Foster, Dr. J.D.: 

Testimony .......................................................................................................... 28 

Prepared statement .......................................................................................... 60 

Harbert, Karen Alderman: 

Testimony .......................................................................................................... 26 

Prepared statement .......................................................................................... 65 

Kelly, Dr. Henry: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 75 

Mazur, Dr. Mark: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 82 

Page

IV 

Parks, Douglas: 

Testimony .......................................................................................................... 22 

Prepared statement .......................................................................................... 88 

Sakoda, Jon: 

Testimony .......................................................................................................... 20 

Prepared statement .......................................................................................... 92 

Wyden, Hon. Ron: 

Opening statement ........................................................................................... 4 

COMMUNICATIONS

American Forest & Paper Association ................................................................... 97 

Biomass Thermal Energy Council (BTEC) ............................................................ 102 

Diamond, John W. ................................................................................................... 106 

(1) 

CLEAN TECHNOLOGY MANUFACTURING 

COMPETITIVENESS: THE ROLE 

OF TAX INCENTIVES 

THURSDAY, MAY 20, 2010 

U.S. SENATE,

SUBCOMMITTEE ON ENERGY, NATURAL

RESOURCES, AND INFRASTRUCTURE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 2:45 p.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Jeff Bingaman 

(chairman of the subcommittee) presiding. 

Present: Senators Wyden, Stabenow, Cantwell, Carper, and 

Bunning. 

Also present: Derek Dorn, Staff Director for Senator Bingaman; 

and Karin Hope, Staff Director for Senator Bunning. 

OPENING STATEMENT OF HON. JEFF BINGAMAN, A U.S. SENATOR FROM NEW MEXICO, CHAIRMAN, SUBCOMMITTEE ON 

ENERGY, NATURAL RESOURCES, AND INFRASTRUCTURE, 

COMMITTEE ON FINANCE 

Senator BINGAMAN. All right. Why don’t we get started? This 

afternoon, the hearing examines ‘‘Clean Technology Manufacturing 

Competitiveness: The Role of Tax Incentives.’’ This term ‘‘clean 

technology’’ refers to technologies that harness zero-emission energy sources—such as wind turbines, solar panels, fuel cells—or enhance energy efficiency. 

If we had held this hearing in 2000, 10 years ago, we might have 

framed the key question as: how do we maintain and expand U.S. 

leadership in clean tech manufacturing? Unfortunately, over the 

past decade the U.S. has fallen behind a number of countries. For 

instance, as recently as 1999, the U.S. commanded a 30-percent 

share of the global solar manufacturing market. As the global market grew, domestic production declined, and by 2008 our share had 

slipped to 6 percent. A similar story can be told for the wind turbine industry: today, only one of the world’s top 10 wind turbine 

manufacturers is American. 

Using OECD data, the New America Foundation found that America’s green trade balance had moved from a surplus of $14.4 

billion in 1997 to a deficit of $8.9 billion in 2008. This is a troubling trend. We see at least three reasons for trying to ensure that 

U.S. leadership in clean tech manufacturing returns. 

2 

First is economic. Building a clean energy technology industrial 

base offers an opportunity to reverse the decline in our manufacturing sector, which has lost more than 6 million jobs in the past 

decade. A national renewable electricity standard, like the one that 

we reported out of our Energy Committee, which my colleagues 

here, Senator Bunning and Senator Wyden, serve on with me, 

could stimulate enough demand for wind turbines, solar panels, 

and other clean energy technologies to create a great many manufacturing jobs, but we must ensure that those jobs are created here 

in the U.S. and not in other countries. 

Second is national security. If we do not grow a domestic clean 

tech manufacturing base, we could be trading our imported oil dependency for an imported clean energy component dependency. 

Shortages in energy and renewable energy components and systems have already slowed domestic renewable energy production. 

Finally is innovation. We have begun to see offshoring of manufacturing being followed by the offshoring of research and development capacity. Failure to lead in clean technology manufacturing 

could undermine our lead in the research, development, and innovation that is related to it. 

For years, other countries have utilized tax incentives to attract 

clean tech manufacturers. In the Recovery Act that Congress 

passed last year, we began to level the playing field. We created 

the Advanced Energy Project, or section 48(c) credit, that allows 

qualifying companies to claim a credit for 30 percent of the cost of 

creating, expanding, or re-equipping facilities to manufacture clean 

energy technologies. 

Under the provisions enacted into law, the Departments of Energy and Treasury were authorized to award $2.3 billion in tax 

credits. In January, the departments fully allocated that $2.3 billion among 183 different projects, representing the solar, wind, vehicles, nuclear energy storage, smart grid, energy efficiency, and 

bio-fuel sectors. 

Awards were made to projects in 43 States, and this includes 

three projects in my home State of New Mexico, four in the State 

of Kentucky. The credit’s vast over-subscription is a powerful demonstration of the potential for clean energy manufacturing in the 

United States. 

To that end, I joined, in December, with Senators Hatch, 

Stabenow, and Lugar in filing the American Clean Technology 

Manufacturing Leadership Act, which would add another $2.5 billion in tax credit allocation authority. I am glad to see that earlier 

this year the President endorsed this expansion, but called for 

$5 billion in credits rather than the $2.5 billion. 

At today’s hearing, we have a panel of expert witnesses who will 

help us consider three issues: first, how have the U.S. and other 

countries attracted advanced energy manufacturing facilities 

through tax and other incentives; second, what is the experience of 

the recently enacted section 48(c) tax credit; and third, should Congress provide additional tax credit authority under this section 

48(c) program? I look forward to receiving this testimony. 

Senator Bunning, go right ahead. 

3 

OPENING STATEMENT OF HON. JIM BUNNING, 

A U.S. SENATOR FROM KENTUCKY 

Senator BUNNING. Thank you, Mr. Chairman. I thank the witnesses for appearing today, and I thank you for holding this hearing. 

I think we all can agree that we need to allow American manufacturers to compete fairly and create jobs, including jobs in clean 

energy. Today, we are looking at whether the tax credit in section 

48(c) of the tax code is succeeding, whether it should be extended 

or changed, and in general, what keeps U.S. manufacturers from 

being competitive in clean energy? 

First, I think it is important to put the tax credit in context. Section 48(c) was created in last year’s stimulus package, a bill that 

added over $1 trillion to our national debt if you include the interest costs. We simply cannot continue spending money that we do 

not have. If we follow the path outlined by the administration, 

America will be on a track to double our national debt in 5 years 

and triple it in 10. Unless we want the situation in Greece to happen here in a few years, we have to stop spending money like 

drunken sailors. 

So let us agree that, if extended, section 48(c) will have to be 

paid for. On the rare occasion that Congress actually pays for anything, the favorite method is to raise taxes, not to cut spending and 

reduce the bloated size of the Federal Government. The Obama administration has proposed paying for clean energy incentives by 

raising taxes on the most abundant source of American energy. 

Since manufacturers have a harder time succeeding when their energy costs are high, it is hard to see how this is going to create jobs 

or make American businesses more competitive. 

Or to put it another way, how many jobs are we willing to destroy in order to create one green energy job? We know that America is second to none in innovation and our high-quality workforce, 

but we should not be surprised that other countries are outpacing 

America in clean energy manufacturing. 

The policy of the Chinese government is to massively subsidize 

their exporting industries. China does this through huge direct 

subsidies and by manipulating currency to make its exports cheaper. One of the most obvious and cost-effective ways to address this 

problem is for the United States to actually enforce our trade laws, 

but our government refuses to take any meaningful action. 

Then there is the problem of environmental and other regulatory 

roadblocks that are thrown up to prevent American energy projects 

from going forward. These roadblocks affect many renewable energy projects, and we would not have to spend a lot of money to 

fix them. Some people suggested that if we impose a cap-and-trade 

system we would not need tax incentives to promote cleaner 

sources of energy and green jobs, but many of our witnesses will 

point out that this will not succeed in creating green jobs. In fact, 

it is likely to push even more manufacturing jobs offshore to countries without emissions limits. 

So, we have a lot of important questions to explore today: (1) can 

we afford to spend another $5 billion on a tax subsidy, and will it 

really help; (2) are we willing to destroy jobs in order to create one 

4 

green job; and (3) are there more cost-effective ways of addressing 

the competitiveness of the United States’ manufacturers? 

Thank you again, Mr. Chairman, for holding this hearing. 

Senator BINGAMAN. Since we have two other colleagues here who 

are vitally interested, let me just ask if each of them would like to 

make a short statement. We do want to get to the witnesses. But 

Senator Wyden, why don’t you make a short statement, if you 

would like, and then Senator Carper? 

OPENING STATEMENT OF HON. RON WYDEN, 

A U.S. SENATOR FROM OREGON 

Senator WYDEN. Mr. Chairman, I will be brief, because I am 

going off to chair another panel on clean energy that you and I 

have a big interest in. 

I look forward to working very closely with you, Mr. Chairman, 

on this topic. As you know, I chair the Trade Subcommittee of the 

Finance Committee. You and I have a mutual interest in looking 

carefully at 48(c), the Advanced Energy Manufacturing Tax Credit, 

because I think we have really reached a fork in the road with respect to how we advance these credits. The two standards essentially for the original credit were: (1) did the proposal create jobs; 

and (2) would that be a commercially viable kind of effort? 

What you and I have talked about is a third area that I think 

is absolutely essential, and that is the ability to take those two 

standards, job creation and commercial viability, and apply them 

to the export area. It is very obvious now that, particularly, China 

is in a crash program to develop these clean energy technologies. 

They have the potential to out-invest us in this area by a factor of 

3:1 in the next 5 years. It just strikes me as a no-brainer to say 

that one of the criteria for the future should be the ability to export. That way, when we produce these wind turbines and solar 

panels—I think Senator Bunning made a good point with respect 

to his concern about spending. 

Let us just say, if we are going to make an investment, let us 

give it the potential to be a two-fer: one to be used in our country, 

these green products here, but second, to have it as something that 

we would export around the world so that our workers could get 

additional good-paying jobs. This also fits with the President’s 

promise, of course, to double exports in the next 5 years. 

The last point I would make, Mr. Chairman, is something else 

you and I have talked about. The structuring of the incentives in 

this area as it relates to manufacturing needs to be done carefully 

to not run afoul of U.S. obligations under the World Trade Organization. But I think it would be possible, by adding exports as a 

third criteria, in effect, to the other two major criteria, to get the 

best of both worlds, an additional opportunity, a major opportunity 

for our country in the export markets, and do it in a way that does 

not run afoul of our obligations under the World Trade Organization. 

Mr. Chairman, I really look forward to working closely with you 

on it. Our staffs have been working together on it, and I think this 

is an extraordinarily important initiative for the future of the 

American economy, and I commend you for your leadership. 

5 

Senator BINGAMAN. Thank you for your statement. 

Senator Carper? 

OPENING STATEMENT OF HON. THOMAS R. CARPER, 

A U.S. SENATOR FROM DELAWARE 

Senator CARPER. Thanks very much. Witnesses, we welcome you 

today. 

Maybe three quick points, if I could. Four. First of all, thanks for 

pulling this together. This is great stuff. When we did the stimulus 

package, voted and worked on that measure in the Finance Committee, I was strongly interested—I think every one of us was 

strongly interested—in making sure, if we are going to move toward clean energy, and I hope we do, that we build those components to support those initiatives in this country. 

Three points. Delaware hopes to be the first State off of whose 

shores will be deployed the first windmill farm. Twelve miles off of 

Rehoboth Beach, hopefully in 2 years we will have a windmill farm. 

They already have a contract with the utility to buy the electricity, 

and we are very much encouraged that that will happen. 

