Clean energy innovation: An investment in the future

With demand for energy projected to skyrocket this century, the U.S. is positioned to create new companies across the clean energy landscape – companies researching, developing and manufacturing new energy technologies as well as companies building renewable energy generation projects, implementing energy efficiency programs, delivering energy management services and financing new projects. Hundreds of millions of jobs will be created globally in this sector over the next decade.

The next generation of clean-tech companies can be started and grown here, but only if the federal government and private sector both invest in research and innovation.

As the debate in D.C. focuses on budgets and jobs, it’s critically important to consider the vital role for the federal government in research.  The starting blocks for innovation industries is research, and the federal government plays a crucial role, representing the bulk of clean energy basic research, and major portion of applied research (needed for breakthroughs to continue to bring down the cost of energy).  At about $5 billion for federal basic and applied research, our total level of investment is inadequate.

U.S. investment in clean energy has lagged for decades, and many countries and regions (including China) now out-invest us in in this area.  By comparison, over the past 25 years federal research in life sciences quadrupled, and has led to even larger growth in private sector investments to prove and commercialize new cures and treatments for many diseases.  Increasing federal investments in basic and applied research, and market development are critical to bringing private capital to invest to create U.S. clean energy companies and jobs. 

Unfortunately, even today’s modest level of federal energy research investment is at risk. The House has proposed to cut the Department of Energy basic and applied science budgets for the current fiscal year by about $1.7 billion.  This also includes cutting ARPA-E, a highly promising new program from a proposed 2010 budget of $300M to $50M.  ARPA-E was modeled after the Department of Defense’s DARPA program – the original research funder for the Internet – and in less than two years its investments in potentially groundbreaking energy technologies have already leveraged more than $100 million in private capital.

These proposed federal research cuts equate to a disinvestment in economic growth and in our ability to be a leader in next generation clean energy technologies and markets.  At a time when the U.S. needs to increase investments in clean energy R&D, incentivize private sector investments, and accelerate market development, cutting major research programs by over 30 percent in effect cedes clean energy leadership and future jobs to China, India and Europe.

Is every dollar in these programs well spent? Certainly not. Program by program considerations and justifications are overdue.  But across the board disinvestments in energy research will doom one of our most promising emerging industries.

Ever since World War II, the U.S. economy has led the world in the creation of new innovation industries, with government playing a crucial role investing in research and catalyzing private sector investment.

As we look at the potential for millions of jobs and trillions in new wealth in the emerging clean energy industry, we need to realize that clean energy innovation is not about government programs versus private sector investments.  It requires an “all of the above” strategy that includes both federal R&D support along with private industry investments, and public-private partnerships to enable new markets.

 Clean energy is on the verge of becoming the first industry where the U.S. ceded the global competition from the outset, at the R&D stage.  This is a deeply worrying trend for the health of our economy, the quality and quantity of U.S. jobs, and for clean energy entrepreneurs.  These entrepreneurs will build companies – that’s what they do.  The question is where?  U.S. disinvestment is a sign that the U.S. is not open to new clean energy innovation businesses.  Other countries will be the winners.

Peter Rothstein is the president of the New England Clean Energy Council. The Council is a Boston-based industry trade association representing clean energy companies, venture investors, major financial institutions, universities, utilities, labor and large commercial end-users.