Event Summary: The Economic Opportunities of Federal Energy R&D

By Erin Smith

The American Energy Innovation Council (AEIC) hosted an event on April 5 to discuss the rationale for investing public dollars in energy innovation. Recognizing that innovation is a driver of long-term economic growth and that the energy sector faces unique hurdles in attracting private research dollars, the event served as an opportunity to reflect on the need for strong and strategic public investments in energy R&D. It also served to highlight the trillion dollar economic opportunities at stake if the U.S. fails to make the investments needed to maintain its energy leadership.

The event began with a fireside chat between Bipartisan Policy Center President Jason Grumet and former Lockheed Martin Chairman and CEO Norm Augustine, also an AEIC principal. The duo reflected on the National Academies’ Rising Above the Gathering Storm report, ten years after its publication. The report was the result of bipartisan, bicameral congressional requests to study the impact of globalization on U.S. competitiveness and sparked a national discussion on science and technology policy. Augustine, who chaired the report, explained the impact that innovation and competitiveness have on our economy, arguing the United States needs to make strong investments in science and technology to create jobs and drive economic growth. When asked about interaction of the public and private sector on funding R&D, Augustine stressed his belief in free enterprise but explained that there are some things industry cannot do, especially in light of current pressures to focus on short term objectives. He went on to highlight the success of ARPA-E, a key recommendation in the Gathering Storm report and one of the most successful energy research programs in the past two decades. As the conversation shifted to the president’s proposed budget cuts to the Department of Energy, Augustine argued there is good understanding in Congress of the economic value of energy innovation—especially ARPA-E’s contribution to our nation’s competitiveness—expressing optimism that it will survive.

It normally takes 20 years to develop a new material but by working closely with industry, researchers at the Department of Energy were able to do it…in just two.

A panel of scholars and industry leaders then gathered to discuss the status and direction of energy research in the United States. Mark Drajem of Bloomberg News moderated the discussion, which included William Bonvillian from the Massachusetts Institute of Technology (MIT); Alta Yen from GE Energy Financial Services; Alexander King from the Critical Materials Institute at Ames Laboratory; and Jim Matheson from the National Rural Electric Cooperative Association (NRECA). Bonvillian teed off the conversation by observing that the U.S. economy benefitted greatly from growth driven by waves of innovation such as in aviation, electronics, and the internet. He explained that the United States has led almost all the innovation waves in the second half of the 20th century and that to lead the next one, which evidence suggests is energy, we must retain institutions like ARPA-E. The other panelists agreed on the need for the United States to sustain its commitment to energy R&D. King stressed that it would be a disaster to lose U.S. leadership on energy innovation, particularly given that energy is a substantial job creation sector, as Bonvillian noted. Yen agreed, arguing that what makes America great is its ability to innovate and that we should be active participants in developing new technology, not passive. She elaborated that if the United States doesn’t develop new technology, someone else will, and we risk ceding jobs and economic opportunities in new industries by failing to sufficiently invest in R&D. Bonvillian cited fierce competition from Germany and China, which are investing in solar, wind, and electric vehicles not for environmental reasons, but because they recognize the economic benefits of leading production in what will be billion dollar industries.

The conversation turned to questions regarding the complementary roles of the public and private sectors in innovation and why Congress should prioritize federal funding for energy research. King, who runs one of the innovation hubs at the Department of Energy (DOE), explained it normally takes 20 years to develop a new material but that by working closely with industry, his researchers were able to develop a replacement for europium–a rare earth element in short supply that is used in displays and efficient lighting—in just two years. His example reflects some of the new capabilities at DOE that allow researchers to get the most bang from their government-funded buck. Drajem then asked if government should conduct basic research and leave the rest to industry, but the panelists seemed to agree that such research silos don’t reflect the innovation cycle in practice. Yen shared her view that a three-legged stool that includes government, academia, and industry is the best model to support innovation. Bonvillian pointed out that institutional innovation at DOE over the past decade—such as the creation of the innovation hubs, energy frontier research centers, and Office of Technology Transitions—has provided valuable lessons on how to best leverage public research dollars. Matheson then argued that the case for a strong federal role in energy R&D should focus on three key pillars: U.S. competitiveness, our domestic economy, and the creation of new jobs in emerging industries. Matheson explained that the United States is losing some jobs through globalization and automation but suggested strategic federal R&D investments can create new jobs and opportunities in emerging markets.

In discussing President Donald Trump’s recent budget blueprint proposal, panelists noted that the United States risks losing its edge as an energy leader and the economic and security advantages that have been the direct result of federal investments in energy innovation. These advantages lie at the root of longstanding bipartisan support, as Grumet noted in his opening remarks. The panel concluded by noting that our collective energy challenges present enormous opportunities to create new and good paying jobs while enhancing our security—with federal investments sufficient to creating the strong public-private partnerships that our long-term competitiveness depends upon.