Energy innovation and grid modernization

Study calls for industry-funded R&D

Phil Carson | Jan 08, 2012


A report released just before the holidays, "Transforming U.S. Energy Innovation," from the Energy Technology Innovation Policy research group at the Belfer Center for Science and International Affairs at Harvard's Kennedy School of Government, is worthy of notice.

That is, for those of us who understand science's role in securing our energy and economic security in an age of unfettered global competition, in which failure to act in a concerted, urgent fashion seals our decline relative to our competitors. "Concerted" here means public-private efforts that align government policies and resources with clear market objectives and private-sector incentives. This approach at least plays off my theme from last week, elucidated in "Electric Vehicles: Rorschach Card for Election Year?"

It would be nearly impossible not to make the connection with grid modernization, but just in case, recall that research and development in the power industry is a major issue and that, despite controversy, much value will be derived from the deployment strategy facilitated by grants made under the American Recovery and Reinvestment Act.

But I'll let the authors of the report make a few points from a video they made to introduce their key findings.

"The driver for the report is the recognition that the world needs a revolution in energy technologies," said Laura Diaz Anadon, director, Energy Technology Innovation Policy, Harvard's Kennedy School of Government. "We cannot continue on the path we're on right now. Our energy systems are relying on fossil fuels, relying on fuels from unstable parts of the world. And what our group and other groups have been realizing over the past ten, twenty years is that we need a new range of energy technologies that can allow us to grow in industrial and developing countries. Our approach was to take a systems approach to the innovation system in the United States."

Matthew Bunn, associate professor of public policy, Harvard's Kennedy School of Government, added to his colleague's opening point. 

"Our report looks at several different things," Bunn said. "First, we need to do more federal government investment in the initial research, development and demonstration of these new technologies. And if the federal government spends more, it should get more bang for the buck. So we looked at the performance of the [national] labs and other energy innovation institutions. We asked, 'How can we make those more efficient and effective?'"

The research included addressing key questions: How much can we reduce dependence on foreign oil? How can we reduce the cost of each energy system? How can we reduce carbon emissions?

"The private sector is an even more key player, in some ways, than the federal government, which has a role in getting technologies to the point that the private sector can take them up," Bunn said. "How can we give the private sector the incentives to deploy those technologies? We looked at the private sector today and did an unprecedented survey of private sector energy innovation and what it takes for the federal government to motivate more work in the private sector."

Anadon continued with a few findings.

"In our research we identified areas that would benefit from large percentage increases in funding from the government for energy R&D," Anadon said. "And the areas we found that would benefit the most from these increases are solar photovoltaics, batteries for utility-scale energy storage, bio-energy and building efficiency.

"We also found there were three technology areas would benefit from increases in funding," she continued. "However, these increases in funding are smaller, in percentage terms: nuclear power, vehicles and coal and natural gas with carbon capture and storage."

Bunn made the pitch.

"We think that even at a time of budget constraints, it's crucial to make high pay-off, long-term investments that are important to the future of our country," he said. "If you look at the past, the investments that have been made in [energy] efficiency and renewables have paid off—usually. That's been confirmed by the National Academy of Sciences and other [groups]. It's clear that those investments have resulted in huge economic payoffs for the United States. In fact, we found that a few billion dollars more a year today in energy R&D could lead to hundreds of billions of dollars in savings to the economy in a strict carbon scenario by 2050, for example.

"These investments are important to the future of the country and there are lots of ways to fund them," Bunn added. "For example, in the past, a small fee was put on transfers of natural gas through pipelines to fund research on the recovery of natural gas. That research actually led to huge improvements in the recovery of natural gas from, for example, coal-bed methane. So that's a way you can imagine doing this [R&D] outside the normal appropriations process. It doesn't add to the deficit of the U.S. government."

Anadon acknowledged that the national lab system, for instance, had room to improve.

"What we found in our study of the National Renewable Energy Laboratory is that while it has some capabilities that are very valuable, such as providing testing facilities that private firms can use ... we found many things that hampered its ability to be more effective," she said. "For instance, the labs face vulnerable budgets. [R&D] activities that take a long time face uncertain funding in different areas. That doesn't help.

"We also found that there wasn't enough information about the markets being used at high levels of decision making," Anadon added. "So researchers at the national labs are working with private firms that have a lot of technical and market knowledge, but aren't contributing as much as they could to decisions at higher levels over where to expend funds. And we also found that there weren't enough incentives for entrepreneurship."