Across the river from us in Delaware, just across the Delaware 

River in New Jersey, there is a place called Salem, and they have 

two nuclear power plants there, Salem and Hope Creek, owned by 

PSEG. PSEG, the utility, wants to build another one on the vacant 

site. There is a plot there that is available to build another one. 

Finally, down in Dover, our State capitol in the middle of the 

State, we have a farm with several hundred acres. The town of 

Dover has decided they are going to help build and deploy a solar 

energy farm there to provide and meet much of the electricity 

needs for the community. 

Now, I love offshore wind and I am a supporter of nuclear, as I 

know my two compadres here are, and I think we are all supportive of solar. It would be great to have all three of those 

projects, I think, happen to put people to work and so forth. But 

would it not be even better if the components that were actually 

going to be used to manufacture and assemble the windmill farms 

and the nuclear power plant and the solar energy farm could be 

made here in America as well? Whatever we could do to incentivize 

that, that is a great thing for our country. So, thanks. 

Senator BINGAMAN. Well, thank you. Thanks for being here at 

our hearing. 

Let me introduce our first panel. Dr. Mark Mazur is the Deputy 

Assistant Secretary for Tax Analysis in the Treasury Department. 

Thank you for being here. And Dr. Henry Kelly is the Principal 

Deputy Assistant Secretary for Energy Efficiency and Renewable 

Energy at the Department of Energy. Thank you very much for 

being here. 

Why don’t you each go ahead? As you are probably aware, the 

practice here on the committee is to try to have folks summarize 

their testimony in about 5 or 6 minutes each, and then we will include your full statement in the record. 

So, Dr. Mazur, why don’t you go ahead? 

6 

STATEMENT OF DR. MARK MAZUR, DEPUTY ASSISTANT SECRETARY FOR TAX ANALYSIS, DEPARTMENT OF THE TREASURY, WASHINGTON, DC 

Dr. MAZUR. Thank you. Good afternoon, Chairman Bingaman, 

Ranking Member Bunning, and members of the subcommittee. 

Thanks for inviting me here to testify before the subcommittee 

today. I appreciate the opportunity to discuss the role of tax incentives in helping to improve clean energy technology manufacturing 

competitiveness for the United States. 

Now, the Obama administration believes that our Nation must 

build a clean energy economy, curb our dependence on fossil fuels, 

limit greenhouse gas emissions, and make America less dependent 

on foreign sources of energy. It is not sufficient to address our energy needs solely by finding more fossil fuels. Instead, we must 

take dramatic steps toward becoming a clean energy economy. 

These include encouraging investment in clean energy infrastructure and energy efficient technologies. 

The Recovery Act took an important step in that direction by pro- viding more than $90 billion for various investments in clean energy technologies, including $2.3 billion in tax credits for investments in advanced energy manufacturing facilities, section 48(c) of 

the tax code. 

This section 48(c) program is one of two major Recovery Act programs promoting clean energy technologies that are administered 

by the Department of the Treasury in consultation with the Department of Energy. The other one provides payments for specific 

energy property in lieu of tax credits, the section 1603 program, 

but the 48(c) program, the subject of today’s hearing, has provided 

$2.3 billion in tax credits to support American businesses in the 

clean energy manufacturing marketplace, funding 183 projects in 

43 different States. 

This tax credit supports investments in advanced energy manufacturing facilities and was designed to help America take the lead 

in the manufacture of wind turbines, solar panels, electric vehicles, 

and other clean energy and energy conservation products. 

Under section 48(c), a 30-percent tax credit is provided for investments in eligible property used in a qualifying advanced energy 

project. A qualifying advanced energy project is a project that reequips, expands, or establishes a manufacturing facility for the production of property designed to produce energy from renewable 

sources, fuel cells, or microturbines; property that supports the 

transmission of intermittent sources of renewable energy; property 

to capture and sequester carbon dioxide emissions; property to refine or blend renewable fuels; electric drive motor vehicles; and advanced energy property designed to reduce greenhouse gas emissions. 

Ineligible property for this credit is tangible personal property or 

other tangible property, but not including a building or its structural components for which depreciation is allowable. 

The 48(c) credit represents a new approach for the United States. 

Previous tax incentives were aimed at increasing clean energy production, and while these incentives increased demand for clean energy equipment, much of this equipment and property was manufactured overseas. 

7 

The 48(c) credit provides a powerful incentive to invest in advanced energy facilities that will produce clean energy equipment 

here in this country. The $2.3-billion cap on the credit resulted in 

the funding of less than one-third of the technically acceptable 

project applications that were received. 

Now, other countries have a variety of programs to encourage the 

clean energy sector. Some countries have adopted systems that require you to purchase a specified amount of energy from renewable 

or clean sources at a set price. The creation of a stable market for 

clean energy increases demand for, and encourages investment in, 

manufacturing capacity to meet that demand. Other programs include direct public investments in clean energy technology, often at 

levels far exceeding what the United States has in their programs. China, for example, is expected to direct nearly $400 billion of 

public investments in clean energy technology over the period 2009 

to 2013. That compares to about half, or less than half, of that 

amount for the United States over the same period. 

Some jurisdictions offer significant tax incentives for clean energy manufacturers. Just one example is Malaysia, that offers photovoltaic manufacturers a 15-year income tax holiday. 

The Obama administration will monitor other countries’ programs that promote clean energy manufacturing and will work to 

establish a level playing field for U.S. clean energy product manufacturers, including vigorous enforcement of our rights under international trading rules and our ongoing efforts in the World Trade 

Organization to eliminate tariff and non-tariff barriers in this area. 

With this as background, I want to turn to the tax proposals in 

the fiscal year 2011 budget that relate to clean energy. These really 

fall into two buckets. One, a proposal to provide additional tax 

credits for advanced manufacturing facilities. The President’s fiscal 

year 2011 budget proposed an additional $5 billion in credits for 

the 48(c) program. We estimate that will support at least $15 billion of total capital investment and create tens of thousands of new 

construction and manufacturing jobs. 

Given the experience with the existing section 48(c) program, we 

believe there will be a sufficient number of high-quality projects 

and substantial interest from a variety of sources. Accordingly, we 

believe that this can be an effective program to further promote advanced energy technologies. 

The second bucket is extending a number of expiring provisions. 

The fiscal year 2011 budget proposes to extend through 2011 a 

number of tax provisions that have either expired or are scheduled 

to expire before the end of 2011. 

The following clean and renewable energy efficiency incentives 

are included in the budget proposal. Incentives for biodiesel and renewable diesel, incentives for alternative fuels, incentives for alcohol fuels, tax credits for alternative fuel refueling property, tax 

credits for hybrid automobiles and other alternative motor vehicles, 

tax credits for energy-efficient new homes, and tax credits for energy efficiency improvement to existing homes. 

Mr. Chairman, this concludes my prepared testimony. I would be 

happy to answer any questions you or other members of the committee may have. 

Thank you. 

8 

Senator BINGAMAN. Thank you. 

[The prepared statement of Dr. Mazur appears in the appendix.] 

Senator BINGAMAN. Dr. Kelly, go right ahead. 

STATEMENT OF DR. HENRY KELLY, PRINCIPAL DEPUTY ASSISTANT SECRETARY FOR ENERGY EFFICIENCY AND RENEWABLE ENERGY, DEPARTMENT OF ENERGY, WASHINGTON, DC 

Dr. KELLY. Chairman Bingaman, Ranking Member Bunning, 

other members of the committee, it is a pleasure to be here today 

to talk about what we think is a crucial part of America’s Recovery 

and Reinvestment Act, which is the 48(c) tax credit program. I 

have a longer statement, which I will submit for the record. 

[The prepared statement of Dr. Kelly appears in the appendix.] 

Dr. KELLY. First of all, let me say that it has been a pleasure 

working with our colleagues at Treasury and the IRS in undertaking this complex, but important, program. A lot of the credit 

goes to this committee for designing a program that allowed us to 

work smoothly together, and we think that it has been a very productive relationship. 

The 48(c) program, as you know, is an integral part of a multipronged effort to encourage clean energy technology innovation and 

investment in the American economy. Taken together, we have 

about $90 billion worth of public investment, which we think will 

leverage a total of over $150 billion of investment in clean manufacturing. 

The 148 projects funded by the 48(c) program cover a wide range 

of technologies in 43 States. The hunger for this kind of program 

and these kinds of investments was revealed by the enthusiastic 

participation. As Dr. Mazur said, we were over-subscribed by a 

large factor, and there is latent demand from places that did not 

adequately understand the opportunity presented by this program. 

In combination with other investments and policies, the 48(c) 

program is providing the incentives to invest in major clean energy 

programs and their supply chains, as with wind energy, for example. Five years ago, only about a quarter of the value-added parts 

in a wind turbine placed into service in the United States were actually sourced from the United States. It is now, thanks to these 

programs, up to 50 percent, and we think we can probably get up 

to the range that the U.S. automobile industry is, which is above 

70 percent, in the near future. We are on a pace to double U.S. renewable manufacturing capacity by 2012, again thanks in part to 

these programs. 

Of course, equally importantly, these investments translate into 

job creation. While the recipients are not required to report jobs 

created to our federalreporting.gov, the 48(c) program applications 

estimated Federal dollars would support about 17,000 of the roughly 50,000 jobs generated in the selected clean energy manufacturing projects. As a result, we can see concrete cases of where this 

program is putting America’s workers back to work in jobs that are 

productive, rewarding, and point towards the future. 

As you know, the President has called on Congress to fund an 

additional $5 billion for the section 48(c) tax credit program, and 

we look forward to working with this committee. And my colVerDate Nov 24 2008 21:37 Aug 15, 2011 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 R:\DOCS\67346.000 TIMD
9 

leagues in the Treasury and I were asked to keep the work that 

we have so productively started this year going, through this additional funding. 

Now, the 48(c) program lays a foundation for a very broad and 

ambitious expansion of high technology clean energy production in 

the United States, and there is wide agreement among economists 

that these kinds of innovative high productivity investments are 

precisely the things that will keep America competitive, drive exports, and create long-term, stable, high-paying jobs. 

Of course, it has to be coupled with a program to make sure that 

the incentive to buy the output of these products both at home domestically and internationally exists, but the combination of ensuring stable demand and finding the funds to ensure the manufacturing to meet the demand can be highly productive. So we thank 

the committee for your leadership in creating this program. We 

think it is key to maintaining U.S. leadership in a crucial and expanding industry. It is an important policy tool, and I look forward 

to discussing the path to the future with you. 

Senator BINGAMAN. Thank you both. 

Let me start with a couple of questions. As you are aware, in enacting section 48(c), Congress outlined broad selection criteria that 

the two departments, Energy and Treasury, have implemented. 

One criterion is for products that ‘‘have the lowest levelized cost of 

generated or stored energy or a measured reduction in energy consumption supply chain.’’ 

I think we included the reference to the full supply chain so as 

not to disadvantage manufacturers of components rather than completed products, but some have suggested that this criterion, the 

way we now have it, creates an implicit bias in favor of manufacturers that import components from overseas. I would be interested 

in knowing whether either of you think that is the case, and is that 

something we need to fix? Dr. Mazur, did you have a view on that? 

Dr. MAZUR. At first blush, it seems that the current requirement 

does not have a bias in it at all. Basically, it just says ‘‘lowest 

levelized cost.’’ As you start thinking about it a little more, if it 

turns out that there are significant cost differences between imported components and U.S.-generated components, perhaps there 

could be some advantage there. 

I think part of the intent of the 48(c) program is to, in a sense, 

jump-start the American manufacturing capability so that we can 

compete on price across the board on this. So there may be a transition issue getting to that point. That is something we would be 

willing to work with you all about in trying to make sure that that 

can be done in the context of meeting our trade obligations. 

Senator BINGAMAN. Dr. Kelly, did you have a view on this? 

