Energy

By Carrie R. Williams, FAS Intern

There is broad consensus that clean energy investments are critical to the long term stability, security and economic welfare of the United States.  Rep. Paul Tonka (D-NY) recently said, “We cannot cut our way to number one.  If we are to stay competitive as a nation in the long term, we must invest in new technologies, clean energy and job creation.”  But who will make the investment?

Globally, in 2010 governments invested more than $5 billion in renewable energy research and development (R&D).   By comparison, the United States invested $5 billion for all energy R&D during the same period.

In FY2012, the total proposed budget for the U.S. Department of Energy (DOE)—the lead financial supporter of energy R&D in the United States—is  $29.5 billion, with $3.2 billion going to the Office of Energy Efficiency and Renewable Energy (EERE) and $550 million for Advanced Research Projects Agency – Energy (ARPA-E).  This would represent an 11.8% increase over FY2010.  However, the House of Representatives is seeking to terminate ARPA-E and decrease EERE funding by $786.3 million for FY2012—drastically cutting the clean energy R&D budget of the federal government.

Within the DOE, EERE and ARPA-E hold the bulk of the clean energy R&D budget.  The EERE mission focuses on strengthening the United States’ energy security, environmental quality and economic vitality through public-private partnerships.  This office seeks to accomplish this mission by financially supporting organizations that work to enhance energy efficiency and productivity and/or bring clean, reliable and affordable renewable energy technologies into the marketplace.  Modeled on the DARPA funding framework, which has funded basic research to create the computer, among other technologies, ARPA-E funds high-risk, high-reward energy ventures.  Created in the America COMPETES Act, ARPA-E’s mission is to fund innovative energy technology projects with the potential to reduce foreign energy imports, cut energy-related greenhouse gas emissions, and improve efficiency across the sector.  For example, in the first round of proposals ARPA-E funded projects related to axial-flow wind turbines and crystalline silicon wafers.

Additional energy R&D and early commercialization funding is also provided through tax benefits, grants, loans and contracts created by the American Recovery and Reinvestment Act (ARRA) of 2009.  This stimulus bill created $260 billion in energy tax credits for companies and consumers, with the goal of improving the market penetration and share of efficient, clean energy technologies. However, these tax credits either have expired or will expire in 2011.

Along with tax credits, DOE also received $1.4 billion in supplemental loans, grants, and contracts for R&D which is distributed between the Office of Science, fossil energy research and development, general science and research activities and the Innovative Technology Guaranteed Loan Financing programs.

With the ARRA money ending and the DOE clean energy R&D budget likely to shrink, researchers and early commercial investors must look to alternative sources of funding and capital.

What are their options?

Chief amongst the likely energy R&D funders will be: private investors both domestic and foreign, universities, and big corporations.

In 2010, venture investment in clean energy companies rose to $5.1 billion in the United States, 23% of all venture capital investment for the year.  Meanwhile, the United Nations Environment Programme (UNEP) reports that in 2010, renewable energy investment worldwide rose to $211 billion.  While the majority of this funding goes to finance large scale deployoment projects rather than R&D or early commercialization activities, the level of financing indicates there is great interest in renewable and clean energy technologies as good monetary investments.

Large corporations that rely heavily on fossil fuels are beginning to turn to renewable and sustainable energy sources; while not a traditional source of clean energy investment, they are likely to prove to be a valuable source of R&D and commercialization funding.  Google – a company whose data centers uses 0.01% of the world’s total electricity consumption in 2010– is looking to invest $350 million in the renewable energy industry.  According to Google Green, Google has cofounded the Climate Savers Computing as well as joined The Green Grid.  These two groups are dedicated to improving efficiency and sustainability standards for computers and data centers around the world in order to reach a goal of a size zero carbon footprint. Big corporations are looking to reduce their reliance on foreign oil and reduce their impact on the environment; moreover, the cash funding available to many large firms – especially those in the technology sector – provide clean energy R&D entrepreneurs with the support needed to commercialize and develop bigger and better things in the future.

