Energy innovation experts converge on need for $15 billion per year in increased R&D investment in final Congressional climate legislation

$15 billion. That is the figure at the heart of a growing consensus of energy innovation experts, all calling for dramatically larger U.S. investment in clean energy research and development. As Congress debates energy and climate change legislation, a chorus of leading voices from business, policy and research communities have converged on a $15 billion increase in annual U.S. energy R&D budgets as a critical component of any final legislation.

Testifying before Congress this week, Google’s Director of Climate Change and Energy Initiatives stressed that it “is essential that Congress address” what he characterized as a “serious energy R&D short-fall” by including “$15 billion per year in federal energy R&D spending in final climate legislation.”

Google’s testimony follows recent calls for the same level of R&D investment from policy think tanks including the Brookings Institution, Third Way and the Breakthrough Institute, as well as a collection of both the nation’s top research universities and dozens of Nobel-prize winning scientists.

These innovation experts all point out that President Obama had originally outlined a similar level of investment in his vision of climate legislation, pledging $15 billion per year from potential cap and trade revenues to clean energy technology development in his first long-term budget outline. Declaring, “President Obama does not accept a future in which the jobs and industries of tomorrow take root beyond our borders,” the WhiteHouse.gov website still states that the President will “[i]nvest $150 billion over ten years in energy research and development to transition to a clean energy economy.”

In contrast, the American Clean Energy and Security Act (ACES), a giant energy and climate change bill passed by the House of Representatives in June, would dedicate only about $1.2 billion per year (out of an expected annual cap and trade revenue of nearly $80 billion) to increase energy R&D budgets – just one tenth the investment level initially called for by President Obama.

Leaving out these critical R&D investments was “a dangerous omission," warned Dr. Burton Richter, winner of the 1976 Nobel Prize in Physics. Dr. Richter, along with 33 other American Nobel Laureates wrote to President Obama after the passage of the ACES bill calling on the Commander in Chief to urge Congress to deliver a final bill that includes “the stable $15 billion annual support that you have proposed.”

“This stable R&D spending is not a luxury,” wrote the 34 leading American scientists and researchers. “It is in fact necessary because rapid scientific and technical progress is crucial to achieving these goals, and to making the cost affordable.”

In an October letter delivered to Majority Leader Harry Reid as the Senate took up its own version of climate change legislation, two organizations representing the majority of the nation’s largest public and private research universities strongly urged the Senate “to ensure the amount of R&D funding designated for clean energy technologies is more in line with the President's proposal of $15 billion.”

The first draft of the Senate’s climate bill authored by Senators John Kerry and Barbara Boxer also falls far short of the $15 billion mark. The Kerry-Boxer bill, the focus of hearings in the Senate Environment and Public Works Committee this week, contains just $1.4 billion per year in new energy R&D funding, barely more than the House-passed ACES bill.

An order of magnitude greater energy R&D investment is necessary to both improve the price and performance of today’s clean energy sources and ensure the next generation of clean technologies are invented and commercialized in America, innovation experts argue.

Even if a climate bill establishes a carbon price to spur private-sector entrepreneurs, these experts warn that if the U.S. does not also make these critical public innovation investments today, it will prove far more costly – if not altogether impossible – to achieve key national objectives, including a stable climate, a secure energy supply, and the nation’s continued economic competitiveness.

"[L]et me emphasize that putting a price on carbon, while absolutely necessary, is not sufficient to address the climate problem” said Google’s Reicher, “and, importantly, will not put the US in the position to seize the extraordinary opportunities that will come with rebuilding the global energy economy."

“Without significant advances in science and technology, the incentives now provided in ACES and other laws are not sufficient to let the US meet its goals,” warned the Association of Public and Land-grant Universities (APLU) and the Association of American Universities (AAU) in their letter to Senator Reid.

According to Dr. Richter:

"Much can be done with the current generation of technologies. However, study after study has confirmed that to combine growing prosperity worldwide with sharply reduced production of greenhouse gases will require technological advances that are possible only through research."

And that’s the problem. The energy sector itself invests a remarkably small portion of its annual revenues in R&D, especially for an industry that is widely expected to require dramatic changes over the coming decades, as the demand for energy grows throughout the world and nations look to shift energy supplies to new, cleaner and more renewable energy sources.

Private sector energy R&D spending in the U.S. has fallen by more than half in recent decades, and the ‘innovation intensity’ of the energy industry – annual R&D investments as a portion of annual revenues – is now less than one quarter of one percent (0.23%).

The innovation intensity of the energy sector is just one-tenth the U.S. industry-wide average (roughly 2.6%) and two orders of magnitude lower than leading innovation-intensive industries, including biomedical, semiconductor and IT firms, which routinely invest 10-20 percent of revenues in research and product development.

Barely beginning to fill this giant innovation intensity gap is the U.S. government, which currently invests about $5 billion per year in energy research and development activities, primarily through the U.S. Department of Energy. That’s only slightly more than half the historic peak in energy R&D spending in 1980 and is still insufficient to boost the overall innovation intensity of the more than trillion dollar energy sector to even the one percent level.

The federal government has been under-investing in energy R&D for decades, which “has left our current knowledge base and our available clean energy technologies inadequate to tackle the looming energy and climate challenges,” wrote APLU and AAU.

Government energy R&D investments have only recently begun to tick up slightly, rising from just over $4 billion in 2008. The economic stimulus bill, the American Recovery and Reinvestment Act, is temporarily boosting energy R&D to the highest levels in decades with a welcome infusion of over $7 billion in funding. But temporary stimulus funds won’t last, and “there is a clear risk of falling off a ‘funding cliff,’” warns Google’s Reicher.

That’s where the “comprehensive” energy and climate change legislation being debated before Congress comes in.

“Given the expected growing federal budget deficits, and the corresponding pressure on the government's discretionary budget,” a significant portion of the new revenue from the climate bill’s cap and trade program must be dedicated to clean energy R&D, wrote the 34 Nobel Laureates, calling the legislation’s current funding levels “a serious deficiency.”

Thus the growing consensus of innovation experts warns: if the final version of energy and climate legislation passed by Congress and signed by the President does not dedicate dramatically more funding to clean energy R&D – on the order of $15 billion per year – the United States will fall far short of the deep cuts in emissions necessary to stabilize the climate, while losing out on the economic benefits of technological leadership to more aggressive competitors overseas.