A new report from Columbia University’s Center on Global Energy Policy, released on Wednesday, says federal funding for the development of clean energy technologies is now a national strategic imperative.
In the report, “Energizing America,” CGEP’s researchers cite figures from the International Energy Agency (IEA), which hold that of 46 critical energy technologies for deep decarbonization—efforts to limit global temperature rise to 2 degrees celsius or less—only six are currently progressing at “sufficient pace to avert catastrophic climate change.”
IEA’s flagship 2020 Energy Technology Perspectives report also claims half of cumulative emission reductions needed to achieve net zero emissions by 2050 come from technology not yet ready for commercialization.
3x by 2025
The research team, led by CGEP director Jason Bordoff, recommends tripling the yearly amount of federal funding for clean energy research, design and development (RD&D) in the U.S. over the next five years, to $25 billion per year by 2025. The group also proposes the launch of a White House National Energy Innovation Mission to marshal forces across government in support of national laboratories, universities and the private sector.
This level of annual spend would bring U.S. public investment in energy research , as measured in percent of GDP (0.1 percent), to parity with China, according to the most recent available data. The proposed increase is one-third the rate seen for the Apollo Space Program, a program that yielded economic benefits of 10x the RD&D costs.
Private money not enough
Per Columbia, private sector funding alone is not enough to support strategic entrepreneurship in this area. They note that in 2019, less than 10 percent of private investment fund flows for U.S. clean energy were awarded to innovators, going instead to developed renewable projects like wind and solar farms.
Moreover, they report, just 0.5 percent of energy company revenues are currently invested in RD&D initiatives. These initiatives typically carry high upfront capital costs and daunting regulatory barriers—particularly electric power utilities—that discourage the use of consumer dollars for risky pilot projects.
“Promising clean energy technologies often remain stranded in so-called ‘valleys of death,’ where private returns are insufficient to induce investment,” Columbia’s researchers write, “Yet public funders shy away for fear of undercutting private opportunities. Few companies or investors will take the risk of turning laboratory research advances into commercial prototypes or fund pilot manufacturing lines.”
Venture capital funds have not seen a compelling investment case, either. Part of this may be explained by the process of energy innovation itself, which fundamentally differs from other sectors of the economy. Energy projects (in particular) face a long haul to commercialization, far exceeding (by decades) the typical five-year holding period for venture capital.
Columbia’s researchers have found that of the $25 billion in venture capital dollars awarded to clean energy startups from 2006-2011, more than half of these investments were write-offs.
“New energy technologies often seek to eke out efficiencies near the limits of physics and thermodynamics, and they must meet daunting performance and cost demands from customers and regulators,” they write. “Energy innovation cannot match the rapid cadence of product development and commercial diffusion achieved by software start-ups. New energy technologies often take decades of development and billions of dollars of investment before achieving commercial traction.”
Smaller—>better
Some private investors have nonetheless been drawn to simpler, modular energy technologies delivered in small, scalable units (like battery storage) that limit investor risk. But even this emerging area has been hit hard by covid constraints. Columbia has found that private investments in clean energy companies were down 30 percent in the first half of 2020 compared to the previous two years.
The report proposes increasing RD&D expenditure along 10 technological lines: foundational science and platform technology, clean electricity generation, advanced transportation systems, clean fuels, modern electric power systems, industrial decarbonization, carbon capture and sequestration, clean agricultural systems, and carbon dioxide removal.
The DoD
In particular, the group proposes siting these efforts with the Department of Defense, where they estimate that roughly half of U.S. military energy investments, or $800 million in 2020, have “potential applications for civilian clean energy technologies.”
Many of clean-energy initiatives would also directly benefit U.S. military operations. Modular solar energy and high-energy-density batteries, they note, could enable bases to operate in remote settings. Advanced microgrids could provide defense against hostile attacks or natural disasters.
CGEP also suggests “harmonizing” international technical standards for clean energy technologies. Specifically, they point to the smart grid technical standards proposed under the Commerce Department’s National Institute of Standards and Technology. Uniform grid technical standards would make it easier for U.S. companies to export technologies to strategic allies, further aiding coalition-building efforts.
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