“Powering America’s Communities” finds that distributed generation (DG) clean energy offers a unique set of benefits to electricity consumers, clean energy generators, and communities overall.  It provides a framework that can cost effectively spur the demand needed to push DG clean energy further down the cost curve, based in part on the best practices of numerous states. This framework is designed to overcome the four key barriers to widespread deployment of DG clean energy:

• Insufficient demand for DG clean energy
• Lack of proper incentives to stimulate investment in DG technologies
• Exclusion of key rate payer groups from effectively using DG clean energy sources
• Gaps in financing options for households and businesses looking to install DG systems

“Powering America’s Communities” not only showcases the best practices of state energy policy, but also introduce new ideas to promote DG clean energy without burdening ratepayers or taxpayers. Four central policy topics were explored that, if implemented, can put a state on the path toward greater clean energy adoption, local economic development, and greater energy security.

The report makes the case that at the heart of successful state energy policy there must be a mechanism that creates demand for distributed clean energy and sends clear, stable, consistent signals to the market. This comes in the form of a renewable portfolio standard (RPS).  The report contends that the RPS must be aggressive, have a DG carve-out, and include proper accountability and REC price structures.

To ensure that sufficient DG clean energy is supplied to meet ambitious RPS goals, states need to design incentive programs that are straightforward, competitive, and cost effective. For residential DG this might come in the form of an upfront incentive; for commercial, a production-based incentive; and for wholesale DG, a reverse auction mechanism.

Next, the report urges forward-thinking net metering rules and community energy programs to expand opportunities for investment in DG clean energy to all ratepayers and bring economies of scale to installations. These programs open up an investment model that can build local economic development and supply clean energy to high-density buildings and urban centers.

Finally, “Powering America’s Communities” calls for improving financing options for DG clean energy systems in the wake of PACE’s setback as a key to democratizing DG clean energy.  Allowing on-bill financing and third party ownership models can help get DG clean energy to low- and middle-income households, nonprofits, and other potential system owners currently frustrated by the limited financing options.

Altogether, the report establishes a framework that can be used by state policymakers interested in fostering economic development and local energy independence by cost-effectively catalyzing the widespread deployment of DG clean energy.

For questions and media inquiries, please contact the authors: Lon Huber (lhuber@email.arizona.edu) and McKenna Morrigan (mckennamorrigan@gmail.com).

“If the U.S. fails to invent new technologies and create new markets and new jobs that will drive the transformation and revitalization of the $5 trillion global energy industry, we will have lost an opportunity to lead in what is arguably the largest and most pervasive technology sector in the world,” they stated.

The seven-member group, called the American Energy Innovation Council (AEIC), also includes Jeffrey Immelt, CEO of General Electric; Norman Augustine, former CEO of Lockheed Martin and undersecretary of the U.S. Army; John Doerr, a leading venture capitalist; Ursula Burns, CEO of Xerox Corp.; and Tim Solso, CEO of Cummins Inc.  The group gained national recognition in 2010 in releasing its first report, A Business Plan for America’s Energy Future, which called for a three-fold increase in federal energy innovation budgets.

This week, the group released a new report called Catalyzing American Ingenuity: The Role of Government in Energy Innovation. In a rare move for high-profile business leaders, the report directly challenges the notion that government should cut investments in technology and calls energy innovation spending “a top national priority.”

“In these debates, some argue that government serves little essential role in innovation… Based on history and on our own experiences leading innovative companies, we disagree,” states the report. “In a time of austerity, the last thing one should do is under-fund R&D and high technology priorities… to do so is the equivalent of removing an engine from an overloaded aircraft in order to reduce its weight.”

The new report contains three chapters: (1) Why does government need to play a role in supporting energy innovation?; (2) How should the government play a constructive role in energy innovation?; and (3) How can the U.S. government pay for energy innovation in a new era of fiscal austerity?

The first chapter documents the successful role the government has played in promoting technology innovation and outlines several reasons why this role is necessary today in energy: “The federal government has played a central role in catalyzing and driving innovation and technology development throughout the history of the United States… All of these factors together create a clear and compelling justification for direct government support of energy innovation, particularly given the economic, national security, and environmental interests at stake.”

The second chapter offers recommendations for the federal government to support energy innovation, including overarching principles and specific policy reforms. The five policy recommendations are:

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

Finally, the third chapter offers several constructive ideas for how the federal government can fund these investments: “In short, we see an urgent need for a new energy innovation funding regime that accounts for current budgetary realities, but still ensures that our nation makes targeted investments in its energy future… For too long, federal energy innovation investments have been plagued by unpredictable funding patterns. Uncertain annual appropriations, short-term tax credits, and one-time spending injections are all unsuited to creating the sustained, predictable funding stream needed to bolster the country’s innovation infrastructure.”  Potential dedicated revenue streams from within the energy sector include:

• Diverting a portion of royalties from domestic energy production: “With continued, and likely expanded, off-shore oil and gas exploration, shale gas production on federal lands, and enhanced oil recovery in the coming years, reorienting a portion of the current suite of domestic energy production fees – including royalty payments, lease sales, bonus bids and other charges – presents a real opportunity to raise new revenue for the federal government that could fund innovation in new energy technologies.”

