The MacNeil/Lehrer Report; 7171; Reagan's Solar Policy

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ROBERT MacNEIL [voice-over]: A landmark today in the development of power from the sun: an American-built aircraft called Solar Challenger successfully flew across the English Channel powered by 16,000 solar cells.

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MacNEIL: Good evening. Solar energy may have scored its first big success in powering flight today, but there are many who believe the solar energy effort in the United States is about to be grounded. At issue are the policies of the Reagan administration, which has cut back on federal funding for solar development. The administration believes private in- dustry will develop solar energy without further government coddling. Critics say reduced government effort will let the Japanese or others take the lead and force us to buy their technology in the future. The feeling is so strong among some solar advocates that a leading Carter appointee, who has now lost his job, has accused the administration of declaring open war on solar energy. Tonight, solar energy and the Reagan administration. Jim?

JIM LEHRER: Robin, President Carter believed the federal government had a major responsibility to fund the development of solar energy. He made public statements about it saying 20 percent of the nation`s energy needs should be met by solar by the year 2000. And he put money in it: this year that amount is at $576 million. But President Reagan has said wait a minute, noting there was evidence that some government solar efforts had been mismanaged and are wasteful. And besides, the bulk of the work should be left to private industry. So he has asked that solar`s money be cut 66 percent next year, down to $193 million. The House and the Senate have taken initial steps to restore some of the funds, back up to as much as $300 million. But the Reagan administration intent to cut back on solar will be done. One of the sharpest of the cuts will be in the Solar Energy Research Institute in Golden, Colorado, which may lose more than half of its money and one-third of its employees. Its director was the Carter man who got fired. He is Denis Hayes, a national advocate of solar energy since the early `70s. when he organized the first Earth Day. Mr. Hayes, on June 24th, you said the following: "Secretary of Energy James Edwards has embarked on a careful, methodical campaign to destroy America`s best energy hope. It is not an over dramatization to say that this administration, and in particular Secretary of Energy Edwards, has declared open war on solar energy." Did you say that out of anger over being fired, sir, or do you really believe that solar energy is on the verge of being destroyed.

DENIS HAYES: It certainly was not out of anger at being fired. In a sense I suppose it`s a degree of relief at being fired because, when part of the team one has to constrain one`s comments a little bit, but in being fired, I think now I can call attention to a series of events not unlike those that you`ve been speaking of here. You don`t trim a budget by 67 percent. That is -- that`s really taking a hacksaw to a budget. You don`t move in and begin systematically dismantling the world`s premiere solar research institute --

LEHRER: That`s yours -- the one you ran in Golden?

Mr. HAYES: That`s correct. -- one that the rest of the world genuinely envies, unless you`re in the process of terminating the program. It seems to me that things were not blissful under the Carter administration; there were mountains of red tape that were mountains of red tape that were burying and misdirecting a number of things that we were trying to accomplish: But at least you could hack through it. On important things you could get decisions made, and bad decisions reversed. The current administration has replaced the red tape with a lead coffin, and we`re slowly being suffocated within it.

LEHRER: Mr. Hayes, you must have some feel, at least in your own mind, as to why the Reagan administration would want to destroy an alternative energy source like solar. What is it?

Mr. HAYES: Well, it sounds almost silly to even come up with reasons because solar is so terribly popular with the public. I am not close enough to any of these people to really impute causality to it, but I can give a degree of evidence. Jim Edwards comes into his job as Secretary of Energy with close to zero energy experience, and he leans very heavily upon his advisors. Those advisors are, without exception, former members of the Atomic Energy Commission who have spent their adult careers promoting nuclear energy. They are skeptical at best and hostile toward, at worst, other technologies -- of all kinds. And as a consequence, when the new budget was being formulated, nuclear power went up 36 percent while solar went down 67 percent. Conservation went down better than 75 percent. In that sort of a context, just the change in the nuclear budget -- the amount that it is being increased -- contains twice as many dollars as remain for all renewable energy resources combined. It`s craziness but I`m afraid that I -- well, to answer your question directly. It seems to me that these are people who genuinely believed in a particular kind of energy. Under the Carter administration they saw it being subjected to obstacles that they thought were unwarranted --

LEHRER: Meaning nuclear energy.

Mr. HAYES: Nuclear, yes. And I think what we`re seeing now is simple revenge. Basically: "Okay, wise guys. We`re in power now, let`s see how you like having your noses rubbed in the mud."

LEHRER: Is there any question in your mind that these budget cuts -- assuming they do go through Congress as, or in some measure at least, what the Reagan administration wants -- that it will be devastating to the development of solar energy, that private industry will not pick up the slack?

