At his confirmation hearing last week, Energy Secretary nominee Ernest Moniz told the Senate that the United States spends far too little on energy R&D. “We are underinvesting by a factor of three,” he said, directly citing AEIC’s previous statements. Indeed, although U.S. energy R&D has been growing in recent years, levels are still below their peak in the 1970s — and they’re set to drop in the years ahead. We’re spending less on R&D to develop various clean-energy technologies than groups like the International Energy Agency have recommended. Moreover, federal energy R&D is lower than what a variety of experts have argued is necessary to tackle climate change.
The article was written by Brad Plumer and can be read on the Washington Post Wonkblog.
In the last half century, American companies have developed the technologies and established the businesses that shape the world’s energy systems today. American companies have led in energy innovation in large part because they are supported by our federal government’s commitment to driving innovation. Acting as a catalyst or instigator, the federal government can quicken the cycles of discovery and invention.
As the American Energy Innovation Council outlined in its previous reports, Catalyzing Ingenuity and The Business Plan, private sector innovation cannot address our energy challenges on its own. Private markets generally do not exist for certain society-wide interests, such as ensuring long-term economic competitiveness, maintaining energy security, improving public health, or protecting the environment. Moreover, the private sector has tended to systematically under-invest in research and development relative to the societal benefits that could be realized through such investment, since businesses and investors cannot fully capture the value of their innovation. Markets will undoubtedly drive innovation, but they will so more rapidly when government addresses these twin challenges.
Today, AEIC staff release three case studies that illustrate the various ways in which the federal government has played a productive and necessary role in energy technology innovation. Staff research on unconventional gas exploration & production, advanced diesel internal combustion engines, and low-emissivity windows examine the various mechanisms that the federal government uses to complement and enhance private sector energy technology innovation.
Most often, the government plays the role of catalyst–speeding up activity that the private sector might have developed over longer periods of time. This role commonly takes the form of lowering risks of new technology to the private sector, such as through seed grants and cost-sharing of demonstration projects; creating incentives that reward use of new technologies and drive learning-by-doing, such as through tax credits; speeding diffusion of technical knowledge, such as through public-private partnerships and applied research and development; and standardizing information to help markets work better, such as through labeling and certification schemes.
Sometimes, the government plays the role of an instigator–creating new conditions that change the direction of private sector activity. This role commonly takes the form of creating new knowledge that market participants will not or cannot, such as through basic and applied research, and driving demand for private sector technology innovation, such as through direct procurement or performance standards.
In both roles, the government’s efforts are a complement to the private sector, not a substitute for them. An exhaustive history of each technology’s development would demonstrate that the private sector is the primary force translating ideas into products and markets; however, it is beyond our scope to recount these efforts in detail. Furthermore, these cases show that the dividing line between private sector and government efforts often blurs. For example, public-private partnerships generally utilize cost-sharing, generating R&D efforts that neither party on its own would undertake. Similarly, government funding of R&D through national laboratories and universities invests many young scientists and engineers with skills that they subsequently take to the private sector. In some cases, the government has been the biggest or the sole customer of particular energy technologies, resulting in collaborative effort with the private sector vendor.
Additionally, these case studies suggests we change our understanding of how energy technology innovation works.
Traditionally, technological innovation has been conceived of as “following a path,” starting with new knowledge and proceeding linearly through increasingly realized stages of research and development until reaching full realization of an intended end-product. “Basic” and “applied” research and development are generally synonyms for scientific research and technological invention, a convention that often demarcates the responsibilities of governments and markets. Commercialization tends to be presumed and considered as a follow-on process from innovation, rather than part of innovation itself.
These cases demonstrate that the preceding convention is incomplete. Throughout these cases, energy technology innovation does not often follow a linear path. Rather, diverse research and development efforts, often from previously unrelated domains, intersect to produce novel discoveries or inventions. Similarly, while the intended goals of particular innovations are important, the useful ends of those innovations are sometimes unpredictable. Failure to realize intended goals is common, but failures may still be productive, as successful innovations are sometimes difficult to identify until years or decades have elapsed. Moreover, new knowledge does not always precede new technology; the act of invention and learning-by-doing leads to further discoveries and informs scientific research. Commercialization is rarely automatic; economic, informational, and infrastructural barriers are often surmounted with supportive policies.