• Reforming and redirecting energy industry subsidies: “subsidies to incumbent industries and mature technologies should be reduced or reformed. The market provides ample incentives for these players to deploy technology without public support… Going forward, a portion of revenues liberated by eliminating, reducing or reforming energy subsidies should be directed to clean energy innovation.”

• Collecting a charge on sales of electricity: “The term “wires charge” (also sometimes referred to as a “public goods charge”) refers to a small fee imposed on each kilowatt-hour of electricity delivered to consumers. It is a fairly common levy at the state level where it is typically used to promote energy efficiency, fund research and development, or pursue other public purposes… Substantial revenues could be raised to fund energy innovation programs with fairly modest consumer impacts.”

• Levying fees on other energy or pollution sources: “there are a number of ways to levy a small fee on various energy sources that could generate significant revenues to fund new technology development. A gas tax, oil import fees, energy export fees, and even perhaps a carbon dioxide (CO2) fee are all options that could be considered… Energy and emissions fees together have the potential to raise more than $80 billion per year.”

• Streamlining DOE: “Policymakers will need to explore ways to streamline, and perhaps even cut, DOE programs that are non-essential in order to free up funding for technology investments that have significant potential… policymakers should examine options to trim other high-dollar programs in order to fund the country’s energy innovation activities.”

If there is any group of high-level messengers who can credibly make the case for energy innovation investment in the current political and economic environment, this is it: America’s most renowned and successful private-sector leaders, job creators, and innovators.  In a largely bleak landscape for U.S. energy and innovation policy reform, the American Energy Innovation Council offers an important glimmer of hope and inspiration to continue fighting for sensible policy reform.  As they put it: “We know the federal government has a vital role to play in energy innovation… 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.”

The report also quotes his book as saying, “Spending our energy dollars here for domestically produced energy while also funding research, development, and production of new sources of energy creates jobs, strengthens the dollar, and reduces our exposure to supply risks and volatility.”

More specifically, points #38 and #39 of Romney’s economic plan are “Concentrate alternative energy funding on basic research” and “Utilize long-term, apolitical funding mechanisms like ARPA-E for basic research,” respectively.  Of course, ARPA-E doesn’t simply engage in “basic research” only, but the plan’s general thrust toward increased focus on energy R&D and innovation is clear.  These points are summarized on pages 95 and 96 of the report:

RESEARCH AND DEVELOPMENT
Government has a role to play in innovation in the energy industry. History shows that the United States has moved forward in astonishing ways thanks to national investment in basic research and advanced technology. However, we should not be in the business of steering investment toward particular politically favored approaches. That is a recipe for both time and money wasted on projects that do not bring us dividends. The failure of windmills and solar plants to become economically viable or make a significant contribution to our energy supply is a prime example.

Focus on Basic Research
There is a place for government investment when time horizons are too long, risks too high, and rewards too uncertain to attract private capital. However, much of our existing energy R&D budget has been devoted to loan guarantees, cash grants, and tax incentives for projects that might have gone forward anyway. As president, Mitt Romney will redirect clean energy spending towards basic research. Government funding should be focused on research and development of new energy technologies and on initial demonstration projects that establish the feasibility of discoveries. This approach offers the best opportunity to promote innovation without distorting the market.

Design Long-Term Funding Sources Free from Politics
From the perspective of creating new jobs and strengthening our economy, the main line of policy should be directed toward technologies that will replace imported oil with domestically produced fuels or electric power. Mitt Romney believes the Defense Advanced Research Projects Agency (DARPA) model—ensuring longterm, non-political sources of funding for a wide variety of competing, early stage technologies—holds the most potential for achieving significant advances in the energy sector. Investment should be channeled through programs, such as “ARPA-E,” that seek to replicate DARPA’s success in energy-related fields.

In the aftermath of the debt ceiling crisis and as the Joint Committee on Deficit Reduction seeks a second budget deal, many public interest groups are working hard to ensure that even while Congress cuts wasteful spending, it preserves vital public programs and expands smart investments in the nation’s future.  In the energy and climate policy community, a broad range of groups are fighting to defend clean technology investment programs – such as the Advanced Research Projects Agency for Energy (ARPA-E) – that have taken years to establish and offer a glimmer of hope amidst a largely bleak political and policy landscape.

Other organizations are taking a different approach.  This week, two progressive groups – the environmental Friends of the Earth and consumer advocacy group Public Citizen – drew attention when they joined the libertarian Heartland Institute and deficit-hawk Taxpayers for Common Sense in releasing a spending cut plan.  In a report called “Green Scissors 2011,” the groups call for $380 billion in spending they identify as “wasteful government subsidies” and “environmentally damaging.”

