Energy, occupying a prominent position as a technology “grand challenge,” has invited significant levels of investment into capabilities that will further advance and improve its production. The importance of energy production to the United States cannot be understated; the energy sector contributes upwards of $1.5 trillion to the domestic economy. Considering this, the United States’ overall investments in energy technology research, and the results of those investments to date, have been seen by many as considerably inadequate. This essay examines the energy options available to the United States today, exploring their respective advantages and disadvantages. From that, it addresses where and how the United States government should intervene to address, and potentially correct, the imbalances of investment apparent in energy technology research.
The United States presently makes use of a mix of energy sources, some of which have a long history of utilization while others are emergent through new technologies, capabilities, and investments. Each have a set of unique advantages and disadvantage – technological, economic, and in utilization – which impact their effectiveness, efficiency, and cost. In approaching the proper government role in addressing the energy “grand challenge,” these advantages and disadvantages serve as important metrics that need be considered.
The predominance of American energy currently comes from non-renewable sources: oil, coal, and natural gas. As the traditional sources for American energy production, the advantages of these resources are multifold. The United States’ energy infrastructure – designed to support their extraction, transportation, and production – allows ease of access to the energy derived from them. In terms of cost, non-renewable sources are, at present, substantially cheaper than alternatives; the long history of electricity generation using these resources has progressively driven down associated costs through technological iteration. Moreover, there is a general abundance of these resources available in the United States – the United States is the world’s leader in natural gas and oil production. Yet, despite this, these resources bear significant disadvantages as well; hence the government’s push to catalyze the development of renewable alternatives. Key among them are the significant levels of carbon dioxide pollution (among other pollutants) that they produce and emit into the atmosphere. Climate scientists argue that increasing carbon dioxide levels will have irreversibly profound negative impacts on the planet’s environment and, accordingly, on humanity. Likewise, methods used to extract natural gas, such as fracking, have been targeted as the source of severe environmental degradation. Finally, though the United States may be the world’s largest producer of oil, it nonetheless continues to rely upon oil imports to fuel its broad energy production needs. National dependence on the global oil market raises national security concerns, as oil price volatility, as well as instability in oil producing regions of the globe, have an impact on the United States’ economy and security.
Alongside these non-renewables, another longstanding source of American energy production has been nuclear energy. Among nuclear energy’s advantages, it offers the potential for near-unlimited energy supply (as nuclear fuels, though not necessarily abundant, are long-lasting) and emits, relative to non-renewables, little pollution into the atmosphere. Nuclear power plants can technically be built anywhere and can operate with high load factors – often at 90%. Yet as history has shown, nuclear power plants often suffer serve cost overruns, passing costs off onto energy consumers. As government subsidies waned, so too have the economics of nuclear power. The issue of nuclear waste is considerable; radioactive and long-lasting, nuclear waste’s disposal has become difficult topic politically and logistically. Most importantly, there is significant public backlash against the use of nuclear energy – the perceived dangers associated with nuclear, exacerbated by the Three Mile Island and Fukushima incidents, have created considerable opposition against the construction of further nuclear power plants.
Finally, there are several renewable energy technologies that are beginning to come to the fore. By 2010, energy produced by non-nuclear renewable sources had grown to supply 8% of national consumption; this trend of growth is expected to continue. Among these technologies are hydro, wood, corn ethanol, geothermal, wind, and solar. While the diversity of renewable options and their increasing share of national energy production may suggest success in the development of renewable sources, their disadvantages are worth note.
Hydropower provides clean and essentially carbon-free power. However, hydropower stations, often in the form of dams, are complicated projects and often expensive to build. By their physical need for flowing water, their scalability and economics are limited by geography – most low-cost sites in the United States have already been developed. Moreover, hydropower output depends on the strength of their water source, which varies by season and year. Wood-derived power, meanwhile, is mostly available in the timber-producing states of the Southeast and Northwest. The growth of this source will necessarily track with lumber and paper production. Producing corn ethanol, the only renewable source competing with oil, is not a technically complex process. However, the economics of corn ethanol for fuel are poor; it contains only two-thirds as much energy per gallon as gasoline and requires the purchase of huge amounts of corn, which divert crops from the food supply. Subsidies that incentivized the forcing of ethanol onto the market were passed off in cost onto American consumers, who additionally must shoulder the cost of higher food prices because of the associated decrease in supply. Geothermal, which makes use of high-pressure water trapped in seismically active areas, leaves a very small environmental footprint. However, its scalability is understandably limited by geography and, accordingly, faces little prospects for production growth in the years ahead.
