On Moving Towards Innovative Solutions to Deploying Clean Energy Technologies
Solar energy entrepreneur Jigar Shah took to the site Greentech Media to criticize U.S. energy policy leaders for failing to champion deploying today’s clean energy technologies. Shah’s focus on ways to better deploy competitive clean energy underscores the critical need to re-frame the clean energy debate in terms of innovation and have a healthy discussion on building better policy solutions for deployment that drive innovation and support the growing clean energy industry.
Assessing the Character of U.S. Energy Policy
According to ITIF’s Energy Innovation Tracker, the United States invested $68.3 billion in clean energy innovation (in addition to $35.6 billion in loan guarantees) since 2009, 67 percent of which went towards clean energy deployment policies. This included deploying existing technologies through Stimulus policies like the loan guarantee program, energy efficiency grants, advanced manufacturing, and almost single handedly saving the solar and wind industry through the 1603 cash grant program at the height of the recession. Even in FY2012, which is absent Stimulus funding, 63 percent of the $14 billion in clean energy innovation investment went to deployment projects and programs.
In other words, deployment has represented a significant focus of U.S. policy and investment emphasis, and I’ve argued that this investment emphasis should shift towards more R&D. But Shah brings up an important question: how can or should the U.S. better structure and institutionalize U.S. deployment policies?
DOE’s Lack of Lab-to-Market Influence
A potential problem is that the DOE’s Congressionally mandated mission is split between environmental cleanup, managing the security of America’s nuclear arsenal, and overseeing the lion’s share of U.S. energy research. As a result, energy deployment policies are largely conducted through the tax and regulatory code, including EPA mandates on power plant emissions and production tax credits, and not through the DOE. Even more so, state energy policies have become the dominant source of deployment support through Renewable Portfolio Standards and a range of tax credits and subsidies to both consumers and producers.
DOE, by nature of its mission, is thus largely delegated to third wheel in the deployment game. This creates challenges in moving successful research to the marketplace as commercial technology. For instance, technology transfer has consistently been an issue within the National Lab system due to overwhelming oversight of Lab partnerships by the DOE and a lack of creating technology pathways of Lab developed research. Energy research as a whole is no different and runs into significant market barriers including uninterested utility markets and a lack of initial customers for new innovations.
Significant work needs to be done to connect DOE’s built-out research institutions and capabilities to markets and deployment. Some of this is happening already within individual Offices, but is the exception so far and not the rule. Unfortunately, much of the deployment investments made since FY2009 failed to connect to the rest of the innovation ecosystem and provided little more than a blunt subsidy for existing technologies. Smarter methods of deploying technologies that provide pathways for emerging technologies and drive performance and cost improvements are necessary.
Are We Making Policy To Meet 17 Percent or 80 Percent?
Another potential problem is how we match our policies to our policy goals. Mitigating climate change requires cutting global carbon emissions to near zero, which requires no less than a transformation of the global energy system from fossil fuels to clean energy. For its part, the United States has set a goal of 80 percent carbon reductions by 2050 and a midterm goal of 17 percent reductions by 2020.
On the one hand, today’s clean energy technologies cannot get us to 80 percent by 2050 without significant innovation, including breakthroughs like new battery chemistries and affordable, higher energy converting solar panels. So an aggressive energy innovation strategy that includes significantly more public investments in research, development, and demonstration, as well as smarter deployment policies is desperately needed.
On the other hand, today’s technologies could help the United States reach its goal of 17 percent reductions in carbon emissions by 2020. In other words, if we just focus all of our efforts on deployment we can get part of the way to our final climate goal, at least in the United States.
This raises some issues. Namely, what is the interplay between aggressively supporting an energy innovation system capable of developing cheap next-generation technologies to meet 80 percent carbon cuts and a policy emphasis on deploying existing clean energy to meet the short-term 17 percent cut? Which is most important? Which policy emphasis produces more global carbon reduction impact? If we put all of our institutional, policy, and economic emphasis on deploying today’s technologies, are we short-changing the development of next-generation technologies actually capable of getting America and the world to near zero carbon?
The simple consensus solution would be to aggressively invest in everything as much as possible, but a gridlocked policy environment and ongoing fervor for budget austerity makes this difficult, if not impossible. Like all other policy issues, choices must be made, putting this discussion in harsher light. We should be careful to balance the ease of short-term solutions with their abilities to support deeper carbon cuts by 2050. Without a doubt, deployment policies help build out early markets for emerging technologies and draw in more investments from the private sector, but that shouldn’t be done at the expense of developing the next-generation technologies we also need.
On Creating Innovative Solutions to Clean Energy Deployment
A cohesive energy innovation strategy demands better institutional support for deployment regardless of whether investments should target R&D or deployment more than the other. And more work needs to be done to better link research with the marketplace so that new technologies and inventions simply don’t collect dust on the lab shelf.
Shah proposes an interesting idea to create a Sematech-like organization that would coordinate U.S. clean energy companies, like Sematech coordinated U.S. semiconductor companies in the 1980’s. Sematech focused on coordinating semiconductor research so that U.S. companies could quickly become more competitive than their rival Japanese counterparts, which at the time had the advantage. The federal government played a convening role and supported the semiconductor consortium over 5 years for $500 million.
A similar consortium for clean energy could play a role by coordinating research and facilitating industry roadmaps based on technological progress and market barriers to deployment. It could potentially provide investors, creditors, banks, and energy providers with certainty as to where the industry is headed and provide a forum to overcome market barriers that all clean energy companies may be dealing with, but have little recourse individually. The DOE is already doing some of this market barrier research through SunShot and other programs at the Office of Energy Efficiency and Renewable Energy so it could theoretically utilize existing DOE deployment budgets, but with a bigger impact.
This type of “smart” clean energy policy engrains deployment within a more cohesive innovation strategy and supports the diffusion of competitive technologies today as well as in the future. Better deployment solutions such as these are needed to institutionalize pathways to markets and accelerate carbon reductions towards both our short and long-term goals.