These types of collaborations are rare, and the report marked a unique opportunity for traditionally opposed organizations to take a leadership role and break the gridlock on budget, energy, climate, and environmental policy.  Unfortunately, the report not only fails to realize this opportunity, but makes fundamentally misguided choices that would be counterproductive to reducing the budget deficit and could potentially exacerbate America’s climate and energy challenges.

At the heart of “Green Scissors” is a collection of $380 billion in “wasteful [federal] government subsidies that are damaging to the environment and harming taxpayers,” which the groups believe should be targeted for cuts or elimination.  The proposed cuts include:

• Eliminating $61.275 billion in conventional fossil fuel subsidies and tax incentives.
• Eliminating $49.615 billion in nuclear energy programs for R&D, loan guarantees, environmental cleanup, and nuclear waste liability funds.
• Eliminating $95.817 billion invested in renewable energy loan guarantees, corn ethanol subsidies, R&D, the FutureGen carbon capture demonstration project, and fuel technologies development among others.  The report also targets the elimination of the Advanced Research Projects Agency for Energy (ARPA-E).
• Eliminating $56.655 billion in agriculture subsidies.
• Cutting over $106 billion in selected transportation programs and projects including transfer payments to the Highway Trust Fund.
• Eliminating $15.290 billion in selected land and water subsidies and programs.

At first glance, the proposal correctly identifies some unproductive spending that should indeed be eliminated. For example, corn ethanol subsidies do little more than prop up an uncompetitive alternative fuel that offers little to no carbon emission reductions (its initial intended goal) and doesn’t represent a future, robust economic growth opportunity.  In this way, the proposal appears to open a more nuanced budget debate that the United States desperately needs.  Instead of across the board slash-and-burn budget politics, policymakers should be examining the entire federal budget with a fine-tooth comb and differentiate between vital public investments – such as programs aimed at solving our key economic, energy, climate, and environmental challenges – from government spending on unproductive programs.  Like Time Magazine’s Michael Grunwald lamented, “Here’s a crazy thought: Maybe we should spend more on good things and less on dumb things.”

But this potential is never fully realized, and the report ends up making several factually incorrect statements, misguided recommendations, and errors of omission.  These recommendations are often supported by ideologically-driven economic myths and backed by shallow analysis and evaluative criteria. In particular, the report makes three major errors:

1. The report focuses solely on spending cuts and ignores the role of public investment. Reducing the budget deficit and addressing the nation’s key environmental challenges requires both cuts and targeted investments. This is a key distinction lost in the current budget debate.  The U.S. cannot simply cut its way out of debt (let alone cut its way out of a stagnant economy).  In fact, the chief budget-cutting measure the U.S. can undertake is spurring economic growth.  This means targeting advanced technology-based industries and accelerating innovation to lay the groundwork for long-term, ecologically sustainable economic growth.  And this means sustained public investments.

Unfortunately, the report not only fails to recognize this reality, it aims to cut vital innovation-based programs like ARPA-E, advanced nuclear energy R&D, and loan guarantees. These cuts would be counterproductive to the goal of addressing the budget deficit by eliminating needed support for future growth industries.  Further, by focusing solely on spending cuts, the report misses a key opportunity to shift wasteful spending into productive investment. Instead of simply cutting fossil fuels subsidies, we should reinvest the savings in advanced energy technology innovation and manufacturing, especially through programs like ARPA-E, Energy Innovation Hubs, and the Energy Frontier Research Centers.  The report fails to seize this opportunity.

2. The report is dead wrong about ARPA-E. Not only does the report ignore the role of strategic public investment to address our deficit and environmental challenges, it falsely characterizes and attacks one of the single most important federal programs designed to accelerate the transition to a low-carbon economy: the Advanced Research Projects Agency for Energy (ARPA-E).

First, the authors misleadingly characterize ARPA-E as a “giant government-run research and development agency.” In fact, ARPA-E was originally authorized by the bipartisan America COMPETES Act in 2007 and provided a total of $400 million for two years by the Recovery Act.  The recent FY 2012 House Energy & Water Appropriations bill would appropriate just $180 million for ARPA-E – hardly a “giant” budget.  Furthermore, calling ARPA-E a “government-run research and development agency” inaccurately implies that government employees are performing the research, when in fact ARPA-E effectively acts as a public venture capital firm that largely funds small, innovative private companies that are developing promising technology breakthroughs.

The authors proceed to repeat tired conservative neo-classical economic talking points that reflect entrenched ideology more than economic reality, asserting that “this type of applied civilian energy research has historically been done almost entirely at private firms,” that it provides “taxpayer subsidies to develop things that the private sector was already using on a large scale,” and that it “fails to add real value.”  However, if the authors made any serious attempt to understand ARPA-E, they would find that it targets high-risk, high-value, pre-commercial technologies that the private sector is largely unwilling to support on its own.

Instead of simply funding the most basic, blue-sky research that may never create commercially applicable technology, ARPA-E is funding projects that can yield massive economy-wide returns on investment, support U.S. economic competitiveness and export-oriented  industries, and drive high-skilled job creation. This is similar to what the Department of Defense’s DARPA has practiced for years and what drove the Information Technology Revolution.  Opposing this kind of public investment is misinformed and antithetical to a serious U.S. economic growth and debt reduction strategy.

