Energy innovation and American technological leadership has been a big point of focus in energy policy circles over the past decade. There exists a variety of strategies and plans
to drive and support energy innovation, each informed by a combination of history, political and economic ideology, and circumstance, but none of them seem to have taken hold yet.
Many advocate government investments in R&D, often differing on which technologies or research areas deserve funding, while others promote a more hands-off role that would see government lift the regulations that many believe stifle private sector investment and innovation. Some advocate pricing CO2 and relying on the market to make technological adjustments, and others advocate a focused, “Manhattan Project” type approach to energy innovation complete with big goals and dedicated funding.
What’s your plan to spur energy innovation? If you were responsible for drafting and implementing a national energy innovation program, what choices would you make? What trade-offs would your plan entail? How would you fund it? What outcomes would you expect?
In my politically realistic plan, I would move forward with Keystone XL. I’ve come to see KXL ultimately as less important as other things, and getting it out of the way and off the table would perhaps free up whatever minimal political capital is available on actually doing ‘important’ things regarding energy.
The more idealistic version of a plan would include something like an actual national energy plan, focused on certain goals and developments. Being able to theoretically streamline regulations, and give more teeth to sound regulatory practices, especially in developing / expanding fracking, would be a top aim. Politically feasible? Unlikely.
I would very much be interested in trying to figure out the best way to get clean energy winners – not by choosing them, but by fostering them somehow. I don’t know the answer, but, there needs to be a bigger name than Solyndra in US clean energy. That national stigma needs to go away. I say this geostrategically, because other countries with less hangups about solar and other clean energy programs are moving forward.
Creating a serious national energy dialogue (ha) would also be an ideal. Explaining things beyond the slogans of energy independence, and actually creating a substantial understanding of global energy markets, or dare I say, the US’s position in the world relative to ‘other countries’. Politically unfeasible, perhaps. But movements in that direction are important.
There needs to be a much, much strong campaign to get STEM education in the US. President Obama touches on it every now and then. I actually wrote a letter to the White House urging him to continue on this front. There really needs to be a national calling – like during the World Wars – to get people into certain programs. The economy of the future is going to heavily depend on new technology, and the jobs will continue to necessarily be outsourced to those who have engineering degrees. The numbers for Americans completing STEM degrees is dropping…. and without the talent pool needed, there will be no innovation at all. Well, in America anyways.
Furthermore, as before, because there is a stifled culture for innovation in America, those non-US citizens who do complete STEM degrees are likely to return to their own countries. This could very much be a brain drain that affects future US profits.
To be blunt, the US is still beholden to hydrocarbon industries, and until that changes, everything else is a bit fanciful.
But to continue with this exercise, I’d say – go forward with KXL, create the best regulatory system in the world in terms of efficiency and production, stress the realistic need for hydrocarbons NOW but the necessity to transform into a clean energy economy in the coming decades, stress REAL energy independence will come through innovation, not digging deeper into the ground.
Creating some sort of a CO2 pricing mechanism would be ideal, but, I see that as entirely unfeasible right now.
My main goal would be to find things to get people excited about US energy innovation – winners, things that work, incentives, etc. The US needs to get something to brag about and be the best at in terms of new energy – but right now natural gas and fracking has the spotlight. That can be a useful thing or not, but that largely depends on politicking and the current ridiculously unproductive environment that is US political discussion.
My plan (“Plan B”) is in my recently published ebook Energy Innovation. Details, ordering information, and a free executive summary are available here:
http://www.energyinnovation.perelman.net
I look forward to comments from this group.
Jesse – excellent points regarding a dialogue that fosters a deeper understanding of global energy markets and STEM education, both of which are sorely needed in the US.
To drive innovation, we need to stop trying to pick winners and losers. We have huge investments in carbon capture and sequestration technologies with virtually non-existent market penetration, epic fails like Solyndra that focus negative attention on an entire industry or technology (rather than on mismanagement), and a regulatory system that mandates “best available technology” that is not commercialized. Regulations, energy policy, and technology innovation have to work together and have coordinated objectives and timelines. What we have now is a schizophrenic policy that provides no investment certainty and a patchwork of ill-conceived or poorly written regulations. This does not encourage innovation.
