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The More Worthwhile Energy Policy Conversation

Arun

On November 17, 2011, energy policy was the hot topic in Washington. On Capitol Hill, a House panel grilled DOE Secretary Steven Chu over the bankruptcy of government-supported solar firm Solyndra. Congress needs to perform its oversight role but what was striking about the hearing was how little actual energy policy was discussed – it was more political theatre.

In contrast, on the same day, over 300 leading climate and energy advocates, policymakers, Congressional aides, academics, and journalists attended Energy Innovation 2011. They shared and debated a range of insights related to devising a cost-effective way for the government to enable the private sector to make affordable clean energy a reality. It’s the conversation Congress should be having, but is not.

Energy Innovation 2011 successfully built on last year’s groundbreaking conference(link to EI10), which brought together hundreds of clean energy advocates focused on the move away from traditional, but politically-dead carbon pricing schemes and towards energy innovation policy. The real goal? Make clean energy affordable and competitive with fossil fuels without subsidies – and do it as soon as possible. This year’s conference moved from the why to the how. The discussions reinforced some key themes which policymakers must keep in mind when developing new energy policy.

One is the importance of what Arun Majumdar, director of DOE’s Advanced Research Projects Agency-Energy, termed “creating new learning curves” that are disruptive and rapidly bring down costs. Another is the importance of providing scarce public resources where they can best drive transformational innovation and unsubsidized cost reductions. A third is the challenge of supporting the clean energy ecosystem even with the looming threat that up to three quarters of current federal support for clean energy innovation will evaporate in the next two years. That leads to a fourth: the need for environmentalists and innovation supporters to unite on making clean energy a viable reality for the short and long term. Finally, discussion of all of these issues takes place against the backdrop of an international effort to slow and reverse climate change as the global race for economic opportunity in the clean energy market continues.

The full video and supporting materials are posted on the conference website. The following are some highlights of the day-long conference:

Dr. Arun Majumdar, Director of the Advanced Research Projects Agency-Energy, at DOE

In his keynote remarks, Majumdar explained that ARPA-E is supporting cutting-edge research that could yield the transformative breakthroughs needed to make clean energy price-competitive with fossil fuels. Supplying energy to a growing world in a sustainable way is a challenge affecting the whole world and a unique opportunity for the United States.

“There are a lot of places in the world where they want to turn on the lights.  And they want to turn on the lights in the right way,” he said. With clean energy likely to grow to a $7 trillion market in the next decade, he asked, “Are we going to stand on the side lines and buy it or are we going to develop and sell it? The next 20 years is the window.”

One example of ARPA-E’s efforts is PETRO (Plants Engineered To Replace Oil). Essentially, scientists are trying to find a metabolic pathway so that plants can more efficiently create energy. Scientists have discovered that tobacco works well. “Imagine big oil and big tobacco coming together to make alternative energy. Now that is innovation!” Majumdar said.

In a more serious tone, he stressed that these and other discoveries are not, “science fiction but happening right now,” and warned that success in energy innovation depends on thinking about the entire process – from R&D to  scale up to attracting investments that lead to widespread commercialization, manufacturing and exporting.

Clean Energy: Crises, Cost Curves, and Capabilities

The first panel focused on some of the immediate obstacles for a successful clean energy policy, namely public awareness that there even is a crisis. Then, we must galvanize a robust commitment to meeting the crisis with investments and bold strategies.

Vice Admiral Dennis V. McGinn (USN, Retired) President, the American Council on Renewable Energy, said the country’s reliance on foreign oil is a large threat to our national security nearly equal to those posed by Japan’s attack on Pearl Harbor 70 years ago, the launch of Sputnik in the late 1950s, and the 9/11 terror attacks. These were dramatic but discrete events in terms of people directly harmed. “Unlike those crises, it (the alternative energy deficit) will affect everyone and for decades,” he said.

Just the same, Devon Swezey, Project Director at the Breakthrough Institute, which was a lead partner of ITIF in the conference, said the situation appears to be at risk of going unaddressed. He warned the public needs to become acutely aware of a looming 78% decrease in government support for energy innovation from current levels after 2014. In addition to the level of support, he said we should be concerned about the nature of support. Most of the public investments in the U.S. as well as other countries are going to deployment of existing technologies, not the development of innovation and new technologies. “But this is the moment of truth. The real goal is a path to subsidy independence,” he said.

Clean Energy Cheaper Than Fossil Fuels: How Do We Do It?

The second panel provided a framework for understanding how policy can drive innovation, making clean energy cheaper than fossil fuels. The discussion opened with comments from Matt Hourihan, Clean Energy Policy Analyst at ITIF, making a distinction between incremental and radical innovation. To be sure, both are needed, but it is radical innovation that will bring about a sea change.  And this kind of innovation is very unlikely to arise using carbon pricing. In essence, the price of gas will encourage ways to improve gas mileage but it will not lead to the invention of a non-gasoline-powered car.

For radical innovations, government stewardship is critical. Letha Tawney, Senior Associate, World Resources Institute, said “it is vital for nations to take an ecosystems approach to their innovation systems, ensuring they have capacities and capabilities across a range of areas, including the development of knowledge, nurturing human capital, enhancing infrastructure, and creating markets and finance mechanisms for innovations.”

