By Brad Townsend
Data overwhelmingly shows that public investment in energy innovation can create jobs, energy savings and security benefits. In fact, smart federal investments in energy research have one of the strongest track records at creating significant economic returns for taxpayers.
Declining Investment in Energy Innovation
- In 2010, the federal commitment to energy research, development and demonstration was just a tiny fraction—roughly 0.044 percent—of the nation’s energy bill.[i] By 2016, that number had climbed to just over 0.06 percent,[ii] or $6.4 billion. Put in historical context, since 1987 energy research has decreased from 14.4 percent of federal R&D outlays to 5.3 percent by 2017.
When We Invest, We Reap the Rewards
- As a result of the early collaboration between DOE and the private sector to develop unconventional gas resources, the United States had a ten- to 15-year head start in commercializing these technologies—industrial electricity prices are 30-50 percent lower than those of other major exporters, providing a significant advantage to manufacturers.
- A recent Harvard study found that unconventional oil and gas development boosted U.S. GDP by $430 billion in 2014 alone, supporting more than 2.7 million jobs.
- Aided by federal research in renewable technologies, more than 750,000 Americans are working in the renewable energy sector.
- Since 2009, the Advanced Research Projects Agency for Energy, or ARPA-E, has invested in almost 600 projects across an array of energy technology domains. As the early rounds of projects reach the stage where they can attract private support, a strong track record is emerging as 74 projects have already attracted more than $1.8 billion in follow-on, private sector funding, including 56 that have formed companies.
- A 2016 DOE study found that R&D investments totaling $12 billion between 1976 and 2012 at the Office of Energy Efficiency and Renewable Energy, or EERE, yielded net economic benefits to the United States of $230 billion (in inflation-adjusted dollars) with an annual return on investment of 20 percent.
- From 1976 to 1983, DOE invested roughly $2 million into researching low-emissivity windows that better insulate buildings and by the mid-1980s, industry investment into these windows had grown to $150 million. By 2000, these windows had already saved Americans more than $8 billion.
- Research into high-efficiency diesel engines that began in the 1970s has likewise paid an enormous return on investment to the American taxpayer. From 1986 to 2007, investments totaling less than $931 million (adjusted for inflation) created more than $70 billion in economic benefits for the United States—a seemingly impossible return of $70 for every dollar of taxpayer investment.
- Much of the early research into lithium-ion batteries was conducted here in the United States and funded by taxpayers. Yet today, China, Japan, and South Korea represent 85 percent of global lithium-ion battery production capacity. The global market for these batteries is poised to grow from $29.68 billion in 2015 to $77.42 billion by 2024—a nearly $50 billion mid-term opportunity with even greater potential long-term.
- The International Energy Agency estimates that by 2040, new nuclear will account for as much new global electric power generation as natural gas. The Department of Commerce projects that nuclear could generate more than $100 billion in American exports over the next decade.
Growing Global Competition
- Recent assessments of global innovation peg the United States anywhere from fifth to tenth, dragged down by insufficient investment in energy R&D relative to the size of our economy.
- The global energy market is more than $6 trillion; investments of $1.8 trillion in 2015 alone show fierce global competition to meet the enormous growth projected.
- S. Energy Information Administration projects that global demand will increase 48 percent by 2040 and the International Energy Agency estimates that by 2040, $67 trillion in investment will be needed to meet this demand.
- America still spends more on research than any other nation—although China is expected to surpass us in the mid-2020s if current trends hold. But America also has the world’s largest economy to support, which is why R&D intensity—R&D spending as a percentage of GDP—is the preferred metric for measuring a country’s commitment to innovation. The United States ranks only 12th in energy R&D intensity.
- Global investments in renewable energy exceeded $300 billion in 2015.
- In the 1950s, researchers at the Brookhaven National Lab who were working on nuclear research realized the medical potential of Technetium-99m, or Tc-99m. Today, Tc-99m is the most widely used tracer in nuclear medicine worldwide—comprising 80 percent of all diagnostic nuclear medicine procedures, or roughly 35 million procedures annually, this research has saved millions of lives
- John Goodenough, who pioneered the rechargeable lithium ion battery, received early support from DOE and the National Science Foundation to research alternative materials to decrease costs. Today, numerous industries rely on this technology—including the smart phone, which generated nearly $53 billion in U.S. sales in 2015 alone.
Federal investments in energy innovation fill critical gaps in the innovation cycle, create jobs, lower energy costs and make our energy systems safer and more reliable.
[i] According to EIA’s Short Term Energy Outlook for Feb. 2017, U.S. annual energy expenditures in 2010 were 8.1 percent of GDP. U.S. GDP for 2010 was $14.681 trillion (U.S. Department of Commerce, Bureau of Economic Analysis), meaning Americans spent $1.17 trillion on energy in 2010. The U.S. spent $5.1 billion on energy R&D in FY 2010 (AEIC)
[ii] According to EIA’s Short Term Energy Outlook for Feb. 2017, U.S. annual energy expenditures in 2016 were 5.4 percent of GDP. U.S. GDP for 2016 was $18.567 trillion (U.S. Dept of Commerce, Bureau of Economic Analysis), meaning Americans spent just over $1 trillion on energy in 2016. The U.S. spent $6.4 billion on energy R&D in FY 2016 (U.S. Department of Energy)