We can learn much from other countries (good and bad). Germany has had success with feed-in tariffs, but did not plan for increasing penetration of renewable energy generation by simultaneously investing in transmission infrastructure. Germany also underestimated the need for reliable baseload power. They effectively encouraged bioenergy, and particularly waste-to-energy by setting high landfilling costs. Technologies such as anaerobic digestion and gasification have become mainstream there. Here in the US, while the technology is well demonstrated, we still struggle to get such projects approved. Why? Because there is no financial incentive to produce energy from waste rather than use land disposal (not only landfills, but agricultural waste stockpiles, etc).
The challenge for many innovative energy technologies is scaling up from demonstration to commercialization. The reason is the capital investment required, with no guarantee of payback because incentive mechanisms are so short-term. Whereas funding for demonstrated technologies are easily secured, many of US technology innovations have difficulty “growing up” to commercial scale (i.e. cellulosic biofuels).
The challenge with encouraging innovation is the higher cost of delivered energy. So appropriate goals and timelines must be set that do not heavily burden American families and manufacturing. For this reason, we need to continue to use fossil sources as the bridge to temper price increases and ensure reliable energy supply. I would point out that innovation can also apply to fossil fuels. We need to find efficient, cleaner ways to acquire and utilize these resources and prevent bad management practices. Setting achievable emissions and pollution standards would be a start.
While you cannot predict what kinds of technology innovation will occur, policies must be in place to make it worth innovators while to invest in risky propositions. This has to happen on two few levels.
First, there must be a fair platform for competition. Developing a technology which is preferable to its competitors (in terms of efficiency, cost-effectiveness, or environmental impact) is useless if it cannot gain a foothold in the market. Regulators have to try to think about the energy market as much like an open source template as possible- to encourage entrepreneurs to invest time and money in developing new technologies. A good example of this is in electricity markets, where regulations often oriented to be utility-centric and do not encourage new entrants into the market- such as companies who may want to bundle packages of efficiency, smart building management, and distributed generation to provide alternative energy services to individual users. Net-metering, rate- reform, more friendly contracting and finance terms, and interconnection standards are all instances where policy could be oriented to be more open platform and encourage competition.
This has obvious consequences for entrenched industry- as new energy service companies would divert revenue streams from existing utilities. However, PUC’s have the authority to restructure incentives to meet changing energy conditions. With electricity demand flat or declining over the next few years, these changes may have to take place anyways.
Second, the market needs some predictability. Right now, partisan bickering has left clean energy project costs dependent on a fluctuating series of incentives and credits- while incumbent fossil fuels enjoy a relatively stable series of tax breaks and reimbursements, access to low-cost capital through structures like MLP’s, no costs imposed on carbon, and well-established commercially viable technologies.
Oddly enough, if either party’s pure ideology came into play- innovation would have a chance. If the free market folks won out, and you cut tax breaks and other indirect subsidies to fossil fuels (maybe pricing carbon), clean energy would have a shot. Innovators would see the window, and charge. On the other hand, if clean energy got the same subsidy breaks which fossil fuels have enjoyed- both at the beginning of their entry to energy markets, and currently- it would be competitive and innovators would have incentive to move.
However, the cherry-picking policies in place leave clean energy holding the bag. Intermittent and uncertain tax and subsidy support paired with not opening up low-cost capital (MLP’s, REITS’s) for clean energy, while refusing to consider closing tax loopholes or a carbon price for fossil fuels is chilling for any kind of new energy innovation which doesn’t rhyme with “shmyfaulic pracking.”
Again, there will be losers in this fight- no doubt about it. But, successful energy innovation either helps an existing technology meet objectives better- or comes up with something new to meet those objectives. This, by its nature, displaces existing technology. But successful innovations open up new supply chains, or as was the case with IT, new employment sectors which more than compensate.
American ingenuity and hard-work, if put to the task of innovating new clean energy technologies, will place the U.S. on the cutting edge of competitiveness on the world stage. However, these innovators need policy signals which show that, if they invest their time and effort in this space, there is the potential for a big payoff. The end result will be a transformed domestic and global energy system which will have economic dividends across a cross-cutting range of stakeholders.
Pingback: COMMENT: “Your Plan to Drive Energy Innovation” (OEP) | Jesse Parent [INFLUENCE]
It is important to convert externalities to internalized costs. A carbon tax or cap-and-trade is a necessary component to help achieve this. Likewise, in evaluating various kinds of vehicles, the full requirements, benefits and costs must be included, not just the proximate ones. For example, when comparing electric vehicles with others, it is important to ask what we use in order to provide the electricity.
I would like to see continued research to try to develop a whole new technology for electricity storage, batteries with much higher capacity, faster input and output, and smaller losses, perhaps based on nanotechnology.