For these reasons, energy technology innovation should be thought of not simply as a specific intention realized through a particular program, but also as an emergent property of a vibrant R&D ecosystem. A productive and appropriate government role in such a system is not easily demarcated by either “basic” or “applied” work. Rather, the government’s role should be as catalyst and instigator of the cycles of discovery and innovation across diverse energy and technology domains.
The three cases are available on the staff research section of the AEIC website.
Republicans are praising a clean energy program supported by President Obama for a reason. ARPA-e is about catalytic funding of energy innovation–small grants that help develop promising new high-risk, high-reward technologies. ARPA-e’s employees themselves are on time-limited assignments, helping the agency avoid bureaucratic stasis that can affect other government R&D. And the funding is spread competitively to projects across the country in both universities and companies.
The article, written by Jim Snyder, can be read at Bloomberg Businessweek.
Today, the F.D.A. approved the first use of artificial retina technology to give limited vision to the blind. While some financing came from the private sector, major support for the development came from Department of Energy , along with other federal agencies. Specifically, through the Artificial Retina Project, DOE funded several national laboratories to work in multidisciplinary teams on dual-use technologies relevant to both DOE’s energy mission and the artificial retina technology. Who would have guessed that research on environmental sensing and biofuels would play key parts in letting the blind see anew? It stands as a testament not only to American ingenuity, but also to the game-changing pay-offs that federal investments in energy technology can produce. And it will undoubtedly mark the beginning of a heretofore completely new industry.
The article was reported by Pam Belluck and can be read at the New York Times.
Good times or bad, one must manage for the future. Discovery and innovation is the pathway there.
Our economy, prosperity and well-being have been driven by scientific discovery and technological innovation in ways that most people rarely think about. In the coming weeks, Congress has a decision to make that will determine if the partnership between government, universities and industry in scientific discovery and technological innovation will continue in the robust way it has in the past. Looming across-the-board budget cuts — known as the sequester — are set to significantly reduce vital federal investments in scientific research and development, and in STEM (science, technology, engineering and mathematics) education. These indiscriminate cuts may save money in the short term, but there will be a significant, long-term, irreparable price to pay if the U.S. government slashes its support for science and engineering and for those who pursue those fields. The authors urge Congress to allocate scarce funds in a manner that creates economic growth and security both now and in the future.
The op-ed, written by Richard Templeton, president and CEO of Texas Instruments, and Shirley Ann Jackson, president of Rensselaer Polytechnic Institute, can be read at Politico.
The US can and should take unilateral action on climate change because energy innovation is fundamentally valuable, regardless of what other nations do. Good energy innovation policy emphasizes basic and applied research at the pre-commercial stages. Government funding is worthwhile across a range of industries because returns from early-stage research are often too speculative and long-term to attract private investment, and because the knowledge created by breakthroughs is spread widely instead of being captured by the inventor. The US government has a strong track record of effectively funding this type of research, using relatively small sums of money in an apolitical way, such as with ARPA-E. AEIC agrees strongly that good innovation policy is the key to low-carbon future, although AEIC differs with the author about what good innovation policy entails.
The op-ed, written in the National Review by Oren Cass, can be read here.
The global clean energy marketplace is expanding rapidly, but with no clear, consistent, long-term national energy policies, American industry risks losing out to competition abroad. In their recently released report, Innovate, Manufacture, Compete, the Pew Charitable Trusts discusses the results of workshops held across the country with industry, academia, and other stakeholders. The report concludes that not only is policy uncertainty the overriding problem for clean energy investment, but also that lack of access to capital and long-standing subsidies to conventional energy sources are the main reasons that policy matters. They recommend that the United States:
- Establish a clean energy standard to guide deployment and investment for the long term.
- Significantly increase investment in energy research and development.
- Enact a multiyear but time-limited extension of tax credits for clean energy sources.
