Don't Shut Down Energy Innovation

I doubt Atlantic senior editor Alexis Madrigal timed the publication of his new book Powering the Dream to coincide with the budget battles currently raging in Washington, but the timing is relevant nonetheless. Madrigal's tour of the forgotten history of green technology is more than just an entertaining jaunt back through time. As Time's Bryan Walsh noted in a recent review, the history he documents is instructive to our current energy policy debate.

In particular, it sheds light on the importance of sustained political commitment to the funding of the research and development (R&D) that is critical to developing next generation energy technologies. Writes Madrigal:

[President Reagan] quickly proposed halving the [Solar Energy Research Institute] budget and cutting overall solar spending by 60 percent. In particular, those technologies closest to commercialization were the ones that would receive the least support.

Programs that had just begun, like durability testing for solar collector materials and better standards for solar water heaters, were eliminated. By all accounts, the Reagan administration's attitude toward solar energy R&D had a 'profound and mostly negative' impact on solar energy programs in the United States.

Today we face a similar choice, the outcome of which will substantially influence America's energy future. While the details of the apparent 2011 budget compromise have not yet been released, the 2011 and 2012 budget proposals presented by each party offer a stark difference in policy choice. The short version is that the Obama vision would increase clean energy R&D, while House Republicans' budgets have proposed significant cuts.

It's deja vu all over again, as Madrigal's history makes clear. If we allow politics to once again hobble our commitment to energy innovation, we can expect to find ourselves, decades from now, lamenting the staggering damage done by climate change and rising oil prices.

At this point you might reasonably object that since my day job is in the clean energy sector, my view is hardly surprising. But the point I'm making here is about support for the public rather than the private sector. One of the fascinating things about studying technological innovation is the realization that government is fundamental to the process, particularly at the early stages.

Private actors are excellent at taking a newly proven technology and commercializing it, but they have little incentive to invest heavily in the basic science that leads to those breakthroughs. The benefits of a new innovation inevitably spill over into society; firms are unable to capture 100% of the value of new information. The result is that the private sector will always under-invest in R&D, making government funding essential. Corporate R&D, while important, is nowhere near sufficient.

History confirms the centrality of government labs and academia in technological breakthroughs. As Steven Johnson concludes in his terrific book Where Good Ideas Come From:

It is an undeniable fact that most of the paradigmatic ideas in science and technology that arose during the past century have roots in academic research. This is obviously true for the 'pure' sciences like theoretical physics, but it is also true for lines of research that on their surface seem to have more straightforwardly commercial applications.

The majority of academic R&D is, of course, government-funded. The Internet, GPS, CT scans and countless other technologies on which we currently rely are the direct result of government investment.

Last week, the International Energy Agency's Clean Energy Progress Report stressed the importance of substantially increasing public clean energy R&D, particularly as stimulus funding ends. Yet here we are, debating possible cuts. Innovation is a mantle claimed by both parties, but no matter one's philosophy of government, any serious account of how it happens must recognize that government funding of R&D is a crucial input. If America is serious about developing the next generation of clean energy technology, it must take ideology out of the equation.