"The Department of Energy's (DOE's) National Laboratories are a core engine of the U.S. national innovation system but one in urgent need of a tune-up if the United States is to meet the pressing challenges of energy security and climate change mitigation. The next administration and Congress must modernize the policy framework shaping the National Labs to allow them to more effectively drive the innovation necessary to meet energy policy priorities."

Characterizing the future performance of energy technologies can improve the development of energy policies that have net benefits under a broad set of future conditions. In particular, decisions about public investments in research, development, and demonstration (RD&D) that promote technological change can benefit from (1) an explicit consideration of the uncertainty inherent in the innovation process and (2) a systematic evaluation of the tradeoffs in investment allocations across different technologies. To shed light on these questions, over the past five years several groups in the United States and Europe have conducted expert elicitations and modeled the resulting societal benefits. In this paper, the authors discuss the lessons learned from the design and implementation of these initiatives.

The United States and the world need a revolution in energy technology—a revolution that would improve the performance of our energy systems to face the challenges ahead. In an intensely competitive and interdependent global landscape, and in the face of large climate risks from ongoing U.S. reliance on a fossil-fuel based energy system, it is important to maintain and expand long-term investments in the energy future of the U.S. even at a time of budget stringency. It is equally necessary to think about how to improve the efficiency of those investments, through strengthening U.S. energy innovation institutions, providing expanded incentives for private-sector innovation, and seizing opportunities where international cooperation can accelerate innovation. The private sector role is key: in the United States the vast majority of the energy system is owned by private enterprises, whose innovation and technology deployment decisions drive much of the country's overall energy systems.

The report, Transforming U.S. Energy Innovation, released on Nov. 22, 2011,is the result of a three-year energy research, development, demonstration, and deployment (ERD3) project of the Energy Technology Innovation Policy (ETIP) research group at Harvard Kennedy School's Belfer Center for Science and International Affairs. The ERD3 project was funded by a grant from the Doris Duke Charitable Foundation to produce and promote a comprehensive set of recommendations to help the U.S. administration accelerate the development and deployment of low-carbon energy technologies.

There is uncertainty about the ex-ante returns to research, development, and demonstration programs in the United States on carbon capture and sequestration (CCS) technology. To quantify this uncertainty, we conducted a written expert elicitation of thirteen experts in fossil power and CCS technologies from the government, academia, and the private sector. We asked experts to provide their recommended budget and allocation of RD&D funds by specific fossil power and CCS technology and type of RD&D activity (i.e. basic research, applied research, pilot plants, and demonstration plants) for the United States....On average, experts estimated that if their recommended RD&D portfolio was implemented, the capital cost of new coal plants with CCS in 2030 would decrease by 10% in addition to the cost reductions/increases that would occur by 2030 through non-public RD&D related factors.

This analysis provides an overview the Department of Energy's fiscal year 2011 energy research, development, demonstration, and deployment (ERD3) budget proposals, and lays out actionable recommendations to strengthen the effort.  Overall, the report concludes that the 7 percent requested increase in applied energy research, development, and demonstration funds, while welcome in a time of budget stringency, remains well short of the sustained investment likely to be needed to meet the energy demands of the 21st century.