Bunn extrapolated on that point.

"It's crucial to structure the market so that companies have the incentive to deploy these low-carbon, innovative technologies," he said. "If it remains free to dump your pollution into the atmosphere, people will continue to do that. We found that you need a burst of investment in the R&D to develop new energy technologies, but you also need the government policies to give incentive to the private sector, which ultimately deploys new technologies, to deploy them. You need to integrate your policies to develop new technologies with your deployment policies."

"The U.S. risks missing a lot of new markets in the future if it's not active in at least some of these areas," Anadon concluded. "We have seen China taking the lead in manufacturing wind turbines, solar panels and other technologies. Energy markets will continue to grow and it wouldn't be smart policy for the U.S. government if it just decided not to compete in any of these markets."

Bunn acknowledged, in closing, that the task before us is huge. 

"The world and the United States need a transformation of the energy technology we have available," Bunn said. "We'll need dramatically more energy to fuel a growing world. And we need to produce that energy without dumping so much carbon into the atmosphere. In fact, we need a drastic reduction in the amount of carbon going into the atmosphere as we're ramping up the amount of energy we produce. That's a huge challenge."

Just another bunch of over-educated eggheads who don't "get" the "free market"? Or accomplished scientists who've studied the art of the possible and see a path ahead, based on objective analysis? I think we've heard far more than enough from the former and too little from the latter. Chew it over.

Phil Carson
Intelligent Utility Daily





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Agreement and disagreement

My area of agreement with statements above is that I feel there should be government investment of taxpayer funds in R&D; however, the present administration is choking off funds to NASA which has come up with many a technological advancement that has been taken up by entrepeneurs or manufacturing firms and turned into viable products on the market.  Also, advances in defense related R&D have advanced the efficiency of gas turbines, engines, hydraulics, and electronics but we are cutting there as well.  Meanwhile, federal agencies are giving away taxpayer money and tax credits to for-profit firms installing renewable energy projects or ethanol fuel that are not financially feasible.

I also disagree with the implication in the article that CO2 is a pollutant.  If it is, then virtually every creature in the animal kingdom is a polluter.  Without CO2, what do green plants "breathe"?  I have read arguments from both sides of the anthropogenic CO2 as the principal cause of global climate change issue and information from the "Climate-gate" emails and have concluded with certainty, the IPCC authors are guilty of dubious extrapolation of information and of rather unscientific conduct in disregarding evidence contrary to their preconceived conclusion.  Actually disregarding evidence is an understatement--it appears they have engaged in active suppression of dissenting opinions and contradictory evidence.

A major problem related to federal investments of taxpayer money in "green" energy that is not economically feasible for deployment is suppression of investment in newer, more efficient power plants which would actually decrease CO2 emissions on a per MWh basis.  These investments have caused older plants which would have been replaced to remain active as backup for the intermittent, highly variable and not dispatchable green facilities.  These investments have also meant that generating companies are installing simple cycle gas turbines as backup for the unreliable green generating facilities; whereas, an investor may have built instead a combined cycle gas turbine facility had he been able to project a reliable financial model.  Also, one must keep in mind that remote windfarms and large-scale solar facilities will require construction of long distance transmission lines that will carry, on average, a considerably smaller amount of electrical energy than the peak output they must be designed to handle.  These costs will fall on the electric ratepayers as yet another form of taxation, in effect, to pay for subsidizing green energy.

In effect, while some of the federal investment of taxpayer money into power generation technologies helps develop newer and more efficient power generation, the feds appear to be putting much more of the taxpayers funds into an investment in private, for-profit ventures that will increase the cost of electricity while decreasing the reliability of the electric grid and discouraging private investment in more efficient and lower polluting fossil facilities to replace out-dated ones.

As for the Chinese taking the lead in wind and solar manufacturing, it is pretty easy to take that lead under the conditions they have with forced labor and the ability to simply dump toxic materials from the manufacturing process where ever they choose to.

Thanks for a cogent response

Your tone here is welcome and your points well-taken. I'd provide a little perspective to keep us on track.

First, the aspects of the Harvard study touched on here are quite general and apply to the U.S. government, not to a specific Administration. Your point is well-taken on defunding NASA -- think of it, we're probing the moons of Jupiter and landing rovers on Mars to search for life! That is perhaps humankind's greatest achievement ever and pays massive dividends for minimal investment. For the cost of a few bombs we can continue to search for the answer to humankind's greatest questions. Thanks for making this point.