With federal funding likely on the decline, a larger percentage of energy R&D responsibilities may also fall to research universities in the U.S., including internationally recognized public universities such as Colorado State University (CSU), which has programs and researchers looking into alternative fuels, clean engines, solar energy production capabilities, “smart” grid technology, wind engineering, water resources and much more.  However, in the current weak economy, public universities – even those with the best programs and most brilliant researchers – face a high risk of budget cuts that impact hiring and merit scholarships to attract the best talent, as well as investments in laboratory facilities and new research projects.

Private universities such as Massachusetts Institute of Technology (MIT) make significant contributions to the clean energy R&D industry through research and patents as well as financial opportunities.  In 2008, Transformative Integrated Power Structure (TIPS) was developed by electrical engineers at MIT to increase the efficiency of power conversion in semiconductors, which will be cr.  TIPS has been patented and commercialized by a start-up, Arctic Sand after testing proved it reduced power losses by 50-75%.  Arctic Sand was able to capitalize on MIT intuitive research to reach out to the core market of data centers as a way to increase energy efficiency where it is needed the most.

With the United States facing the largest budget deficit it has ever seen, the federal government is committed to cut spending and reduce the deficit over the next 10 years by $1.5 trillion.  The clean energy sector can no longer depend upon federal government funding and must reach out to alternative and even unconventional sources for development support.  Reaching out to domestic and foreign investors, university led R&D and commercialization ventures, and corporate funding all have a role to play.

As Mike Bowlin, chairman and CEO of ARCO said in 1999, “We’ve embarked on the beginning of the last days of the age of oil.  Embrace the future and recognize the growing demand for a wide range of fuels or ignore reality and slowly – but surely – be left behind.”  The United States cannot afford to be left behind when the reality of federal funding slips away.  The country, its clean energy entrepreneurs, and its investors must continue to push forward the state of clean energy technology and market penetration before it’s too late.

U.S. public energy RD&D spending as share of GDP is only 1/3 of Japan's

Yesterday morning the President’s Council of Advisors on Science and Technology (PCAST) released its “Report to the President on Accelerating the Pace of Change in Energy Technologies Through an Integrated Federal Energy Policy.”  This report, requested by President Obama, issues recommendations for the Administration and the Department of Energy on how to “transform the energy system” over the next two decades through “leadership in energy technology innovation.”

Informed by a working group of PCAST members and energy experts, this report makes recommendations that are, in large, both feasible and ambitious.  Based on our reading of the report and the summaries presented by co-chairs Maxine Savitz and Ernest J. Moniz at the release event, we particularly applaud PCAST in calling for the coordination of federal energy policies and for its recommendation that the US Federal government spend $16 Billion annually on energy RD&D.

Some of the key recommendations of this report are to:

• Establish an interagency Quadrennial Energy Review (QER) led by the Office of the President (OOP)
• Based on the QER, realign federal energy subsidies and incentives and align DOE processes and organization to meet energy objectives
• Enhance energy technology innovation and technology by exercising the Federal Government’s purchasing power
• Increase annual energy research, development, demonstration, and deployment (RDD&D) funding to about $16B, with $10-16B of that generated through “new revenue streams”
• Direct $12B of the new RD&D money to outside the DOE-national lab sphere and focus on funding DOE competitive programs such as ARPA-e
• Initiate a multidisciplinary social science research program

While we approve of the goals and objectives of this report, we have significant concerns about the feasibility and implementation of both the QER and the RDD&D fund.

The QER is not a new idea. Rather, it is a timescale change.  The Section 7321 of US Code (Title 42, 84, VIII, 7321) already legally obligates the President to produce and submit to Congress a biennial National Energy Policy Plan.  The comprehensive plan is to be developed with the participation of “consumers, small businesses, and a wide range of other interests, including those of individual citizens who have no financial interest in the energy industry.” The last plan produced was the Bush Administration’s controversial 2001 report, Reliable, Affordable, and Environmentally Sound Energy for America’s Future.

