Reenergizing America's Lead in Energy Innovation

Dr. Varun Sivaram

Want America to lead in climate action and global clean energy innovation? Read Dr. Varun Sivarum's latest book -- Energizing America: A Roadmap to Launch A National Energy Innovation Mission. Below is an excerpt.


The United States was once a global leader in developing the energy technologies of the future. Commercial nuclear reactor technology was born in America after World War II and then exported around the world. Modern solar photovoltaic power was invented in Bell Labs in the 1950s and is today the fastest-growing power source in the world. More recently, the shale revolution sprang from sustained research and development (R&D) investments by the federal government that, in tandem with investments by private industry, turned the United States into the worlds largest producer of oil and gas.

But increasingly, the United States is ceding leadership in energy innovation to competitors abroad. Around the world, countries are investing in innovation as part of the transition to clean energy -- in part to reduce carbon emissions, but also to cut dependence on fossil fuel imports, reduce energy costs, and clean polluted air. Today, China is the world's largest producer, exporter, and user of solar panels, wind turbines, and batteries. By contrast, the United States ranks a distant fourth place in terms of its manufacturing of these clean energy technologies in aggregate.

China is not alone. Many countries are pursuing aggressive industrial policies that pair targeted investments in emerging clean energy technologies with export promotion. For example, Japan deploys financing from its export-import bank to sell hydrogen vehicles and electrolyzers abroad. Similarly, countries from South Korea to Germany have made sustained investments in innovation central to their long-term strategies to take leadership positions in burgeoning clean energy industries. The technologies they are focusing on include gasifiers, ultra-high-voltage transmission lines, fuel cells, efficient ships, and more.

The United States is well-placed to lead many nascent clean energy industries. Carbon capture technology is one such opportunity. As countries seek to reduce their greenhouse gas emissions from fossil fuels, demand for technologies to separate carbon dioxide from the emissions from industrial facilities and power plants as well as directly from the atmosphere will grow. By 2040, the market for such technologies could be worth several hundred billion dollars. Currently, more cutting-edge carbon capture facilities are operating or under development in the United States than anywhere else in the world. But translating this early progress into long-term industrial leadership will require sustained investments in innovation. This holds true across a range of technology opportunities where the United States is well placed to lead, from clean transportation technologies to digital tools for managing complex energy systems.

Varun Sivaram TED Talk, "How India could pull off the world's most ambitious energy transition," November 16th, 2020.

As countries around the world seek to stimulate their economies and recover from the COVID-19 crisis, the United States could fall further behind in a range of technology areas. The European Union announced more than $200 billion in climate-friendly economic recovery investments, such as clean hydrogen infrastructure. Germany has gone even further, unveiling a national strategy targeting the "creation of a hydrogen economy and the leadership of German companies" and emphasizing investments in energy RD&D. The Chinese government has announced a "new infrastructure" package worth $1.4 trillion that will include investments in advanced energy industries and infrastructure. Its plans include building out high-voltage transmission and high-speed rail networks, extending subsidies for electric and hydrogen-fueled vehicles and deploying networks of vehicle charging infrastructure, and producing advanced batteries for vehicles and the electric grid.

By contrast, funding for clean energy technologies has been notably absent from US stimulus measures so far, even though government support for energy innovation can underpin the long-term growth of competitive US clean energy industries. In addition to funding energy RD&D, policymakers should pursue measures to promote inclusive economic growth and clean energy technology exports in industrial clusters across the country. Although a broader industrial policy agenda is beyond the scope of this volume, Box 1-1 briefly surveys policies to cultivate clean energy industries that can help propel a long-term US economic recovery from the COVID-19 recession.

Varun Sivaram TED Talk, "We're doomed if solar energy stall -- here's how to keep it rising," March 28th, 2018.

The United States risks missing out on a lucrative opportunity to lead an overhaul of global energy infrastructure. To seize the opportunity, US policymakers should elevate clean energy innovation as a core national priority -- on the level of biomedical, defense, space, and artificial intelligence innovation. Setting the right priorities is the first step.

