Energy Report: Transforming U.S. Energy Innovation

The U.S. government could save the economy hundreds of billions of dollars per year by 2050 by spending a few billion dollars more annually to spur innovations in energy technology, according to a new report by the Belfer Center’s Energy Technology Innovation Policy (ETIP) research group.

Achieving major cuts in carbon emissions in the process will also require policies that put a substantial price on carbon or set clean energy standards, the researchers found.

The report is the result of a three-year project to develop a set of actionable recommendations to achieve “a revolution in energy technology innovation.”

The project included the first survey ever conducted of the full spectrum of U.S. businesses involved in energy innovation, identifying the key drivers of private-sector investments in energy technology.

The researchers also surveyed more than 100 experts working with energy technologies to get their recommendations for energy R&D funding and their projections of cost and performance under different R&D scenarios. They used the experts’ input to conduct extensive economic modeling on the impact of federal R&D investments and other policies (such as a clean energy standard) on economic, environmental, and security goals.

The research team identified industries that would most benefit from increased innovation investment. The report recommends the largest percentage increases for research and development in four fields: energy storage, bio-energy, efficient buildings, and solar photovoltaics.

The report, titled Transforming U.S. Energy Innovation, recommends doubling government funding for energy research, development and demonstration efforts to about $10 billion per year. The modeling results suggest that spending above that level might deliver decreasing marginal returns.

The modeling done for the report projected that investing more money in energy innovation without also setting a substantial carbon price or stringent clean energy standards would not bring big reductions in greenhouse gas emissions -- largely because without such policies, companies would not have enough incentive to deploy new energy technologies in place of carbon-emitting fossil fuels.

The researchers propose ways for the government to strengthen its energy innovation institutions, particularly the national laboratories, so the United States can get the most bang for its buck in energy innovation investments. The report concludes that the national laboratories suffer from fast-shifting funding and lack of incentives for entrepreneurship.

The researchers also find that performance of public-private partnerships and international partnerships on energy innovation would benefit from gathering information about performance of previous projects.

The ETIP project is part of the Science, Technology, and Public Policy Program and Environment and Natural Resources Program at the Belfer Center. Venkatesh (Venky) Narayanamurti and Matthew Bunn were principal investigators for this work, and the research team was led by Laura Diaz Anadon, ETIP director. The project was supported by a grant from the Doris Duke Charitable Foundation.