To illustrate how this cohesive approach could succeed, Ramamoorthy Ramesh, Director of the Department of Energy SunShot Initiative, highlighted the agency’s work in bringing together interdisciplinary expertise from across government and the private sector to bring down the costs of solar energy at multiple levels, including module performance, balance of system costs, and permitting. By taking this focused approach, SunShot hopes to reduce solar power costs by 75% within the next decade. The program highlighted the importance of fusing national strategy and real-world networks from around the country in driving the adoption of innovation. Just as important, it reinforced the vital role of road mapping and use-directed research at decentralized institutions like the national labs in meeting our energy technology challenges.

Looking Beyond the Horizon: Driving Technological Breakthroughs

The first afternoon discussion shed light on the role of technology transfer and how large-scale implementation of ideas developed in labs plays critical roles in making sure promising technologies have a chance to deliver. Mike Schwenk, Vice President and Director of Commercial Partnerships, Pacific Northwest National Laboratory/Battelle, noted that national labs spend $1 billion a year and employ, 5,000 people to produce, on average, one invention a day. However, he commented that this would represent a good return on investment only if those inventions can be put to use in potentially game-changing ways. And that is where the challenge of large-scale implementation comes into play.

Sam Thernstrom , Senior Climate Policy Advisor, Clean Air Task Force, while welcoming the growing support for innovation, stirred up the discussion by observing that it matters less where this scaling up and commercialization is happening and more that the breakthroughs are becoming reality. Citing examples of U.S. firms that are building nuclear power plants in China, he conceded these companies are surrendering some of their IP but contended that they are also on the cusp of seizing new market opportunities around the globe, thanks to the experienced gained in China. “U.S. innovation is going strong but it is in China,” he said. “If China didn’t exist, there are companies that would not be in business.” (There were additional discussions on that issue later in the day.)

Smart Energy Policies: Driving Innovation in a Time of Budget Austerity

The panel reviewed some specific ways governments and the private sector are working together to pool resources and align goals for a cost-effective way to drive innovation. Peter Rothstein, President, New England Clean Energy Council, said modest DOE grants can help get pilot projects off the ground and then regional efforts can take them to the next stage of experimentation and deployment on a more cost effective and coherent way. Multi-state efforts are one way to bridge the “valley of death” along with meeting scale-up and commercialization challenges for promising innovations, agreed Lew Milford, President of the Clean Energy Group, and Travis Doom, Program Specialist at the Center for Science, Policy and Outcomes.

Public investments do not have to be huge initially to lead to more significant advances but it is critical the investments are, in fact, made. Jesse Jenkins, Director of Energy and Climate Policy at the Breakthrough Institute, said for the concept of exponential innovation well known  in computing needs to be applied in energy innovation. And for this to succeed there must be adequate investments in innovation and policies that better link scientists and innovators who will deploy breakthroughs. He envisions the ideal situation when energy innovators are creating ideas for technologies and capabilities that do not yet exist but almost certainly will a few years down the road because there is so much dynamism in this industry.

China and Clean Energy Innovation: Trade War, Technology Partner or Both?

There was an excellent debate on the benefits of China’s significant clean energy investments being offset by the harm caused by its “green mercantilism.” ITIF President Rob Atkinson dismissed the idea innovation “nirvana” can be achieved by “hitching our wagon to China’s innovation,” charging that undermining innovators in the U.S. and other countries and stealing ideas hinders innovation globally and hurts everyone in the long run.

Echoing the call for a more aggressive stance to China, Jayme White, Staff Director of the Senate Finance Subcommittee on Trade, said a tripling of China’s share of export of global market share in clean energy technologies was not the work of the “invisible hand” of the marketplace  but the Communist Party’s 12th five-year plan. “If we lose the solar market entirely, we will not be rewarding innovation.  We will be rewarding cheating,” He asserted.

To that Atkinson added, “the Chinese were asleep the day they taught comparative advantage. They want complete advantage.”

But Armond Cohen, Co-Founder and Executive Director at the Clean Air Task Force, acknowledged that China’s trade practices are sometimes dubious but insisted there is value in China’s large scale building. Ideally, he said both countries would be financing and building to let innovations thrive and take hold on a grand scale. “Chinese activism is not a reason for American quietism,” he said.

Innovation and Environmentalism: Finding Common Ground

The day ended with a discussion between David Goldston, Director of Government Relations, Natural Resources Defense Council and Josh Freed, Vice President for Clean Energy at Third Way, which suggested that the pro-innovation movement and the traditional environmental movement, with its emphasis on carbon caps and regulations, can come together. The real question is whether ideological opposition to a governmental innovation policy and ideological aversion to taxpayer-funded public investments can be overcome in the current budgetary and political climate.

On the policies and conditions that would best ensure that clean energy replaces fossil fuels is a complex and open question. However, the conference reinforced the urgency of developing these breakthroughs as quickly as possible.

Lunchtime Keynoter Sen. Mark Udall (D-CO) helped articulate the message of the conference, saying, “We cannot afford to discourage innovation – it is just that simple.” Citing a recent report from ITIF and the Breakthrough Institute, Taking on the Three Deficits, he said energy innovation is the key to winning to the global economic race and we must invest in cutting-edge technologies and whatever the cost, “We can’t wait for the next national tragedy or natural disaster.”

 

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About the author

Steve Norton joined ITIF in 2010 as communications director, bringing over 20 years experience in economic policy and communications. Norton came to ITIF from Stewart and Stewart, an international trade and government relations firm, where he was senior communications advisor. Prior to that, he served as speechwriter and assistant press secretary for U.S. Trade Representatives Susan Schwab and Rob Portman. His service at USTR came after a 10-year career as a journalist at Congressional Quarterly, National Journal’s CongressDaily and other publications where he covered taxes, trade, and other economic policy issues.