Council Calls for Action on Clean Energy Agenda

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Publication date: 
11 October 2011

Some of America’s most  prominent business executives have called on Congress and the Administration to  “improve the effectiveness of the U.S. energy innovation program.”  Among their recommendations are a significant  increase in funding for ARPA-E, and support for the Department of Energy’s  Innovation Hubs. 

This is the second report  issued by the American Energy Innovation Council (AEIC).  The council’s members are Norm Augustine,  former chairman and CEO of Lockheed Martin; Ursula Burns, chairman and CEO of  Xerox; John Doerr, partner at Kleiner Perkins; Bill Gates, chairman and former  CEO of Microsoft; Charles Holliday, chairman of Bank of America; Jeff Immelt,  chairman and CEO of GE; and Tim Solso, chairman and CEO of Cummins Inc.  The Bipartisan Policy Center hosts the  council, and provides staffing.

“Catalyzing American  Ingenuity: The Role of Government in Energy Innovation”was released in mid-September.  Three exhibits  in the 37-page report illustrate the council’s central finding that U.S. spending  on energy R&D is insufficient.  The  first, on page 27, shows that the 2010 federal budget of $3.60 trillion allocated  only $2.1 billion for energy R&D.  A  second exhibit on page 32 reveals that China spent 0.11 percent of its 2008 GDP  on public energy RD&D spending, as compared to 0.03 percent for the U.S.  A third figure on page 11 shows that the  pharmaceutical industry spends 20.5 percent of its sales on total R&D  spending, contrasted with that of the energy industry’s rate of 0.42 percent.

The council concluded that the  energy industry is unlikely to significantly increase R&D spending.  Rejecting arguments that the federal government  should not increase its role in energy innovation, the council makes the  following major recommendations:

“Develop and implement a  comprehensive, government-wide Quadrennial Energy Review (QER) that seeks to  align the capacities of the public and private sectors. The QER should pinpoint  key market failures and technology chokepoints in order to better orient  federal programs and resources.”

“Support ‘innovation hubs’  that concentrate resources and knowledge and thereby accelerate the development  of new technologies. We strongly support the direction of U.S. Department of  Energy (DOE) Innovation Hubs, Bioenergy Research Centers and Energy Frontier  Research Centers and believe they should receive full funding.”

“Support and expand the new  Advance Research Projects Agency-Energy (ARPA–E). As we have noted previously,  ARPA–E challenges and empowers innovators across a range of technology  pathways. By nearly all accounts, it appears that ARPA-E is being managed as a       highly efficient,  risk-taking, results-oriented organization.   At a minimum, ARPA-E should receive at least $300 million per year.  Going forward, investments in ARPA-E should be prioritized and increased.”

“Make DOE work smarter along  the ARPA-E model.  DOE has a critical  role to play but needs to evolve beyond its current program structure and  culture to be maximally effective. We argue for ‘ARPA-izing’ a larger portion  of DOE and the national labs by expanding some of the new       authorities, tools and  processes that are embodied in ARPA-E to other parts of the agency.”

“Develop a first-of-a-kind  technology commercialization engine along the lines of the proposed Clean  Energy Development Administration (CEDA). Previously, we called for a new  government-backed institution dedicated to overcoming financing hurdles for new  advanced, commercial scale energy technologies. We believe the CEDA legislation  aligns with our original recommendation and would mobilize significant  private-sector capital to bridge the transition from demonstration to  commercialization.”

The federal government has  responded – in varying degrees - to these recommendations.  Late last month, Energy Secretary Steven Chu  and Office of Science and Technology Policy Director John Holdren released the  Department of Energy’s Quadrennial Technology Review.  A House-passed FY 2012 appropriations bill  would provide $180 million for ARPA-E, while a Senate committee bill recommends  $250 million.  Both bills include funding  for Energy Innovation Hubs.  In May, a  Senate committee held a hearing on the proposed Clean Energy Development  Administration.

Realizing that federal  resources are constrained, the council includes suggestions on how additional  funding could be obtained to implement their recommendations through taxes,  fees, and streamlining DOE operations.   Of note, the council states: “We must develop a funding regime that is  dedicated, consistent, and not beholden to annual appropriations.  In general, federal funds for energy  innovation should originate from revenues from the energy sector itself rather than  from general revenues.”  Regarding the  level of funding, they write:  “Previously,  AEIC called for a three-fold increase in annual energy innovation investments.  We understand that this level of funding cannot be provided overnight. However,  we maintain that investments of this magnitude should be our country’s target  over the next decade.”

In concluding their report,  the council states:

“In sum, we know the federal  government has a vital role to play in energy innovation. We know the federal  energy innovation system can be structured effectively to achieve real results.  And we know there are several ways to pay for public investments in this  domain. There are no excuses. As a country, it is time to put aside partisan  differences and embark on a clear path to achieving our clean energy goals.

“We call on Congress and the  President to act.”

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