Mr. HAYES: There`s no question but that private industry can pick up some slack, and there`s no question but that there was waste in the solar budget. And in a time of fiscal austerity, it`s critically important that the people in the solar camp, like those in all of the other camps, tighten their belts. But there certainly was not $400 million worth of waste in a $576-million budget. And if one is going to cut out the waste in the solar budget, I hope that it`s evenhanded and consistent. We should go for the waste everywhere. There`s one reactor that they`re building now, in Clinch River [Tennessee]; the commitment this year to that one reactor is more than the entire budget for wind, for biomass, for alcohol fuels, for solar -- for everything in the renewable side. And the commitment to that reactor over the years that it will take to build it -- which is $3 billion -- is about three times as much money as has been committed to all renewable energy resources during the course of the country`s history. For heaven sakes, if you`re going to push one that aggressively, let`s push the other. If you`re going to withdraw from one and rum it over to the market, then turn everything over to the market.

LEHRER: Mr. Hayes, thank you. Robin?

MacNEIL: We hear now from a Congressman who is in favor of solar energy but in favor of the cuts in the federal solar program. He is Republican Robert Walker of Pennsylvania, a member of the House science and technology committee and the subcommittee on energy development. Congressman, has the administration declared war on solar energy development? Is it out to kill it?

Rep. ROBERT WALKER: I don`t think so at all. I think that what we see is a differing philosophy in this administration over the previous administration. This administration is determined that what they want to do is move toward more research and development, move toward new generations of solar technology, rather than investing money in tech-nology that`s already proven. And so that we are taking, in the Gramm-Latta budget. $300 million and investing it toward primarily, research and development efforts.

MacNEIL: Well, does that mean that all the money that has been cut is being withdrawn from programs that were just further proving already proved technology, in your view?

Rep. WALKER: I think the bulk of it was programs of a nature that we had proven technology on line, and the commercialization of that technology is very possible at the present time, and we -- I think we have to look at the fact that we have a tax credit in place to encourage the commercialization. The staff on the science and technology committee -- the minority staff -- estimates that between now and 1986 that that tax credit will be worth about $10 billion. And that`s a major commitment toward the development of solar energy in the near term.

MacNEIL: What do you say to the point we`ve just heard from Mr. Hayes, that the new Secretary of Energy -- and I know you`re not a member of the administration -- but the new Secretary of Energy. Mr. Edwards, is surrounded by advisors who all come from the old Atomic Energy Commission and. as he put it, are getting their revenge on the slighting of nuclear power in the previous administration?

Rep. WALKER: Well. I think that what you need to look at is the budget that the administration is operating under now. That budget is the Gramm-Latta budget: it`s $300 million. More money is there for non-nuclear research and development than is there for nuclear fission research and development. So that I think that that particular budget does define an other than nuclear energy goal for the nation`s energy future.

MacNEIL: Aren`t the cuts in the federal program, in your view, going in any way to inhibit or hurt the development of solar energy?

Rep. WALKER: I think they could end up being a plus for solar energy because I think that what you see is a real effort to inject a new philosophy -- a philosophy that recognizes that the prime inhibiting factors to solar energy have been economic. They`ve been the high interest rates. They`ve been the lack of capital investment money available. And I think that this administration through its policies of decontrol and deregulation, through its policies of trying to bring down inflation and interest rates, will do more to help the development of solar energy than the government subsidy program that the past admin-istration relied on so heavily.

MacNEIL: In addition to taking money out of, in your view, programs that merely continued to prove already-proved technology, Mr. Hayes has pointed out that there are really substantial cuts in the staff and budget of the Solar Research Institute, which he said was the envy of other countries in the world. What`s your comment on that?

Rep. WALKER: Well, I think we will still have a Solar Energy Research Institute that will be the envy of other nations in the world, except that it`s going to be oriented toward research and development now. It`s going to be oriented toward building the new genera-tions of solar technology rather than toward the more broad-based kinds of efforts that characterized that Institute during the Carter years.

MacNEIL: Well, thank you. Jim?

LEHRER: Mr. Hayes, it`s merely a change in philosophy, and ii could end up being a plus for the development of solar energy. You don`t agree?

Mr. HAYES: Well, it certainly is a change in philosophy. But I can see no way that it could end up being a plus. As I said, there are things that I`m willing to eliminate. There are silly excesses that went on in various communities.

LEHRER: Give me an example of a silly excess.

Mr. HAYES: Well, one that the Congressman is particularly fond of using anecdotally is. there was a grant of $8,000 or $9,000 once to build a solar doghouse. That`s $8,000 or $9,000 --

LEHRER: Is that one you`re fond of using anecdotally. Congressman?