As the renewable energy sources that have perhaps garnered the most attention and enthusiasm in recent years, wind and solar produce a surprisingly limited share of the United States’ supply. Nonetheless, they have experienced rapid growth. Wind power is environmentally clean. However, as of 2012, its economics were costly compared to non-renewables; nonetheless, these costs are beginning to decline. Relying on the force of the wind, this source power is intermittent, has a substantially slow load factor, and is generally disproportionately available at night. Moreover, the most state-of-the-art turbines require large wind farms which generate considerable opposition from populated areas, thereby forcing them into remote areas which necessitate expensive transmission lines. Solar power, meanwhile, is tremendously environmentally friendly. However, with very low load factors and efficiency, it remains at present too expensive for widespread application and use. Like wind, however, its costs too have begun to considerably decline in recent years.
The quest for new energy options – particularly renewables – is and remains a priority for the federal government; however, intensive federal research and investment into these renewable sources has yet to produce transformative results capable of supplanting our need for non-renewables. Noting the disadvantages listed above, a key metric is their comparatively limited economics – considering load factor capability and efficiency – and high costs relative to non-renewables. This suggests that renewable energy technologies invested in and brought to market today have been prematurely commercialized; for a sector as large as energy, forcing the use of more expensive forms can have serious consequences for growth.
For renewables to succeed in the “grand challenge,” they must be cost-competitive when they launch into established markets and scale up rapidly if they are to make a difference. This “moment of market launch” problem, as important as the traditional “valley of death,” is the key issue underlying the imbalances of investment apparent in energy technology research. Addressing it will take government intervention in the “front-end,” and particularly “back-end,” of energy R&D. Of note, however, is that the government should legislate standardized support and intervene in common ways across technologies, so that technology neutrality is preserved and the optimal emergent technology has the best chance to succeed – a necessary approach if a sustainable, economical energy solution aligned to the pressures of the commercial market is to be found.
Foremost among suggested approaches regarding the front-end is the need for direct government support for long and short-term research and development and technology prototyping. Notably, the energy industry invests less than 1% of annual revenues in R&D for new technology. Laboratory work, being relatively inexpensive, is an area in which the government has a comparative advantage; the federal energy technology budget can be focused on conceptual and technical research. The establishment of Energy Frontier Research Centers, research hubs, and the Advanced Research Projects Agency–Energy are steps toward creating a more robust and capable front-end that accelerates innovation and cuts technology costs; government funding toward these initiatives should be prioritized. Beyond this, the government’s energy R&D portfolio should consider the “moment of market launch” issue facing new energy technologies. To that end, agencies should seek and support technologies that offer new functionalities upon market launch and therefore command a premium price. Likewise, agencies should strive to fast-forward research agendas to develop technologies to a stage where they are cost-competitive upon market launch.
Yet to directly address the key issues facing renewables, the government’s innovation system – historically focused on the front-end – will need to emphasis a focus on the back-end of energy R&D through the creation of initial commercial markets for new energy technologies. Among the suggestions issued, and debated, regarding appropriate government intervention in the back end are: tax credits – particularly those with incentives that offer additional benefits for the next stages of efficiency gains; loan guarantees – which should involve a wider risk portfolio and support more commercial-scale demonstrations than has traditionally been the case, in order to foster low market-entry costs; low-cost financing; and price guarantees. Government procurement programs are seen as a significant back-end enabler: boosting innovation and mandating efficiency in the federal building sector could provide a significant test bed and initial market for new energy technologies. Making greater use of federal regulatory authority to strengthen the back-end would be a powerful means to drive significant energy savings. Mandating minimum energy-efficiency standards is a method to incentivize the use of increasingly energy-efficient renewable sources; regulatory mandates could encourage the use of technologies that, in a non-regulated market, would face contested launch. Moreover, promoting an energy services model that rewards efficiency, not power sales, would, if coupled with financing tools to offset costs, help consumers achieve savings – boosting energy efficiency, after all, is among the cheapest methods toward progress in the energy sector. Through regulatory energy-efficiency mandates, the government need not pick “winners” and “losers” or selectively invest in particular technologies, but rather would incentivize efficiency iteration in a portfolio of technologies; the most commercially effective energy technology would emerge.