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2021 presents a critical opportunity for Congress and the administration to rapidly scale up U.S. investment in energy innovation. In a polarized political system, energy innovation has long enjoyed bipartisan support, and large majorities of voters across the political spectrum support more funding for research into clean energy. So far, this support has translated into modest, though important, expansions to the federal energy innovation system.
But the 2021 budget cycle may be different. In December, Congress came together to pass the Energy Act of 2020, a sweeping overhaul of many elements of the Department of Energy (DOE). The Act sets the stage for a major expansion in federal support for energy research, development, and demonstration (RD&D). Members of Congress on both sides of the aisle have called for reinvigorating U.S. energy innovation in order to reverse decades of declining investments and position the country to thrive in the future.
The Energy Act can serve as the launch pad for a clean energy “moon shot” if the budget supplies enough fuel. Congress and the administration should seize on the momentum created by its passage and provide a multi-billion-dollar increase to raise the ambition for energy innovation programs at DOE in its fiscal year (FY) 2022 budget. To guide lawmakers through that process, the Information Technology and Innovation Foundation (ITIF) has conducted a comprehensive analysis of DOE’s RD&D programs in a new report with 21 policy briefs and an interactive data visualization covering renewable energy, transportation, energy efficiency, grid modernization, nuclear energy, fossil energy and carbon management, and basic sciences.
Innovation to Combat Climate Change and Drive Economic Growth
Innovation is critical to combat climate change. But current RD&D funding levels are not sufficient to generate the pace of innovation needed. Nearly half of the annual emissions reductions necessary to decarbonize the global economy by midcentury will likely come from technologies that are in the early stages of development but not yet commercially available. (Complementary “demand-pull” policies, like clean energy and clean product standards will also be needed to accelerate these innovations.)
The transition to clean energy brings with it risks and opportunities for U.S. industry. Investment in key clean technologies—from hydrogen to electric vehicles to batteries to carbon capture and storage (CCS)—is rapidly increasing around the world. Even during the COVID-19 pandemic, when many traditional energy industries suffered from declining investment, global investment in clean energy increased. A key question for policymakers is how much of that investment will occur in the United States.
The solution to both of these challenges is for the United States to be a global clean energy innovation leader. Accelerating innovation requires assertive federal policy that goes far beyond basic research funding. Federal investment in applied research, development, and demonstration as well as basic research will be required, along with policies that hasten early adoption and ignite the private sector.
Energy Act of 2020: A Significant Step Forward
The Energy Act of 2020 has delivered a monumental overhaul of DOE energy programs—the first significant reauthorization since the Energy Independence and Security Act of 2007, and one of the biggest, wholly bipartisan advances in clean energy innovation policy in over a decade.
Its key elements include:
- Revising and updating program authorizations to account for technological advances over the last decade and to address current and emerging challenges;
- Creating new programs in clean manufacturing and carbon removal—sectors that have historically been underrepresented in DOE’s portfolio; and
- Providing the first significant new investment in large-scale demonstration projects—which are essential for scaling up and validating emerging technologies—in more than a decade.
Gaps remain. Certain technologies received comparatively less attention, and some program reauthorizations did not make it into the final bill. But the Energy Act of 2020 shows that Congress can come together in a bipartisan manner to address national challenges. This success makes it more likely that Congress will take the next one: providing sufficient funding to turn words into deeds.
2021: A Critical Opportunity for Energy Innovation
Building on last year’s success, a growing chorus of leaders across all sectors of society is calling for a substantial scale-up of investment in the U.S. clean energy innovation ecosystem. For its part, ITIF partnered with Columbia University’s Center on Global Energy Policy (CGEP) to produce Energizing America: A Roadmap to Launch a National Energy Innovation Mission. The volume calls on Congress and the president to at least triple funding for energy RD&D over five years in order to harness the nation’s innovative capabilities and speed the progress of clean energy technologies. Energizing America provides a strategic framework for building a growing RD&D portfolio, with detailed funding proposals across the full spectrum of critical energy technologies.
The tripling target has been affirmed by the National Academies of Sciences, Engineering, and Medicine, the American Energy Innovation Council, the Center for Climate and Energy Solutions, and the President’s Council of Advisors in Science and Technology. Breakthrough Energy has called for a fivefold increase in funding to $35 billion by 2030, which would bring energy RD&D to roughly 0.1 percent of GDP, in line with levels of energy innovation investment in the 1970s, and roughly in line with health R&D spending today ($38 billion).
These targets are both ambitious and measured. Other national innovation missions in space, health, and defense show that the United States can marshal its innovative capacity on a much larger scale than it currently does for energy (see figure). Federal investment in RD&D has accelerated the development of life-saving drugs, modernized the military’s arsenal, and put a man on the moon. By comparison, the federal government has neglected clean energy.
What Happens Next
The Biden administration’s budget guidance for FY 2022 calls for quadrupling government-wide investment in clean energy innovation over the next four years, with DOE filling a central role. The full budget and supporting documents are expected to be released in late spring and will provide more details about what the president is requesting and why.
In May 2021, more than 100 energy and environmental organizations, industry groups, and research institutions jointly signed a letter calling on congressional leadership to provide an FY22 appropriations allocation that enables a multi-billion-dollar increase in the research, development, demonstration, and commercial deployment activities at DOE.
The next step is for the House and Senate to agree on an overall top-level discretionary budget, and then apportion the budget to the 12 bills that fund the government. DOE, along with the Army Corps of Engineers, Department of Interior, and other related agencies, is funded through the Energy and Water Development (E&W) appropriations bill. The House is expected to release its spending proposals in June, and the Senate has not yet announced its timeline.
As Congress considers its FY 2022 appropriations, it must seize the tremendous opportunity to build on the foundations laid by the Energy Act of 2020. If policymakers decisively invest in the clean energy technologies of the future and sustain that investment, the United States will be well-positioned to lead the response to climate change and prosper as the world transitions to clean energy.
ITIF will update its interactive data visualization with the latest budget figures as the process unfolds.