While changing the timescale from two years to four years will decrease the time burden on the DOE and the OOP, it will not fundamentally change the fact that the energy review process will still depend upon annual Congressional appropriations for funding as well as continued OOP compliance.  In order to ensure the success of the QER, the relevant legislation must both fund the entire four year process outright and include provisions compelling Congress and of Executive branch to act upon the results and recommendations of the QER.

Raising $16 Billion for energy RDD&D will require finding significant new funds. While the program could and will likely be funded in part through Congressional appropriations, this is neither the preferred nor the most stable long-term funding stream.  Rather, the report calls for generating the funds through “new revenue streams”—government speak for taxes.  Likely to take the form of new energy taxes on transmission, production, generation, and/or consumption, in the current fiscal and political environment new taxes are going to be an extremely hard sell.

To raise these funds, the government must work to build a base of support for energy RDD&D at the national and local levels and must sell the long-term advantages of innovative energy technologies to all energy and energy policy stakeholders.  Support will need to come from voters, local governments, industry and business, regulatory authorities, public utilities, the finance and venture capital sector, academia, and think tanks.  Before a new energy technology tax can be passed and this critical energy technology development process begun, the OOP and DOE must take the helm and begin this necessary, but difficult dialogue.

Both the full PCAST report and executive summary can be accessed here: http://www.whitehouse.gov/administration/eop/ostp/pcast/docsreports.

 FAS’ High Performance Building Guide for Habitat for Humanity affiliates is now published on the Building America (BA) website. To check out the Guide for yourself,  see the “Latest Additions” sidebar on the publications page or find the Guide on the BA website here or the FAS website here.

Want to know more about the High Performance Building Guide?  Read a summary of the Guide and what it offers affordable housing builders in our earlier Earth Systems blog.

The Building America Program is an industry-driven research program, sponsored by the U.S. Department of Energy, designed to accelerate the development and adoption of advanced building energy technologies in new and existing homes.

The publications and products of the Building America Program are developed and written by Building America Builders Challenge teams, which consist of building scientists and engineers, builders and developers, and high performance housing advocates from private corporations and companies, national laboratories, the Department of Energy, and non-profit organizations.

How do you make a highly fuel efficient car that looks cool, and appeals to the average consumer?  If you are the X-Prize Foundation, you would have a competition offering a $5,000,000 prize for anyone who makes a really cool car that can also get 100 mpg and meets other requirements intended to push it along the path to mass production.  The Progressive Automotive X-Prize was awarded yesterday to three teams, who shared the $10 million in prize money.

The Mainstream category prize of $5 Million was awarded to The Edison2 team who created the “Very Light Car,” which weighs 800- pounds and gets 100-miles to the gallon…
…and it is pretty blue with doors the open in a really cool way.

What? Who cares if it’s pretty?  Well, it surely does matter whether it’s pretty. Who wants to buy a car that is ugly? And who buys a car they don’t want?  One reason the X-Prize Foundation choose to create this competition to demonstrate that fuel efficiency can be fun to drive, cool to look at and worthy of your neighbor’s envy.

Photo from the Edison2 team website

Another motivation of the X-Prize Foundation is to speed up the rate of development of highly fuel efficient cars. And as many of the X-Prize competing team members say, that the competition has actually done that.

How this prize affects car development?

The various team members agree that fuel efficient technology development is accelerated by this X-Prize.  In the above video they give concrete examples about how it has helped them, motivated them and changed their research plans and methods.  We all hope that significantly more fuel efficient cars, whether they be gasoline powered, like The Very Light Car, or whether they be electric powered, as some of the other X-Prize winners.

The Department of Energy, as well as Congress have put their support behind The Automotive X-Prize.  Educational materials for K-12 students can be found on the Department of Energy Fuel Our Future Now website.

We hope the increased awareness and accelerated technology pay off in great increases in fuel efficiency.  What do you think?