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December 3rd, 2010

Top federal sci-tech council calls for $16B increase in energy RDD&D funding, quadrennial review

Published on December 3rd, 2010 | By: pwray@ceramics.org


I have been out of the news loop for several days because of some health problems, but it appears to me that surprisingly little notice was given to a report issued last week by the President’s Council of Advisors on Science and Technology that called for major new U.S. investments in energy-related research, development, demonstration and development and a four-year cycle of reviewing and recalibrating the nation’s energy RDD&D strategies.

(Okay, I think the truth is that the PCAST proposals are being ignored because mainstream editors think they are complicated and, more importantly, DOA — which they likely are. But the truth is that these same editors are gleefully greenlighting disproportional coverage to other proposals in Washington that have appeared for weeks to be DOA, too. Plus, that energy talk — you know, it’s so 2009?)

Regardless, first let’s look at the funding proposal. Despite the anti-new-stimulus and anti-new-spending mood that seems popular in Washington, the PCAST group initially recommends that federal energy RDD&D support increase by $16 billion per year. The group cites three overarching strategic purposes for these investments (from the executive summary):

• Economic Competitiveness: renewal of our own energy infrastructure and access to rapidly
growing global markets for clean energy technology;

• Environment: rapid progress towards lower­ carbon energy in this decade as a prudent response to global warming risks; and

• Security: scaling­ up of technologies that reduce oil dependence and thereby improve both our balance of payments and our security posture.

The other big — and not unconnected — piece of the PCAST proposal has to do with improving coordination and direction of federal energy policy. The current reality is that the U.S. energy policy is a hodgepodge of efforts spread out over several agents and subdirectorates. This includes policy related to advanced energy innovation, and PCAST urges the executive branch to get a tighter organization rein on the situation and strive for a fully “integrated energy innovation policy.” Again from the executive summary:

“This is needed because “energy policy” is an amalgam, and often derivative, of policies for environment, competitiveness, security, finance, land use, and more. The President should establish a Quadrennial Energy Review process that will provide a multiyear roadmap that lays out an integrated view of short-, intermediate-, and long-term energy objectives; outlines legislative proposals to Congress; puts forward anticipated Executive actions coordinated across multiple agencies; and identifies resource requirements for the development and implementation of energy technologies.”

Returning to the PCAST’s proposal for increased funding, the group notes with alarm that the U.S.’s public spending on energy RD&D trails many competitor nations, including Japan, Korea, France and China (see chart at the top of this post). The council also notes that combined public–private R&D investment in energy innovation (as a percent of sales revenues of industries dependent on advanced technology in general) is in “order of magnitude below” support for other technical R&D work.  It warns that the current situation makes it nearly impossible to achieve the economic, environmental and security goals outlined above.

The council says that a reasonable benchmark (in comparison with other industrialized countries) for federal energy R&D investments is 0.08%. Currently the U.S. government contributes only about one-third of that goal.

PCSAST admits that $16 billion represents something of a middle-ground proposal. A prior incarnation of PCAST in 1997 called for a doubling of spending. Nobel laureates called for a tripling last year. Brookings Institute recommends $20-$30 billion annually. The council essentially admits to adopting the American Energy Innovation Council’s recent proposal for a $16 billion, split into a $1 billion pot for R&D and another $4 billion for “large-scale demonstrations and deployment.”

But after these warnings, it seems PCAST sighs and acknowledges that the council isn’t oblivious to the realpolitiks of Washington right now (emphasis in the original):

“Given the difficulty of increasing appropriated funds to this level and the importance of “front­loading” the required investment to jump start innovation, we recommend an alternative approach. The President should engage the private sector and Congress so as to generate about $10 billion per year of additional RDD&D funding through new revenue streams.”

What kind of “new revenue stream” do they have in mind? The models they point to as working well in the past include the creation of natural gas and electric RDD&D fund pools generated by surcharges on the industry. PCAST, for example, says that a one mill/kWh charge linked to electricity usage would generate $4 billion and a two-cents-per-gallon charge on transportation fuels would yield another $4 billion.

One final proposal worth noting is that PCAST, somewhat obliquely, suggest that there are many contradictory incentives and subsidies affecting energy usage and RDD&D policy, and further suggests that no one in the administration is responsible for tracking or making sense of these in light of current policies:

“Ongoing subsidies that are misaligned with today’s policy goals have the indirect effect of limiting new incentives aligned with Administration priorities. Those limits are manifest not only in the strength of the incentive that can be implemented in the short term but also, because of budgeting rules, in the length of time for which an incentive can be committed. The latter effect can lead to ‘stop and go’ incentives that complicate private sector efforts to develop and deploy alternative energy technologies.”

The alignment of policies and incentives would require that a lot of political oxen be gored. Short of that, PCAST offers the idea that a good starting point would be to have the Council of Economic Advisors at least “systematically inventory existing energy subsidies and incentives with the intent of proposing a reallocation aligned with evolving priorities, as specified in the Quadrennial Energy Review.”

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