AEIC Releases Recommendations for Restoring American Energy Innovation Leadership

Energy technology innovation is critical for expanding U.S. economic growth, enhancing energy security, and protecting our environment. However, critical federal investments in energy innovation have remained unchanged since 2010, as detailed by the American Energy Innovation Council (AEIC) in its third report, Restoring American Energy Innovation Leadership: Report Card, Challenges, and Opportunities, released today. The report finds that Congress and the Administration have a mixed record on implementing AEIC recommendations to promote energy innovation and urges greater federal investments critical to achieving the country’s economic, security, and environmental goals.

DOE Energy RD&D Budget FY 2008-2015

AEIC’s leaders—Bill Gates, Jeffrey Immelt, Chad Holliday, Tom Linebarger, Norm Augustine, and John Doerr—came together in 2010 because of a common concern over America’s insufficient commitment to energy innovation. In previous reports from 2010 and 2011, the AEIC recommended several federal policy actions to promote energy innovation. However, the federal government has a mixed record on these recommendations. Tangible progress has been made towards the development of a comprehensive national energy strategy through the release the Department of Energy’s (DOE) Quadrennial Technology Review and its follow-up Quadrennial Energy Review. Moreover, the Department’s Energy Innovation Hubs, Energy Frontier Research Centers, and Institutes for Manufacturing Innovation provide critical, collaborative forums for the pursuit of energy research, as well as for the development and accelerated commercialization of new manufacturing technologies.

Nevertheless, stagnant government funding for energy RD&D over the last five years represents a major failure in U.S. energy policy. Public investment in energy RD&D remains less than one-half of one-percent of the annual nationwide energy bill. The scale of energy RD&D is still just one third of what AEIC recommends for the United States to compete effectively in global markets, diversify away from foreign oil, and mitigate environmental harms from energy production. Private energy innovation investments, which often build on federally-funded science and RD&D, are flat or declining as well.

Progress on the AEIC Recommendations to Promote Energy Innovation is Uneven

greenlightCreate an independent National Energy Strategy Board charged with developing a National Energy Plan for Congress and the executive branch. Alternatively, develop and implement a comprehensive, government-wide Quadrennial Energy Review that aligns capacities of the public and private sectors.
redlightIncrease annual investments in clean energy research, development, and demonstration (RD&D) by $11 billion to $16 billion per year.
greenlightCreate Centers of Excellence in Energy Innovation with each center receiving annual funding of $150–$250 million.
yellowlightFund ARPA-E at $1 billion per year. At a minimum, ARPA-E should receive at least $300 million per year.
redlightEstablish a New Energy Challenge Program for large-scale demonstration projects. Alternatively, develop a first-of-a-kind technology commercialization engine along the lines of a proposed Clean Energy Deployment Administration.
yellowlightMake DOE work smarter along the ARPA-E model.
redlightDevelop a funding regime that is dedicated, consistent, and not beholden to annual appropriations.

Innovation remains an indispensable strategy for meeting the competitiveness, security, and environmental challenges of the American energy system.

Competitiveness. RD&D investments made decades ago form the basis for the country’s competitiveness today. Although the United States maintains a significant lead in energy technology overall, American public investment in energy RD&D also faces increasing competition from other nations. The United States must build a pipeline of scientific discovery and invention that businesses can translate into globally competitive clean energy products. If these investments are not made, other countries have demonstrated they will step in to sell new technologies in energy production and delivery to the world.

Energy Security. By diversifying the energy technologies businesses and consumers rely on, the United States can reduce its economic vulnerability. For instance, U.S. transportation remains almost entirely dependent on petroleum, the price of which is subject to the vagaries of the global market. As such, price volatility remains a threat to American economic wellbeing, and energy technology innovation is critical to diversifying the country’s energy sources. Moreover, it is critical we develop technologies that enhance the resilience of our energy system.

Environment. Climate change is a global challenge. The United States must drive down the cost of clean energy and energy efficiency technologies as fast as possible, not only to make them viable choices worldwide, but also to ensure that American companies lead markets. In that respect, energy innovation is fundamentally a global approach to climate change that is in the best interests of the United States.

Overall, the scale of the energy challenges facing the United States demands a step-change in energy innovation investment. Although the United States counts past progress on clean energy innovation, more cycles of discovery and invention are necessary to produce the solutions that will make full transformation of energy systems attainable. The federal government has a critical role to play in this process, including RD&D as a complement to both regulatory and tax-based approaches. As the federal government steps up and invests in RD&D, businesses and investors are better able to justify and continue their own research, development, and venture investments. All of these actions help to address supply and demand challenges in the energy system and to drive down the unsubsidized cost of clean energy.

The AEIC urges policymakers to:

  1. Increase federal appropriations for energy RD&D across all low-carbon energy sources;
  2. Support increasing authorizations for DOE energy innovation programs, such as through reauthorization of America COMPETES legislation; and
  3. Support large-scale demonstration projects and limited downstream innovation investments, such as through a Clean Energy Deployment Agency or other investment authority, and/or through appropriately targeted tax provisions.

Ultimately, every year that clean energy technologies remain undeveloped or uncompetitive represents lost opportunities to build American companies’ global market share, create jobs, avoid disruptions to the economy, and reduce climate impacts. America’s current energy abundance is in part the product of many years of past energy innovation investments. Future generations should have a rich suite of options to choose from, or they may be swamped by the challenges described in the AEIC report.

“Any serious business leader would recognize that the country needs to take advantage of its current strength and act now to create a clean energy future. Only by investing in ingenuity and restlessness will the United States preserve its global leadership and ensure its future prosperity.”