Fresh off its $7.9 billion acquisition of Constellation Energy, Exelon Corp. – now the nation’s largest competitive power producer, with total generation capacity of 34 gigawatts – reported weak quarterly earnings this week due to a historically mild winter, the plunging price of natural gas, and costs associated with the merger with Constellation.  Also the largest U.S. nuclear power company, Exelon faces rough sailing ahead under new CEO Christopher Crane.  Confronted with a natural gas glut with no end in sight, plateauing demand for electricity, and forthcoming stringent regulations on greenhouse gas (GHG) emissions, particularly from aging coal plants, U.S. utilities are going through a wave of consolidation and cost cutting as they attempt to weather the stormy transition to more sustainable forms of power generation.  The Exelon-Constellation announcement was followed by Duke Energy’s purchase of Progress Energy for $13.7 billion in stock, in January.

Chicago-based Exelon is in a particularly interesting, not to say dicey, position because of the big bets that Crane’s predecessor, John Rowe, placed on nuclear power.  A blunt-spoken “lawyer and amateur historian with a fascination for antiquities and a love of the podium,” as Crain’s Chicago Business described him, Rowe had become a familiar figure in Washington, D.C.’s corridors of power and a leading advocate for the heralded “nuclear renaissance.” He believed that the shift away from coal and other carbon-emitting forms of power would favor nuclear power, which supplies 20% of America’s electricity and remains cheap compared to other forms of clean energy, including renewables.

“The single most disruptive technology in my 28 years as a CEO was shale-gas fracking,” Mr. Rowe told an energy conference in March. The natural gas boom represents “a huge challenge for my successors at Exelon.”

That’s not exactly a rousing vote of confidence for Crane, who never finished college and who started out as an electrician at nuclear plants in the 1970s.  Exelon’s share price has lost 18% of its value since its peak in November 2011, before the full extent of the domestic natural gas supply became evident.  That now seems like another era.  Few people foresaw the gas glut that’s now proving to be an economic boost for the United States and a huge challenge for big producers of power from coal (like American Electric Power) and nuclear, like Exelon.

Exelon is also locked in a political battle over a new 650-megawatt plant planned by Omaha-based operator Tenaska, Inc. on Exelon’s home turf of Illinois.  Tenaska had originally planned a $3 billion next-generation “clean coal” plant for its Taylorville, Ill. site.  Faced with strong opposition from state politicians and influential business figures including John Rowe, Tenaska this week said it would shift gears and build a natural gas plant instead, at a third of the cost.  How Exelon will respond remains to be seen.

The waves rippling across the energy industry represent the biggest change in the utility business since deregulation, in the 1990s.  How these new power behemoths navigate the tossing energy seas will play a major role in determining the structure of the U.S. energy industry for a generation.

In articles, op-eds, and books like Power Hungry, Robert Bryce has become America’s foremost skeptic of renewable energy generation.  It’s not that Bryce doesn’t like wind, and solar, and biofuels; he just scoffs at the notion that they are going to provide enough power, at low enough prices, over the next few decades to make a dent in energy demand.  (Disclosure: when Bryce was editing the website Energy Tribune I contributed a few articles, and his work is mentioned in my new book SuperFuel.)  Now Bryce has written an article for Slate demanding to know why President Obama is so “blind” to the big production surges coming from domestic oil and gas resources.

In 1990, Bryce writes, the United States had 33.8 billion barrels of proven oil reserves.  Today that figure stands at 31 billion barrels.  Over the two decades from 1990 to 2010, “the domestic oil sector produced about 52 billion barrels of oil.  In other words, between 1990 and 2010, the United States produced nearly twice as much oil as we believed the whole country had in 1990, and yet at the end of that period, we still had about the same amount in proven reserves.  What’s going on?”

The answer, of course, lies in the “shale revolution” – the technological advances that have allowed producers to wring oil and natural gas from so-called “tight rock,” reserves that 10 or even five years ago would have been uneconomic to produce.  So far, this is inarguable.  But Bryce, who has a penchant for drawing sweeping conclusions from data that could be interpreted in varying ways, goes on to claim that Obama is not only anti-Big Oil but is ignoring (or ignorant of) the economic and geopolitical ramifications of the shale revolution.  Obama is “wrong about what those percentages mean, and his wrongness reflects a fundamental misunderstanding of the oil and gas industry.”

The Innovation Debate

There are two things wrong with Bryce’s argument. No. 1 is that Obama is hardly blind to the achievements of the domestic oil and gas industry.  To be sure, Obama has tried to balance political demands from his Democratic base with the oil industry’s demand for more pipelines and more drilling.  But here’s part of Obama’s Jan. 18 statement when he essentially put off a decision on approval for the Keystone XL pipeline expansion: “This decision … does not change my Administration’s commitment to American-made energy that creates jobs and reduces our dependence on oil.  Under my Administration, domestic oil and natural gas production is up, while imports of foreign oil are down.  In the months ahead, we will continue to look for new ways to partner with the oil and gas industry to increase our energy security –including the potential development of an oil pipeline from Cushing, Oklahoma to the Gulf of Mexico – even as we set higher efficiency standards for cars and trucks and invest in alternatives like biofuels and natural gas.  And we will do so in a way that benefits American workers and businesses without risking the health and safety of the American people and the environment.”

