June 18, 2020

AEIC Scaling Innovation Project: Technology Demonstration Case Study Series

The American Energy Innovation Council has begun a new Scaling Innovation project focused on addressing the challenges inherent to the scale-up and demonstration of new energy technologies. We have convened experts from industry, academia, finance, entrepreneurship, and government to explore the challenges and policy fixes necessary to drive clean energy innovation to scale. The first product from the Scaling Innovation project is this set of case studies from leading experts looking back to notable past policy efforts to help inform new programs to demonstrate first of a kind energy technology projects.

In the first AEIC report, A Business Plan for America’s Energy Future (2010), a New Energy Challenge Program was proposed as a way for the U.S. government to support the demonstration and eventual commercialization of new energy technologies. For the United States to meet aggressive mid-century decarbonization commitments, a technology-inclusive portfolio of clean and innovative technologies, including advanced nuclear and renewable energy systems, zero-carbon fuels, long-duration electricity storage, and carbon capture and storage must be deployed commercially at scale.

The initial demonstration of complex technologies is a well-recognized challenge in the energy sector where first-of-kind risks are difficult to manage and projects must operate in highly regulated commodity markets, many of which may not yet appropriately value their advanced attributes.

This case study series consists of four case studies examining the role of demonstration projects in the commercialization of new clean energy technologies

  1. The American Recovery & Reinvestment Act and the Rise of Utility-Scale Solar Photovoltaics: How U.S. Public Policy During the Great Recession Launched a Decade-Long Solar Boom by Varun Sivaram.
  2. A Review of Federal Efforts to Demonstrate Carbon Capture and Storage with Commercial-Scale Coal-Based Power Plants (2003-2016) by Eric Redman.
  3. The U.S. Clean Energy Deployment Administration: A Business-Driven Approach to Leveraging Private Sector Investment in U.S. Clean Energy Technology Innovation, Commercialization, and Deployment by Dan Reicher.
  4. Flying Laboratories, Prototyping, and Dem/Val: The Crucial Role of Technology Demonstration in Advancing Military Innovation and Its Relevance for the Department of Energy by Dorothy Robyn.

 


Cover Letter: “Lessons for American Energy Innovation Policy”

As Congress considers further investments to help the economy recover from the effects of COVID-19, a focus on clean energy technology is likely as lawmakers seek opportunities to stimulate near-term job creation while also positioning America to meet critical long-term challenges such as climate change. In this context, understanding lessons learned from the federal government’s past experience with technology policies and programs will be important to ensure that new public investments are well designed and achieve maximum results.

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The Successful Demonstration of Utility-Scale PV

The 2009 American Recovery and Reinvestment Act serves as an example of how direct investment in the demonstration of clean energy technologies jump-started what is now one of the most dynamic sectors of the U.S. economy. ARRA funds were used to successfully demonstrate utility-scale solar photovoltaic technology through federal loan guarantees, which, in conjunction with state renewable portfolio standards and the 1603 Cash Grant Program, helped contribute to renewables now being the fastest growing source of electricity in the United States.

 

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The Mixed Success of the Carbon Capture Demonstrations

The mixed record of the FutureGen and Clean Coal Power Initiative shows the challenges inherent in demonstrating first of a kind technologies. From 2003-2015, the US supported large coal-based CCS projects. Of the five projects, only two were successfully built and only one – Petra Nova – worked. Unlike the scale-up of solar PV, which is achieved by deploying multiple modularly-manufactured panels, first of a kind power plants with Carbon Capture and Storage required bespoke engineering and relied heavily on anticipated economies of scale that were not realized due to cost over-runs, schedule delays, and complexity challenges due to the integration of two major subsystems – the power plant and the chemical separation.

 

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Looking Forward with a Clean Energy Deployment Administration

Securing and structuring financing for the first set of commercial projects is typically a major hurdle for new energy technologies, because these technologies have an unknown risk profile and lack a proven track record and established rate of return. Legislation originally put forth in 2009 proposed the establishment of a new federal entity, the Clean Energy Deployment Administration (CEDA), an independent and business-driven federal financing agency with a diverse set of tools to leverage private investment in accelerating U.S. clean energy deployment.

 

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Lessons from DOD, Where Demonstrations Are Part of the Culture

In designing programs at the Department of Energy to scale-up and demonstrate new energy technologies, policy makers can look to the Department of Defense where technology demonstrations are embedded in the culture. The DoD spends $105B/year on Research, Development, Test and Evaluation programs, of which technology demonstrations are crucial element. At the DoD, technology demonstration programs are designed with the scale of a demonstration fit for the purpose, with industry participants having sufficient control. Unlike DOE, DoD is capable of using the carrot of government procurement thus allowing DoD to catalyze private investment where firms anticipate DoD procurement as a final market.

 

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