Rep. WALKER: Yes, I`ve used that one, and also the solar outhouse and the solar beeswax melter, and several others that were very wasteful expenditures in my mind. But I don`t think that really gets to the base of the funding. I mean, there are -- there are several problems with the idea of -- I`ve said from time to time it reminds me of the aviation industry buying the Wright brothers` airplane over and over and over again.

LEHRER: But let`s speak to his basic point on that.

Mr. HAYES: That`s precisely how in high technologies we have seen technology after technology be commercialized. The Defense Department has gone and bought the Wright brothers` airplane or the transistor or item after item time after time after time, and has ridden it down a learning curve to the point where the cost is sufficiently low as a result of purchases by the Department of Defense, purchases by NASA, purchases by the Depart-ment of Agriculture, will drive it down to the point where common citizens can in fact afford it.

LEHRER: But he says it`s there on solar energy in so many of these areas, and the government should get out of that and go on staying in the outward fringe of new develop-ment.

Mr. HAYES: Yeah. He was saying for that, and for a couple of technologies it in fact is there. For a wide variety of others we still have truly a distance to traverse. And it`s again something you -- being almost economic is like being almost pregnant. You either are there where consumers are going to start buying it or you`re -- can I give you a specific example?

LEHRER: I`d love it.

Mr. HAYES: Homebuilders. Homebuilders are right now, due to some of the economic factors that the Congressman was alluding to, in real trouble. They can`t sell their houses. Interest rates are very high, and people can`t afford the energy bills that are associated with them, and houses just are not moving at all. They`re frightened. They tend to be mostly very small businessmen; they tend to have high school or trade school educations, and they want to know what it is different to do. We run a program for about a $100,000 at SERI that taught them -- a dozen of them -- how to build --

LEHRER: SERI is the Research Institute.

Mr. HAYES: Solar Energy Research Institute. We taught them how to use existing technologies. Now they did not have the courage, if you will, the depth of knowledge to know how to build these houses themselves. So we walked them through it. We paid the design fees, basically, to have the houses built so that they would use one-tenth as much energy per unit of interior footage as the average house in Colorado at an incremental cost of 3 to 5 percent. This was a hundred bucks spent on -- a hundred-thousand bucks spent on an educational program helping, if you will, the marketplace by providing it with more perfect information. And in that context, those houses sold lickety-split. There are some-thing like $8 million of new construction money now available to these builders from people who have pre-bought replicas of those houses, and at least some of these builders - - none of whom had ever built a solar house before -- have said that they`ll never build anything but a solar house now.

LEHRER: Congressman, is that not a legitimate function?

Rep. WALKER: Sure. It`s a legitimate function, but I would say that if there`s a con-sumer demand for solar houses, be they passive or active solar homes, those builders are going to respond to that market demand, and the best way of getting that market demand is to get interest rates down, which of course, the total economic program and the total cuts in spending are aimed -- is aimed at doing; bringing down the inflation rate so that families can afford those homes, and when you decontrol energy, you make those energy options far more attractive because people will begin to see the advantages of having passive solar in their homes to help save some of that decontrolled oil.

LEHRER: Mr. Hayes gave us an example. Let me ask you for an example. Congressman, of the kinds of projects you think it is a proper role for the federal government to fund.

Rep. WALKER: Well I think, for instance, we ought to be moving very heavily in advanced solar photovoltaics -- active solar systems. Improving the silicon products, and there are several types of development projects in that area. I think that we can also move in a variety of areas in the passive solar that again upgrades materials, demonstrates --

LEHRER: Keep it mostly in the scientific research area, and stay away from the market-ing that -- stay away from marketing.

Rep. WALKER: Bring them to the point where they are commercially feasible, and then allow the commercial market to take over.

LEHRER: All right, gentlemen, thank you. Robin?

MacNEIL: Now for the views from the marketing side of the solar debate. Paul Cronin, former Republican Congressman from Massachusetts, is the founder of a small company, Sunsave, that manufactures solar heating and cooling units. Mr. Cronin is also president of the Solar Energy Industries Association, a national trade association. How are the Reagan cuts going to affect the industry, the solar industry?

PAUL CRONIN: It depends on what part of the industry we`re talking about. If we`re talking about people that make flat-plate solar collectors -- who are the people you would see providing solar heating and cooling in homes, hot water in homes, this type of thing -- it`s probably going to be a big help that the Reagan cuts are in place.

MacNEIL: Why?