As a recent ITIF report explained, “In many ways, [ARPA-E] represents public-private innovation at its finest, both for what it does and how it does it: this is not your grandfather’s politicized bureaucracy. It’s a fresh and nimble organization that operates at the intersection of fundamental and applied research, bringing science research and technology development together under one roof. And we’re already beginning to see early returns: ARPA-E projects, worth approximately $360 million in public funding, have to date obtained $285 million in follow-on private investment and led to 17 patent filings, and the program is still very young. But ARPA-E has only just started to spur successful innovation—and we have yet to see what this innovation engine can really do.”

3. The report picks technological winners and losers with an ideologically-driven agenda. The report espouses hard-headed libertarian economic doctrine principles, but in reality, it peddles the same kind of failed strategy of picking which low-carbon energy technologies the government should support and which programs should be eliminated.

For example, the report adamantly opposes any and all forms of carbon capture and storage (CCS) technology and advanced nuclear power (even fusion power, for no explicable reason, as well as small modular reactors). In a follow-up post, Friends of the Earth further laments the idea of leveraging any form of nanotechnology or genetic engineering techniques for low-carbon energy technology.  This is why it opposes ARPA-E, asserting that “much of this program harms the environment.”

Yet it is hardly reasonable logic to oppose the entire agency, paint it as largely harmful to the environment, or suggest that it should be defunded, as the report does.  ARPA-E is investing in a broad suite of clean and low-carbon energy technologies, many with the potential for game-changing impacts to dramatically accelerate the U.S. and global transition to a low-carbon, sustainable energy system.  The agency has only invested in the range of $50 million toward advanced CCS technologies – which could in fact eventually reduce carbon emissions from coal plants – out of its total investments of about $450 million.  Only one of ARPA-E’s six primary programs is focused on, as it describes, “revolutionizing technologies that prevent carbon dioxide produced by coal-fired power plants from entering the atmosphere and contributing to global warming.”  The report paints this kind of modest investment in emerging technology in the same way as billion-dollar demonstration and deployment projects, but they are much different.

Opposing these modest investments in general reflects a fundamental lack of understanding about the nature and scale of the global climate challenge and what it demands (the vast majority of energy and climate experts, including the IEA and IPCC, recognize the need to invest in advanced forms of CCS and nuclear).  But even if Friends of the Earth is ideologically opposed to any form of CCS, this is no reason to oppose the entire ARPA-E agency.  Indeed, the same logic could lead these groups to advocate abolishing the entire Department of Energy because it supports particular technologies they dislike.  Instead of taking a balanced approach that creates a level playing field for all low-carbon energy technologies – enabling potential winners to emerge instead of hand-selecting them – the report would not only eliminate any programs related to CCS and nuclear, it would slash or eliminate entire agencies like ARPA-E that engage in any such activities – an extremist and dogmatic approach.

Conclusion: The 2011 “Green Scissors” report offered a unique opportunity to break through the budget gridlock in a way that cut wasteful programs while reinvesting in vital areas for economic and environmental progress.  Unfortunately, it failed to meet this potential.  Instead of taking a balanced approach, the report jumped on the spending cut bandwagon and focused solely on slashing or eliminating public programs, including vital investments like ARPA-E, which has become one of the federal government’s single most important agencies for advancing a sustainable economic future.  In order to justify these cuts, the report peddled false myths about the nature of public investment and innovation policy, even while pushing an ideologically-driven agenda for picking energy technology winners and losers.  In this way, despite some of its strengths, the report offers a misguided strategy for confronting the nation’s budgetary and environmental challenges.

It’s time to take off the kids’ gloves in the energy debate.

For the last five years, clean-tech advocates have extolled the potential benefits of a clean energy economy. You know the drill: millions of new jobs; freedom from oil; better technologies and cleaner air.

Where have we gotten in terms of policy outcomes? Besides ARRA’s clean energy investments and higher fuel mileage standards, practically nowhere, and the clean energy industry is poised for a crash, as my colleagues argued on this forum.

Meanwhile, on the political front, we are witnessing one of the harshest backlashes against the role of government and public investment in U.S. history. The Tea Party has successfully hijacked the national agenda to focus on deficit reduction at all costs, even with unemployment above 9%. Science and technology budgets are under attack across the board, with the recent House Appropriations bill slashing budgets for energy innovation, NIST, NASA, and the Office of Science and Technology Policy, which was cut by over 55 percent. What will emerge from the Joint Committee on Deficit Reduction – or what the outcome will be if it fails to reach a deal – is highly uncertain, but it could result in even more draconian cuts to energy and technology budgets.

The bottom line: clean energy and innovation advocates across the board are losing. Badly. No matter how grand the benefits of a sensible economic policy proposal might be – whether in clean energy or other sectors – extolling these benefits is hardly a winning approach in today’s political environment.

Hence the need to take off the kids’ gloves and develop a new strategy.

