The Past, Present, and New Year of U.S. Clean Energy Policy

When President Barack Obama was inaugurated on January 20, 2009, clean energy was largely a policymaking afterthought. Federal investment in clean energy research and development (R&D) stood at just over $4 billion a year – less than 40 percent of its peak in the 1970’s. Policy support for clean tech commercialization, demonstration, and deployment was in equally bad shape, plagued by boom-and-bust periods of expiring incentives and on-again, off-again subsidy extensions. “Innovation” was little more than a political buzzword in the energy policy debate. Making matters worse, economic collapse cast doubt on the prospect that existing levels of funding for clean energy would even be maintained, and that the nascent clean energy industry could survive.

It’s an understatement to say a lot has changed in the four years since. As we flip the calendar to 2013, it’s important to take a moment and take stock of where clean energy policy has come in the last four years and what challenges it faces today to inform what needs to be done in the next four years (and beyond).

U.S. Clean Energy Policy Under the First Obama Administration (2009-2012)

There can be no doubt that the first Obama administration implemented several important energy policy initiatives. For example, the past four years have seen the following highlights:

• Historic public investment in the energy sector: Aided in large part by the American Recovery and Reinvestment Act of 2009, the federal government is expected to invest more than $150 billion on clean energy R&D, demonstration, and deployment between 2009 and 2014 – more than three times what was spent in 2002-2008. Specifically, as previously noted on this blog, TIME Senior National Correspondent Michael Grunwald observes that Stimulus funds “revived the wind industry and the rest of the clean-tech sector from a near death experience” and “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.”
• Full funding for the Advanced Research Projects Agency-Energy (ARPA-E): As ITIF has noted, ARPA-E is now “a leading force for energy innovation in the country, if not the leading force.” But it wasn’t always so. ARPA-E – the United States lead program for investing in high-risk, high-reward energy technologies the private sector is unwilling or unable to support – was authorized during President George W. Bush’s administration but didn’t receive appropriations until the Obama administration. Although just barely three years old, the agency has provided $521.7 million in grants to more than 180 projects located in 34 states, across 12 very diverse program areas. The agency has also helped encourage private investment – 11 of the projects funded by ARPA-E to the tune of $40 million have leveraged more than $200 million in follow-up private funding (All as of May 2012) due to successfully meeting research goals.”
• Beginning to roadmap public investments in clean energy: The Department of Energy released its inaugural Quadrennial Technology Review, which comprehensively assessed the DOE’s energy technology R&D programs, National Lab research and clean energy technological progress to inform better department R&D strategies moving forward.
• Building collaborative energy R&D projects: DOE established several Energy Innovation Hubs across the country aimed at solving complex, multidisciplinary research problems related to next-generation energy technologies by bringing together the best researchers from the National Labs, Universities, and Industry. These Hubs aim to solve leading technology problems related to solar energy, energy efficiency, and nuclear energy. The creation of the fourth Hub, focused on battery and energy storage technology development, was announced in late November 2012.
• Making manufacturing an energy innovation policy priority: The Obama Administration implemented or is implementing a series of promising manufacturing policy initiatives, like the establishment of the Advanced Energy Credit for Manufacturers (which has sun-setted) and the National Network for Manufacturing Innovation. The NNMI is particularly important as it sets to create up to 15 hubs of manufacturing innovation around the country to work on cross-cutting technology issues related to making American energy manufacturers competitive. As I have pointed out on this blog, a failure to adequately support clean energy manufacturing is a warning sign that the United States is losing the global clean energy race.

U.S. Clean Energy Policy Under the Second Obama Administration (2013-2016)

Nevertheless, for all the first Obama administration’s energy policy accomplishments, much more work remains to be done to strengthen and streamline the national clean energy innovation ecosystem. It will continue to be a challenge to halt and reverse declining public investments in clean energy and counter the effect of annually expiring deployment incentives. Furthermore, political gridlock at the federal level will make it tough to accomplish broad reform. But that does not mean policymakers should not strive for good policy. As such, as we move from commenting on the past four years to looking to the next four years, President Obama’s policy agenda should include:

• Appointing a reform-minded Energy Secretary: As I wrote last month, as Secretary Steven Chu is expected to leave the Energy Department, the president needs to pick an able replacement, with “a clear understanding of the innovation process and an eye towards continuing reforming the DOE. Recommendations include former ARPA-E Director Arun Majumdar, exiting MIT President Susan Hockfield, and former Lockheed Martin Chairman Norman Augustine.
• Increasing public investment in clean energy RD&D: According to ITIF’s Energy Innovation Tracker, the federal government currently invests roughly $6 billion per year in clean energy innovation programs. Yet in comparison to other leading innovation challenges, clean energy is significantly underfunded: the United States annually invests $9.5 billion for space exploration, $30 billion in healthcare research, and $70 billion to develop new weapons. Leading energy experts and thinkers have called for ramping up public investments to $15-25 billion per year to spur the development and deployment of cheap clean energy technologies. The administration should double clean energy innovation investment to at least $15 billion per year.
• Reforming public research institutions to better support clean energy technology commercialization: The President and policymakers should aim to refocus DOE’s mission to explicitly include energy innovation. As previously laid out, this requires taking a look at reforming the DOE itself by eliminating Department-wide energy innovation micromanagement and strengthening the National Labs system. One way of doing this is to reform the mission of the National Laboratory system so that barriers to the labs partnering with industry are removed and that labs are rewarded in part on the basis on research outcomes and performance and not just outputs like number of patents. The Labs should be provided more flexibility to invest in energy research ideas, build collaborations, and manage its research infrastructure. Additional steps should be taken to officially link key DOE innovation programs with DOD’s operational energy strategy so that DOD’s procurement system can leverage DOE’s RD&D investments, providing both benefits to the military as well as support the scale-up of new energy technologies.
• Establishing a dedicated revenue stream for clean energy innovation programs. The boom-and-bust cycle of federal funding for clean energy had contributed to substantial policy uncertainty for the industry, with hampers long-term planning efforts. Furthermore, fiscal austerity threatens funding for clean energy in general; establishing a dedicated revenue stream, akin to federal gas taxes going to the Highway Trust Fund and thus funding transportation infrastructure, would overcome these issues. In that vein, options for a dedicated clean energy innovation revenue stream include royalties from energy production, a carbon tax, and ending fossil fuel subsidies and redirecting those funds.
• Establish “smart” clean energy deployment policies: The clean energy subsidy debate is one of the most contested, but unsophisticated policy debates in Washington today. It largely boils down to a specific energy industry fighting to extend its preferred subsidy and anti-clean energy advocates fighting to eliminate said subsidy. As a result, little attention is paid to how these policy incentives impact clean energy innovation and whether energy technologies need different types of support or better deployment support all together. Reforming clean energy deployment policies so they become active tools in driving down costs, increasing performance, and supporting emerging technologies is crucial for connecting the public investments in energy R&D to market and moving clean energy from niche product to industry leader.

Piece originally published at Forbes.com