Mr. CRONIN: Mainly because this part of the marketplace has been devastated by the supposed good intentions of the previous administration and the monies that they appro-priated for solar. A couple of quick examples: there was a program to provide $500 grants to homeowners in 10 states to put in individual domestic hot water systems. This came at a time when the industry was really beginning to get some sales and build a good solid base, and create a good business structure. The government took a year and a half from the time they announced that program till the time they put out any money at all. During this time the average homeowner just dropped off because they figured if we can get $500 for nothing, why should we spend our money now? And the rules and regulations that HUD finally came up with for that program cost the individual homeowner who took advantage of it a minimum of $ 1,200 to take the $500.

MacNEIL: On which side will it not help to have the federal government out of it?

Mr. CRONIN: I think in the area of R&D for future --

MacNEIL: Research and development.

Mr. CRONIN: Research and development for future solar technologies, and those areas that are very capital intensive: things such as the power tower, ocean thermal, things that are very capital intensive, and still need a substantial amount of R&D for an extended period of time. That`s the type of thing where I don`t think industry has the hinds that would be needed to follow these projects through to the end. however --

MacNEIL: Can I ask you about something Mr. Hayes said rather poetically a minute ago. I thought, about some of the things that appear to be known technology now. that it is still necessary -- going to examples in the past -- as he put it "to ride the technology down the learning curve" even though it is known, until the cost and the practice is appropriate for the consumer. Is there a lot of that in between the flat-plate collectors and the advanced technology that would still need some federal support to make it attractive to industry.

Mr. CRONIN: Yes, there is, but there are other ways of doing it. and the tax credit is one of the principal ones. I think that when we talk about solar, all too often we tend to think of solar as being very homogeneous. It really isn`t. There are quite a few very diverse parts to solar. The thermal part of the flat-plate collector and even some photovoltaics are here and now. They`re cost-effective today; have been for some while. But you can then get from there through both active and passive into some pretty far-out solar technologies that are going to take a good deal of time before they`re developed.

MacNEIL: What proportion of the industry might be frightened off from investing or participating in this research and development because of the retrenchment of the federal effort?

Mr. CRONIN: I think some of the major corporations in the country that have traditionally worked, whether it be through Department of Defense, Department of Energy, or other major agencies, in systems development contracts, R&D contracts, to traditionally fund the risk part of their new investment. The major corporations whose names we all know have been doing this for many years with Department of Energy and Department of Defense. They are not going to put up their own money to take the place of this govern-ment money, in my opinion, in the short run. They`re probably going to wait and see whether there is a turnaround in the government`s attitude, and I don`t think that`s all bad. I think we have a little bit of lead time in that area. I do think we need a heavier government commitment in R&D for that type of technology. So far as the here and now is concerned, we don`t need that type of a commitment. All we need is the tax credit -- the 40 percent credit that`s in place for the homeowner. For the industrial and commercial it`s now only 25 percent, and in all honesty, to be effective and competitive, it should be 40 percent, the same as the homeowner`s. But if we had that I think our part of the industry would be very happy with government.

MacNEIL: Thank you. Jim?

LEHRER: Now to a Wall Street financial analyst who has studied solar energy`s private industry prospects. He`s Tony Adler. vice president of the investment house. Miller and Company. He serves with Mr. Cronin on the board of directors of the Solar Energy Industries Association. Mr. Adler, how strong is the American solar energy industry right now?

TONY ADLER: Well, measured in terms of sales, the thermal industry last year recorded installed sales of approximately $375 million. That`s opposed to a market that did not exist in 1974. That industry has grown at a compounded rate of approximately 57 percent. It should continue to grow at about a 30- to 35-percent rate over the next five years, and by 1985, should record sales of about $1 billion.

LEHRER: Do you think it`s capable of picking up the slack that might come in research and development in the long term -- the industry as a whole?

Mr. ADLER: Well, in terms of the thermal industry, I certainly do. We must differentiate between the technologies. The most advanced and highly technical of the technologies is photovoltaics such as those that powered the plane referred to at the beginning of the program. That technology is at the moment reporting sales of only $75 million a year -- a very small technology producing approximately four megawatts of electricity a year.

LEHRER: And the federal cuts could affect the development there? Is that what you`re saying?

Mr. ADLER: Dramatically. And this is an area referred to earlier where competition from the Japanese is coming on rapidly, and if the government does not wake up, we will lose our edge in that technology and look to Japan to buy our photovoltaics in the very near future.

LEHRER: What would be the damage there in buying technology from Japan, other than the fact that we have to buy it from Japan?

Mr. ADLER: Loss of jobs. Loss of national security. Photovoltaic cells are used to power practically all the satellites, or a great deal of the satellites we have in space today.

LEHRER: Does Wall Street see solar energy in very optimistic growth terms? I mean, is there a willingness on the part of Wall Street to invest in solar energy development and companies that are selling it and making things related to solar energy?