That is hardly the language of a man ignorant of rising domestic oil and gas production.  Obama wants to move toward a non-fossil-fuel energy system while producing domestic oil and, in particular, natural gas to fuel U.S. industry and create jobs.  Even Bryce would have a hard time arguing with that strategy.

The No. 2 caveat to Bryce’s Slate article is that the following statement is blatantly untrue:  “Over the past few years, the oil and gas sector has out-innovated the political darlings of the moment: solar and wind energy.”  Innovation in the wind and solar sectors has been second to none, without the increasingly apparent environmental damage that hydraulic fracturing, or fracking, is causing in tight-rock oil and gas production areas.  As my colleague Peter Asmus has pointed out, the price of power from solar photovoltaic arrays has declined to near grid-parity levels, even as federal subsidies are being phased out.  Bryce strays into ignorant territory himself when he suggests that the practice of pumping chemicals into the ground to break up geologic shale formations is somehow more “innovative” than the rapid advances in solar technology.

In reporting for a cover package on the natural gas boom for Fortune, I spoke to John Deutch, the former CIA director, now an Institute Professor at MIT.  Hardly a tree-hugger, Deutch is all for the economic benefits of the shale revolution; but he sees it through a wider lens than Robert Bryce.

“I recently chaired a committee studying the environmental impacts of shale gas production,” Deutch told me.  “We came to the very strong conclusion that those impacts have to go down over time if the U.S. is going to support those advances in production.

“Air quality, water quality, community effects – these are very important issues. What concrete action are we taking to reduce those problems?  The answer is, ‘Not enough.’”

Taking a measured approach to energy policy, even as cheap natural gas floods the market, is what presidents are supposed to do.  There’s nothing blind about that.

In a sharply worded analysis that will cause fear and trembling in the U.S. cleantech industry, a group of three research and policy organizations have produced a report saying that a cleantech collapse is imminent in this country unless subsidies, incentives, and federal policies are extended and reformed.  Entitled “Beyond Boom & Bust,” the lengthy report from the Brookings Institution, the Breakthrough Institute, and the World Resources Institute argues that, according to many indicators, the cleantech sectors have achieved remarkable successes over the last half decade: “Renewable energy generation doubled from 2006 to 2011, the first new nuclear plants in decades are under construction, and prices for solar, wind and other clean energy technologies have fallen while employment in those sectors has risen by 70,000 jobs even during a deep recession.”

Unfortunately those gains are not enough to create a self-sustaining and thriving cleantech industry: “Despite this recent success, however, nearly all clean tech segments in the United States remain reliant on production and deployment subsidies and other supportive policies to gain an expanding foothold in today’s energy markets. Now, many of these subsidies and policies are poised to expire—with substantial implications for the clean tech industry.”

On both the glowing-success and the looming-chasm side, this echoes many of the themes we at Pike Research have been pointing out over the last year, including in this blog on the so-called cleantech bust.  The cleantech subsidies provided by the American Recovery and Reinvestment Act of 2009 (ARRA), which are now winding down, are not only the target of withering scorn from the opponents of President Obama, but also generally tend to be viewed differently than fossil fuel subsidies, which have been around so long as to have become an accepted feature of the energy landscape.

Whatever your political or economic point of view, though, there’s one fact that is incontestable: the United States stands to fall far behind other nations in its commitment to new energy technology and new business models for generating and supplying energy.  The “cleantech gap” is especially worrisome when it comes to China, which is shaping up to be both an economic and military revival to the United States in this century.  But a quick scan of Pike Research blogs turns up this theme repeatedly, whether it’s Denmark pledging to move to 100% renewable energy by 2050, smart grid development in Germany,  green data centers in Iceland, the United Kingdom becoming a leader in offshore wind power, or the European Union’s ambitious “20/20/20” initiative, which could impose stiff costs to businesses in the short run but is nevertheless an achievement in long-term, non-partisan policy thinking that the U.S. seems structurally incapable of today.

The “Beyond Boom & Bust” report makes several policy recommendations for avoiding the possible decimation of America’s cleantech industry, including “Reforming energy deployment subsidies and policies to reward technology improvement and cost declines,” and “Strengthen the U.S. energy innovation system to make clean energy cheap.”  Unfortunately those are the kind of sweeping ideals that tend to gather dust on policy makers’ shelves.  And the economic boom being powered, in some regions of the country, by cheap natural gas (which I cover in the current issue of Fortune) makes investment in clean energy technology an even more courageous effort.  A bipartisan energy bill that puts in place a far-sighted vision for the future of energy seems, more than ever, like a pipe dream.

