What Will Happen To Clean Energy Startups Under Trump?

In the middle of the Nevada desert, 10,000 billboard-sized mirrors reflect sunlight onto a tower that stores the energy in molten salt–an innovative way to make solar power available to nearby Las Vegas at night. In Arizona, Fluidic Energy designs rechargeable, next generation batteries for energy storage that are in use around the developing world. In Oregon and elsewhere, the solar developer SunPower is using drones to more quickly plot the ideal configuration for solar farms, and robots to clean panels so they can absorb more sunlight.

All of these technologies got their start at least in part because of government funding, from sources that may dwindle or disappear under Trump. It raises a question: how will the current administration’s policies affect innovation in renewable energy?

The White House’s proposed budget eliminates the Advanced Research Projects Agency-Energy (ARPA-E), as does a spending bill currently in Congress. The Congressional bill also cuts funding roughly in half for the Office of Energy Efficiency and Renewable Energy (Trump wanted to cut it 71.9%). It cuts 2018 funding for energy programs in the Department of Energy by $1.7 billion compared to 2017 (Trump wanted to cut it by an additional $2.3 billion).

This is happening when the renewable energy industry is arguably stronger than it ever has been before. In 2016, more than half of all new energy installations used renewable sources. Solar and wind are now cheaper than coal power in many markets, and in about a decade, solar is likely to be cheaper than natural gas. Cleantech startups are thriving. But it’s also possible that changes in policy and government funding could slow down future innovation.

Large energy companies, who often invest in startups with new technology, typically don’t want to fund nascent innovations that aren’t already proven. “If they look externally, they’re going to look at companies that have already established themselves, that have a product that can come to market relatively quickly,” says Rohit Shukla, CEO of the Larta Institute, a company that helps commercialize technologies funded by federal grants. In the past, the riskiest new ideas might have had a better chance of getting a government grant.

“Who fills that gap is the real issue,” Shukla tells Fast Company. “There’s so much good science coming out from universities or smaller companies. And yet there’s no particular support for the first phases of bringing that technology to a particular point so that they then become acceptable and worthwhile for larger companies to invest in.”

The possibility of slower progress is worrying some of those larger companies, not just the researchers and entrepreneurs working on very early-stage technology. “I’ve been having conversations with some of the larger companies, and they’re nervous because they benefit from the cleantech startups that can take the risks they can’t,” says Eliot Metzger, a senior associate at the World Resources Institute, a global research organization. “They’re worried that this stunts their growth.”

Investors are also typically interested in technology that’s more proven. “Early-stage capital is really difficult to find,” Shukla says. “There used to be a lot more of it available in the U.S. when the venture industry was a more patient industry, not so tied to short-term returns.”

As the federal government pulls back on support, the rest of the world is doing the opposite. China, for example, plans to spend more than $360 billion on renewable energy in the next three years alone. Much of that investment will probably go directly to building out new solar and wind farms, but it can be inferred that the country is also strongly supporting tech development, especially as the demand for clean energy increases globally. Overall, China expects its investment to create 13 million jobs.

In the U.S., renewables are also creating jobs but could do so at a much faster pace with support. The solar and wind industries are among the fastest-growing job sectors. One study estimated that lower-emissions technology could add another 4 million jobs by 2030.

If the administration pulls back from programs like the U.S.-China Clean Energy Research Center, which facilitates collaborative research, U.S. technology could be less likely to be deployed in China, and the U.S. could have less access to Chinese tech. Changes in trade agreements could also hurt solar installation companies if prices on cheap solar panels from countries like China go up in the U.S.

Still, existing American renewable energy companies are likely to continue to grow, and some believe that the industry will continue to thrive even without federal support. Technologies like wind and solar are already cheap enough that market forces can carry them forward. “We are moving past the most critical time in the development of many of the clean energy technologies in their need for government support,” says Andrew Beebe, managing director at Obvious Ventures, a VC firm focused on companies that produce social benefit.

“I think this is sort of a blip on the radar–it’s a really big one–but ultimately Washington does not really make these decisions at the end of the day,” says Dawn Lippert, CEO of Elemental Excelerator, an accelerator for energy startups that considers hundreds of applications for its program each year. “Washington cannot determine the path of industry, the path of technology, in many of these cases, and so those organizations are really redoubling their efforts to innovate and deploy.”

Many state and city governments have also increased their commitment to clean energy as a direct response to the announcement of the withdrawal from the Paris agreement. While some technologies could suffer a slowdown in innovation without more support for research and development–including energy storage, smart grid, and carbon capture tech–others are ready to scale up deployment now.

Proterra, an electric bus company, says that it’s already seeing increased interest from customers in reaction to the administration’s choices.

“Proterra is fortunate in that the majority of our customers’ decisions are made at the local level,” says Ryan Popple, the company’s CEO. “In fact, we’re already seeing that the withdrawal of the Paris Accord is invigorating mayors and local transit authorities in cities across the U.S. to push even harder for clean transit and commit to 100% zero-emission fleets. Pittsburgh, for example, was cited in the Paris exit speech, and then the city committed to going 100% renewable. It’s emblematic of hundreds of other municipalities that are showing climate action leadership at the local level.”