A Business Plan for America’s Energy Future

By the American Energy Innovation Council

In the defense, health, agriculture, and information technology industries, the United States has used intelligent federal investments to unleash profound innovation, resulting in leadership in those realms. In energy, however, the United States has failed the grade, and is paying a heavy price for that failure.

Government must play a key role in accelerating energy innovation for two reasons. First, innovations in energy technology can generate significant, quantifiable public benefits that are not reflected in the market price of energy, including cleaner air and improved public health, enhanced national security and international diplomacy, reduced risk of dangerous climate change, and protection from energy price shocks and related economic disruptions. Second, the energy business requires investments of capital at a scale beyond the risk threshold of most private-sector investors. A slow turnover rate for energy equipment, and existing market structures, limits investments in new ideas and creates a vicious cycle of status quo behavior.

We feel that the following five recommendations to government can unleash the nation’s technology potential.

Recommendation #1: Create an independent national Energy Strategy Board

The United States does not have a national energy strategy. Without one, there is no framework for the development or assessment of energy policies driving new technologies.

We recommend the creation of a congressionally mandated Energy Strategy Board charged with (1) developing and monitoring a National Energy Plan, and (2) oversight of a New Energy Challenge Program (see Recommendation #5). The Board should be politically neutral, external to government, and populated by energy experts.

Recommendation #2: Invest $16 billion/year in clean energy innovation

To maintain our competitive edge, America needs large and sustained investment in energy innovation. We believe that $16 billion/year is the minimum level required.

Funding should be set with multi-year commitments, managed by well-defined performance goals, focused on technologies that can achieve significant scale, and free from political interference and earmarking.

Recommendation #3: Create Centers of Excellence with strong domain expertise

Technology innovation is most effective and efficient if institutions are located in close proximity to one another, share objectives, and are accountable to each other. We recommend the creation of national Centers of Excellence in energy innovation, with an annual budget of $150 – $250 million each.

Recommendation #4: Fund ARPA-E at $1 billion/year

The creation of the Advanced Research Projects Agency-Energy (ARPA-E) has provided a significant boost to energy innovation. The program has high potential for long-term success, but only if given the autonomy, budget, and clear signals of sustained support to implement needed projects.

Recommendation #5: Establish and fund a New Energy Challenge Program to build large-scale pilot projects

We recommend a program to fund, build and accelerate the commercialization of advanced energy technologies. The Program should focus on the transition from pre-commercial, large-scale energy systems to integrated, full-size system tests.

The program should a partnership between the federal government and the energy industry and should report to the Energy Strategy Board (see Recommendation #1).