Here’s President Reagan delivering a national address in 1988 (emphasis added):

“Federal funding for science is in jeopardy because of budget constraints. That’s why it’s my duty as President to draw its importance to your attention and that of Congress.

…The remarkable thing is that although basic research does not begin with a particular practical goal, when you look at the results over the years, it ends up being one of the most practical things government does… Major industries, including television, communications, and computer industries, couldn’t be where they are today without developments that began with this basic research.

…one thing is certain: If we don’t explore, others will, and we’ll fall behind. This is why I’ve urged Congress to devote more money to research. After taking out inflation, today’s government research expenditures are 58 percent greater than the expenditures of a decade ago. It is an indispensable investment in America’s future.

…Some say that we can’t afford it, that we’re too strapped for cash. Well, leadership means making hard choices, even in an election year. We’ve put our research budget under a microscope and looked for quality and cost effectiveness. We’ve put together the best program for the taxpayers’ dollars. After all, the American tradition of hope is one we can’t afford to forget.”

In a new article for Foreign Affairs, “Globalizing the Energy Revolution: How to Really Win the Clean-Energy Race” (subscript. req’d), Michael Levi and colleagues at the Council on Foreign Relations argue that the world is “woefully underspending on clean-energy innovation” and needs to pursue a new international strategy:

“Clean energy is almost always more expensive than energy from fossil fuels, and often by a big margin… Yet the world is woefully underspending on clean-energy innovation… the IEA estimated that the world would need to spend an average of $51-$100 billion each year to support the research, development, and demonstration of clean-energy technologies. Current public spending is a mere $10 billion annually… The shortfall is staggering.”

What should be done?  First, the developed world needs to ramp up its efforts. “Major scientific advances are still most likely to occur in the developed world, alongside much of the work necessary to commercialize clean-energy technologies and the capital required to support those efforts,” they write.  U.S. strategy should include two basic element: first, incentives to create a larger domestic market to drive both deployment and indirect innovation; and second, direct government support for clean energy innovation through research, development, and demonstration.

However, in order to “globalize the energy revolution,” the authors argue for a better international approach.  First, the world needs to create a more “open innovation system,” primarily through open investment and trade policies, and avoid protectionist measures that discourage innovation (we recently made a similar argument here):

“Technology advances most rapidly when researchers, firms, and governments build on one another’s successes. When clean-energy investment is seen as a zero-sum game aimed primarily at boosting national competitiveness, however, states often erect barriers. They pursue trade and industrial policies that deter foreigners from participating in the clean-energy sectors of their economies, rather than adopting approaches that accelerate cross-border cooperation. This slows down the very innovation that they are trying to promote at home and simultaneously stifles innovation abroad.”

Unfortunately, “green protectionism” is on the rise.  Although countries like Brazil and India have relatively open approaches, the Chinese government supports aggressive protectionism. For example, according to the authors, forced technology transfer from foreign firms has caused an “unprecedented backlash from foreign companies that do business in China… A hostile environment also makes it politically difficult for Washington to support policies that actively accelerate the spread of clean-energy technology to China.” The U.S. should push strongly for free clean energy trade but without sparking backlash in developing countries that reduces domestic support for clean energy. (Two recent NYT articles discussed these issues in the wind industry, “To Conquer Wind Power, China Writes the Rules” and “China’s Push Into Wind Worries U.S. Industry.”)

Second, beyond creating a more open global innovation system, the U.S. government must actively support advanced energy technology development and diffusion abroad.  The authors propose several ideas, including cross-border demonstration and commercialization projects; stronger export promotion through the U.S. Export-Import Bank and the Overseas Private Investment Corporation; greater support for joint R&D programs like the U.S.-China Clean Energy Research Center; and more.  These efforts would involve substantial public investment, however as the authors note, this approach could be much more politically appealing than proposed alternatives through the UNFCCC:

“Many of these initiatives–particularly those that focus on the more commercial end of the innovation spectrum–could cost a considerable amount. But they would have their benefits–not only in terms of cutting global oil consumption and reducing greenhouse gas emissions but also in helping U.S. clean-energy innovators and companies. And when it comes to climate change, they might present a more attractive alternative to the other options, which tend to involve financial support for clean-energy deployment in the developing world with few strings attached. Money that boosts U.S. clean-energy companies while helping the big emerging economies adopt advanced technologies is likely to be much easier to sell politically than funds that are not tethered explicitly to U.S. economic goals.”

The authors conclude by warning that without such a concerted and enlightened international strategy, all parties will lose:

“The alternative is not a world in which the United States dominates the clean-energy field… It is more likely to be one in which the cost of clean energy does not drop as quickly as needed, particularly in the developing world, and in which massive markets for clean-energy technologies do not materialize. In that case, the United States and the world will both lose.”