As I just argued at Breakthrough Journal, if advanced energy advocates want to help salvage the United States from a decade or more of political dysfunction and economic malaise, they need to present a stark choice to the public in the years ahead: elect “leaders” who refuse to govern and would tear the country down — thus empowering China to dominate the 21st century — or choose a vision and agenda to rebuild the economy and reclaim American strength for decades to come.

Despite the current dysfunction, exceptionalism still runs deep within the American psyche, as it has since the founding and throughout Civil War and Great Depression. As national pollster Stan Greenberg has said, “People think the country is in trouble and that countries like China have a strategy for success and we don’t. They will follow someone who convinces them that they have a plan to make America great again. That is what they want to hear. It cuts across Republicans and Democrats.”

Earlier this year, a Gallup poll found that 52% of the public would name China as the world’s “leading economic power,” the highest percentage favoring another country in Gallup polling history. In contrast, only 7% named Japan, and just 3% the European Union. Meanwhile, the IMF recently projected that China’s GDP will surpass the U.S. by 2016, measured by purchasing power parity — a vastly over-optimistic prediction, but shocking nonetheless.

This isn’t rocket science. Voting to cut vital technology and infrastructure budgets – especially in the strategic advanced energy industry – should be equated with supporting Chinese economic dominance, plain and simple. Even Ronald Reagan recognized the importance of these budgets and once declared: “I’ve urged Congress to devote more money to research… 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.”

The television ads practically write themselves.

This isn’t to imply that no groups have ratcheted up the competitive analysis on China; my colleagues and I did so in 2009 with “Rising Tigers, Sleeping Giant,” as did the Pew Foundation and other groups. But there is still no concerted political and policy strategy to put this analysis to good use.

Of course, the neoliberals and cosmopolitans will balk and urge against such competitive and hard-hitting tactics – never mind the fact that China is using such measures against the U.S. on a daily basis, not only rhetorically, but with a wide variety of protectionist economic policies. In contrast, this isn’t about U.S. protectionism, but spirited competition to get our house in order and embark on a nation-building project here at home.

Those who are still committed to American leadership — Democrats and moderate Republicans alike — must recognize that “the vision thing” hasn’t worked to advance clean energy and other strategic industries. The public needs to understand the full stakes for the United States and the world if we fail to reinvest in the foundations of our economic dynamism. And what’s at stake is nothing less than the American era and international order as we know it.

Just three short years after Barack Obama’s campaign, “No We Can’t” is the new “Yes We Can,” and the vision of hope and unity that re-inspired a generation has been shattered.

In the aftermath of Washington’s fabricated debt-ceiling crisis, and amidst a looming double-dip economic recession, prospects for the United States look grim. Public disapproval of Congress has soared to the highest level on record, and a deepening sense of disillusionment has swept the country.

When future historians look back, they may conclude that 2011 was the beginning of a lost decade – when the U.S. descended into a decade or more of political dysfunction and economic malaise, and the American people concluded that the nation’s problems are largely insurmountable.

But it doesn’t have to end this way.

Instead, those future historians might conclude that 2011 and 2012 were watershed years that ignited a Great Renewal — when a generation of Americans realized how much is at stake if we fail to unite behind an optimistic vision for national revitalization, make essential investments in our future, and fight back against those who would tear the country down. For what is at stake today is nothing less than the foundation of American leadership and the international order.

The 20th century was the American century in large part due to our economic dynamism and innovation, which depended on unrivaled public-private partnerships to invest in the engines of progress: science, technology, infrastructure, and education. This dynamism positioned the United States to underwrite the most peaceful and prosperous global period in modern history.

These investments spanned across Democratic and Republican administrations alike. As one president declared in a national address, “I’ve urged Congress to devote more money to research… 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.”

Jimmy Carter? No, that was Ronald Reagan.

He was no exception. President George Washington supported the development of interchangeable parts, which revolutionized U.S. manufacturing, as the Breakthrough Institute has documented. Lincoln delivered railroads and land grant universities, FDR oversaw the Manhattan Project, Eisenhower developed interstate highways and nuclear power, Kennedy advanced microchips and the Apollo Project, Nixon launched the quest to cure cancer, and both Clinton and George W. Bush helped triple the budget of the National Institutes of Health.

Unfortunately, in the mad rush to reduce deficits, our leaders have forgotten these fundamentals — even while countries like China are making epic investments to fuel their rise. Instead of strengthening our commitment to science and technology, the recent House Appropriations bill slashes budgets for energy innovation, NIST, NASA, and the Office of Science and Technology Policy, which was cut by over 55 percent. Some of the most draconian proposals were defeated, but the damage may already be done, and the debt-ceiling deal could result in even greater cuts.

We cannot simply cut our way to fiscal solvency. Fiscal responsibility requires a long-term economic growth strategy, and cutting in areas like technology and infrastructure is penny-wise but pound-foolish. The 1990s are a good example. The federal government balanced its budget, not through drastic budget cuts, but through an economic boom that boosted federal revenue. Much of this growth was driven by information technology, especially the rise of the Internet, which was developed largely at the Department of Defense. Indeed, economists estimate that up to 80 percent of modern economic growth arises from technological innovation.

