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.”