Box 1-1 Supporting long-term economic recovery from the COVID-19 recession through investments in clean energy innovation

The coronavirus pandemic plunged the US economy into recession and sparked widespread unemployment, prompting the federal government to pass major economic relief measures. Those measures focused on addressing the acute crisis and providing immediate relief. As the economy recovers from this shock, the federal government should pursue additional policies that promote long-term recovery, economic growth, and global competitiveness. Investments in clean energy RD&D are well suited to do just that.

A chorus of voices has called for a "green stimulus" comprising investments to both stimulate an economic recovery and reduce greenhouse gas emissions. Given that the federal government’s real cost of borrowing is currently negative and significant economic capacity is idle, there is a historic opportunity to make large-scale public investments, both to deploy mature clean energy technologies and bring emerging technologies to maturity through demonstration projects. To complement short-term stimulus, investments in innovation should also be included in a green recovery package.

An array of research suggests that such investments would deliver both long term economic and environmental benefits. A survey of more than 200 economists and central bankers from around the world found that public funding for clean energy R&D is a rare policy intervention in response to COVID-19 that will both produce high long-run economic returns and substantially reduce emissions. Additionally, an assessment of US public investment in wind energy R&D since 1976 found that the resulting economic benefits -- including lower energy costs and avoided health impacts from air pollution -- have outweighed government investment costs by a factor of eighteen.

Public funding for innovation can contribute to long-term employment. For example, doubling federal research funding for a US university has historically been associated with a 1 percent employment increase in that university’s county, controlling for other drivers of employment. Similarly, federal research subsidies to private firms also stimulate employment. A survey of results from around the world, spanning US military RD&D funding to Finland’s government subsidies for innovative firms, suggests that the cost of creating a job through public investments in innovation is anywhere from $2,100 to $28,000. Using a conservative estimate of $25,000, our target level in 2025 of $25 billion in annual federal RD&D funding could support one million jobs over the coming decades. For comparison, stimulus spending by the US government during the Great Recession resulted in a cost per created job of $50,000.

Across technology areas that policymakers might consider funding, investments in clean energy technologies produce some of the highest returns on taxpayer investment. For example, patents for innovations in battery, hydrogen, and carbon capture technologies stimulate greater US economic growth, on average, than those for innovations in other areas from artificial intelligence to biotechnology. Public RD&D funding can help firms translate breakthroughs into commercial success. For example, grants from the federal government's Small Business Innovation Research program have increased the patenting activity, revenue, and survival rates of start-up companies developing innovative energy technologies.

Yet federal investments in innovation are not guaranteed to result in globally competitive, job-creating industries located in the United States. There is a risk that other countries will capitalize on US investments in technology innovation by then manufacturing and commoditizing those technologies abroad. Even though solar photovoltaic technology was invested and incubated in the United States, China manufactures and exports the large majority of solar panels. Similarly, China, Japan, and South Korea collectively dominate battery manufacturing, even though US scientists, supported by public funding, invented the types of lithium-ion batteries used for automotive and grid applications.

To avoid this outcome, it will be essential to promote diverse elements of innovative industrial ecosystems, such as manufacturing capabilities, local supply chains, and engineering talent. In industries with a heavy emphasis on engineering -- such as the automotive, semiconductor, and several clean energy industries -- manufacturing plants are an important source of innovation. Firms that locate manufacturing in close proximity to research and development facilities and to suppliers of components and services can improve the performance and cost of their products more quickly. As the federal government triples energy RD&D funding to $25 billion by 2025, it should not narrowly target early-stage R&D. Rather, it will take public funding for demonstration, manufacturing, and export finance -- along with immigration, education, and training policies that prepare a qualified workforce -- in order to seed industrial clusters in communities across the country, promote inclusive growth, and reap the full economic benefits of energy innovation.


Copyright © 2020 by Varun Sivarum. This excerpt originally appeared in Energizing America: A Roadmap to Launch a National Energy Innovation Mission by Varun Sivarum, Colin Cunliff, David Hart, Julio Friedman and David Sandalow. Published by Columbia University SIPA Center for Global Energy Policy. Reprinted here with permission.