Waving the White Flag on American Energy Innovation
By Fahad Siddiqui
When it comes to investment in American innovation and competitiveness in the $1.4 trillion global market for advanced energy technology, the Trump Administration’s recent budget proposal is a blueprint of surrender to our global competitors like China, South Korea, and the European Union.
The Trump budget would slash and burn key public investments in clean energy innovation, advanced manufacturing, small business research, and science funding, including:
- Complete elimination of ARPA-E, the bipartisan breakthrough energy technology agency modeled after the Defense Advanced Research Projects Agency.
- A $900 million cut to the Office of Science, which supports the U.S. National Laboratories and unique basic research activities across the country.
- $1.735 billion slashed from the budgets of the Department of Energy’s advanced energy technology offices, a 43% reduction.
- Elimination of the Advanced Technology Vehicles Manufacturing program, which helped restart the American auto industry and brought Tesla Motors’ Model S to market, and the Loan Program Office that opened the door for a new generation of U.S. nuclear reactors.
The Trump budget takes to the extreme the idea that the government should “just get out of the way” and let the private sector innovate. This concept, however, is completely detached from the history of American innovation and the realities of an increasingly competitive global marketplace.
Thanks for the Breakthroughs, Uncle Sam
The president’s budget willfully ignores the fact that American innovation has always been fueled by a unique partnership of entrepreneurial initiative and public investment in new research and technology. Take the public out of this successful public-private partnership and the United States could lose the ability to launch the next game-changing industries — in advanced energy and in other important global markets.
Steve Jobs and Apple deserve all the credit for designing and building the groundbreaking iPhone. But the reality is that federal funding lies behind every core component of the iPhone — and the 2.3 billion smart phones that have followed in the iPhone’s wake. That includes the multi-touch display at its surface (invented with National Science Foundation (NSF) funding), the microchips and cellular radios at its core (emerged from U.S. military and space programs), the SIRI digital assistant (funded by DARPA), and the Internet and GPS systems that give the “smart phone” its smarts (both established as Department of Defense systems that birthed entire new industries).
In 1994, the NSF made a bet on two young Stanford graduate researchers working on a new algorithm to index and rank sites in the rapidly expanding World Wide Web. Their names were Larry and Sergey; the dynamic duo would go on to found Google, and the NSF-funded PageRank algorithm is at the core of the company’s search engine to this day.
From jet engines to microchips to countless life-saving medical breakthroughs, the long history of American innovation runs directly counter to the idea that we’d be better off if government “got out of the way.”
The Department of Energy: indispensable partner in American energy innovation
The U.S. Department of Energy — and its predecessor agencies — has played a central role in American energy innovation for the last half century.
Commercial nuclear power was birthed from U.S. Navy innovation and the first commercial reactors were demonstrated with funding and oversight from the Atomic Energy Commission (one of the predecessors to DOE). Nuclear power now produces nearly one in five kilowatt-hours consumed in the U.S., adds $40-$50 billion to the economy each year and provides more than 100,000 high-paying jobs. To this day, DOE’s Office of Nuclear Energy and the National Labs continue to support American leadership in nuclear energy technology, from improvements in nuclear fuel to enabling longer lifespans for existing reactors to crucial support for the over 50 American nuclear entrepreneurs working on the next generation of nuclear technology.
Of course, nuclear power isn’t the only important energy resource that the Department of Energy and its predecessors helped get off the ground.
Sparking a shale gas revolution
Pioneering wildcatter George Mitchell and his company Mitchell Energy were the first to crack the secrets to commercial shale gas production in the 1990s. Their breakthrough ushered in a new era of shale gas extraction that has transformed U.S. energy markets, cut household energy bills by $13 billion per year and spurred $170 billion in new U.S. manufacturing investments.
Yet just like Apple’s iPhone and Google’s PageRank, the foundations for the shale gas revolution were laid by decades of federally funded research, demonstration, and deployment efforts. Don’t take my word for it. Here’s Mitchell’s granddaughter and president of the Cynthia and George Mitchell Foundation, Katherine Lorenz:
“While to many it seems like the shale revolution occurred overnight, in truth it was decades in the making. … [T]he cost-effective combination of technologies — not just hydraulic fracturing but also underground mapping and directional drilling — were the result of a network of institutions, including Mitchell Energy, the Department of Energy labs, the Gas Research Institute, and other private firms.”
Or as Dan Steward, former Vice President of Mitchell Energy puts it, the Department of Energy “started it and other people took the ball and ran with it. You cannot diminish DOE’s involvement” in the shale gas revolution.
Bringing solar power down to Earth
Solar photovoltaic (PV) technology found its first applications in NASA and DOD-funded space programs, but the Solar Energy Research Institute — now the DOE’s National Renewable Energy Laboratory — brought the technology down to earth.