As we look beyond the debt-ceiling crisis, the U.S. should embrace a new, proactive growth strategy that is commensurate with our capabilities. The specifics are debatable, but the outlines are clear: rebuilding our infrastructure, reforming science and math education, and strengthening innovation and manufacturing in advanced industries. For example, the American Society of Civil Engineers has already identified $2.2 trillion in necessary upgrades. In energy technology, a broad group of bipartisan experts have agreed on the target of $15 billion annually for federal investment. In advanced manufacturing, we need a public-private partnership and industry consortium to identify key hurdles and develop a national roadmap, similar to how SEMATECH revitalized U.S. semiconductor manufacturing in the 1980s. The list continues.

Fortunately, some of the country’s leading economists and private investors are beginning to voice similar perspectives. As Mohamed El-Erian, CEO of PIMCO and a leading global investment manager, wrote in the Washington Post last week, “fiscal solvency is not merely a function of deficits and debt… It is also highly sensitive to economic growth… the next step is equally important: to use the current political shambles as a catalyst for a renewed sense of common purpose and a better economic future.” Writing in Politico, the economist Jeffrey Sachs just called for a “a new economic framework for a new century,” which he described as “legislation to build advanced-technology job skills, invest in the health and education of our children, create an advanced energy system that taps our vast renewable resources, build a 21st-century transportation network and invest in scientific research to open new frontiers of knowledge and ensure U.S. leadership in 21st-century technologies.”

Of course, the pundits and DC insiders will dismiss all of this as impossible. Democrats and Republicans are too polarized and entrenched, they’ll say; the public, too weary and demoralized; the Tea Party, too radical and influential; our leaders, too small-minded and self-interested. And they will be right – if we allow ourselves to descend deeper into pessimism and shrink the realm of the possible even further.

The United States is at a crossroads, and the world is watching what we do. If we fail to rise to this moment, then the American era as we know it will end — not all at once, but slowly and surely — as will our ability to lead the world to overcome the defining 21st century challenges. But if our generation can embrace an aspirational vision for renewal and invest in the future – if we are willing to step up and fight for our future as so many before us – we can revitalize our nation’s greatness and global leadership for decades to come. The choice is ours.

–
Teryn Norris is a Truman Scholar, president of Americans for Energy Leadership, and former Project Director at The Breakthrough Institute.

“Climate Pragmatism, a new policy report released July 26th by the Hartwell group, details an innovative strategy to restart global climate efforts after the collapse of the United Nations Framework Convention on Climate Change (UNFCCC) process. This pragmatic strategy centers on efforts to accelerate energy innovation, build resilience to extreme weather, and pursue no regrets pollution reduction measures — three efforts that each have their own diverse justifications independent of their benefits for climate mitigation and adaptation. As such, Climate Pragmatism offers a framework for renewed American leadership on climate change that’s effectiveness, paradoxically, does not depend on any agreement about climate science or the risks posed by uncontrolled greenhouse gases.”

The authors include scholars from Oxford University, London School of Economics, Pacific Northwest National Laboratory, Arizona State University, McGill University, University of Colorado at Boulder, Information Technology & Innovation Foundation, American Enterprise Institute, Breakthrough Institute, and Third Way.

Energy innovation policy is the first and foremost area the paper identifies for progress.  The authors note (emphasis added):

“Both incremental and radical innovations are therefore required across the full suite of low-carbon technology options. Without such innovation and improvement, the rapid pace and massive scale of low-carbon energy deployment required to meet global energy demand while averting potentially catastrophic climate risks will prove all but impossible to achieve. This central innovation challenge must be tackled directly and proactively.

Fortunately, with a diverse array of emerging technologies at hand, the energy sector holds huge potential for innovation, and the United States is well poised to drive this clean energy transformation. The United States has led the world in energy technology transformations in the past just as it has led in most other domains of technological innovation. Indeed, the US innovation system — its key institutions, as well as its human resources and vibrant private sector — are assets that can make America a global leader in developing the affordable,scalable, low-carbon energy sources needed to fuel the world.

…Put simply, we must make clean energy cheap. For emerging and immature energy technologies, deployment subsidies therefore need to better reward innovation and price improvements, not simply production of more of the same. At the same time, the nation must ramp up today’s paltry national commitment to energy innovation to the scale of a true national priority — from just $3-4 billion annually today, to reach $15 billion or more annually.

Furthermore, whatever the level of investment, policymakers must reform and strengthen the energy innovation system, including more productively focusing on commercial-oriented innovations; supporting more high-risk but high-reward research; effectively linking the various stages of the innovation process through better institutional arrangements; and fostering collaboration between public and private sector researchers, universities, technology companies, manufacturers and suppliers, and investors.”