Mr. ADLER: There is a willingness, albeit a hesitant one. To date this year three com-panies have gone public -- in the marketplace. Over the last seven years there have been a total of 30 companies that have gone public in Wall Street, and that`s out of a total of 364 companies referred to by the Department of Energy as producing solar collectors or photovoltaics. I do think that there is an appetite out there for solar; certainly it is as specific and as choosy as it is for any industry in the marketplace today.

LEHRER: Thank you. Robin?

MacNEIL: Congressman Walker, what`s your reaction hearing these two businessmen talk about the feeling about the solar energy. We heard a prediction that the big corpora-tions are perhaps going to hold back for a while, with the government pulling out, to see if there`s a change in government policy. Mr. Adler just said that there`s a certain hesitancy, really, to plunge in enthusiastically at the moment. How do you react to that?

Rep. WALKER: Well, I think that, once again, it demonstrates the kind of commitment that we need to research and development. For instance, Mr. Cronin mentioned the OTEC types of experimentation. That was included in the Gramm-Latta budget. I think it`s around $40 million which is in there.

MacNEIL: Excuse me. OTEC?

Rep. WALKER: That`s Ocean Thermal Energy Conversion. And that`s one of the more advanced technologies that we`re looking at, and that`s included as a part of the R&D that was under the Gramm-Latta budget.

MacNEIL: Well, just let me get it straight from these gentlemen. Are you satisfied that there`s enough left in what the government`s doing to keep the excitement and the motiva-tion going, or that it isn`t quite enough? How do you -- I didn`t quite get it from you. How do you feel?

Mr. CRONIN: I think for the people in the solar industry who are in business today and selling a product to the consumer, there very definitely is enough in there to keep him happy, and that is basically --

MacNEIL: I`m referring to the -- to the new industries getting in, new risk capital, that kind of thing.

Mr. CRONIN: Even there. For the people that are out in the marketplace who are selling a product -- they have the ability to attract capital so that they can survive. And they will not only survive but grow, with the tax credit. And without any additional authorizations or appropriations. However, when we get beyond that stage, of the people who are there today selling a product -- that provides space heating and cooling and hot water and, in some cases, photovoltaics for remote uses -- that is one side of it. The next side of it is. what`s the next level, the next plateau? That next plateau still needs additional support.

MacNEIL: More than is already in the -- is left in the funding now?

Mr. CRONIN; Well, a lot of it depends on how they`re going to spend it. If they spend it the way it`s been spent in the past, certainly it`s not enough. If they spend it much more wisely than they have in the past, and start targeting areas where that investment will provide the greatest return, I think it`s more than enough.

MacNEIL: Congressman, what about Mr. Adler`s point that we -- if the government, in his words, doesn`t wake up we stand to lose our edge on the photovoltaics to the Japanese, and we`re going to find ourselves in a short time buying it back from them.

Rep. WALKER: I think that that to some extent, though, is a function of the economic problems that we face. I think that our own development of the photovoltaic industry involves getting that risk capital put forward. And in our present economic circumstances, that`s not going to happen. That`s the reason why we need to turn around the economy. I also think that the one reason why we should look toward some of that foreign tech-nology -- I think that`s a driving force for our own technology. Any development that`s taking place overseas will also help us here because it helps move us step by step toward even better technology and new generations of technology for the future.

MacNEIL: Mr. Hayes, briefly. The Carter projection of 20 percent of our energy needs from solar by the year 2000. Was that a sensible projection, and is it still a sensible projection in view of the cuts?

Mr. HAYES: Well, it was certainly a sensible, and perhaps even a conservative, pro-jection of what could be accomplished if we had continued to build the way that we were building for the last four years. In view of the cuts that have come. I would like to hope that, in fact, all of these things can be picked up. The tragedy may well be that a large fraction of that 20 percent may well be imported technologies instead of domestic tech- nologies.

MacNEIL: Mr. Walker, briefly -- Congressman Walker, what`s your reaction to that?

Rep. WALKER: Well, I don`t think that the 20 percent has been abandoned at all. I think that if we`re going to arrive at the 20 percent it in large part demands that the market forces work -- that people want that technology put into their homes, put into their industries.

MacNEIL: We have to -- I guess I catch your drift, but we have to cut it off there. I`m sorry to interrupt. Thank you. Congressman Walker, Mr. Hayes, and thank you, Mr. Cronin and Mr. Adler. Good night, Jim.

LEHRER: Good night, Robin.

MacNEIL: That`s all for tonight. We will be back tomorrow night. I`m Robert MacNeil. Good night.