In yet another example of public-private partnership at work, NREL’s Thin Film PV Partnership funded the technology development efforts of a little firm called Solar Cells Inc. in 1991. Thanks to early investment from NREL, that small start-up would go on to become First Solar, now the largest U.S.-based manufacturer of solar panels and a $3.5 billion global company with headquarters in Tempe, Arizona and manufacturing and technology operations in Perrysburg, Ohio. The U.S. solar industry, which NREL has helped keep its competitive edge for four decades, now employs 73,000 Americans and is hiring at rates up to 17 times faster than overall U.S. economic expansion.
Regaining America’s edge in wind power manufacturing
Just like First Solar, GE Wind Energy, the largest U.S. wind turbine manufacturer, traces its origins to an NREL public-private partnership. After ceding early leadership in wind turbine technology to Danish firms, NREL’s Advanced Wind Turbine Program helped the U.S. regain its competitive edge in the 1990s. NREL funded the development of Zond’s first commercial turbine, which the small company then demonstrated in a joint NREL-Electric Power Research Institute program. NREL funded further scale-up and improvement of the Zond turbine, and the company went on to win numerous solicitations for wind farms in California and elsewhere. The turbine technology designed and developed with sustained support from NREL was acquired by General Electric in 2002 and became the seed for GE’s now $2 billion per year renewable energy business.
Detecting a theme here? Yes, America is home to unrivaled entrepreneurship and dogged innovators. But the reality is that Uncle Sam is a quiet but indispensable partner in the history of American innovation, from shale gas to solar power, and so many more important breakthroughs.
America First?
This isn’t just a history lesson. It’s a warning cry that without sustained federal investment in next generation research and technology, the U.S. could lose out on the next big thing. The U.S. isn’t the only innovative economy in the world, and today’s global economic landscape is getting more competitive every year.
Can you imagine the damage to the United States’ economic standing if entrepreneurs in Japan had designed the iPhone, wildcatters in Australia had cracked the secrets to shale gas extraction, or Korean tech companies had cornered the Internet search market?
These aren’t really hypothetical questions. China, Japan, South Korea, Europe and others learned the lessons from America’s history of innovation and are copying our playbook — just as the Trump budget would have us abandon the playing field.
Between 1999 and 2009, Asia’s share of global R&D investment grew from 24 percent to 32 percent, while U.S. R&D expenditures declined from 38 percent to 31 percent. China is on pace to overtake the U.S. in total research investment by 2022 — and sooner if Trump’s budget is enacted. Meanwhile, the European Union is increasing government R&D investment by 40% from 2014–2020 over the previous seven-year period.
When it comes to advanced energy innovation, global competition is particularly fierce. After a brief surge in energy innovation funding during the Stimulus era, U.S. federal energy RD&D has stalled over the last few years. If Congress follows the Trump budget, it will go into a nosedive. Meanwhile, both Japan and South Korea already invest a greater share of their national wealth in energy RD&D than the United States, and China recently surpassed the U.S. in government spending on renewable energy research.
We’re in a race for the future, and the Trump Budget would leave the U.S. on the starting block. The damage to the U.S. economy will be both immediate and long lasting. And if the Trump team thinks this will only hurt wonks and bureaucrats in Washington, they’re dead wrong.
The Department of Energy and other federal innovation agencies under the chopping block in the Trump Budget invest directly in science and engineering talent and innovative companies across the U.S. from Clemson, SC to Tucson, AZ.
These investments train the next generation of scientists, researchers, and engineers, help build cutting edge research facilities at U.S. universities and national labs, and result in dozens of spin-out companies that form the beating heart of regional innovation economies all over the country.
If enacted, these budget cuts will be felt immediately. There are more than 60,000 employees at National Laboratories from Oak Ridge to Idaho. The government funds thousands of important research projects at universities all over the country, as well as the graduate students conducting the research. DOE’s Office of Science alone supports researchers in all 50 states and Puerto Rico. Dozens of start-ups developing the next big thing in energy are getting risk-tolerant funding provided by government agencies like ARPA-E or the Small Business Innovation Research program to cross the financing Valley of Death. All of this could be wiped out.
Dedicated investment in energy innovation has ensured American leadership in the energy sector, resulted in tens of thousands of jobs across the country, and brought trillions of dollars to our economy. With the backing of Uncle Sam, our innovators and researchers are working on hundreds of innovative game-changing technologies like converting waste carbon dioxide and shale gas to high value chemicals, producing oil from algae, nuclear fusion, and many more. Even if a fraction of these technologies materialize, we could be looking at the next Sergey Brin and Larry Page of energy — creating entirely new markets and generating billions of dollars for the economy. Without government support, we lose our competitive edge and the long-term consequences to the U.S. economy would be devastating.
President Trump says he’s all about America First. Yet his budget would concede the global competition for advanced energy markets to Europe and Asia.
It’s really that simple.
Fahad Siddiqui is the Fellow for Clean Energy at Third Way.
