Energy Innovation Policy: Priorities for the Trump Administration and Congress

Energy is an enormous and vital economic sector, and clean energy in particular is growing rapidly in much of the world. Countries that have seized this market opportunity, valued at over $300 billion globally in 2015, are fueling economic growth at home and expanding exports abroad. Asian countries, in particular, have vaulted to the forefront of global trade in clean energy technology. For example, China is the world leader in the production of solar panels, batteries, and wind turbines, and it is quickly taking the lead in next-generation nuclear power and technologies to capture carbon. The United States is losing this race because Asian countries are out-investing it and dictating the terms of competition, often flooding the market with low-cost, unimaginative products.

But the race is not yet lost. By investing in energy innovation and infrastructure, the United States can wrest back markets, create thousands of advanced manufacturing jobs, and improve its trade balance. Moreover, innovation is necessary to make cleaner energy truly cost-competitive—sans subsidies—thereby enabling widespread adoption that enhances U.S. energy security, improves the environment, and protects public health. The United States has a strong foundation for rapid progress. U.S. universities and national laboratories have developed many of the most promising new technological options on the horizon, and American companies like Tesla and First Solar have successfully commercialized innovative products.

However, the United States is not doing enough to seize the energy innovation opportunity and capitalize on its progress to date. For example, federal funding for energy research and development (R&D) lags well behind funding for space, health, and defense R&D. Eleven other countries around the world spend more on energy R&D as a percentage of GDP than the United States—and China spends three times as much.

President-elect Donald Trump and the 115th Congress should make energy innovation a high priority and address the obstacles to developing and deploying new technologies. To do so, they will need to reform a sprawling set of institutions to increase the commercial impact of federal energy R&D and maximize taxpayer return on investment. These reforms should draw inspiration from experiences in other sectors, including life sciences, semiconductors, electronics, and agriculture, where breakthrough technologies have been successfully commercialized.

This report offers five principles for institutional change that should be applied to key federal agencies, especially the U.S. Department of Energy (DOE):

• Connect basic science with technology priorities,
• Reorient the national labs to pursue commercially relevant RD&D,
• Encourage more private investment in energy innovation,
• Support demonstration projects, and
• Complement “supply-push” policies with “demand-pull” policies.

These reforms will help focus federal energy-innovation resources on urgent and coherent needs. We put forward six candidates for these “Technology Missions”:

• Nuclear power;
• Solar energy;
• Energy storage;
• Carbon capture, utilization, and storage;
• Advanced cooling and thermal energy storage; and
• Smart energy management and connected vehicles.

Accelerating energy innovation to accomplish these missions will require significant new funding as well as more effective use of existing resources. Recognizing this fact, 20 countries around the world—representing the vast majority of energy R&D investment and led by the United States—recently committed to a “Mission Innovation” pledge to double public-energy R&D funding over a five-year period. Anticipating this increase, a group of large investors led by Bill Gates has announced a new effort called Breakthrough Energy Ventures that will invest more than a billion dollars in innovative energy technologies.

The Trump administration, in partnership with Congress, should seek to meet the United States’ Mission Innovation commitment. Dedicated revenue sources for federal energy-innovation investments would provide private investors with confidence that these investments will be sustained and avoid the stop-and-start pattern that has plagued energy-innovation policy in the past. This paper concludes with a set of funding options that merit more careful exploration.