Dr. KELLY. Well, we had actually thought about this quite considerably during the selection process. We did not find any restrictions on our ability to select, and found no evidence that the people 

who were importing parts had any greater access to these funds 

than anyone else. On the contrary, what we have been able to do, 

through these programs, is increase the domestic content, as I 

mentioned earlier regarding the statistics about wind domestic content. 

10 

By encouraging the investment in wind manufacturing here, you 

then build a local domestic supply chain, and the wind domestic 

content has been growing very sharply as a result. There is no evidence that this bias exists. Of course, we have to be vigilant that 

our reviewers understand this, but so far our track record is good. 

Senator BINGAMAN. One of the other suggestions has been that 

we make this credit refundable. In fact, I believe there is a bill that 

has been filed to that effect here in the Congress. Given the fact 

that the application volume substantially outstrips the credits 

availability, do you believe we have a need to make this credit refundable, or does the high demand suggest that the credit already 

can be utilized by more than enough taxpayers? 

Dr. KELLY. The evidence of over-demand for the available funds 

speaks for itself. We feel that we have a portfolio of options for people who want to receive funding for projects that are in various 

stages of maturity. We have, of course, the loan programs. We have 

the 1603 payment in lieu of tax credit programs, which provides 

payment for projects that are not in a position to be paying taxes. 

There are, of course, the existing investment tax credits and production tax credits. So we think that the 48(c) actually fills a very 

crucial niche within this portfolio of opportunities. 

Senator BINGAMAN. By establishing an allocated tax credit, 

which is what 48(c) is, Congress asked the administration to play 

a role that is not dissimilar from the role that a venture capitalist 

plays, that is, take a limited pool of capital and invest that. Congress established broad selection criteria that the Department then 

implemented. Do either of you have recommendations for ways that 

we should modify the statutory selection criteria? 

Dr. KELLY. We were actually very satisfied with the way the 

original bill was written. We felt that it gave us the flexibility to 

attract exactly the kinds of investments you were looking for. 

If I were going to fault the process, it is not in the design of the 

legislation itself, it is that we probably were not as active in marketing this to certain parts of the community as we should have 

been. We were sort of surprised that, in areas like nuclear components and some efficiency areas, we did not receive as many applications as we had originally expected. With additional funding, we 

can be very active in making sure all the potential recipients are 

aware of this opportunity. All of that can be done within the existing statute. 

Dr. MAZUR. Actually, one improvement that could be made would 

be to allow applicants to apply for a portion of the cost of their 

project rather than the entire amount, and that would allow them 

to say they needed a smaller amount of money to make the project 

go. That would allow, then, more projects to be funded and perhaps 

to leverage the funds a little bit more highly, more effectively. 

Senator BINGAMAN. All right. 

Senator Bunning? 

Senator BUNNING. Thank you, Mr. Chairman. 

Dr. Kelly, what percentage of the U.S. energy supply is currently 

from renewable sources? 

Dr. KELLY. If you count hydroelectric, I believe hydro is 

around—— 

Senator BUNNING. No, all. 

11 

Dr. KELLY. It is around 10 percent. 

Senator BUNNING. Ten? 

Dr. KELLY. Yes. I would like to correct that for the record, but 

I think that that is roughly correct. 

Senator BUNNING. All right. That is fine. 

Would it be fair to say that most U.S. manufacturers currently 

get their energy from traditional fossil fuel sources? 

Dr. KELLY. With a total only being 10 percent, obviously that is 

roughly the fraction manufacturers are getting from the renewables. 

Senator BUNNING. All right. 

So, if we raise taxes on the most abundant form of energy in 

order to pay for clean energy incentives, what assurances can you 

give us that we will not be losing more jobs than we will gain? 

Dr. KELLY. Well, we are trying very hard to get renewables and 

investments in efficiency, including industrial efficiency, to come in 

at a price that is fully competitive with the price of traditional 

fuels. So, in effect, it will not be affected. 

Senator BUNNING. In other words, so it will not cost more than 

traditional fossil fuels? 

Dr. KELLY. That is certainly our research goal. Also, the fact is 

that there are environmental costs associated with using some of 

these fuels that are not captured in the current market price. That 

is a decision we have made. But there is a price, in pollution and 

in other areas, that is not being captured in the real economics of 

energy. 

Senator BUNNING. Just so I can get this straight, Dr. Mazur, you 

said that 48(c) funded 148 projects. But Dr. Kelly, I believe you 

said that 183 projects were funded. 

Dr. KELLY. I think we both said 183. 

Dr. MAZUR. I thought I said 183. I may have misspoken. 

Senator BUNNING. All right. I just wondered why the numbers 

disagreed. So they are both 148? 

Dr. MAZUR. No. It’s 183 projects. 

Senator BUNNING. One hundred and eighty-three? 

Dr. MAZUR. And 43 States. 

Senator BUNNING. Forty-three States, 183. Thank you. 

Dr. MAZUR. You are welcome. 

Senator BUNNING. Dr. Mazur, are there any small businesses 

that receive the 48(c) tax credit? 

Dr. MAZUR. I believe, yes. 

Senator BUNNING. Would any of those small businesses be likely 

to earn more than $200,000 or $250,000 a year? 

Dr. MAZUR. I do not know for sure, but that is possible, yes. 

Senator BUNNING. Well, if they do not earn more than that, then 

they probably would be able to create a whole lot of new jobs. The 

President is planning to raise taxes on successful small businesses 

that earn more than $250,000. Even if the 48(c) credit is extended, 

will you not just be giving with one hand and taking away with another? 

Dr. MAZUR. What the President proposes in the 2011 budget is 

to allow the tax cuts from 2001 and 2003 to expire as scheduled 

for high-income households, those with $250,000 or more, both 

wage earners and business earners. 

12 

Senator BUNNING. Well, we are talking about businesses, not individuals. 

Dr. MAZUR. Well, generally it is on the individual income taxes. 

Senator BUNNING. Are you talking about the small business that 

does not file the corporate tax? 

Dr. MAZUR. Right. They either file Schedule C as a sole proprietor—— 

Senator BUNNING. All right. 

Dr. MAZUR [continuing]. Or schedule F as a farmer, or just another part of their 1040 form. 

Senator BUNNING. All right. It is my understanding that the tax 

credit was sometimes given to businesses in which there was a foreign parent company that manufactured most of the products offshore and that was just assembled here. These products might 

have been assembled here anyway for logistical reasons, even without the tax credit. Is this really encouraging innovation? What assurances can you give us that this tax credit is going to projects 

that create U.S. jobs, not just subsidizing jobs that would have occurred here anyway? 

Dr. KELLY. Well, you get the credit only by investing in the 

United States and creating U.S. jobs, so an assembler would have 

to be matching that. 

Senator BUNNING. I understand that. But what if the parts were 

manufactured other places and, as a convenience, they were put together here in the United States by a corporation that was formed 

to do just that? 

Dr. KELLY. All businesses import some parts. What we want to 

do is make sure the highest fraction of the parts in renewables, as 

in other things, are in fact manufactured here. 

Senator BUNNING. You brought in wind as something that we are 

up now to 50 percent. 

Dr. KELLY. To get this credit, the wind assemblies have to invest 

roughly 2 or 3 times as much as we are giving them in credit of 

their own money in the U.S. to get the credit. They do not get the 

credit unless they do that. Wind now imports roughly half the 

parts, but because of the local manufacturing, the supply chain is 

growing very rapidly here, so domestic production is driving associated part production here in the U.S. very rapidly. We lost a lot 

of this over the last 5 years. In the last few years, we have been 

getting it back quickly. 

Senator BUNNING. Well, is that because the Federal Government 

has not subsidized, or what was it? 

Dr. KELLY. As Dr. Mazur said, there are huge subsidies for wind 

and other renewables overseas, and that is why a lot of the production went over there. We think we are well on track to get a lot 

of production back here, and this tax credit has given people a very 

strong incentive to decide that they are going to assemble here in 

the United States and put a robust supply chain in place here. 

Senator BUNNING. Thank you. 

Senator BINGAMAN. Thank you. 

Senator Carper, go right ahead with your questions. 

Senator CARPER. Thanks. Thanks, Mr. Chairman. 

Dr. Kelly, Dr. Mazur, again, welcome. We have heard complaints 

from some manufacturers that with 48(c) it has taken too long for 

13 

the money to be received. Let me just ask two questions, really. 

First is, how can we improve that process? How can we expedite 

it? Second, can we make it easier for manufacturers? Those are my 

two questions: how can we improve the process and, second, can we 

make it any easier for manufacturers? Please. 

Dr. KELLY. I think we actually got it done ahead of time, a week 

ahead of the deadline, and we put together a very effective team 

and moved quite rapidly. The second time we do this, it will obviously be somewhat more efficient. 

We thought hard about ways to make this easy for the applicants 

to participate, and one of the innovations was to get them to submit a 2-page pre-proposal which was necessary, but not sufficient, 

to get the grant. That allowed us, among other things, to understand what kind of projects we were going to get and assemble a 

peer review team rapidly so that, when the applications came in, 

we would immediately be able to start reviewing them. 

Second, it allowed us to immediately weed out applicants that 

were just not going to qualify for one reason or another. So we actually are proud of the track record here. The next time around, 

we can obviously do it somewhat more productively, but from our 

point of view we would not recommend any statutory changes to 

the process. It worked well. 

Senator CARPER. What kind of lessons did you learn or take 

away from this process for the last year or so? 

Dr. KELLY. There were parts of industry that should have been 

much more active than they were. 

Senator CARPER. Including? 

Dr. KELLY. Well, a lot of energy efficiency product manufacturers; nuclear was not well-represented, et cetera. It seems that some 

industries, like the solar industry, were just much better at using 

their network and getting the word out. We are going to have to 

tap into a new set of networks, and we think we know how to do 

that, but we would love to work with the committee to find more 

effective ways to do that, particularly if many States have local innovation networks and ways of communication with production 

people in the States. I want to make sure that we are making full 

use of those. 

Senator CARPER. All right. 

Dr. Mazur, I have a follow-up question. If you have something 

you want to say at this point, go ahead. All right. I think you mentioned—one of you mentioned—$70 million of 

manufacturing tax credits were awarded to a couple of companies 

to manufacture nuclear reactor components, I think. Was that correct, $70 million? All right. 

Dr. KELLY. Yes. 

Dr. MAZUR. Yes. 

Senator CARPER. Is that $70 million out of $2.5 billion in 

projects? Is that correct? 

Dr. KELLY. Let me see. There were two projects. It is $73.8 mil- lion, yes, out of the $2.3 billion. 

Senator CARPER. Again, you may have said this. Let us just go 

back, though. How do we make sure that in the next step, the next 

leg as we are pursuing this, that the nuclear industry is not just 

coming in for, in this case, I will not call it chump change, but reaVerDate Nov 24 2008 21:37 Aug 15, 2011 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 R:\DOCS\67346.000 TIMD
14 

sonably modest amounts of money? Any lessons that we learned as 

to how to change that, or how they can change that? 

Dr. KELLY. Well, the reason the number of awards was low is, 

we had comparatively few applicants in this area. So, as I said—— 

Senator CARPER. Again, why do you think that was the case? 

Dr. KELLY. Our understanding is that a lot of people who could 

have qualified simply did not know about the opportunity, and we 

need to be much more aggressive in working with the industry associations—— 

Senator CARPER. Good. 

Dr. KELLY [continuing]. As I said, State organizations, utilities, 

and other people to make sure that the entire nuclear supply chain 

that qualifies knows about this next time around. 

Senator CARPER. All right. 

Let me just ask one last question on this point. Again, if you 

would respond, Dr. Kelly. Do you believe we are going to build new 

nuclear power plants in this country in the next 15 years? Do you 

think we will? There are applications to build a couple dozen. What 

do you think? 

