Countering David Frum: Super-Charging Energy Innovation through Public Investment

Originally posted at Forbes.com.

Earlier this month, The Daily Beast columnist David Frum took the opportunity of a book review of Michael Grunwald’s The New New Dealto deride the idea of direct public investment in energy innovation: “The single largest chunk of federal stimulus spending – the almost $90 billion in direct federal investment in new energy technology – seems to have gone up into the ether leaving little behind,” Frum writes.  Unfortunately, Frum’s comments are just the latest misguided take on energy innovation policy and the role of public investments in spurring next-generation technology development.

[caption id="" align="alignright" width="221"] Micro-scaled solar cells developed through public investments at Sandia National Lab. Photo citation: Department of Energy.[/caption]

Change tends to come slowly to the energy industry, which is both capital and time-intensive and only three years have passed since the Stimulus. Nevertheless, Stimulus funds have clearly made a tangible, positive impact in that short time. As Grunwald wrote inTIME in August 2012, the Stimulus “revived the wind industry and the rest of the clean-tech sector from a near death experience.” “The Stimulus,” he continues, “has financed the world’s largest wind farm, a half-dozen of the world’s largest solar farms, the nation’s first refineries for advanced biofuels, a new battery industry for electric vehicles, unprecedented investments in cleaner coal and a smarter electric grid and over 15,000 additional clean-energy projects.” Perhaps most importantly, the Stimulus also provided $400 million in seed funding to the Advanced Research Projects Agency-Energy (ARPA-E). As ITIF has detailed, ARPA-E is now the nation’s preeminent public impetus for energy innovation, with early grant awardees such as Ambri, Envia, and PolyPlus already announcing breakthrough technology development.

Frum also explicitly points to the $10 billion allocated for grid modernization as a wasted investment. “Will our grid be appreciably smarter in 2013 than it was in 2008? In a word: no,” Frum opines. Does he provide any evidence to back up his assertion? In a word: no. In fact, Grunwald, again, chimed in on the subject himself in a TIME article in July 2012, and inadvertently refutes Frum’s point:

Behind the scenes, Obama’s billions are gradually upgrading the grid. Utilities now receive updates on transmission lines 30 times a second instead of every two seconds. They are also expanding transmission, even though electricity use has yet to recover to prerecession levels. “You wouldn’t expect the industry to be building new wires left and right, but there’s a huge amount of activity,” says Peter Fox-Penner of the Brattle Group. Meanwhile, stimulus investments in sensors, auto-mated substations, “synchrophasors” and other unsexy electrical equipment are helping diagnose, pinpoint and solve problems before we even notice them so utilities no longer have to deploy battalions of trucks to troubleshoot entire neighborhoods.

Finally, Frum gets to his coup de grace: “Cheap gas has also rendered government-preferred energy sources like solar even more uneconomic than they were beforehand.” In other words, the shale gas revolution – which Frum believes to be a product of “free markets” – shows why government investments in clean energy are futile. Unfortunate for Frum, the shale gas argument actually shows why government investment is so important for without it, there wouldn’t be dirt cheap natural gas. As ITIF reported earlier this year, “The Breakthrough Institute, a non-partisan think tank, released a study on this very subject last year detailing how decades of government investments in R&D, tax credits, and public-private partnerships made today’s natural gas boom possible. The Associated Press found the same, observing that the Department of Energy invested roughly $137 million in gas research over three decades and that the federal tax credit for drillers constituted $10 billion between 1980 and 2002.”

There is no greater example today of the significance and impact of public investments in energy innovation than natural gas. The same types of investments made during the 20+ years of shale gas innovation are in many ways the same type of investments made through the Stimulus into clean energy.

To be sure, the Stimulus was not 100 percent successful. Brad Plumerrelated at The Washington Post that some green programs funded by the Stimulus “have a murkier track record.” For example, battery maker and Stimulus funds-recipient A123 recently filed for bankruptcy and was auctioned off to a major Chinese manufacturer. Nevertheless, as Michael Grunwald points out in his own rebuttal of Frum, “Most of [the Stimulus] was less about picking winners and losers than picking the game of clean enegy. The stimulus didn’t just pick Solyndra, or solar manufacturers, or solar, or renewable power; it helped finance all kinds of technological and entrepreneurial pathways that could reduce dependence on fossil fuels…”

Ultimately, like shale gas, it will take some time to accurately gauge the Stimulus’ full effect on the clean energy industry. But in just three years, Frum’s claim as to the near-worthlessness of the Stimulus’ clean energy funding has already been proven false. As Frum closed, “It’s a very unusual investor whose success rate is literally zero. But most don’t, and the Obama administration’s record seems unlikely to improve on that of other governments that have succumbed to the same fatal conceit.” On the contrary, the emerging fruits of breakthrough batteries, higher-efficiency solar cells, next-generation wind turbines, and a smarter grid, are clear evidence of the overwhelming value of public investment in clean energy.