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Focus, Reform, Invest: Energy Innovation Agenda for Trump, Congress

In few areas were the differences between the presidential candidates this year starker than energy policy. Hillary Clinton promised Americans a half-billion more solar panels. Donald Trump promised to revive the coal industry. The candidates’ rhetoric, and the emotions that they stirred, obscured an energy agenda with support from both sides of the aisle. With the election in the rear-view mirror, the new administration and Congress have a chance to reclaim that mainstream agenda, advance U.S. economic and environmental interests, and deliver on campaign promises on manufacturing and trade.

Innovation, not regulation, lies at the core of this agenda. Relying solely on existing energy technologies to combat climate change would be costly, messy and unpopular. It would also sacrifice a huge opportunity for global leadership. The United States is losing the race to build and sell clean-energy technologies, from advanced nuclear power to energy storage. This market is worth more than $300 billion per year and growing rapidly. We haven’t yet lost the race, but we can’t afford to lose any more ground. Our winning strategy is exactly what we’ve already done in other high-tech sectors where we lead: be more innovative than our competitors.

In fact, President-elect Trump’s choice for Secretary of State, ExxonMobil CEO Rex Tillerson, has forcefully made the case for why energy innovation “will be vital in the decades ahead.” And former Texas Governor Rick Perry, tapped as secretary of Energy, has remarked, “Energy innovation, it’s the quickest way to make our anemic economy very powerful.” This thesis also has broad support among leaders in the private sector. Just this week, a group of wealthy investors led by Bill Gates unveiled Breakthrough Energy Ventures, a fund in excess of $1 billion to invest in early-stage clean energy technology companies.

The United States comes to the energy innovation game with enormous advantages. Our universities and government laboratories have developed many new technologies, and American companies such as Tesla, GE and First Solar have successfully commercialized innovative products. But we ought to be doing even better. Our strategy is unfocused. Our institutions are under-performing. And our competitors are out-investing us. The energy innovation agenda, therefore, is straightforward: focus, reform, and invest.

To focus the federal effort and send signals to private investors, the administration should adopt “technology missions” that would address urgent needs. Advanced nuclear reactors promise to generate safe, affordable, and reliable power with zero carbon emissions. Advances in capturing, storing, and profitably using carbon dioxide might make it possible to burn fossil fuels and protect the environment at the same time. Better solar energy technologies would harness sunlight to produce not only electricity more cheaply than today but also clean fuels. New energy storage options could stabilize the grid and power long-range electric vehicles. Super-efficient air conditioners would take a bite out of monthly bills at home. Revolutionary progress in software would improve building energy efficiency, coordinate distributed energy resources, and link electric vehicles to the grid and to one another. All of these areas would have big payoffs if they advanced more rapidly.

The second part of energy innovation agenda is reform, beginning with the Department of Energy. The DOE manages a sprawling set of institutions, many of which pay little attention to energy, instead working on nuclear weapons or doing basic science. The DOE’s 17 national laboratories have made great contributions to the nation since World War II, but their energy activities are too often disconnected from mission-driven, industry-relevant technology development and demonstration. The labs are also hamstrung by micro-management from Washington. Greater autonomy and stronger incentives to collaborate with industrial partners could improve their record of commercializing breakthrough energy technologies.

Some promising initiatives at the DOE are very effective, and deserve to be scaled up. The seven-year-old Advanced Research Projects Agency-Energy, which is modeled on the extraordinarily successful Defense Advanced Research Project Agency, for instance, has supported entrepreneurs who have already gone on to raise more than $1.25 billion in follow-on funding from private investors. DOE’s support for first-of-a-kind technology demonstrations has played a critical role in jumpstarting multi-billion dollar U.S. industries, from hydro-fracturing to utility-scale solar.

Reforming the DOE to unlock its untapped potential and scaling up its most effective new programs would give the nation more bang for the federal buck. But more bucks are also needed — part three of the agenda. Eleven other countries around the world spend more on energy R&D as a percentage of their economy than the United States. China spends three times as much and is sponsoring an all-out push on all technology fronts. The lack of U.S. public investment is mirrored in the private sector. Venture capital and private equity investment in American renewable energy companies, for instance, peaked in 2008 and has not fully recovered.

To fill this gap, America must invest in innovation. Along with other leading countries, the United States pledged last year to double its energy R&D investment over a five-year period. The $6.4 billion in additional federal funding that would fulfill this commitment could be raised in creative ways — such as restructuring of the Strategic Petroleum Reserve — that protect this investment from the vagaries of the annual appropriations process. That stability will give young scientists and entrepreneurs the confidence they need to devote their careers to this vital field. It will also inspire private investors, such as the Breakthrough Energy Coalition led by Gates, which has pledged to use its money to bring innovative energy technologies to market.

President-elect Trump has an opportunity to make good on his campaign promises to create well-paid advanced manufacturing jobs, protect the environment, embrace a diverse energy mix that includes fossil fuels, and boost the flagging U.S. trade balance. Seizing that opportunity, in cooperation with the 115th Congress, will require making energy innovation a high priority. Focus, reform, and invest — that’s an agenda that puts America’s economic and environmental interests first.

 

Varun Sivaram is the Douglas Dillon Fellow and acting director of the Program on Energy Security and Climate Change at the Council on Foreign Relations. Colin McCormick is partner and chief technologist at Valence Strategic. David M. Hart is a senior fellow at the Information Technology and Innovation Foundation and director of the Center for Science and Technology Policy at George Mason University’s Schar School of Policy and Government. They are the authors of “Energy Innovation Policy: Priorities for the Trump Administration and Congress.”

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