Hank Habicht (L) and Dan Kammen discuss the impact of policy on investing in clean technology companies.

In his opening remarks, Dan Kammen, founder of the Renewable and Appropriate Energy Laboratory, said, "I no longer know where to begin. With the events of the past couple of days it's unclear exactly where to start."

The night before the Clean Tech Investor Summit opened, president Bush announced renewable energy initiatives that could focus federal policy and funding on renewable energy, especially biofuels for transportation. This panel of energy policy experts, moderated by Clean Edge's Ron Pernick, went with the flow.

R&D funding drives leadership and innovation
Kammen said the president's energy pronouncements, while narrow and under-funded, nonetheless deserve recognition as a positive step.

"This is a moment where credit is due on a number of fronts," Kammen said. "The White House gets some credit. Advisors from DOE, EPA and others have an opportunity not only to be pleased with the pronouncements, but to make the promises real. We've had many times when promises were made and they didn't become real."

When a president says we have an oil addiction, and that we need to cut that addiction with technologies of today and near future, Kammen says we should be optimistic that the promises will be kept. He dubbed the Wall Street Journal lead article on biofuels "skeptical."

Kammen argued that research and development funding in energy pays off. He presented historical data showing a correlation between R&D dollars invested in wind energy, and the innovations achieved.

"In almost every energy tech sector, dollars in equals patents out," Kammen concluded. Unfortunately, he said, R&D funding in renewable energy remains a depressing story. He considers the president's increase in DOE funding a modest first step.

"Energy is the biggest industry on the planet, and these numbers in the low billions need to go up," Kammen said.

He pointed out that Germany has half world's installed wind energy capacity. Even though Germany's wind resources are less favorable than those in North Dakota, the country's policies are more favorable than in the United States.

Consider how policy affects the business plan
"The conventional wisdom of the 1980s is still appropriate," said Hank Habicht, former EPA Deputy Administrator and now CEO of the nonprofit Global Environment and Technology Foundation. "Investors don't like to invest in businesses that are dependent on government decisions, whether a stroke of a pen for removing a benefit, or depending on policies that haven't yet gone into place. Yet we all know this is a field we can't afford not to be in, and policy is going to be important."

Habicht offered a framework for thinking about how policy affects business.

"Think about policy in categories," Habicht advised. "RD3 stands for research, development, demonstration and deployment. All three D's are important at the policy level."

The financial incentives category, in his assessment, needs to be more stable and predictable. The category of goals and mandates includes traditional regulations on emissions, as well as more contemporary policies such as renewable portfolio standards, capacity goals, the 25X25 initiative. Then there is a category of policies related to climate change and carbon. Integrated sector strategies attempt to align the efforts of multiple industries -- e.g., agriculture and transportation -- through policy.

"Almost every bill is looking at how to integrate the environment and each sector of our economy," Habicht said, advising investors to watch for the policies that will drive business value.

"Don't overemphasize policy. Don't underemphasize policy. And don't t just be a policy taker," he warned. "Government and policymakers are looking for what business needs to make these kinds of investments."

What do investors need in the president's agenda? Habicht has a shopping list: predictable incentives; R&D in energy; mandates for flex-fuel vehicles; coal gasification incentives; and trade policy providing support for biofuels.

"The major lesson is this: Focus on policy in the right way to make sure you know where the winds are blowing. Have some idea how it will affect your business model, and make sure you're getting every advantage you can get for the business you're investing in. Regulators and grant makers aren't the customer. The customer is the customer, so focus on the basic business model with policy in the right place."

Current policy is no stretch goal
Art Rosenfeld, a Commissioner with the California Energy Commission, remarked that he "wasn't as happy with the president's speech as some were. When I hear the words 'global warming' or 'fuel economy' coming out of the president's mouth I'll pay more attention."

Rosenfeld had comments on the 25X25 initiative, whose goal is to replace 25 percent of fossil fuel consumption with biofuels by 2025:

"The goal of the 25X25 initiative is a little better than 1.25 percent a year. But we're coming down by 1.75 percent a year now. It's hardly a stretch goal. Bush jumped on the bandwagon to avoid being run over by it."