Overall, these ideas are a welcome contribution to the unfolding debate.  In the aftermath of cap and trade and binding global emissions agreements, it is clear that the United States and the world must pursue a new strategy for clean energy innovation, which is necessary to drive down to price of clean technologies and enable their affordable deployment (see “Energy Innovation 2010: A New Beginning for U.S. Energy Policy“).  This begins with a new U.S. domestic strategy, which must be extended abroad through a new international technology framework.  Concerns about economic competitiveness in the clean energy race provide a strong motivational factor for domestic policies, but we must guard against protectionism that discourages innovation while actively promoting advanced technology abroad.

Erskine Bowles and Alan Simpson, Co-Chairs of the National Commission on Fiscal Responsibility and Reform

David Leonhardt — one of the country’s leading economic reporters at the New York Times — has a new article, ”One Way to Trim Deficit: Cultivate Growth,” which calls for increased federal investment in science, technology, and education as one of “the best ways to promote growth” and a primary strategy to reduce the budget deficit. He reports:

“If the economy grew one half of a percentage point faster than forecast each year over the next two decades — no easy feat, to be fair — the country would have to do roughly 40 to 50 percent less deficit-cutting than it now appears…

Even more important than the next couple of years is the second part of a pro-growth strategy: the long term. A good deficit plan doesn’t simply make across-the-board cuts for years on end. It cuts funding for programs that do not spur economic growth and increases funding for those relatively few that do…

Beyond tax reform, both [proposed] deficit plans mention the importance of making investments that will lead to future growth. In particular, the Bowles-Simpson plan calls for a gradual 15-cents-a-gallon increase in the federal gasoline tax to pay for highways, mass transit and other projects. The plans also urge the government to prioritize education and science.

These are clearly among the best ways to promote growth. The United States created the world’s most prosperous economy last century in large measure because it was the world’s most educated country. It no longer is. Federal science dollars, meanwhile, led to the creation of the intercontinental railroad, the airline industry, the microchip, the personal computer, the Internet and numerous medical breakthroughs. Yet science funding is scheduled to decline as stimulus money runs out.”

Leonhardt’s case, which our allies and us have consistently advocated, is supported by a large and growing degree of evidence.  For example, in an article for The Quarterly Journal of Economics titled “Measuring the Social Return to R&D,” two Stanford economists concluded:

“the optimal share of resources to invest in research is conservatively estimated to be two to four times larger than the actual amount invested by the U.S. economy. The extent of underinvestment is substantial, and could well be much larger.”

In other words, the federal government has been substantially underinvesting in science and technology, and securing robust long-term growth and deficit reduction requires new public investment in strategic growth sectors — with clean energy technology being a prime example.

See also:

• “The Collapse of Competitiveness Policy?“
• “How America Can Lead the Clean Energy Race“
• “Winning the Clean Energy Race“

As long as fossil fuel based technologies dominate the news cycles and federal attention, low-carbon energy sources will remain secondary.  While the Bureau of Land Management has had well noted trouble overseeing oil gas and mining leases in recent years, few have paid attention to its failure to distribute land for solar power generation.  This is a tale of incompetence, lack of focus, and general wastefulness. The Associated Press reports that millions of acres in America’s south west, one of the world’s most promising solar regions, lay barren after federal lands were distributed for the purpose of building solar farms:

“Congress in 2005 gave the Interior Department a deadline: approve 10,000 megawatts, or about five million homes’ worth during peak hours, of renewable energy on public lands by 2015. Reaching that goal was left to the BLM, which oversees federal land and knows oil, gas and mining leases but is new to solar.”

The result of the mandate has been that while land was distributed, it was done so in such an inefficient way that not one of the projects has broken ground.  Rather than basing the land grants on the merits and reality of projects, the BLM used a first come, first served leasing system. Many of the applicants had no experience in solar plant construction, such as the Goldman Sachs & Co. subsidiary that laid claims to over fifty percent of the land leased in Nevada with no knowledge of the business and seemingly no intent to follow through with its proposals.

At its core this depressing scenario is indicative of the energy crisis at large. The same Associated Press article reveals that the BLM was not able to effectively distribute land for its solar initiative because the priority was reviewing oil and gas leases:

“BLM’s database of solar applications shows many languished for years while the agency approved more than 73,000 oil and gas leases in the last five years. BLM has yet to give final approval to one solar lease.”

