FESI for Regions: How the Foundation for Energy Security and Innovation Can Contribute to Place-Based Energy Innovation

The 117th Congress passed three landmark bills that are reshaping energy innovation in the United States. One under-appreciated feature of the new policy regime is dramatically expanded federal support for regional clean-energy-based economic development strategies. The mechanisms for carrying out this new mission are still being forged. The Foundation for Energy Security and Innovation (FESI), authorized by Congress to advance the mission of the U.S. Department of Energy (DOE), can and should be one of them.

The Changing Federal Role in Place-Based Economic Policy

Since World War II, national economic policy in the United States has focused on macroeconomic levers like fiscal and monetary policy. National strategies that target specific industries in specific places have been controversial. States and localities, on the other hand, have regularly adopted such place-based strategies, whether they are attracting large facilities with tax breaks or trying to grow new industrial clusters with seed money.

Now the dam seems to have burst. The Bipartisan Infrastructure Law will fund a large handful of regional hydrogen hubs to the tune of $1 billion or more per hub, and build out an electric vehicle (EV) battery supply chain with billions more. The CHIPS and Science Act provides $52 billion to the semiconductor industry and authorizes major new regional economic development programs in the National Science Foundation and the Department of Commerce and a smaller one at the Department of Energy. The Inflation Reduction Act deploys tax incentives, financial incentives, and public procurement to accelerate domestic EV production and reshore solar panel production, among many other things.

Place-Based Energy Innovation

Clean energy and climate innovation figure prominently in this new federal approach. The transition to a low-carbon economy, which the world needs if the worst effects of climate change are to be avoided, requires building entirely new industries, like low-carbon electricity, and radically retooling others, like vehicles. These sectors and segments will be among the fastest-growing in the world in the coming decades. Innovation in materials, methods, designs, and systems will be rapid and, in many cases, closely linked to production and deployment.

The geography of the clean manufacturing industries of the future is up for grabs as a result. Locations that make car engines are not necessarily good at making car batteries. Those that turn fossil fuels into petrochemicals may or may not be primed to put captured carbon together with clean hydrogen to make their equivalents. The places that succeed most fully in winning production and jobs in the low-carbon economy will move nimbly to integrate innovation, skills, supply chains, natural resources, and entrepreneurial acumen.

The competition is dynamic and global. Many Chinese regions, for instance, have seized key positions in global supply chains for clean manufacturing. The vast majority of the transition, however, still lies ahead. U.S. regions can make up ground or seize new territory if they accurately assess the opportunities and risks of the energy transition and build their capabilities appropriately. The federal government’s new programs should support them as they do so.

FESI: A New Tool to Accelerate Place-Based Energy Innovation

The 117th Congress charged DOE with many new responsibilities and gave it some new tools to carry them out. FESI is one such tool, a highly flexible one with great potential to advance DOE’s expanded mission. It will be a private nonprofit organization, but thanks to its congressional authorization, one with a unique relationship to the Department. Senior DOE officials will sit on FESI’s board along with philanthropic, community, and business leaders. Together they will create cross-sectoral partnerships that will complement and supplement the Department’s programs.

Such partnerships are vital to accelerating place-based energy innovation and technology commercialization, which FESI’s authorization specifically calls out as an objective. DOE’s national laboratories and R&D programs play important roles in regional energy innovation ecosystems, but these ecosystems also involve a wide range of other institutions that are not always well-connected to one another or to DOE, including start-up firms, large companies, states, localities, universities, and other federal agencies. FESI should spark such connections, convening these diverse players and drawing on experts from DOE’s national network to identify opportunities and gaps.

Innovation clusters have already sprung up around many DOE labs, such as the Colorado “cleantech” cluster associated with National Renewable Energy Laboratory, and the growing electric vehicle components cluster near Oak Ridge National Laboratory in Tennessee. In these locations, FESI should work collaboratively with national-laboratory-based foundations to nourish emerging clusters by facilitating access to lab expertise, supporting industrial partnerships, and nurturing entrepreneurial start-ups.

FESI can play a particularly valuable role in regions that are behind the curve in the new energy innovation ecosystem. It may be able to provide bridge funding when state and local programs are in flux, partnering with regionally oriented community foundations. Many of these foundations have expressed strong interest in both environmental issues and economic development, but generally lack the technical capabilities needed to solve these challenges. FESI, leveraging DOE’s capabilities, should work to fill this gap.

Advancing DOE’s Mission in a Time of Transformation

DOE has a vast, vital, and challenging mission: “to ensure America’s security and prosperity by addressing its energy, environmental and nuclear challenges through transformative science and technology solutions.” Advancing it effectively, as the global energy and industrial system transforms, will require the agency to build deeper connections with the nation’s diverse regional economies, as former Energy secretary Ernest Moniz has eloquently argued, FESI is an ideal tool to assist it in doing so.