By Ayesha Rascoe and Nichola Groom
WASHINGTON/LOS ANGELES (Reuters) - U.S. Energy Secretary Steven Chu, the Nobel Prize winner who shepherded an effort to help spur a clean energy U.S. economy, will step down after a tenure rocked by the failures of some costly government investments.
Chu's departure, which was announced Friday and follows similar moves by the Environmental Protection Agency administrator and the interior secretary, will allow President Barack Obama to craft a fresh team to address climate change.
Obama has said responding to the threat of climate change will be a priority during his second term, giving the issue a prominent place in his inaugural address last month.
After legislation setting up a program to cap greenhouse gas emissions failed to get through Congress, the administration pushed ahead with regulating carbon through the EPA. Lawmakers are still divided over climate change and analysts expect Obama will continue to use federal agencies to target emissions.
Chu's successor will likely operate under a much more constrained budget, but could play a key role as the department develops energy efficiency standards, funds research into clean energy innovations and helps oversee the shale oil and gas boom.
Potential contenders for the energy post are said to include Christine Gregoire, former governor of Washington; Bill Ritter, former governor of Colorado; and Dan Reicher, a Stanford professor and former Google climate change executive who worked in the Energy Department during the Clinton administration.
Analysts have said Obama likely will pick a successor with business expertise or political clout to fend off congressional critics of the department's spending on clean energy.
For the last two years, Chu had been at the center of Republican-led probes of his management of the $37 billion his department received for clean energy development from the 2009 economic stimulus.
When Chu took the energy post that year, he was supposed to put a new focus on clean energy. "Drill baby drill" was out, the Toyota Prius - or even better, the Chevy Volt - and solar roof panels were in.
Chu got to play Santa Claus to the clean energy sector with the stimulus funds. But hard times followed when one of the recipients, solar-panel maker Solyndra, filed for bankruptcy in 2011 after receiving a $535 million loan guarantee.
Chu defended his record to the end, fighting off charges that his department doled out funds to political allies.
"We should be judged not by the money we direct to a particular state or district, company, university or national lab, but by the character of our decisions," he said in his resignation letter.
Chu said he may remain in his post past the end of February to help in the transition to his successor.
Unlike his predecessors, who included former politicians and businessmen, Chu was a self proclaimed nerd and energy efficiency fanatic who does not own a car, cycles to work and walks many flights of stairs to his office.
Instead of focusing on fossil fuels, Chu made clear his focus was on fuels of the future. In a famous early misstep, Chu even said OPEC was not his domain, then backtracked.
Chu's scientific pedigree was often touted as an asset by the administration. The White House tapped Chu to help figure out how to cap BP's ruptured Macondo well during the 2010 Gulf oil spill, crediting him with helping to devise the ultimate solution for capping the well.
Detractors complained that the bookish physicist's awkward style made it hard for him to push a compelling message promoting renewable or alternative fuels.
Under his watch, big increases in U.S. wind and solar power development were overshadowed by new methods to get at old-fashioned energy sources: crude oil and natural gas.
Kevin Book, managing director at Washington energy research firm ClearView Energy Partners LLC, said the shale natural gas boom in particular upended Chu's agenda.
"Secretary Chu came to Washington to transform America's energy infrastructure and he's going to leave Washington where natural gas has transformed the viability of everything he cared about," said Book.
That oil and gas bonanza has helped to put the country on track to its long-sought after goal of energy self sufficiency, but environmental groups have raised concerns about continued reliance on carbon-releasing fuels.
BAD BET ON SOLYNDRA
The fallout from Solyndra, a "bad bet" that was once a crown jewel of the Obama's renewable energy policy, engulfed Chu in a political firestorm.
Solyndra was supposed to be a success story in the White House's effort to promote green energy and create jobs.
But, after the federal loan aid and visits from President Obama and Vice President Joe Biden, Solyndra filed for bankruptcy in September 2011. The Republican-led House of Representatives probe into the government's aid to Solyndra then kicked into high gear.
"The fact that he was not extremely well versed in how to handle folks on Capitol Hill probably created a more adversarial atmosphere than there needed to be," said Salo Zelermyer, an attorney with Washington law firm Bracewell & Giuliani who served as senior counsel at the Energy Department during the Bush Administration.
The department's advanced battery grant program has also experienced some high profile setbacks, with battery maker A123 also filing for bankruptcy.
Despite the negative optics, though, analysts have said it would be unrealistic to expect such a large portfolio of projects to be without failures.
The full impact of the department's efforts is not yet clear, but Chu helped place the nation on a path to compete in the global clean energy market, said Joshua Freed, director of clean energy program at the think-tank Third Way.
"The secretary was brought in because he had an understanding and vision for how to innovate," Freed said. "He actually did that quite well."
Martin Lagod, managing director and co-founder of venture capital firm Firelake Capital Management, said Chu's most important legacy was ARPA-e, the DOE entity that promotes high-impact energy technologies not yet ready for prime-time.
"It is a beautiful program and frankly should be funded bigger and better. ... It's a great catalyst for creative and innovative thinking. A good role for government is to help spur and fund basic research and to me this is a very good example of it in the DOE," said Lagod.
(This story corrects Reicher's title to former Google executive in paragraph six)
(Additional reporting by Jeff Mason, Roberta Rampton and Timothy Gardner; Editing by Ros Krasny and Doina Chiacu)
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