Time Magazine’s Bryan Walsh reports (emphasis added):

“The challenge will be to develop low-carbon alternatives that can compete with fossil fuels on price. (Subsidies are limited — already, even ultra-green countries like Germany are cutting back aid for renewable power because of the rising price tag.) In some places and some conditions, renewables are already winning — for example, in rural areas of Cameroon, where I’m currently traveling, it’s often cheaper to support off the grid solar than run power lines to remote villages. But if alternatives are going to win they need to get a lot cheaper and a lot more efficient, and that’s going to require vast increases in the amount of basic R&D spent on energy. The American Energy Innovation Council — a heavyweight lobbying group that includes Bill Gates — has suggested that the U.S. should increase funding for energy research around $3 billion a year to at least $15 billion annually. Some of that money could come from a small price on carbon, just as the federal gasoline tax raises money for highway construction and maintenance.

…Most of the proposals put forth in the “Climate Pragmatism” paper aren’t new — which in some ways is their virtue. Nationally and internationally, climate politics are deadlocked, even as carbon emissions keep rising and the most of the U.S. sweats through a summer that feels like a trailer for global warming to come. What’s needed in this long hot season is an oblique approach to climate change, one that sidesteps the roadblocks by taking advantage of popular, no-regrets actions that are worth doing even if global warming wasn’t real. It’s not as simple or as elegant as one global deal — but it might actually work.“

The full paper deserves review here.  Climate Pragmatism is an important and welcome contribution to the debate and will surely spark much-needed rethinking among energy and climate policy advocates.

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.”

Department of Energy Announces Funding for Nationwide Student-Focused Clean Energy Business Competitions Competitions Will Encourage Entrepreneurship in Clean Energy Nationwide

Washington, D.C. – As part of the Obama Administration’s effort to support and empower the next generation of American clean energy entrepreneurs, U.S. Energy Secretary Steven Chu today announced $2 million in available funding for the National University Clean Energy Business Challenge. This nationwide initiative will create a network of regional student-focused clean energy business creation competitions whose winners will compete for a National Grand Prize at a completion held at the Department of Energy in Washington, D.C. in early summer 2012. The funding will support up to six regional competitions that will inspire, mentor, and train students from across the country to develop successful business plans to create a new generation of American clean energy companies. These regional competitions will take place before May 1, 2012. This national initiative will enable student participants to gain the skills required to build new businesses and transform promising innovative energy technologies from U.S. universities and national laboratories into innovative new energy products that will to solve our nation’s energy challenges, spur business creation, create American jobs, and boost American competitiveness.

“Fostering innovation at America’s universities and producing our nation’s next generation of clean energy entrepreneurs is vital to ensuring our nation’s competiveness in the clean energy economy of tomorrow,” said Secretary Chu. “This investment will train a new generation of scientific and technical leaders and support the Administration’s continued effort to ensure that America has the workforce we need to secure our energy future, create jobs here at home, and win the future.”

This funding opportunity announcement (FOA) will consider applications that propose annual U.S. university-based business creation competitions for student entrepreneurs with business ideas in energy efficiency and renewable energy. Student teams that participate in the competitions will work with experienced mentors from the energy industry and start up community, along with university and national lab-based researchers, to develop creative business plans for transforming ground-breaking energy technologies into high impact market solutions. The FOA has been posted to FedConnect and is available under the reference number “DE-FOA-0000570.” Applications are due on August 22, 2011. Selections are expected to be made before the end of September 2011.

This initiative, facilitated by the Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE), aims to increase the number and quality of start-up businesses created with university-based energy technologies and to promote a new generation of energy entrepreneurs. The Office of Energy Efficiency and Renewable Energy invests in clean energy technologies that strengthen the economy, protect the environment, and reduce dependence on foreign oil.

The report offers a plethora of data and analysis, and several commentators have already weighed in with various interpretations (see Bryan Walsh at TIME). But one of the key conclusions worth highlighting is that the driving force behind the U.S. “clean economy” over the last decade has been emerging energy technologies –- not in other “green” sectors related to buildings and home weatherization, energy-saving consumer products, or efficient appliances (as some advocates predicted). In other words, emerging energy technologies appear to have the greatest job and export growth potential, and this carries important implications for U.S. policy priorities — a conclusion recently echoed in Google’s energy innovation report.

Brookings defines the “clean economy” as a very broad range of goods and services that provide environmental benefit, including everything from electric vehicle technologies to organic foods and waste management (see list below). As it explains, the report is “the first study of the U.S. clean economy to provide timely information that is both comprehensive enough in its scope and detailed enough in its categorization to inform national, state, and regional leaders on the recent employment dynamics of the U.S. low-carbon and environmental goods and services super-sector…”

According to the data, the highest job growth and export intensity in the overall clean economy between 2003-2010 was primarily in emerging energy technologies. Out of the 39 measured sectors, the top eight with the greatest relative job growth were all energy-related: wave/ocean power, solar thermal, wind, carbon storage and management, solar PV, fuel cells, biofuels, and smart grid.   In terms of export intensity, seven of the top eight sectors were energy technologies: biofuels/biomass, electric vehicle technology, battery technology, wind, solar PV, and fuel cells. The most export-intensive “category” of sectors was renewable energy technologies, at $64,884 in exports per job, compared to only $20,129 for the aggregate clean economy.