Dr. KELLY. We are determined to get them built. We have certainly gotten our loan guarantee program up and running, and for 

the first time real applications are being actively considered. So, I 

am actually quite optimistic that we have the sites, we have the 

financing, and we have the applicants. 

Senator CARPER. All right. 

And I presume from what you said, you believe that the manufacturing energy tax credit will help increase our manufacturing 

base for new nuclear. Is that a fair statement? 

Dr. KELLY. The manufacturing tax credit helps across a very diverse supply chain, because the components of nuclear plants qualify under this. 

Senator CARPER. Last question. Dr. Kelly, you mentioned the 

need to also provide incentives for clean energy use, to build new 

clean energy manufacturing. Several of my colleagues and I have 

introduced legislation to build our offshore wind industry in this 

country, and one such bill was introduced by Senator Snowe and 

a number of us, a bipartisan bill. It separates offshore wind from 

onshore wind in the tax code and extends the production tax credit 

and the investment tax credit for offshore wind until 2020. 

I would just like to ask you to maybe comment on that. Do you 

agree that offshore wind has a longer start-up time than onshore 

wind, and could an extended tax incentive for offshore wind help 

our Nation to develop an offshore wind industry, including a manufacturing base for making offshore wind technology? 

Dr. KELLY. We have a very ambitious program to try to move forward. The Recovery Act actually allowed us to get a very exciting 

jump-start on offshore wind, including the project partly run out of 

Maine. In terms of the specifics of the bill, I would defer to my colleague from Treasury on that. 

Senator CARPER. All right. 

Dr. MAZUR. I think generally, in terms of tax incentives, you try 

not to make distinctions between similarly situated taxpayers. So, 

you would have to have a very good story for why offshore wind 

should be treated differently than onshore wind. 

15 

Senator CARPER. I think the reason why is because a lot of people believe it has a significantly longer start-up time than onshore 

wind. It is simply because of the difficulties we have seen in the 

Gulf, the difficulty in uprigging, and the water depths of those 

magnitudes. 

Dr. MAZUR. Also, partly because of the maturity of the industry. 

I think that you have seen way more onshore projects than offshore 

projects. 

Senator CARPER. Yes, we have. 

Dr. MAZUR. Exactly. 

Senator CARPER. All right. Mr. Chairman, you have been generous with your time. Thanks so much. 

And gentlemen, thanks so much for really good work. 

Senator BINGAMAN. Thank you. 

Senator Stabenow? 

Senator STABENOW. Well, thank you, Mr. Chairman, very much. 

First, thank you to you for your leadership. It was my pleasure to 

partner with you during the Recovery Act, in the Finance Committee, to be able to place the advanced energy manufacturing tax 

credit in the Recovery Act. 

I know, certainly from Michigan’s standpoint, this has made a 

real difference and is creating jobs. I would emphasize again, and 

you may have already said this, but jobs have actually been created 

in 48 different States, and I think that is a pretty good track record 

for this particular policy. I know that we can, in fact, do more. 

I am pleased to be a co-sponsor of your bipartisan legislation, 

and also to have authored a provision in the Budget Resolution, if 

in fact we have a budget resolution this year, that would in fact 

place the full $5 billion into the budget—it is in the Budget Resolution in the Senate coming out of Committee—to expand this very 

important tax policy. 

We, I think, have made a very important statement about the 

fact that we need to make things in this country. It is not enough 

just to have clean energy R&D, we actually want to create the jobs 

and the manufacturing here in the United States. So, I think that 

is very important. 

Mr. Kelly, a couple of questions for you. We know that we have 

had many more applicants—I know you have spoken about that— 

technically, acceptable applicants than we had dollars for. That is 

our job, to do our best to be able to expand this very important tax 

credit. 

But I am often asked by those who applied and did not receive 

funding the first time how a second round would work in terms of 

those who have already applied. Are you assuming that people 

would reapply, or would you begin with those whom you did not 

give a credit to this time? How do you see that working? 

Dr. KELLY. I would be happy to try to take a stab at this, but 

the rules governing reapplication are really IRS’s rules. Dr. Mazur 

would—— 

Senator STABENOW. I am sorry. Dr. Mazur, I should be maybe directing that to you. But if you would both like to say something 

about that. 

Dr. MAZUR. Basically, it would depend on the statute, the way 

the statute read. You could imagine the statute reading just to exVerDate Nov 24 2008 21:37 Aug 15, 2011 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 R:\DOCS\67346.000 TIMD
16 

tend the current rules for another round and say $5 billion for the 

next round. That would require reapplication. 

You could imagine statutory language that had some different 

language in there that would allow the taxpayers that have already 

applied to just sort of roll their applications over. It would probably 

be fairer to have a new round of applications so those who did not 

get the awards could update their applications and perhaps make 

a stronger case. That may put them in a better position than just 

using the application that is already in place. 

Dr. KELLY. We certainly have a large number of highly qualified 

applicants who did not get the funding. We would hope that, no 

matter what happens, we would make the reapplication process 

very simple so that they could basically do a modest update and 

not have to do a lot of paperwork to reapply. 

Senator STABENOW. Well, to add to that, though, let me ask then, 

what is being done in terms of debriefing companies to give them 

feedback, those that did not receive the tax credit, so that they 

would be in a better, stronger position to reapply? 

Dr. KELLY. We were under some constraints given the tax treatment rules of application data as outlined in the Notice. However, 

we do engage applicants as best we can. 

Senator STABENOW. Well, I think that is very important. I would 

encourage you to do more of that. We have many manufacturers. 

As you know, in Michigan, they are moving from autos into alternative energy: wind, solar, other applications. It is important, for 

those that did not receive a credit, that they do have the opportunity to get feedback and to work with you on how to strengthen 

their proposals. 

Thank you, Mr. Chairman. 

Senator BINGAMAN. Thank you. 

Senator Cantwell, did you have questions for this first panel? 

Senator CANTWELL. Yes, I did. 

Senator BINGAMAN. Go right ahead. 

Senator CANTWELL. Thank you, Mr. Chairman. Thanks for holding this important hearing. Like many of my colleagues, I do think 

that 48(c), and going in and making sure that we make improvements there or expanding the program, is very important. But I 

also wanted to talk about 1603, the Treasury grant program. I 

know that many people in the renewable energy industry feel like 

that has been a very successful program for them as far as incentives. According to Lawrence Berkeley Lab, by the end of 2010, we 

will have created 143,000 new jobs from this program. 

So do you think that this has been a successful program, and 

given where the equity markets are and still the challenges with 

clean energy, should we expand this program, or continue it, I 

should say? Either of you. 

Dr. KELLY. As you know, we have asked for an additional $5 billion for the 48(c) credits. We think that has been an enormously 

successful program and we think nicely matches the capabilities of 

1603, so people have two different places that they can turn depending on what state of maturity they are in. We strongly support 

both programs and think that they have worked well. 

17 

Together, they have had a really dramatic impact on domestic 

manufacturing investment in the United States and in many parts 

of the country, including places that badly need it. 

Senator CANTWELL. Yes. Thank you. 

Dr. Mazur, any comments on the Treasury grant program? 

Dr. MAZUR. No. 

Senator CANTWELL. That is a ‘‘yes, we support it,’’ ‘‘no, we do not 

support it,’’ or—— 

Dr. MAZUR. We support the program as it exists, yes. 

Senator CANTWELL. Do you support continuing it? 

Dr. MAZUR. I think it has a substantial amount of lead time still 

before it runs out, so it is not something that is in the budget to 

be extended. 

Senator CANTWELL. Well, there are clearly people who are going 

to, by the end of the year, have a curtailment of jobs. If we are 

looking here at where we have created jobs and where we can create jobs moving forward, it has been one of the most effective programs. That was a yes? Is someone or something holding you back? 

Dr. MAZUR. Yes. They can place these projects in service for several more years, so they have to have started construction by the 

end of this year and then have been placed in service by, I believe, 

2017. 

Senator CANTWELL. This committee is full of experts on what 

happens when you do not have certainty by the end of the year. 

What happens about this time of year, maybe in another month, 

is that people start looking at their time period and start saying, 

oh my gosh, we are never going to meet that deadline, and we are 

going to start canceling projects. 

We do not want that; we want people to have predictability and 

certainty so they will invest for the future. If somebody can come 

up with another area where we have had so much job growth and 

creation, we would be certainly interested, so I would hope that 

Treasury would help us and get this legislation through. 

So, thank you, Mr. Chairman. 

Senator BINGAMAN. Thank you both very much for your testimony. I think it has been useful. We will continue to work with you 

and see if we can move ahead with expansion of this program. 

Let me call the second panel forward. The second panel is Dr. 

Robert Atkinson, president of Information Technology and Innovation Foundation here in Washington; Jon Sakoda, who is a partner 

with New Enterprise Associates in Chevy Chase; and Dr. Douglas 

Parks, who is senior vice president for Business Development and 

Attraction with the Michigan Economic Development Corporation. 

I believe Senator Stabenow wished to make a comment before we 

get to your testimony. And Mr. Kevin Book, who is managing director of ClearView Energy Partners in Washington; Ms. Karen Alderman Harbert, who is president and CEO of the Institute for 21st 

Century Energy at the U.S. Chamber of Commerce; and Dr. J.D. 

Foster, who is the Norman B. Ture senior fellow in the Economics 

of Fiscal Policy with The Heritage Foundation. 

So, we are glad you are all here. Why don’t we just start with 

Dr. Atkinson? If each of you could take 5 minutes and summarize 

your testimony, we will include your full statements in the record. 

Go right ahead. 

18 

STATEMENT OF DR. ROBERT D. ATKINSON, PRESIDENT, INFORMATION TECHNOLOGY AND INNOVATION FOUNDATION, 

WASHINGTON, DC 

Dr. ATKINSON. Thank you, Mr. Chairman, Senator Bunning, and 

other members of the committee. It is a pleasure and an honor to 

be here today. 

I want to talk about two things: one, why I believe we need to 

continue the 48(c) credit; and second, some suggested modifications 

that might be made to the credit to make it more effective. 

I am going to start by responding to some concerns about the 

generalized program, on why do we need a program like that, and 

does such a program lead to distorting the market. I think fundamentally we have to ‘‘distort the market’’ if we want to achieve 

and solve climate change. 

We have to get, by 2050, an 85-percent improvement in energy 

and carbon efficiency globally because, to meet a 50-percent goal, 

we have to match that with population growth and per capita 

growth. So, we have to radically transform and decarbonize our energy system. Frankly, the market will not do that, even with pricing, so we have to take steps that get us to that goal. One of the 

important steps is a program like this that supports clean energy 

production. 

I would also argue that demand-side policies are not enough. 

Demand-side policies such as carbon trading or carbon tax are a 

necessary, but insufficient, condition to do what we want. First of 

all, they, by themselves, will not lead to the fundamental innovations we need in decarbonizing the global economy, but second, 

even if they were to be effective in getting us where we need to go 

alone, they will create demand for these clean energy products and 

services, but they will not necessarily create supply. 

As we wrote in a report with the Breakthrough Institute called 

‘‘Rising Tigers, Sleeping Giant,’’ Korea, Japan, and China are outinvesting us by a factor of three, so other countries are focusing on 

the production side to create low-cost clean energy, but also to create a clean energy industry. We need to do the same. 

The second component, I would argue, is with regard to jobs. If 

this program were to simply just create some low-wage jobs with 

no export opportunities, then I would say there is no reason for it. 

We do not need jobs that badly. The market does create jobs eventually, but clean energy jobs are: (A) higher wage jobs, and therefore the industry ends up creating more wealth in the U.S. economy than other types of market activities; and (B) they have the 

potential to create exports. 

