Google: Energy Innovation Can Have A "Transformative Impact" On U.S.

By Teryn Norris, originally published at leadenergy.org

A few years ago, the high-tech giant Google helped reframe the national energy and climate policy debate when it launched its "RE<C" program, or "renewable energy cheaper than coal." The idea was clear: instead of primarily focusing on making fossil fuels expensive through climate policy, Google believed the U.S. should focus on driving down the price of clean energy through technological innovation -- or "making clean energy cheap," as the Breakthrough Institute puts it.

Today, in the midst of a raging national debate about energy and economic policy, Google took its analysis a big step further by releasing a new report and interactive website that offers one of the most comprehensive assessments ever performed on the economic impact of clean energy technology innovation.

The key conclusion? Achieving breakthroughs in energy technology could have a "transformative impact" on the United States, offering major benefits for economic growth, job creation, lower energy costs for American families, and reduced oil consumption and carbon emissions. By 2030, the economic analysis finds that key energy innovations alone could provide the following benefits over business-as-usual:
 

• Grow the US economy by over $155 billion in GDP/year


• Create over 1.1 million new net jobs


• Save US consumers over $942/household/year


• Reduce US oil consumption by over 1.1 billion barrels/year


• Reduce US total greenhouse gas emissions (GHG) by 13%

The report, "The Impact of Clean Energy Innovation," (PDF) was developed using McKinsey & Company's U.S. Low Carbon Economics Tool, a sophisticated set of models that estimate the economic implications of various policies. The main purpose was to model the impact of achieving various cost reductions in key energy sectors, including clean power generation, energy storage, electric vehicle, and natural gas technologies. It also examined the impact of (1) comprehensive federal incentives and mandates, called "Clean Policy," and (2) a power sector-only $30 per ton price on CO2 emissions.

Other key conclusions from the report include:
 

• Delaying innovation significantly reduces benefits: the longer the United States waits to achieve these technology breakthroughs, the fewer economic benefits it will capture. According to the report, "a mere five year delay in starting aggressive cost curves could cost the economy an aggregate $2.3-3.2 trillion in unrealized GDP gains, 1.2-1.4 million net jobs, and 8-28 gigatons in avoided greenhouse gas emissions by 2050."


• Technologies that develop fastest will dominate: the clean energy technologies that become cheaper than fossil fuels most quickly will dominate the future U.S. energy system. Google notes that an "'innovation arms race' between clean technologies will encourage healthy competition, while benefiting consumers."


• Breakthroughs in electric vehicle (EV) batteries could be transformative: cheaper and denser battery technology could enable mass adoption of electric vehicles and unlock much of the potential economic benefits. The report notes, "This leads to EVs, Hybrid Electric Vehicles (HEV) and Plug-In Electric Vehicles (PHEV) achieving 90% market share for light duty vehicle sales, reducing oil consumption by 1.1 billion barrels per year by 2030 -- or more than Canada's entire 2009 oil production."


• Smart policy can enhance economic benefits and achieve further emissions reductions: Beyond the public-private investments necessary to achieve the core energy technology breakthroughs, modest deployment mechanisms such as a clean energy standard and/or $30 per ton carbon price can significantly enhance the benefits. The analysis found that when the "All Tech Breakthroughs" scenario was combined with a $30/ton carbon price, by 2030 GDP growth increased to $182 billion, job growth to 1.5 million, and emissions were reduced by 22% (compared to 13% under "All Tech" alone).

The full report contains many more details and important findings.

In order to focus its analysis, Google intentionally avoided making policy recommendations or prescriptions. But the implication is loud and clear: U.S. policy should seek to unleash clean energy technology innovation as rapidly as possible. And while the exact mix of policies can be debated -- and deployment policies are essential as well -- there's one tried and true method for the federal government to drive breakthroughs in technology: major investment in research and development.

That's why a growing bipartisan group of think tanks and business leaders -- including groups like the American Energy Innovation Council, American Enterprise Institute, Breakthrough Institute, Brookings Institution, Information Technology & Innovation Foundation, Association of American Universities, Third Way, President's Council of Advisors on Science and Technology, New England Clean Energy Council, and many others -- have been calling on the federal government to increase its investment in advanced energy research and development from approximately $3 billion to $15 billion per year.

As David Leonhardt wrote in the New York Times last fall, "To put it another way, the death of cap and trade doesn't have to mean the death of climate policy. The alternative revolves around much more, and much better organized, financing for clean energy research. It's an idea with a growing list of supporters, a list that even includes conservatives -- most of whom opposed cap and trade."

Google's report is a much-welcomed addition to the debate that opens up a whole new lens for evaluating various energy policy proposals, and it offers a message that clean energy and climate advocates across the board would be wise to take seriously. Google concludes: "Energy innovation is a powerful tool capable of simultaneously addressing society's goals of economic growth, enhanced energy security, environmental health, and de-carbonization... Getting there will take the right mix of effective policy, a major sustained national investment in innovation by public and private institutions, and the increased mobilization of the private sector's entrepreneurial energies."