There are small signs, though, that at least at the state level, politicians and businesspeople are waking up to the danger of letting the cleantech achievements slide off a cliff.  There’s nothing like the loss of tens of thousands of jobs and the erosion of national economic competitiveness to grab people’s attention.

An essay on TheAtlantic.com by Eric Garland, a former strategy analyst and author of Future Inc: How Businesses Anticipate and Profit from What’s Next and How to Predict the Future…and WIN!, recounts Garland’s growing disenchantment with the field in which he’s made a living for 15 years: strategic intelligence.

I don’t particularly trust anyone who writes books with titles like that (particularly ones with totally ungrammatical subtitles), but Garland’s indictment is stinging and persuasive. “The market for intelligence is now largely about providing information that makes decision makers feel better, rather than bringing true insights about risk and opportunity. … Our future is now being planned by people who seem to put their emotional comfort ahead of making decisions based on real — and often uncomfortable — information.”

Garland is mostly talking about strategic intelligence at the corporate and nation-state level, but his definition of “strategic intelligence” (“researching trends, analyzing their potential impact, and reporting the possibilities to decision-makers”) could certainly apply to the field of clean technology research and analysis that we inhabit at Pike Research, as well.  He identifies three trends that are making it harder for empirical evidence and clear-eyed analysis to overcome institutional biases, internal politics, and short-term thinking.  First, “the explosion of cheap capital from Wall Street has led major industries to consolidate,” leaving a smaller pool of firms, many of which operate in markets distorted by politics, protectionism, and government handouts.  Second, this concentration of capital and economic clout has created giant bureaucracies in which “conventional thinking and risk avoidance become paramount.”  When you’re part of a large bureaucracy far removed from the real-world consequences of individual decisions and actions, it’s harder, and less rewarding, to base your thinking on strategic intelligence.

Finally, the influence of policy-makers is stronger than ever before.  This may seem counter-intuitive at a time when the United States can’t even craft a national energy policy, but Garland makes the case that national governments are now in the business of shielding large corporations – GM, Verizon, big banks – from the turbulent forces of globalized capitalism.

“How can you use classical competitive analysis to examine the future of markets when the relationships between firms and government agencies are so incestuous and the choices of consumers so severely limited by industrial consolidation?”

Watch Out for the Elephants

I have a couple of responses to this lament. One is that, although many cleantech sectors (electric vehicles and solar power, to name two) are certainly influenced by – many would say “distorted by” – government policy and government handouts, I have not found it the case that that limits the usefulness of evidence-based analysis and quantitative market sizing and forecasting.  Quite the opposite: the companies we talk to every day need independent intelligence more than ever, in large part because the actions of governments can be so unpredictable and so market-changing.  When you’re trying to run through an elephant herd it helps to know which way the trunks are swinging, as it were.

Second, the lamentable state of strategic intelligence is not news.  Garland never refers to the invasion of Iraq nor the intelligence failures (or misuses) that led up to it, but his critique certainly springs from the dark days of 2002, when an entire generation of CIA intelligence gatherers and analysts saw their work distorted and repurposed to further a predetermined foreign policy objective: the invasion of Iraq.  In 2007 John Heidenrich wrote a long essay on the CIA’s official website called “The State of Strategic Intelligence,” which made the same complaint that Garland makes today: “The architects of the National Security Act of 1947 would be greatly surprised by today’s neglect of strategic intelligence in the Intelligence Community.”

Last year former Fortune managing editor Walter Keichel III published an essay on the Harvard Business Review site in which he noted that the entire business model of corporate strategic analysis has shifted: “Behemoths such as McKinsey and BCG … have broadened what they do and moved down the food chain. McKinsey teams are beavering away in places like the United Arab Emirates and the ‘Stans — Turkmenistan, say, or Tajikistan — but they’re as likely to be doing operations projects as pure strategy work.”  These days the real money, Keichel notes, lies not in corporate strategy but in “semi-permanent, year-in, year-out relationships with companies rich enough to pay scores of millions annually for help and advice.”

That reminds me of the old Woody Allen joke: “I know therapy works – I’ve been doing it for 30 years!”  (To be sure, though, ongoing customized client relationships are often not only more lucrative to the consultant but more valuable to the client than one-off, high-level strategic studies.)

Garland’s overall point is inarguable.  “The study of the future used to be easier to sell, maybe because the analysis usually predicted the growth of the consumer economy or the next great gadget,” he writes.  “But the future is no longer nearly as palatable, and the customers are less interested.”

But the customers who aren’t interested in hard truths about an unpalatable future aren’t good customers, anyway, because they’re not going to be around for very long.