I know there is a lot of focus on the debt and the budget deficit, 

and rightly so. That is an important issue for the U.S. to face. But 

we have to recognize we face two debts in this country for our future generation: we face the budget debt, and we also face the 

trade debt. That has to be paid off at some time in the future, 

which means we have to start running a trade surplus at some 

point. Focusing on the production side of the clean energy equation 

makes it easier to do that. 

So let me suggest a few possible changes in the program. One, 

I think we can tighten up, and should tighten up, some of the criteria in the program, if for no other reason than the program was 

19 

over-subscribed, so one could do that and still have very good 

projects. I think one change I would suggest would be—and I think, 

Senator Bingaman, you alluded to this—to make the program easier for companies to qualify for it if they do not have tax liabilities 

presently, whether that is because they are too small or because of 

their current tax situation, and that could be done through a grant 

program or refundability. I would favor that. 

Second, I think, and rightly so, when this bill was drafted there 

was clearly a significant economic crisis. That crisis has moderated 

somewhat; I believe we are on the road to recovery fairly strongly 

now. So I think some of the criteria for the program, such as funding projects that have already been initiated, having the shortest 

project time from certification to completion, and greatest domestic 

job generation, I would actually take those out or diminish them 

in terms of their importance. I think they were critical for the last 

time this was done, but I do not think they are as important this 

time. 

So what is important? I think the most important thing is to be 

focusing on the kinds of technologies that we are going to need to 

be able to meet that 85-percent carbon reduction goal by 2050. 

That means not just focusing on current net impact, but, as the bill 

says, ‘‘a levelized cost of energy.’’ One could imagine that there are 

certain projects today that could do that, such as projects on building insulation. Those would be projects that could maybe get us 

there, maybe better than, say, solar energy projects, in the short 

run. 

The problem, I would argue, is that we are not going to be able 

to meet an 85-percent global energy carbon reduction goal with efficiency. Efficiency is useful, it is important, but it is not going to 

get us to where we need to go. So, to the extent there is greater 

demand and supply of money here, I would be focusing on a narrower set of technologies that is going to be critical in reaching that 

goal, and I would not put efficiency there. 

The last point I would make—and again, I think Senator Wyden 

alluded to this point—I would add a criterion that rewards projects 

that are going to lead to greater exports. It is critical for us not just 

to be producing here domestically, but to leading global export markets. 

Related to that, I think that we really should be focusing on 

prioritizing projects that are not just assembly projects. 

Some of those projects, I think as Senator Bunning alluded to, 

frankly, would be done here anyway. Since we have a limited supply of funds for this program, I would be targeting projects that are 

going to produce more value added here. So perhaps having a criteria of value added produced in the U.S. as a key component of 

criteria, I think, would make the program a little bit more effective. 

Overall, ITIF supports the program, it supports expanding the program in the future. So, thank you. 

Senator BINGAMAN. Thank you very much. 

[The prepared statement of Dr. Atkinson appears in the appendix.] 

Senator BINGAMAN. Mr. Sakoda? 

20 

STATEMENT OF JON SAKODA, PARTNER, NEW ENTERPRISE 

ASSOCIATES, CHEVY CHASE, MD 

Mr. SAKODA. Chairman Bingaman, Ranking Member Bunning, 

members of the committee, thank you for inviting me to the hearing. It is an honor to be here today. 

I am a partner of New Enterprise Associates and a member of 

the Clean Tech Advisory Council for the National Venture Capital 

Association. NEA is, by assets under management, the largest U.S. 

venture capital firm, with $11 billion under management. Through 

our 30 years of history, we have funded over 650 companies and 

have had over 160 of them go public. Our 50 largest companies 

have created over $65 billion in revenues and have created hundreds of thousands of jobs in this country. 

Today, the energy technology industry represents one of the most 

compelling investment opportunities in the history of venture capital. We are one of the most active investors in the sector, and 

today have more than 30 portfolio companies creating new technologies in solar, wind, nuclear, advanced batteries, smart grids, 

electric vehicles, and energy-efficient building materials. 

Energy technology is a complex industry, but the goals of our entrepreneurs are simple: create companies that enable us to make 

or save energy better, faster, cheaper, and cleaner than anyone else 

in the world. 

The U.S. has long been the home of great clean energy innovation, but over the past decade the U.S. has lost its leadership in 

clean energy manufacturing to China, Japan, and Germany. As one 

example, the U.S.’s market share for solar manufacturing has fallen from 45 percent in the mid-1990s to roughly 5 percent today. 

In the past decade alone, the two best U.S. solar technology companies in the world, First Solar and SunPower, the equivalent of Intel 

and Cisco for solar, were recruited overseas to Germany, Malaysia, 

and the Philippines. These companies have developed the majority 

of their manufacturing overseas, creating jobs and economic growth 

primarily in other nations. 

Prior to the Recovery Act, this paradigm of developing innovative 

technology in the U.S. and exporting manufacturing to foreign nations has been driven primarily by a significant imbalance between 

U.S. and foreign tax policies and incentives. 

As is shown in the table in my submitted testimony, low labor 

cost was not the most important variable in the equation. Up-front 

manufacturers’ incentives and long-term tax holidays were frequently as important, if not more important, variables influencing 

U.S. companies as to where they should establish their manufacturing facilities. 

The result of this imbalance has been the loss of direct and indirect jobs, a loss of intellectual property, and a loss of economic 

growth here in the U.S. for one of the fastest-growing global industries of the 21st century. 

In describing this trend, I must remind the committee that venture capitalists and entrepreneurs are, by definition, optimists. I 

believe the U.S. can be a leader in clean energy manufacturing and 

have witnessed this firsthand in my portfolio companies. We are 

not giving up on the American entrepreneur, and I hope you will 

not either. 

21 

With the help of the tax policies and incentives put forth in the 

Recovery Act, this Nation’s best energy technology companies are 

expanding their domestic capacity, reopening closed factories, retraining new workers, and rebuilding local economies depressed by 

the Great Recession. 

One of the most important policies in restoring American competitiveness is the section 48(c) advanced manufacturing tax credit. 

This program awarded $2.3 billion in tax credits to over 100 companies in 43 States and was over-subscribed with requests for over 

$8 billion in projects. 

One section 48(c) recipient, a company in our portfolio named 

Suniva, was able to expand its solar manufacturing from 33 

megawatts to 170 megawatts in Norcross, GA and hire an additional 60 workers, creating more than 100 construction jobs in an 

economically depressed suburb of Atlanta. 

Many of Suniva’s full-time employees were either veterans or 

laid-off auto workers who have now subsequently been retrained in 

solar manufacturing. This company was recently named the ‘‘Renewable Energy Exporter of the Year’’ by the Export-Import Bank, 

and today exports greater than 90 percent of its industry-leading 

high-efficiency solar cells overseas to Europe, China, and India. 

Suniva has plans to expand to 400 megawatts in Saginaw, MI, 

a project which would create over 400 direct, and over 1,000 indirect, jobs over the life of the project. This is one of just many section 48(c) success stories. 

Recovery Act programs such as section 48(c), competitive market 

incentives such as the investment and production tax credits for 

wind and solar development, and compelling State incentives are 

making the U.S. a more competitive and compelling Nation for 

manufacturers. Already this year, you have seen one of China’s 

larger solar manufacturers and one of Japan’s larger solar manufacturers announce plans to open or expand facilities here in the 

U.S. These are encouraging signs that the U.S. has started to regain momentum lost over the past decade. 

To continue to restore American competitiveness in this industry, 

we need to maintain consistency and support for these important 

incentives over the long term. I believe time is of the essence to reopen the section 48(c) program through its expansion of an additional $5 billion, as called for by the administration. Many of the 

most promising 48(c) applicants have qualified to build facilities 

here in the U.S. They want to stay in the U.S., but ultimately may 

have to move their plans overseas. Expanding 48(c) gives these 

companies the choice and the chance to stay in the U.S. 

In closing, I feel compelled to dispel the myth that I hear all too 

frequently, that the U.S. will never be competitive in energy manufacturing. I hear that our labor costs are too high, I hear that we 

lack innovation, and I hear that our workers are not skilled enough 

to compete. These are all myths, and they need to be dispelled. We 

are home to some of the best energy technologies in the world, we 

are home to some of the most skilled workers in the world, and we 

are taking the right steps to level the playing field and restore 

American competitiveness in this very important sector. 

Thank you very much for inviting me to be here today. I look forward to your questions. 

22 

Senator BINGAMAN. Thank you very much for your testimony. 

[The prepared statement of Mr. Sakoda appears in the appendix.] 

Senator BINGAMAN. Senator Stabenow, did you wish to introduce 

our next witness? 

Senator STABENOW. Well, thank you very much, Mr. Chairman. 

I am very pleased that Doug Parks is with us, senior vice president 

of the Business Development and Attraction unit of the Michigan 

Economic Development Corporation. 

Mr. Chairman and Ranking Member, he is where the rubber 

meets the road. I have to tell you that Doug has done a fantastic 

job. When I hear a previous witness talk about folks coming to 

Saginaw, MI, Doug Parks is right in the middle of that. Clean energy technology manufacturing is very much what he is focused on. 

So, welcome, Doug. Good to have you here. 

Mr. PARKS. Thank you, Senator. 

STATEMENT OF DOUGLAS PARKS, SENIOR VICE PRESIDENT 

FOR BUSINESS DEVELOPMENT AND ATTRACTION, MICHIGAN ECONOMIC DEVELOPMENT CORPORATION, LANSING, 

MI 

Mr. PARKS. Good afternoon, Chairman Bingaman, Ranking Member Bunning, and members of the subcommittee. My name is Doug 

Parks, and I am the senior vice president of Business Development 

and Attraction at the Michigan Economic Development Corporation, or MEDC. I am pleased to be here today to present testimony 

on behalf of the MEDC and the administration of Governor Jennifer M. Granholm regarding the critical role tax incentives play in 

attracting and retaining advanced energy manufacturing facilities 

and jobs. 

I would also like to express my sincere gratitude to Senator 

Stabenow, whose leadership on energy issues and attention to manufacturing have been extremely important for the State as we seek 

to diversify our economy. Her leadership on the advanced energy 

manufacturing tax credit, the advanced technology vehicles manufacturing loan program, and worker training for green jobs has 

been a vital part of our diversification strategy, so thank you. 

Clean energy tax policies play a crucial role in creating new 

high-wage American jobs, spurring economic growth, and improving the environment. The Senate Finance Committee is wellpositioned to accelerate these innovations by creating and expanding tax and other policy incentives that support State and local economic development by reducing the risk to innovators and entrepreneurs. 

Establishing a strong domestic manufacturing base for clean energy technologies is critical. True energy independence requires a 

domestic manufacturing base, as well as domestic R&D. Since 

2000, Michigan has lost almost 1 million jobs. However, we are one 

of a handful of States that has been able to add green jobs, 109,000 

in total, in spite of overall negative job numbers. 

In 2006, the MEDC began to focus economic development efforts 

on diversification opportunities with the potential for significant 

growth by leveraging the State’s competitive advantages, including 

our natural resources, workforce, rich engineering, and deep manufacturing heritage. 

23 

The MEDC’s intense review of best practices across the globe has 

led us to focus on four targeted clean energy sectors: advanced energy storage, solar energy manufacturing, wind energy manufacturing, and bio-energy. 

Teams were developed around these targeted sectors, composed 

of Ph.D.-level technology experts, industry experts, engineers, 

MBAs, and economic developers to guide State strategy in these 

areas. We also forged partnerships with national laboratories, including Oak Ridge National Laboratory and the U.S. Army Tank 

Automotive Research, Development, and Engineering Center, or 

TARDEC, to assist us in vetting projects. 