(Click to view larger images)

The report highlights this growth trend in its second conclusion:

“The clean economy grew more slowly in aggregate than the national economy between 2003 and 2010, but newer “cleantech” segments produced explosive job gains… 78 percent of all job gains between 2003 and 2010 came from establishments born in 2003 or later… Along these lines, four of the five fastest-growing segments during this seven-year period were in renewable energy… Young, technology-heavy segments were also adding jobs at elevated rates each year over the period.”

The concluding section similarly notes (emphasis added):

“Already the aggregate clean economy employs more people than the fossil fuels and biotech industries. More importantly, a dozen or so “hot” segments – mostly dynamic renewable energy categories like wind energy, solar photovoltaic, and smart grid – doubled and tripled in size in the last decade, answering the hype that has surrounded them despite extremely difficult recent market and finance conditions.”

This rapid growth in clean-tech contrasts with building-related and other sectors (emphasis added):

“The slowest growing segments, by contrast… took place in older building- and building infrastructure-related segments… including, for example: water efficient products (e.g. plumbing and bathroom equipment); green chemical products (house paint); appliances; and energy-saving consumer products (office equipment, glass, home weatherization services). Hydropower and nuclear energy also experienced weak growth, with the former actually losing jobs.”

The implication is this: if the U.S. wants to prioritize job and export growth in the “clean economy,” it should put primary emphasis on new, technology-intensive, energy-related sectors. U.S. federal and state policies to advance the aggregate clean economy should focus especially on energy innovation – on the research, development, manufacture, demonstration, and commercialization of new energy technologies, as well as supporting infrastructure and advanced human capital. Indeed, on the latter item, the report also finds that “the clean economy employs a higher percentage of scientists, architects, and engineers (10.1 percent) than the national economy (5.4 percent),” which points to need for a national energy science and engineering education program, such as RE-ENERGYSE.

The report offers three overarching policy recommendations to advance the clean economy – categorized as market creation (i.e. support for deployment), finance, and innovation – which are largely consistent with this assessment. In terms of innovation policy, the report drives home the existing consensus on the need to increase federal energy RD&D from its current level of only $3-5 billion up to $15-25 billion annually. In the near-term, it suggests incremental growth in DOE’s new energy R&D program budgets – the Energy Frontier Research Centers, ARPA-E, and the Energy Innovation Hubs – “including a tripling of the ARPA-E budget, the creation of new hubs, the creation of a water sciences innovation center, and the establishment of a regional clean economy consortium initiative.” It also recommends that states expand their RD&D and cluster development programs, pointing to the New York State Energy R&D Agency (NYSERDA) and Ohio’s Nortech as models.

In terms of finance, the report emphasizes the needs to reform existing subsidies to prioritize innovative technologies, similar to the recommendations in “Post-Partisan Power” (a 2010 report by American Enterprise Institute, Brookings, and Breakthrough Institute). Its primary recommendation is the creation of an emerging technology deployment finance entity to address the “commercialization Valley of Death,” between the demonstration/scale-up and commercial roll-out stage of new technologies.  It goes on to recommend “a push to rationalize and reform the myriad tax provisions and incentives that currently encourage capital investments in clean energy projects… Such reform might well pair selective extensions of key production, investment, and manufacturing tax credits as well as the Treasury grant cash-back program with staged, technology-specific phase-outs, which would at once provide new industries support, predictability, and a nudge toward innovation and cost-reduction.”  It also suggests creating more state-based finance programs, such as revolving loan funds like California’s Infrastructure & Economic Development Bank.

Staying true to Metro Program’s mission, the report calls for all these policy reforms — in innovation, finance, and deployment — to be crafted in the context of regional cluster development.  This will require renewed attention and research into the details of local industry dynamics and regional growth strategies: “Regional actors, meanwhile, should take the lead in using data and analysis to understand the local clean economy in detail; identify competitive strengths; and then move to formulate strong, “bottom-up” strategies for overcoming key clusters’ binding constraints.”

Beyond these recommendations, another area for further exploration is the role of advanced manufacturing and its policy implications. The data shows that the clean economy is particularly manufacturing-intensive — 26% of clean economy jobs are in manufacturing establishments compared to just 9% in the broader economy — but the report recommendations don’t contain much on manufacturing policy. Growing evidence suggests that manufacturing is a vital stage in the innovation process, and R&D dollars will follow manufacturing capacity overseas if the U.S. doesn’t compete for these facilities. (For example, see ITIF’s recent report, “The Case for a National Manufacturing Strategy.”)

Of course, the Brookings report contains much more information and certainly merits a full review. But this key finding on the importance of energy innovation for driving the overall clean economy warrants particular attention from energy, climate, and growth advocates. This conclusion aligns well with the policy priorities of Americans for Energy Leadership and our allies, and it plays well to the United States’ comparative advantage in innovation. With the right policy support for advanced and emerging energy technologies, the U.S. can continue to unleash the potential of the clean economy — and regain our global leadership.