On the Department of Defense, I'm afraid there's a reckoning at hand. The revolving door between the military and its contractors is rife with abuse, fraud and waste, to the detriment of our troops and offensive and defensive postures. The no-bid contracts awarded during the Iraq war, just to pick a recent example,  that gave political cronies tens of  billions of  dollars for under-serving the troops, the firing of the Army officer who upheld the rule of law on those no-bid contracts and the lack of provision for heavily armored vehicles, for example,  at the same time cost our men and women their lives and limbs. Further, Congressional support for failed programs in their districts has cost us bazillions. DoD has been a cash cow fed on by an unscrupulous system. That has to be reformed, out of decencies sake, as well as financial reasons.

Now to rake the "other" side. I'd agree that the point of the Harvard study was the development of the technology for private investment, NOT necessarily the subsidization of the deployments of unprofitable technologies, as ARRA did -- though the jury is out on that program's overall effectiveness.

However, there is a point to be made that we developed the railroad system and the highway system as an investment in our prosperity and security without seeking direct taxpayer payback. That got out of hand with the railroads, as we know, but it enabled national commerce to everyone's benefit.

We've enjoyed historically cheap electricity because we've deferred the costs of pollution to individuals and to the atmosphere, and that has to change. It's always a good time to consider the long view and the conflicts that will arise over scarce fossil fuel resources.

Further, as a biologist, I can assure you that CO2's role needs some clarity. It is a major, natural element of the atmosphere and the lifeblood of plants, sure, but only in balance. Recent studies have shown, for instance, that excess levels of CO2 cause agricultural plants to produce less nutrutional value. As CO2 rises above optimal levels, we'd have to grow and eat more to sustain ourselves. Also, it's well established that C02 plays a significant role in cardio-pulmonary disease, again, at the excessive levels clearly in play since the industrial revolution. Above the ability of plants to absorb it, we absorb it, and those costs overshadow the costs of mitigating it.

As for developing "cleaner coal" burning plants, let's do it. Unfortunately, the industry and its patrons have, by and  large,  fought this tooth and nail. Reducing emissions is expensive and yes, research could make it cheaper. But we have technology now that can do that; it costs money. You don't get something for nothing. 

That brings up another canard, rarely aired. Price signals are a good, market-based mechanism for forcing more efficient use of resources. Implementing cost increases for electricity doesn't have to be punitive. It can be structured to avoid hitting the lowest-income citizens and protecting the viability of our industries, while connecting price to cost. Yes, it's complicated. We can do it if we pay what it costs and stop deferring those costs to human and environmental degradation.

As for mentioning "climate-gate," for anyone actually paying attention, that's merely another example of human weakness, not failure of the science. Let's all grow up and pay attention to the overwhelming evidence. Did Newton's "fudge factor" undermine the law of gravity? I think not.

You mention the cost and impact of long-distance transmission lines to get renewable resources to load centers. I agree that Big Green is not a solution. Distributed generation is better and more sustainable in the long term and that's where research could save  us from creating a cat's cradle of high-voltage lines to 'solve' our issues.

As for China, your point is well taken. Globalization may mean that we cannot compete in manufacturing, though for security reasons we cannot relinquish manufacturing completely. Leading and winning in a connected world will require a lot of hard work. No  one of us has the answers.

In fact, the underlying theme here is for Americans of all stripes to return to sacrifice for country. That's not pie in the sky, it's a call to remember that while we're all struggling to 'make it,' we're still part of the same nation -- a nation at a crossroads. If we just dial back the greed and self-interest enough to include our future and others' well-being, we can all enjoy the fruits of our labors. If not, we consign ourselves to a diminished role in the future and a downward spiral in prosperity. The free market has a short-term bias; while sustaining profitability is indeed sought, it does not carry forward our collective  interests as a nation. That's why we formed a federal government; let's reform it, not hamstring it and then declare it a failure. 

It's that collective interest in transparency and honesty and a sustainable future path that has dwindled in parallel with our decline. And to make it work, unfortunately, requires watchdogs such as the press, budget oversight and other regulatory mechanisms that ensure fair play. People, organizations, companies, industries and government don't self-police effectively. (Nor does the media, now getting its rightful comeuppance from the democratization of news.)

Heck, now I need a ladder to get off this soapbox. Welcome to 2012!

Regards, Phil Carson