We developed a unique toolbox of State incentives to help grow these industries and attract these industries, including $1 billion in 

refundable tax credits for advanced energy storage projects, batteries—or as we like to say in Michigan, the new power train—$75 

million in refundable tax credits for photovoltaic manufacturing opportunities, and $75 million in grants for Centers of Energy Excellence programs, which promote clean energy commercialization 

partnerships between industry, government, and academia. 

Federal incentives have played a vital role in our State’s diversification strategy, and most of the incentives that I have just described were created specifically to complement Federal funding opportunities. For example, the advanced energy storage sector, the 

same companies that received $1 billion in refundable tax credits 

from Michigan, subsequently received over $1.3 billion in competitive grants from the electric drive and component manufacturing 

initiative of the Recovery Act. 

This has influenced the entire supply chain, which was our goal, for vehicle batteries to locate in Michigan, resulting in $5.8 billion 

in total investment to date. The 48(c) advanced manufacturing tax 

credit has been an effective tool, and a complementary tool, in 

spurring economic development in Michigan. Earlier this year, 12 

Michigan projects received $242 million worth of these credits. 

As an example, the MEDC has worked closely with many of 

these 48(c) recipients. One of them is Energetx, a spin-out company 

from composites manufacturer and boat builder S–2 Yachts, located 

in Holland, MI. Its business was significantly impacted by the economic downturn, and, while many in the marine industry were 

forced out of business, S–2 Yachts is weathering the storm, in part 

by applying its composites expertise to the production of wind turbine blades. 

For its clean energy manufacturing efforts, Energetx received a 

48(c) credit of almost $2 million, and subsequently—and this is important—received $7 million in grants from two additional Michigan State programs. In addition, Energetx forged partnerships with 

key supply chain partners, is working with two national laboratories, and is hiring interns from two Michigan universities. 

Michigan appreciates your leadership, Mr. Chairman, together 

with Senator Stabenow and Senator Hatch, in first proposing to extend and expand the advanced energy manufacturing tax credit. 

We also support the President’s call to commit $5 billion more for 

the 48(c) program, as included in the Security and Energy Manufacturing Act. This bill would extend the tax credit by 2 years, provide $5 billion more in 48(c) credits, place more emphasis on manuVerDate Nov 24 2008 21:37 Aug 15, 2011 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 R:\DOCS\67346.000 TIMD
24 

facturing than on the assembly of goods, and allow for direct grant 

payments. 

As a State that is working aggressively—as hopefully you can 

see—with our manufacturing partners to leverage Federal clean 

energy incentives, the MEDC believes Congress should give strong 

consideration to expanding the statutory review criteria to benefit 

projects that can demonstrate strong financial capacity through the 

commitment of State financial incentives and investments. We believe the early success of the 48(c) program, coupled with an abundance of worthy unfunded proposals, justifies swift enactment of 

additional authority to stimulate more American manufacturing ingenuity. 

Thank you, Mr. Chairman, for the opportunity to present Michigan’s views. I would be pleased to take any questions from you or 

other members of the subcommittee. 

Senator BINGAMAN. Thank you very much. 

[The prepared statement of Mr. Parks appears in the appendix.] 

Senator BINGAMAN. Mr. Book, go right ahead. 

STATEMENT OF KEVIN BOOK, MANAGING DIRECTOR, 

CLEARVIEW ENERGY PARTNERS, WASHINGTON, DC 

Mr. BOOK. Thank you, Chairman Bingaman, Ranking Member 

Bunning, and distinguished members of this committee, for the 

privilege of being here this afternoon. 

My name is Kevin Book, and I lead the research team at 

ClearView Energy Partners, LLC, a research and consulting firm 

that serves institutional and corporate strategic investors in energy. 

My testimony considers the 48(c) credit through the lens of three 

basic types of demand for clean and green power: fundamental demand for energy, legislative demand—in other words, from renewable energy mandates or carbon surcharges—and financial demand, which is from government programs that pay premiums to 

financial sponsors. 

Before the economic crisis, U.S. fundamental demand for clean 

and green sources was mixed, stronger for wind than for solar. Legislative demand was growing with State-level portfolio standards. 

Most demand, however, came from investors who paid developers 

for tax equity, the stream of income-shielding tax credits generated 

by the projects. 

Back then, some of my clients thought that investors would want 

$7 to $9 billion in clean energy tax equity in 2009. Of course, back 

then, conventional fuel prices were still rising, after all, and many 

investors thought the daunting spike in subprime mortgage defaults would remain contained. 

One year later, Investment Tax Credits (ITCs) and Production 

Tax Credits (PTCs) were extended within the bill that created 

TARP, but clean technology investors had little to cheer about. Financial demand had dried up. The once-profitable banks that held 

once-untroubled assets that TARP was designed to relieve had been 

a big part of the tax equity market. Troubled assets meant losses, 

not money to spend on tax credits or profit to shelter. 

Fundamental energy demand weakened also. In 2008 and 2009, 

U.S. power consumption fell by almost 5 percent. Retailers sold off 

25 

inventories, layoffs decreased fuels demand, and foreclosures diminished building energy needs. Weak demand hurts alternative 

power twice, not just intrinsically, but also because conventional 

fuels get cheaper. 

Which brings us to the American Recovery and Reinvestment Act 

green stimulus monies, especially 1603, now more than $3.5 billion 

in spending, and the over-subscribed 48(c) credit, for which $2.3 

billion was obligated. 

The credits are very different: 1603 grants are demand-side subsidies; 48(c) credits work on the supply side. The 1603 credit has 

mostly paid for wind projects and, according to independent studies, much of this technology came from leading manufacturers overseas. Almost half of the 48(c) credit has gone to solar power, and 

about one-third of the money has encouraged leading clean tech 

companies to invest in capacity here in the U.S. Both credits are 

likely to have preserved employment, and DOE projects impressive 

job creation numbers from the 48(c) program. 

Even so, both programs present areas for discussion. Demandside subsidies get expensive fast because investors always like free 

money. Many governments, especially Spain and Germany, have 

begun to experience what we call equity subsidy fatigue as their 

fiscal fortunes weaken. 

Debt subsidies, like loan guarantees such as those proposed by 

you, Mr. Chairman, and Ranking Member Murkowski on the Energy Committee, could encourage clean and green demand while 

minimizing equity subsidy fatigue. My written testimony provides 

a hypothetical example of a wind project under different scenarios. 

A 10-year PTC would give developers only about 47 percent of the 

buying power of every taxpayer dollar spent. 

ITCs and grants would do better, achieving gains of 51 and 71 

percent return per taxpayer dollar, respectively. Assuming a 10- 

percent default rate, loan guarantees would deliver 337 percent developer benefit per taxpayer dollar. No matter what, green protectionism could be risky. U.S. clean technologies will not win market 

share at home or abroad until they can compete on a price basis 

with technologies produced overseas. 

On the supply side, it is also not clear the U.S. can win in every 

corner of clean tech. The U.S. manufactured about 5 percent of 

global solar equipment in 2009, making the 47.5-percent allocation 

of 48(c) credits to solar power a very ambitious statement. The U.S. 

is unlikely ever to enjoy lower factory costs than China, and the 

point is well-taken that there are other things that the U.S. does 

very well, and I certainly do not want to discount that. 

But it is also not clear that domestic demand will prove sufficient 

to create an internationally competitive solar sector comparable to 

those driven by energy security and power price pressures in Japan 

and Germany. We have very cheap power, and we currently have 

extra. Fundamentally, Americans, in 2009 and 2010, have demanded about one-third of the incremental energy per job recovered that they demanded in 2001 and 2002. Legislatively, it remains unclear whether efforts putting a price on carbon or a national RPS will succeed, and financially the potential lapse of the 

1603 credit at year-end could bring a demand cliff. 

26 

It may not make sense to expand 48(c) funding without corresponding expansions in domestic demand. The good news is, 

there may be many eligible sources, technologies that capture, sequester, or reduce energy sector greenhouse gas emissions, for example. Last week, EPA released its final tailoring rule that will 

regulate greenhouse gas emissions from stationary sources. Currently, it will begin on January 2 of next year. Forty-four percent 

of our power came from coal-fired plants last year. Perhaps future 

48(c) allocations could establish the U.S. as a global leader in postcombustion retrofit technologies for capture and storage. 

Retroactively allocating money to original applicants for 48(c) 

projects may not represent the best investment strategy. New dollars might best be directed at new applications, and new award 

considerations informed by new energy use patterns and new commodity price expectations. 

Rescinding fossil energy tax benefits to pay for 48(c) outlays may 

not improve competitiveness either. We are 85 percent fossil-fueled. 

Taxing fossil energy means higher prices, increasing the cost of all 

manufacturing. Even though higher prices could make clean tech 

seem more attractive here, they are unlikely to augment demand 

for our products overseas. 

In short, extending and expanding the 48(c) program seems reasonable if fundamental legislative or financial demand exists to absorb the new supply, and particularly if the next round of funding 

unlocks innovative investments for which significant domestic demand may soon exist. 

This concludes my prepared testimony. I look forward to any 

questions at the appropriate time. 

Senator BINGAMAN. Thank you very much. 

[The prepared statement of Mr. Book appears in the appendix.] 

Senator BINGAMAN. Ms. Harbert, go right ahead. 

STATEMENT OF KAREN ALDERMAN HARBERT, PRESIDENT 

AND CEO, INSTITUTE FOR 21st CENTURY ENERGY, U.S. 

CHAMBER OF COMMERCE, WASHINGTON, DC 

Ms. HARBERT. Thank you, Chairman Bingaman, Ranking Member Bunning, and members of the subcommittee. I am Karen 

Harbert, president and CEO of the Institute for 21st Century Energy, which is an affiliate of the U.S. Chamber of Commerce. 

Last month, Doug Elmendorf, Director of the Congressional 

Budget Office, highlighted the results of a CBO report that forecast 

an increase in the public debt to $20.3 trillion by the end of 2020, 

if President Obama’s fiscal year 2011 budget were to be implemented, with debt accounting for 90 percent of GDP. 

So, as we examine energy policy, it is more important than ever 

that we look to options that do not further burden the taxpayer 

and provide the affordable energy we need to restore the jobs lost 

to the recession and the millions of new jobs we need to recover 

over the next decade. 

We also have to recognize that U.S. energy demand is projected 

to increase by as much as 33 percent between now and 2035, so 

we need a realistic plan that transitions us to a low-carbon future, 

while keeping our Nation strong and competitive. 

27 

Renewable sources of energy, such as wind, solar, energy from 

waste, and biomass, will certainly play an increasingly important 

role in our Nation’s energy supply, yet today wind and solar comprise less than 2 percent of our electricity, so we must be realistic 

about their achievable rate of expansion. Even under the Energy 

Information Administration’s modeling of the Waxman-Markey bill, 

the climate bill’s aggressive carbon regulation, wind and solar will 

only comprise 6 percent of the country’s portfolio by 2030. 

The recent history of fiscal incentives for clean energy technologies is checkered, with boom-and-bust intervals that have inhibited the formation of private capital. Investors in businesses and 

manufacturers need predictability to make capital decisions, but 

that does not mean that subsidies should exist forever. Once a 

technology has realized the milestone of commercial deployment, 

the government should step back and let the efficiency of the market determine its eventual success or failure. 

The advanced energy project credit, 48(c), was included in the 

American Recovery and Reinvestment Act as an investment tax 

credit for the expansion or retrofitting of manufacturing facilities 

geared towards advanced clean energy sources. As the original allocation has now been committed, there are several issues this committee should consider before expanding the credit by another 

$5 billion. Some of them are as follows. 

Is the number of jobs created sufficient to justify its continuation, 

and are those jobs sustainable? Are there other more cost-effective 

ways to stimulate these investments and these jobs? In light of our 

ballooning deficit, what is the return on investment from those 

credits? 