No one would suggest that improved safety standards and regulation for offshore drilling aren’t crucially important, but why are we not focusing on how we can move away from this inherently dangerous practice altogether?  We stand by quietly as millions of the world’s most productive acres for solar development lay dormant, yet we continue to argue loudly about the regulation of an energy source we know to be dirty and dangerous.  No matter how well we regulate oil and gas drilling, unless we begin investing our resources in clean energy alternatives, oil spills and rig explosions will be an inevitability.  In the future the BLM must focus more of its attention and resources on the distribution of land for clean energy production.  This need not be at the expense of drilling oversight, but rather at the expense of the total amount of drilling leases distributed each year. We will never regulate oil drilling and its associated dangers away — we must replace it with new clean and cheap alternatives, and we will never have clean and cheap alternatives until we give clean energy sources at least equal attention.

Update Sept 2: Bill Gates has responded at Dot Earth

Andrew Revkin is hosting an interesting discussion at New York Times Dot Earth right now on energy innovation policy.  It began with a post about Bill Gates’ recent interview with MIT Technology Review, which focused primarily on energy, and a rebuke from one commentator,  Richard Rosen, in “A Challenge to Bill Gates on Energy Research.”  Revkin encouraged discussion in an email to several experts, and this was my initial contribution.  Bill Gates is apparently offering a response at Dot Earth tomorrow, so stay tuned:

The White House recently released its report on how ARRA is promoting innovation, particularly in solar PV, batteries, and DNA sequencing.  ”Near-term improvements will be able to cut the cost of solar power in half, as second generation thin-film solar panels such as the rapidly emerging CIGS and Cd-Te technologies compete with ever improving traditional silicon-based panels,” the report noted. “Beyond that, breakthrough technologies could make solar as cheap as new fossil fuel plants without government incentives.”

This assertion stands in direct contrast to one of Richard Rosen’s most basic assumptions, which is that it is thermodynamically infeasible for low-carbon electric generation technology to provide electricity as cheap or cheaper than coal-fired power plants.  Secretary Chu’s own assessment that we need several Nobel-caliber level breakthroughs to make low-carbon energy cheap enough to compete also stands in contrast.  I think we can assume that Secretary Chu understands the second law of thermodynamics! (As well as Dr. Holdren and his team, for that matter, who I’m sure played an important role in the White House report).

What’s more important than the question of whether major price reductions are achievable is how we achieve them as rapidly as possible.  The importance of technology-pull in combination with technology-push is well understood among innovation economists, but it’s not clear that Gates yet understands the pull.  It’s true that he will passingly mention the need for demonstration, but it’s more of an appendage to his larger R&D theme, and he almost entirely ignores the need for direct deployment and procurement.

Making a powerful case in Nature for direct federal procurement and deployment of low-carbon energy technology, John Alic, Dan Sarewitz, Bill Bonvillian, and Chuck Weiss recently argued, “government R&D by itself, almost regardless of its scale, cannot foster innovation on a broad front… Government purchases of integrated-circuit chips in the 1960s fostered advances in microelectronics at least as much as did government-funded R&D.”  So while Gates’ overall emphasis on the need for innovation and price reductions is very important, and represents a larger shift occurring in the climate and energy consensus, I would agree that he puts too much emphasis on R&D.

With that said, procurement and deployment policy needs to be better designed to achieve price reductions, and not simply aimed at subsidizing already-mature technologies (which can actually increase barriers and reduce the incentive to innovate, a dynamic we’re seeing play out in parts of China right now).  Feed-in tariffs and RPS policies don’t address this problem.  The CEDA proposal included some provisions along these lines, but there’s much more work to be done on this front here and abroad.  If Gates can take his overarching logic and apply it to the broader innovation chain, well then we’d really be onto something.

See also:

• News Roundup on the American Energy Innovation Council

The Atlantis-AK1000 tidal energy turbine unveiled last week in Scotland.

That America is lagging behind other nations in developing and deploying products in the emerging $600 billion renewable energy technology market has been well-documented. But it can be surprising to realize just how rapidly others are progressing relative to the U.S:

• Just yesterday, France announced a $1.73 billion (USD) national investment in renewable energy technologies. The money, to be spent over 4 years, will be used to subsidize and provide low-interest loans to accelerate the deployment of renewable energy fossil-fuel alternatives that go beyond the country’s existing nuclear and wind power options.
• Last week, Scotland unveiled a cutting-edge tidal turbine energy platform in Invergordon. The lone turbine—a beta deployment of a technology designed to be installed in large fields a la wind turbines—is planned to produce 1 MW, enough to power 1,000 homes. The turbine, which was developed by London-based Atlantis Resources, has already injected more than $6.3 million (USD) into Britain’s renewable energy sector and has provided employment across a broad range of sectors including design, engineering, fabrication and project management. “We are at the start of a new industrial boom, akin to the development of the North Sea oil and gas fields,” said Atlantis CEO Tim Cornelius. “If we receive the same support from all levels of government that the oil and gas industry received to make the North Sea the success that it is, then the future is very bright for marine power and even brighter for Scotland.” Experts believe that tidal energy technologies, such as that used in the AK1000 project, have the potential to produce 5 TW, or 30% of global energy demand. If only for this reason, tidal energy expertise is a hefty prize in the renewable energy race.
• And finally, China yesterday announced that it has plans to build a MagLev/Vacuum train that will attain speeds of up to 620 mph. The technology behind the train—which would be capable of reaching Los Angeles from San Francisco in 50 minutes or New York from Washington in 30 minutes— is expected to attract sovereign and private demand for Chinese expertise around the world to the great benefit of Beijing’s coffers.

