Monday, November 29, 2010

Don’t Get Ahead of Yourself: The U.S. Needs a Comprehensive Long Term National Energy Plan

A Response to the Coalition for Green Capital

By Matthew Stepp

In a previous post, I critiqued the Coalition for Green Capital/Center for American Progress comprehensive energy proposal titled Cutting the Cost of Clean Energy. I made two key arguments. First, the U.S. does not have all the clean technology it needs and simply creating a market for already mature technology through deployment and financing measures is not a long term solution to making clean energy cheap enough for widespread adoption. Second, any comprehensive, national energy plan must include policy support at all stages of innovation, not just deployment, if we are to benefit from affordable, unsubsidized clean technologies. The Coalition for Green Capital (CGC) has responded.

The bulk of their response is a misrepresentation of my argument. CGC writes that I am presenting a false choice between supporting the development of breakthrough technologies and deploying already existing technologies. This couldn’t be farther from the truth. Instead, I explicitly argue that any comprehensive national energy policy must support the entire spectrum of innovation including basic science, RD&D, scale up, education, infrastructure, manufacturing, and deployment.

To a degree, CGC agrees with my analysis. They recognize the critical role breakthrough clean technologies play in a clean energy economy. And I applaud them for supporting Senator Bingaman’s Clean Energy Deployment Administration proposal that would provide a dedicated source of financing for high risk clean energy projects. But ultimately their argument that breakthrough energy innovation is fully supported by existing or proposed institutions and that the only gap in support is for the deployment of existing technologies is not supported by the evidence.

The main goal of a national energy plan should be to actually cut the real cost of clean energy, not its price through prolonged public subsidies.

As it stands, the CGC plan doesn’t do this. The mature technologies that CGC wants to deploy aren’t affordable without government support. So on one hand, artificially reducing the cost of these mature technologies through deployment measures like low cost financing is good policy because it keeps supply chains intact for future technology innovations, but on the other hand it is strictly a short term fix. Deploying mature technologies will not spur breakthrough innovation in the long term, but instead result in incremental change. If the opposite were true why aren’t Duracell and Energizer pioneering the next generation of advanced battery storage technologies?

Long term, innovation will be the driver of real clean energy cost reductions. But while the U.S. does have some institutions in place to do this additional policy support is needed to ensure that early stage developments will emerge. The wide gap in what the U.S. currently invests in energy innovation and what is needed is the most prominent example. Most recently, the President’s Council of Advisors on Science and Technology (PCAST) recommended that the U.S. invest an additional $16 billion a year on advanced technology research, development, demonstration, and deployment. Recognizing a lack of support for innovation, PCAST recommended that 75% of those funds be directed to research, development, and demonstration.

Given the significant need for greater funding of clean energy innovation, it’s confusing that the CGC plan is branded as a “comprehensive” proposal for making clean energy cheap when in fact it leaves out (or assumes that they are already in place) the very innovation policies that will make clean energy cost less than coal and oil.

Even their main example of a technology that will benefit from a deployment-only approach – nuclear energy - raises this disparity. The U.S. nuclear manufacturing industry moved to foreign countries because of the moratorium on new nuclear power plant construction in the 1970’s, effectively drying up the domestic consumer base for large scale nuclear technology. But broadly citing nuclear energy’s decline because of the moratorium doesn’t tell the whole story or drawing an important lesson.

Let’s recognize that nuclear power plants were pushed to the market by significant federal R&D support and the government acting as an early adopter of the technology (e.g. procurement policy for submarines). Nuclear energy is actually an example public support for breakthrough energy technology (which nuclear was in the 1950’s) and is a model for how the U.S. should advance and deploy next generation clean energy.

An example of this more effective innovation strategy can be seen in the development of new small modular nuclear reactors (SMRs), which the federal government is playing a similarly critical role. For instance, Babcock & Wilcox’s mPower SMR demonstration and scale up project is being supported by the federally-funded Tennessee Valley Authority. The NuScale SMR was a spinoff of a Department of Energy funded partnership with the University of Oregon. The GE-Hitachi Hyperion SMR prototype will be developed and tested at the DOE funded Savannah River Site. In fact, many if not all next generation SMR designs are being supported through government innovation support. It can be argued that the customer base for these cheaper, more easily manufactured and customizable nuclear plants will be much larger than their big box brethren.

To conclude how I finished the first post - the CGC/CAP plan is a good start, but just one part of a much larger energy innovation agenda. It will take a multifaceted approach to make unsubsidized clean energy cheap. If CGC and CAP want to present a real comprehensive energy plan, they would do well to address the other two-thirds of the innovation equation.

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