There are other carbon-abatement technologies that were excluded from consideration in the initial round, and, since government should not be picking winners and losers, should all these 

technologies not be considered eligible and be judged on their merits? Lastly, what would be offered as the pay-for for these new 

credits, and how do their benefits stack up against the credits benefits? 

The Chamber supported 48(c) at the outset and has supported 

many other incentives for renewable technologies. For example, we 

support extending the various renewable production tax credits for 

8 years, followed by a 4-year phase-out, providing the long-term 

certainty investors need, but also the definitive sunset which will 

ensure tax dollars do not continue to support technologies that are 

not commercially viable. 

Also, policymakers need to be mindful of the counterproductive 

effects of singling out industries at the expense of others. Germany 

has done that. Twenty years ago, they implemented the most aggressive renewable policy on the planet. In 2008, Germany was 

home to the largest installed solar capacity and wind capacity in 

the world, yet in 2009, the electricity generated from wind and 

solar accounted for only 7 percent of the electricity supply, even 

with an estimated direct subsidy of $100 billion over 10 years. 

In Spain, Italy, and Denmark, 2009 studies show that the green 

jobs that were created were offset by those policies with losses in 

other areas. In other words, we need to be really focused on job dislocation and also the sustainability of the subsidized jobs. 

28 

It is also important to recognize that there are other things that 

we could do to stimulate manufacturing and clean energy in our 

country that do not break the back of the taxpayer. For example, 

we support the creation of an independent clean energy bank, 

which is captured, Senator Bingaman, in your Clean Energy Development Authority Administration, and we applaud you for that 

leadership. This would not be a further burden on the taxpayer because those loans, the financial instruments, would be paid and 

therefore would not have long-term impact on the deficit. 

Also, every new energy project that would be the market for the 

beneficiaries of the 48(c) program struggles with regulatory and 

siting burdens that either increase the project’s cost or result in its 

cancellation. Can you imagine that getting the approval to site a 

transmission line in our country across State lines can take upward 

of 10 years? Congress can solve this problem by granting the Federal Energy Regulatory Commission preemptive siting authority, 

much like it already has for natural gas pipelines. 

Jobs. Finally, we must remember that we still have a strong economic foundation of our existing energy industry. Nuclear power, 

for example, accounts for more than 70 percent of our emissionsfree electricity. Each plant contributes $430 million to its local 

economy. If the 26 reactors that are currently in the queue at the 

Nuclear Regulatory Commission were built, we estimate that that 

would create an additional 240,000 jobs for our country. 

Let us not forget the oil and natural gas industry that currently 

employs 9.2 million people. So in short, if we are going to lay a 

groundwork for a clean energy economy to secure our Nation and 

install environmental protection, we have to pursue policies that 

put more options on the table, yet do not artificially explode our 

Nation’s debt. Thank you. 

Senator BINGAMAN. Thank you very much. 

[The prepared statement of Ms. Harbert appears in the appendix.] 

Senator BINGAMAN. Dr. Foster? 

STATEMENT OF DR. J.D. FOSTER, NORMAN B. TURE SENIOR 

FELLOW IN THE ECONOMICS OF FISCAL POLICY, THE HERITAGE FOUNDATION, WASHINGTON, DC 

Dr. FOSTER. Thank you, Mr. Chairman, members of the committee. My name is J.D. Foster. I am the Norman B. Ture senior 

fellow in the economics of fiscal policy at The Heritage Foundation. 

The views I express are my own and should not be construed as 

representing The Heritage Foundation’s position. 

In its ‘‘Reasons for Change’’ discussion in the Treasury’s general 

explanation of the administration’s fiscal year 2011 revenue proposals, Treasury writes, ‘‘The credit the administration proposes to 

repeal distorts markets by encouraging more investment in the industry than would occur under a neutral system. To the extent the 

credit encourages over-production, it is detrimental to long-term 

energy security.’’ I would hasten to add that this paraphrased language on page 75 refers to the administration’s proposals relating 

to the oil and gas industry and their proposal to eliminate a credit 

in other fuel preferences, proposals with which I fully agree. 

29 

But what is bad for goose is also bad for the gander. Just as oil 

and gas subsidies distort economic decisions, so, too, does the 48(c) 

credit and similar subsidies. They are detrimental to long-term energy security and to the economy, as Treasury rightly observed. 

In my view, and following Treasury’s logic, the 48(c) credit is bad 

energy policy, bad tax policy, and bad economic policy. My concern, 

to be clear, is not with clean energy manufacturing, per se. Rather, 

it is the government’s bad habit of attempting to pick successful 

technologies of any sort to favor and others to disfavor. 

There is nothing wrong with hoping one sort of energy or one 

sort of technology will succeed in the marketplace. If we believe so 

firmly in a company or industry, we have capital markets that 

allow us to encourage and participate in its success or failure. 

Tax provisions like 48(c) do something else entirely: they involve 

the power of the Federal purse to influence artificially the development of these markets and technologies. Is this taxpayer investment based on any information superior to what the market already has and has processed? No, it is not. 

In the case of 48(c), for all the professionalism, is there any reason to believe the employees at the Internal Revenue Service and 

Department of Energy are more adept at picking technologically 

promising and economically sustainable technologies than market 

participants investing their own time and money? No. 

If they were, they would already be doing so, working for venture 

capital firms, making large amounts of money. They are working 

at the agencies because this is not their strength. Market participants investing their own time and money are vastly better at sifting information and rendering judgments regarding economic viability. No doubt, there are some excellent players in fantasy football at the IRS and DOE, but that does not mean they are qualified 

to run an NFL franchise. 

Markets are not perfect. Markets make mistakes, and government has a modest, but clear, role to play in the process. But over 

time and on balance, market participants facing price signals undistorted by government policies make fewer mistakes, less costly 

mistakes, and more quickly correct those mistakes. 

One argument raised to defend provisions like 48(c) is that the 

industry is somewhat at an infant stage and the credit is needed 

temporarily to get the industry moving forward. The obvious first 

problem with this temporary tax credit argument is that the word 

‘‘temporary’’ is redefined over time to cover decades. Temporary can 

take on near-cosmological proportions. 

Another problem is the industry, protected by the credit from the 

pressures to become more efficient, typically fails to advance, to become internationally competitive. The infant industry argument 

would be better labeled the ‘‘Peter Pan’’ argument because it means 

the industry never needs to grow up. Further, this Peter Pan industry is then likely condemned to second-class status on the world 

stage. Members hoping for good things out of advanced energy 

manufacturing should beware: good intentions are no substitute for 

bad outcomes. 

A second argument that we have heard this afternoon is that the 

U.S. has fallen behind already on the world stage. Interpreting this 

situation requires a couple facts, the first of which is that techVerDate Nov 24 2008 21:37 Aug 15, 2011 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 R:\DOCS\67346.000 TIMD
30 

nology is inherently mobile, so the U.S. position does not have to 

do with our innate inability to get our hands on technology. Second, 

the United States generally offers the best economic environment 

in the world to incubate a high-tech industry. On this point, I 

would align myself with Mr. Sakoda’s remarks. 

Given the mobility of capital and America’s advantages, if the 

U.S. lags, then one of two circumstances is almost certainly at 

work: either we have employed our own counterproductive policies 

restraining this activity, in which case the remedy is to reverse 

those policies; or other countries may have borne heavy costs in 

creating subsidies to distort their own markets and gain a temporary advantage, such as perhaps China, as Senator Bunning alluded to earlier. 

While it is tempting to match these countries foolishness for foolishness, this is not a gap we should seek to close. Their advantage 

will fade as market distortions accrete, while their industries become ever-more dependent on these subsidies to survive in the 

global marketplace and ours gain steadily an advantage. 

In conclusion, the 48(c) credit, like so many provisions that litter 

the tax code, is bad economic policy, distorting the allocation of our 

resources. It is bad energy policy for precisely the reasons Treasury 

lays out in the context of oil and gas credits, because it encourages 

over-production and it is detrimental to long-term energy security. 

Of course, the credit is bad tax policy, adding to the litter of special 

provisions that constitute the sum total of past efforts to micromanage our economy through an already inherently complex income tax system. 

Thank you, Mr. Chairman. 

[The prepared statement of Dr. Foster appears in the appendix.] 

Senator BINGAMAN. Well, thank you all very much for your testimony. I will start with a few questions. 

Mr. Sakoda, let me start with you. I was glad to hear that you 

see a promising future for U.S. manufacturing. Could you just explain how the receipt of a tax credit for manufacturing such as 

48(c) would impact the attractiveness of a company for venture capital investing? I mean, is this something that you folks would look 

at closely to see which companies are, in fact, being chosen for 

these kinds of tax credits? 

Mr. SAKODA. Senator, is the question whether our investment decisions are driven by whether or not the companies have received 

tax credits? 

Senator BINGAMAN. Well, as to whether that is a factor, or 

whether you think that there is any correlation between a company’s ability to obtain a tax credit and the attractiveness of the 

company for venture capital investment. 

Mr. SAKODA. It is helpful, probably, to go back a few years in history. Actually, the growth of the clean tech industry in the U.S. has 

been primary venture-backed, and that trend really started about 

7 or 8 years ago. Actually, the height of venture capital investment 

in clean tech was in 2008. Many of these companies were commercializing some of the most innovative technologies, which had been 

developed primarily within national labs and universities here in 

the U.S., in many cases through decades of Federal funding provided by DOE. 

31 

It has been, within the past 3 or 4 years, that many of those 

companies have been approached to scale up their manufacturing 

overseas, so the examples that I gave of First Solar and SunPower, 

again being U.S.-based technologies, innovations created here in 

the U.S. but manufacturing being exported overseas, was happening again in this most recent venture capital-backed industry. 

Some of our best companies, the future First Solars and SunPowers, were being attracted overseas. 

So I believe the answer to your question is that many of our best 

companies have already been venture-backed. They are U.S.-based 

companies, U.S.-based entrepreneurs, U.S. technologies. They just 

have a choice as to where they can scale up their manufacturing. 

The U.S. is not the number-one end-market for renewable energy 

technology. We can debate all day long whether solar and wind is 

the right portfolio mix inside the U.S., but the second, third, and 

fourth largest economies have already spoken. So, our companies 

need to scale up their manufacturing somewhere. The question is 

really, where are they best set up to compete long-term when they 

expand their manufacturing? That is why the 48(c) tax credit is so 

important. 

Senator BINGAMAN. Thank you. 

Mr. Parks, you, undoubtedly, have had a lot of experience trying 

to attract companies to Michigan that might choose, on the contrary, to locate in foreign countries. I have had a frustration over 

the years in seeing our Economic Development Department in New 

Mexico, for example, or the Albuquerque economic development entity, try to compete for foreign companies to locate in our State. I 

would be interested in your perspective on the importance of this 

kind of a section 48(c) at the Federal level to complement what you 

are able to do at the State level in actually getting these firms to 

come to Michigan. 

Mr. PARKS. Well, Mr. Chairman, let me start by saying it is definitely a contact sport, and it is a very aggressive environment. 

Early on in Michigan, we did a couple of things that I think caused 

us to be successful. First, we understood what we were good at or 

what we thought, if all things were equal, would compete, and 

went in. The second thing we did was we understood that, if we 

were going to create these tools, where would our investment be 

best placed? So in batteries, for example, we identified that it was 

not assembly, it was not the material side, it was cell manufacturing, a critical national need that had been lost to Asia back in 

the 1980s. 

