U.S. High-Tech Leaders Call for Tripling U.S. Public Investment in Energy Research and Development

June 10, 2010 | Devon Swezey,

Citing stagnant investments in clean energy research and deteriorating competitiveness in the global clean energy industry, a diverse group of CEOs and business leaders released a new report calling on the U.S. federal government to increase public investments in clean energy research and development to at least $16 billion annually--more than triple the current level of investment.

The new report, "A Business Plan for America's Energy Future," comes a day after the Breakthrough Institute released a new analysis of the Kerry-Lieberman American Power Act (APA) which found that the legislation would only increase funding for clean energy R&D and demonstration by as little as $2.2 billion per year.

The executives--including Bill Gates, Jeff Immelt of GE, and Chad Holliday, the former CEO of Dupont--have formed a new organization called the American Energy Innovation Council (AEIC), and introduced a five-point plan for securing America's clean energy future through major investments in clean energy innovation. They recommend creating an independent Energy Strategy Board charged with developing a coherent National Energy Plan for the United States, creating and funding regional Centers of Excellence to accelerate the pace of clean energy innovation, increasing funding for DOE's ARPA-E to $ 1 billion annually, and creating an independent, public-private corporation to accelerate the commercialization of new energy technologies, such as fourth generation nuclear power plants and CCS coal plants.

But none of these recommendations matter much, according to the executives, unless the United States dramatically boosts investments in clean energy research:
 

"If this recommendation is not adopted, the others will not do much good. Incrementalism will neither fill the gaps, nor create the sweeping change this nation needs in energy. Bold action is required. Numerous groups, from the National Academy of Sciences to the President's Committee of Advisors on Science and Technology, have studied energy innovation spending; all agree that large increases are necessary."

The authors note, as the Breakthrough Institute has long argued, that the "innovation intensity" of the U.S. energy sector--the portion of industry sales reinvested in R&D--lags far behind other technology-dependent sectors, such as pharmaceuticals and aerospace. Indeed, the energy industry invests only 0.3% of annual sales in R&D, two orders of magnitude lower than pharmaceuticals, at 18.7%, according to the report.

The Government Must Lead the Way

The private sector cannot solve this problem alone, the report argues. The large-scale deployment of new energy technologies require massive capital expenditures and long time horizons, which often make such projects too risky for private investors with short-term investment profiles. Furthermore, the turnover in energy infrastructure is slow, leaving a limited market for new models. It is little surprise, then, that the private sector underinvests in energy R&D to such a large degree. Even as corporate energy R&D spending declines, public investment in energy R&D has not expanded to fill the gap. While the U.S. government invests $30 billion and $80 billion in health and defense-related R&D, respectively, energy R&D receives only $5 billion per year.

Pointing to the long history of public investment that spurred technology innovation and catalyzed the creation of new industries in the U.S., the executives forcefully argue that the U.S. government must lead the way in energy by making a similar public commitment:
 

"Federal programs have been responsible for a wide range of game-changing technologies: new unmanned aircraft systems save the lives of American soldiers serving overseas; the Internet was born from military programs; and many of the most important medical breakthroughs of the last century came from our world leading investments in medical science research at our universities and
laboratories."


In a recent interview, Gates, who made his fortune making the software that helped PCs become ubiquitous, acknowledged that without prior investments in microprocessors and the Internet, Microsoft's entrepreneurial efforts would never have been possible:

"The Internet and the microprocessor, which were very fundamental to Microsoft being able to take the magic of software and having the PC explode, were among many of the elements that came through government research and development."


Indeed, as we documented in our report, "Case Studies in American Innovation," the development of virtually every advanced technology that we take for granted today--from jet engines to semiconductors--has benefited from public investment.

Just as technology breakthroughs enabled the IT revolution and led to radical advances in biotechnology that underpinned decades of U.S. economic prosperity, today new clean energy breakthroughs are necessary to modernize the U.S. energy infrastructure and aggressively reduce carbon dioxide emissions. "Among all the swirl of different ideas of how to raise the money and how to regulate carbon," said Gates in an interview, "there is no way either in this country or internationally you're going to come close to meeting an 80 percent reduction unless you have an immense breakthrough."

As climate and energy legislation continues to falter in Congress, and cap-and-trade appears to have been dealt its final blow, the new report by the AEIC may offer a viable Plan B that would finally put America on a path to jumpstarting a clean energy revolution with major investments in clean energy R&D.