- Level the playing field across the energy sector by evaluating barriers to competition.
- Enhance clean energy manufacturing in the United States.
- Expand markets for U.S. goods and services.
The Pew Charitable Trusts report can be read here.
R&D directors at major, innovation-driven companies in America believe that the inconsistency of the R&D tax credit, a lack of access to science and engineering talent, and intellectual property licensing issues are some of the biggest obstacles to R&D success in the United States. These are some of the findings of a new staff report from the American Energy Innovation Council, “Unleashing Private-Sector Energy R&D: Insights from Interviews with 17 R&D Leaders,” by Jeffrey Rissman and Maxine Savitz.
The report investigates an issue that is central to technological progress in the energy sector: the role of private companies in researching and commercializing new technologies. Rissman and Savitz interviewed top R&D executives at some of the largest and most innovative companies in America, like IBM, Ford, BP, and Philips. Their insights shed light on how these companies integrate research and development into a successful business model. They also reveal how government and business can work together to accelerate innovation and solve America’s energy challenges.
How R&D is funded and managed in private companies is the subject of the first chapter. The authors compare centralized vs. decentralized research structures and highlight factors that are driving companies to increasingly perform their R&D activities overseas. Gating mechanisms” companies use to redirect funds away from poorly performing research projects to more fruitful options are discussed, as well as the benefits and challenges companies face when entering research partnerships with universities and national labs.
Interviewees’ views of public policies that effectively promote private-sector R&D comprise the second chapter, such as grants and contract research, which account for 32% of all federally-funded R&D in the U.S.
Finally, the last chapter discusses obstacles private companies face to greater R&D success in the United States. The most often-cited obstacle is a lack of access to talent, caused by insufficient science, technology, engineering, and mathematics education combined with the difficulty of securing green cards and visas for immigrants with technical skills. Inconsistent or insufficient tax credits, such as the R&D tax credit (which has been extended by Congress 14 times since its introduction in 1981), and difficulties associated with licensing intellectual property from universities were also major concerns.
This report offers a rare look into the management of R&D in successful corporations and makes clear the policy environment necessary to enable U.S. companies to make bold, transformative investments in R&D. If government and business can work together to foster a climate that promotes innovation, then private-sector R&D can help set us on a path to an affordable, secure, and clean energy future.
The report is posted on the AEIC site and can be read here.
AEIC is proud to co-sponsor the fourth annual ARPA-E Energy Innovation Summit. Having called for the creation and funding of ARPA-E in our prior reports, AEIC is honored to remain an active supporter of the premier event dedicated to transformative energy solutions. See coverage of last year’s event here.
Hosted by the U.S. Department of Energy’s Advanced Research Projects Agency-Energy (ARPA-E), the Summit brings together leaders from academia, business, and government to discuss cutting-edge energy issues and facilitate relationships to help move technologies into the marketplace. Attendees have the opportunity to see the latest technological advancements across a variety of energy sectors, many never before shown to the public.
ARPA-E funds transformational projects that create entirely new ways to source, distribute, and use energy. The Summit’s Technology Showcase displays over 250 breakthrough energy technologies from ARPA-E awardees and a highly selective group of companies and research organizations.
ARPA-E Energy Innovation Summit
February 25-27, 2013
Gaylord National, 201 Waterfront Street, National Harbor, MD 20745 (in the Washington DC metropolitan area)
In today’s world of rapid technological innovation, looking at a snapshot is next to useless. Instead, one is better served by taking a look at the process and speed of innovation, and where it’s occurring. Renewables, batteries, and hybrid vehicles are changing dramatically and fast, compared to coal- and natural gas-fired generation systems. Fossil generation has been around for decades, and the room for technological breakthrough is not nearly as big as it is for the new and immature players on the block. As a result, we are probably underestimating the technological change about to envelop us. Even in a low-priced electricity world, fueled by cheap shale gas, the forces of innovation are on the move. The snapshots we take today are probably useless in the near future, and scenario planning and financial modeling are going to get harder.
The op-ed, written by Peter Kelly-Detwiler, can be read at Forbes.