All the suppliers had arrayed around the consumer electronics 

industry, and it was firmly entrenched. So we identified our programs early and we identified our targets, and we spent a great 

deal of time working with the national labs and the Defense Department, identifying who the worldwide best players were. Then 

we were very aggressive in developing what I mentioned earlier 

were a billion dollars in refundable tax credits. We are a State that 

has to balance the budget, and I had to discern or identify to our 

legislature, both sides, that the return on investment was such 

that, if we did this, we would be competitive. 

But early on we also realized that we could not do it alone, and 

that, not only was it important for us to develop these credits, but 

32 

it was important that we would be part of a comprehensive plan 

that included competitive grants, that included 48(c) programs, so 

that, when we worked to attract these companies, we could represent to the companies that we: (A) did our homework; (B) were 

working aggressively to invest in the right parts of the supply 

chain so the remainder of the supply chain would then be recruited—and that is happening, which will make them more costcompetitive; and that (C) we had a Federal Government that we 

could work with these companies with that might have funds available to help them accelerate and expand, and I think 48(c) is a part 

of that plan for us. 

Senator BINGAMAN. Thank you very much. My time is up. 

Senator Bunning? 

Senator BUNNING. Thank you. 

If you all could just shorten your answers a little bit, it would 

really help, because we are limited to 5 minutes. 

Dr. Atkinson, you support having a trade policy that challenges 

clean technology protectionist policies in other Nations. Would it 

not be highly cost-effective to simply enforce our own trade laws? 

Dr. ATKINSON. It would be highly effective, but I think it would 

be insufficient. I agree with you 100 percent, we do not enforce our 

trade laws, and we let countries get away with murder, but I do 

not think enforcement is enough. There are many things other 

countries do that are not protectionist, but are promoting innovation or production, which I would not call protectionism. There are 

other things that the Chinese in particular do that are clearly protectionist, so I think for us to win we would have to do both. 

Senator BUNNING. All right. 

Dr. Foster, you have heard some witnesses say today we should 

subsidize clean energy manufacturing because other countries are 

doing so. What are the problems with making U.S. subsidies match 

the subsidies of other countries? 

Dr. FOSTER. Well, first of all, we are in effect engaging in the 

same bad behavior that they are. They are distorting their economy. They are misallocating resources, and we are following suit 

in self-protection. I think, to the extent one could address this 

through the trade side, that would be far preferable, as per your 

previous question. 

The other point, though, is that the simple fact of history that 

we have learned from the trade area is that, when you create tax 

provisions or tariff provisions that protect an industry, you also 

prevent that industry from properly growing up. That is why I referred to it as a Peter Pan process. These industries become protected, and they refuse to grow up. They operate in a protected environment, so you are almost condemning them to second-class citizens in the global economy. 

Senator BUNNING. Thank you. 

Ms. Harbert, can you elaborate on some of the studies that show 

that subsidizing green jobs can actually destroy more jobs than it 

creates? 

Ms. HARBERT. Certainly, and I will be brief. Certainly there is a 

much more detailed explanation in my written testimony. But a 

study in Spain, for example, showed that the creation of one green 

job destroyed 2.2 jobs in other parts of the economy. There was a 

33 

similar study just done in Italy, and that was double the number 

of jobs that were destroyed in the industrial sector, mainly because 

Italy imports most of its technologies. 

In Germany, a detailed study of 20 years of its subsidizing of renewable energy shows that actually the cost of energy did not go 

down, in fact it went up, and actually, the usage of renewable energy stayed the same. They are still 45-percent dependent on coal. 

So we have to think about it very hard and look at real-time examples right now of what other countries have done. We are guessing, 

for the future; we have examples right here today. 

Senator BUNNING. All right. Thank you. 

Mr. Book, I see that carbon capture and storage received 0.21 

percent of the 48(c) credit, and coal makes up about 50 percent of 

our electric generation. On the other hand, wind and solar projects 

received 60 percent of the 48(c) credit, and they make up less than 

2 percent of the electric generation. Are we being cost-effective in 

the way we allocate our resources? 

Mr. BOOK. Senator, I think it is a good question. The first panel 

did make, I thought, a laudable attempt to try to broaden the franchise to reach into some of the other fuels. But the scope of the 

challenge of decarbonizing the U.S. economy is not going to be met 

by adding new high-cost green capacity. We are still going to have 

almost 600 electric generating units that need to be retrofitted for 

carbon capture and storage. If we get good at doing this through 

a Federal subsidy, maybe we will be like Germany is in solar 

today. Maybe we will be the global leader. My suggestion is not so 

much that it should be proportional to the fuel mix you have, but 

proportional to the result you want. 

Senator BUNNING. Thank you. 

Ms. Harbert, what are some of the most cost-effective ways to 

promote clean energy projects? 

Ms. HARBERT. We have just studied, the last 3 years, the amount 

of energy projects that have been proposed in the United States, 

and we have found that over 380 projects have been stopped 

through abuse of the siting process. Surprisingly, 40 percent are in 

the renewable area. If we really want to get some generation capacity built in this country, whether it is wind, solar, nuclear, or clean 

coal, we have to get beyond the BANANA syndrome, Build Absolutely Nothing Anywhere Near Anyone, and clear the way for capacity to get built. That would cost nothing. It would create jobs. 

It would create revenue. It would create investment, and it costs 

nothing. But it does demand action by Congress, and that would 

be something that would be tax-free, and it would certainly generate revenue and jobs. 

Senator BUNNING. Thank you, Mr. Chairman. 

Senator BINGAMAN. Thank you. 

Senator Stabenow? 

Senator STABENOW. Well, thank you again, Mr. Chairman. 

Thank you to all the panelists for your input. 

Mr. Parks, I really want to indicate again the great work that 

you are doing is very much appreciated at MEDC. We really appreciate your great work in getting out the word about the Federal 

partnership opportunities that we have been working on together 

and how businesses can be a part of that. 

34 

It is also a great sense of pride for me that we are, in fact, becoming a clean energy manufacturing leader in Michigan, and 

there has been a tremendous amount of hard work that has gone 

into that. I know you have been very much a part of it, and I have 

been pleased to do my part on this end as well. 

With the 48(c) and the Recovery Act, can you again tell us how 

many companies in Michigan have been successful in receiving the 

credit, and also talk a little bit about what these companies are 

doing? 

Mr. PARKS. I think we had 12 companies, $242 million awarded, 

approximately 10 percent of the award. Most of our awards were 

in solar and wind, ranging from monosilane, which is a material 

in the thin-film photovoltaic sector that was a Dow-Corning award, 

to a tool and die shop in, I think, Battle Creek, Great Lakes Technology, that diversified into gear box manufacturing for the wind 

industry. 

So we also know that we had a number of projects that were teed up then and are teed up now. We closed, in 2009, about $9 billion 

in business in the alternative energy arena, and we are actively 

working to pursue the supply chains, many of which we are recruiting from Asia right now to support our battery industry, for example, and we think we have a significant pent-up demand, potentially, for 48(c)s, if they are reauthorized. 

Senator STABENOW. I wanted to ask a little bit more about that 

because, as I indicated earlier, I was successful in the Budget Committee in being able to get the inclusion of an additional $5 billion 

that would expand 48(c). Of course, the chairman has been leading 

our efforts legislatively, and I am pleased to work with the chairman on this. But it is important to look at the kinds of companies 

that could take advantage of this in Michigan, or any other State, 

but specifically in Michigan. Are there companies? What do you see 

in terms of the specifics if we were to expand this very important 

manufacturing credit? 

Mr. PARKS. So what we did early on, for us it was about jobs. 

It was about diversifying the auto manufacturing industry or the 

suppliers to the auto space. We spent a lot of time identifying what 

the value chain was and put diversification programs together for 

auto suppliers. 

We have over 400 companies, for example, that are teed up that 

have been, and still are, auto suppliers that are looking to diversify 

into wind component manufacturing, for example, which we think 

is an easy transition for our folks, many of whom we think would 

be applicants in this process. 

We have a number of folks—I do not know if people know, but 

80 percent of the R&D in the auto industry happens 50 miles from 

the Renaissance Zone (RenZone) in downtown Detroit. A number of 

the folks that have been all auto R&D are looking to diversify within the auto sector—that is a key point we like to make—on the energy storage side, on batteries. We have a number of defense companies that are looking, or people who want to support defense, 

who are looking at diversifying into clean tech to support some of 

the renewable portfolio standards in the defense sector. 

So we believe we have about a billion-dollar pipeline in applicants. I do not want to necessarily foreshadow what we have, but 

35 

we have a large number of applicants that I think, if successful, 

would help us accelerate our plans in Michigan. Again, I am here 

talking about jobs in Michigan. 

Senator STABENOW. Right. Which I think for the two of us in the 

room, at least, that is absolutely a top priority, certainly. 

Talk a little bit more about the race with China. We have talked 

today about what is happening in other countries. We know that 

the latest numbers I saw, China was spending about $280 million 

every day to beat us on clean energy technology, and we certainly 

do not want to go from a dependence on foreign oil to a dependence 

on foreign technology. So could you talk about 48(c) in terms of 

closing that gap with China? 

Mr. PARKS. Well, again, 48(c) is part of a comprehensive plan we 

put in place. On the battery side, for example, we were recruiting 

companies, even U.S.-based companies, that were going to manufacture exclusively in China. So we put our refundable tax credits 

together to recruit those folks and were successful in recruiting a 

Korean battery manufacturer, and two battery manufacturers in 

the U.S. that were manufacturing solely in China, to manufacture 

in Michigan. They, as well as their suppliers, are going to be applicants as they expand into the supply chain and into their activities 

in Michigan. But 48(c), again, for us, is part of the puzzle. 

One of the recommendations that we had early on is, I think we 

all need to have shared skin in the game as we go forward. We 

would hope that you would look for States that are aggressive, that 

have done their homework, and see how they are creating jobs, ecosystems, and supply chains that will be sustainable, and how 48(c) 

is a very important part of that as we locate these manufacturers 

and then grow the supply chain. 

Senator STABENOW. Thank you. 

I see my time is up, Mr. Chairman. Thank you. 

Senator BINGAMAN. Well, thank you very much. 

I would intend to go ahead and end the hearing at this point. Did 

you have any burning question you needed to continue with here? 

I know Senator Bunning and I have other questions, but we feel 

we have proceeded long enough. 

Senator STABENOW. Mr. Chairman, I have one, actually. 

Senator BINGAMAN. Why don’t you ask that question, and then 

we will terminate. 

Senator STABENOW. Just in general. Just out of curiosity, I guess. 

Ms. Harbert, you said something I thought was interesting, and I 

just wondered your position, or the Chamber’s position, talking 

about our national debt, which of course is a serious issue that we 

all care very deeply about and have to address. 

But you were talking about being concerned about continuing 

these particular tax cuts, given the national debt. Would that apply 

to all tax cuts? Do you think we should not be doing tax cuts until 

we address the national debt? 

Ms. HARBERT. No. We are looking at such a ballooning deficit 

that we have to look through a new lens when we look at new appropriations, as we are in the appropriations process now. We have 

to have an additional level of scrutiny, I think, and make value 

judgements, cost/benefit analyses, as we are looking at the outlays 

of billions and billions of dollars. We have long supported the proVerDate Nov 24 2008 21:37 Aug 15, 2011 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 R:\DOCS\67346.000 TIMD
36 

duction tax credit for renewable energy, for example, and extending 

it so investors have certainty. But on the other hand, can we afford 

some of these new outlays that we are considering today that did 

not exist a couple of years ago? We need to really take those under 

consideration, in light of our deficit. 

Senator STABENOW. We have a difference of opinion on that in 

terms of what it does to create jobs, but I did want to ask that 

question. Thank you. 

Senator BINGAMAN. Well, thank you all very much for being here. 

I think it has been useful testimony. 

We will conclude the hearing. 

[Whereupon, at 4:35 p.m., the hearing was concluded.] 

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