This article was also posted on National Geographic’s The Great Energy Challenge blog curated by Planet Forward.

This was a funny week to be in Washington DC. I happened to be in town on Tuesday when the Senate was debating whether to repeal the numerous tax subsidies given to the oil and gas industry. To give you a sense of scale, the subsidies on the block add up to $21 billion over the next 10 years for the top five oil companies alone.

Of course this was Washington theater and the repeal was turned down by a majority made up of Democrats and Republicans. No big surprise there. I frankly didn’t expect the Senate to make a move that would effectively raise gasoline prices in the current environment. But it wasn’t a complete waste of time either. The debate provided several opportunities to compare how we talk about subsidies offered to the fossil industry vs how we talk about renewable incentives.

First, this week’s debate makes plain that we’re subsidizing oil and gas in a pretty big way. How can we expect new technologies or renewables to ‘compete’ in the market when we’re handing out big subsidies to the incumbents? The answer is obvious: we can’t. (I blogged about this issue back in July). If we’re going to continue subsidizing fossil fuels, then we need to recognize that new technologies and renewables need subsidies just to maintain a level playing field. That’s an idea even my second graders can understand. 

Second, opponents of the repeal kept referring it to a ‘tax increase’ rather than a repeal of tax subsidies to some of the most profitable companies on earth. It’s identical to the way last year that those who voted against extending ‘temporary’ Bush era tax breaks were characterized as ‘raising taxes.’ I think the renewables industry could learn a thing or two from this example. From now on I think we should characterize any proposal to decrease or drop the renewable tax credits/grants as ‘raising taxes’ on renewable electricity. 

Finally, the main argument of the opponents rested on the notion that Americans are already suffering from high prices at the pump. They argued that eliminating tax subsidies now would simply increase gas prices and further hurt consumers. Again, I see an important lesson for renewables here. We should make it clear that raising taxes on renewable electricity will raise overall electricity prices and make it hard for Americans to afford the clean, reliable electricity they need to light and heat their homes. Let’s not hurt consumers by taking action that would increase the price of electricity!Oil 

I’m being a little tongue-in-cheek here to make a point. For the record, I don’t support any approach that singles out one or two tax incentives for elimination is missing the big picture. It’s clearly disingenuous to argue for one set of tax breaks on consumer grounds while arguing against another on the principle that government shouldn’t interfere in markets. If we’re against tax breaks, lets eliminate them all. Absent that course of action, the only fair answer is to provide similar breaks to new technologies and renewables to level the playing field.

This article was also posted on Fast Company’s FC Expert Blog under the title “Why Big Oil’s Purchase of Solar is a Good Thing.“

Last month saw the surprise announcement that Total SA–one of Europe’s largest oil companies–agreed to buy 60% of U.S. solar company SunPower for $1.38 billion. Many pundits saw the goal of the deal as helping SunPower take on low-cost Chinese solar module manufacturers. But I actually don’t think that was the main focus of this deal. In my view, the hook up reflects the continuing evolution of the solar industry from a niche to a significant part of the mainstream energy industry.

A lot of the commentary on the deal, frankly, had me scratching my head. Most analysts seemed unable to get beyond the SunPower-vs-low-cost-Chinese-solar-modules framework. While the announcement noted some incremental investment in R&D and new technology, it clearly wasn’t the centerpiece.

If SunPower was looking for a technology partner to improve its cost-structure, an oil company would be an odd place to find it. And if Total was looking to make an investment in a solar technology business, there are lots of other ways to do that besides buying the majority share of a company like SunPower.

This deal was about access to capital and credit. Lots of it. What SunPower got in this transaction was Total’s massive balance sheet, as highlighted by the announcement of $1 billion in credit support from Total. Why do they need the credit support? Because one of SunPower’s biggest unrealized assets is its large utility-scale solar project pipeline (the lines that get the power from the solar plant to the grid). The key is that it will take a ton of capital to deliver the pipeline to full operating status–and raising more equity was not the answer.

There are two ways to extract maximum value from the pipeline for SunPower’s shareholders: One is to reduce the cost of building the solar plants themselves. The other is to cut the cost of financing the projects. The transaction with Total takes a tremendous amount of risk off the table for SunPower. What Total got was a way to put its balance sheet to work while sharing in the uptick in value it created for SunPower. It’s a smart deal and I think it makes a ton of sense for both companies.

There are strong parallels to Sharp’s acquisition last year of Recurrent Energy (where I’m CEO). Like SunPower, Recurrent Energy has one of North America’s top three pipelines of utility solar projects. The key execution challenge for us was finding a way to maximize the company’s value. The sale to Sharp provided both a balance sheet and access to the supply-chain expertise to reduce the cost of building our plants–the two levers for realizing maximum pipeline value.

As the utility scale solar market grows, pipelines will become ever more important. And because building those pipelines requires large amounts of low-cost capital, a key competitive feature of tomorrow’s solar leaders will be access to a balance sheet that maximizes pipeline profit for shareholders.

While that’s good news for shareholders, perhaps it’s more important to recognize that it’s also tremendously good news for the world. Energy generated from solar PV is 100% clean and carbon-free. Solar PV’s rapidly declining price over the last couple of years has made it one of the best cost renewables. As a result, it’s now the fastest growing source of new generation in the utility power industry. The fact that financiers and conventional energy businesses are embracing PV means it’s ready for primetime. And what the world needs pretty badly right now is prime time-ready renewables that can deliver energy cost-effectively at large scale.