Guest post by Jesse Jenkins, MIT graduate researcher and former Director of Energy and Climate Policy at the Breakthrough Institute.
ITIF recently unveiled an interesting new interactive budget tool based on data directly from the Energy Innovation Tracker entitled the Energy Innovation Budget Builder. Specifically, the Budget Builder allows users to allocate up to $50 billion across five innovation phases and see how their ideal budget compares to the actual federal FY2012 distribution.
Consistent with the recommendations in the October 2010 report, “Post-Partisan Power” co-authored by energy analysts at the Breakthrough Institute, Brookings Institution and American Enterprise Institute (including myself), I used the Budget Builder to craft a hypothetical budget that would devote U.S. clean energy innovation funds as follows:
- Double federal investments in basic energy sciences from about $1.5 billion today to $3 billion. Devote a considerable portion of this increased budget to more use-inspired basic science meant to remove basic science barriers to unlock breakthrough energy innovations, including roughly $300 million in annual funding to scale up the Energy Frontier Research Centers (EFRC) program over the coming years (EFRCs are currently funded at $100 million annually).
- Increase investments in applied energy R&D from about $3.6 billion today to $7.5 billion. Up to $5 billion of this funding should be used to establish a robust national network of regional energy innovation institutes bringing together private sector, university, and government researchers alongside investors and private sector customers. Funded at $50-300 million annually, each institute will foster competitive centers of clean energy innovation and entrepreneurship while accelerating the translation of research insights into commercial products. For more on this proposal, see “Energy Discovery-Innovation Institutes” (Brookings Institution, February 2009) and “Jumpstarting Clean Energy Innovation with a National Institutes of Energy” (Breakthrough Institute and Third Way, April 2010).
- Bring the Advanced Research Projects Agency for Energy (ARPA-E) to scale by providing $1.5 billion annually, while dedicating a significant portion of new funding to dual-use energy technology innovations with the potential to enhance energy security and strengthen the U.S. military. The Department of Defense (DOD) should work actively with ARPA-E to determine and select dual-use breakthrough energy innovations for funding through the ARPA-E program and potential adoption and procurement by the DOD.
- Devote $2 billion annually to targeted advanced energy demonstration funding designed to help promising technologies cross the Commercialization Valley of Death. At a negligible $34 million today, this is a key funding gap in the energy innovation system. New demonstration funding could be used to establish a Clean Energy Deployment Administration that could effectively leverage limited federal funds to unlock private investment in advanced energy demonstration, and/or to establish a National Clean Energy Testbeds program that would open up federal lands ideally suited for clean energy demonstration sites. Ideal technology candidates for demonstration include carbon capture and sequestration plants, small modular nuclear reactors, advanced solar technologies, engineered/enhanced geothermal, various utility-scale energy storage technologies, advanced biofuels production facilities and new manufacturing techniques for advanced batteries. For or more, see “Bridging the Clean Energy Valleys of Death,” (Breakthrough Institute, 2010).
- Expand DOD efforts to procure, demonstrate, test, validate, and improve a suite of cutting-edge energy technologies. New, innovative energy alternatives are necessary to secure the national defense, enhance energy security, and improve the operational capabilities of the U.S. military. Provide up to $5 billion annually in new appropriations to ensure the Pentagon has the resources to pursue this critical effort without infringing on funds required for current military operations. Today, DOD invests roughly $540 million in procurement of energy technologies.
- Finally, we should reform the nation’s morass of energy subsidies. Instead of open-ended subsidies that reward firms for producing more of the same product, the U.S. should employ a new strategy of competitive deployment incentives, disciplined by cost reductions and optimized to drive steady improvements in the price and performance of a suite of emerging energy technologies. Incentives should be created for various classes of emerging energy technologies to ensure that each has a chance to mature. Incentive levels should decrease until emerging technologies become competitive with mature, entrenched competitors to avoid creating permanently subsidized industries or picking winners and losers, a priori. For more, see “Beyond Boom and Bust: Putting Clean Tech on a Path to Subsidy Independence” (Breakthrough Institute, Brookings Institution and World Resources Institute, April 2012). If deployment subsidies are reformed and optimized in this manner, the U.S. government can get more bang from it’s deployment buck and likely accomplish its objectives with spending on the order of $6.5 billion annually. This compares to roughly $8.6 billion spent on deployment today.
A more nuanced discussion of federal investments by energy innovation phase is desperately needed – hopefully, the Budget Builder will serve as a helpful tool for policymakers and stakeholders as they strive for a smarter budget breakdown.
Try out the Energy Innovation Budget Builder and share your breakdown on Facebook and Twitter!