President Obama speaking at ZBB Energy in Wisconsin. The President emphasized the importance of developing renewable energy economy in order to secure a prosperous future.

At a speech at ZBB Energy in Wisconsin this week, the President announced a commitment to create 800,000 clean energy jobs by 2012 that will not only “create work in the short-term, but lay the foundation for lasting economic growth.”

ZBB produces advanced zinc bromide flow batteries and intelligent power control platforms for renewable energy storage with the help of a $1.3 million loan through the American Recovery and Reinvestment Act (ARRA) State Energy Program loan. The company is using the loan to support a $4.5 million factory renovation that it anticipates will triple its capacity to manufacture flow batteries and power systems—proof of what federal capital applied to innovative energy technologies stands to achieve.

The President emphasized that despite the prognostications of pessimists, the sun has not set on American manufacturing, and that renewable energy technologies provide an opportunity to “jumpstart a homegrown clean energy industry” in America. The global market for clean energy technologies is forecast to reach $450 billion by 2012, and $600 billion by 2020.

He spoke of the havoc the economy has created for manufacturers and the challenges that remain.

“These have been a very hard couple of years for America,” he said. “And there will be more difficult days ahead. It would be a mistake to pretend otherwise. But we are headed in the right direction, and I am confident about the future because of what I have seen at this plant and because of what I have seen taking place across this country.”

But despite his words, the United States still only invests a fraction of what other countries invest in the development, deployment and demonstration of innovative renewable technologies. Since his initial call for a $150 billion federal investment in renewable energy during his inaugural address, the President has been less ambitious in his commitment to “New Energy for America,” as the plan was dubbed.

Though large sums of ARRA money have been used to support the sort of renewable energy investments that the President has called “critical,” they do not scratch the surface of the investments that the President called for, and which experts have determined are necessary, to catalyze a clean energy future.

Oil executives testifying before Congress in May.

Reporting on BP’s imbroglio in the Gulf of Mexico, Peter Coy of Businessweek finds that energy companies are neglecting long-term investments in research and development at the price of technological breakthroughs:

“Energy companies worldwide are far less science-oriented than one might expect from an industry that is heavily dependent on technology for safety and profit. In the U.S., energy companies’ spending on research, development, and deployment amounts to just 0.3 percent of sales. That’s barely more than a tenth what the auto industry spends as a share of sales and is dwarfed by the pharmaceutical industry, which spends nearly 19 percent of sales.”

He goes on to ponder the shortcomings of public investments in innovation:

“But government R&D spending on energy has been scarce, too. It was less than 0.03 percent of U.S. gross domestic product as of 2007, about one-third the share in Japan. The dearth of investment in energy R&D helps explain why the world is still getting its energy by punching holes in the sea floor rather than from safer, renewable sources such as the sun and the wind.”

Coy cites attempts by Republicans to cut funding from the America COMPETES Act, which only narrowly passed the House last month despite the gimmickry of some Members, as some of the “formidable obstacles” public innovation investments face in Washington:

“Representative Ralph Hall, the ranking Republican on the House Science & Technology Committee, tried in May to cut about $40 billion from the $86 billion sought by House Democrats for the America COMPETES Act, which funds federal research and math and science education. ‘We must be mindful of our spending if America is to continue to compete globally,’ Hall said then. The House eventually voted to reauthorize the act without Hall’s cuts, while the Senate hasn’t yet acted. Even if Congress agrees to authorize the full $86 billion, funding could still be cut in the appropriations process.”

As the American Energy Innovation Council (AEIC) announced earlier this week, and as the Breakthrough Institute and Americans for Energy Leadership have concluded, at least $16 billion of annual federal investments in clean energy technology research, development, and demonstration is needed to spur breakthrough innovations.

An energy proposal is due in the Senate this July, and President Obama is scheduled to meet with Senate leaders next week to focus those discussions.

Source: National Science Foundation, Science and Engineering Indicators, 2008