Tuesday, May 15, 2012

Senate Hearing To Focus On Business Execs' Energy Investment Plan

May 15: The Senate Energy & Natural Resources Committee, Chaired by Senator Jeff Bingaman (D-NM), with Ranking Member, Lisa Murkowski (R-AK) announced that it will hold a hearing on May 22, to receive testimony on a report, produced by the American Energy Innovation Council (AEIC) entitled, Catalyzing American Ingenuity: The Role of Government in Energy Innovation, and related issues." The report, released late last year by AEIC, a group of America's top business executives including Bill Gates, details the case for government investment in research to produce long-term energy breakthroughs, arguing that even in times of budget austerity such investments are crucial to US economic competitiveness and to the development of clean, affordable, and secure supplies of energy. The report followed up on recommendations AEIC first outlined in June of 2010 in another report, A Business Plan for America's Energy Future.
    Gates said at the time the report was released, "We are in critical need of a government commitment to research into new energy technologies that can free us from our dependence on foreign oil and create affordable clean-energy alternatives. Yet today, the U.S. government spends only one-sixth as much on energy innovation as it does on medical research." In addition to Gates, chairman and former CEO of Microsoft, AEIC members include: Norm Augustine, former chairman and CEO of Lockheed Martin; Ursula Burns, chairman and CEO of Xerox; John Doerr, partner at Kleiner Perkins Caufield & Byers; Chad Holliday, chairman of Bank of America and former chairman and CEO of DuPont; Jeff Immelt, chairman and CEO of GE; and Tim Solso, chairman and CEO of Cummins.

    Gates said further, "Understandably, especially in this period of tight budgets, people ask why the private sector can't fund the necessary R&D into energy alternatives. No matter how well intentioned, utility companies and other private investors simply are not going to invest deeply in the kind of R&D needed to create scalable, low-cost, low-carbon energy innovations. They have little or no economic incentive to do so. This is a unique but critical role for government, one central to our long-term economic competitiveness." Norm Augustine, who is also a former Undersecretary of the Army said, "Neither the private sector nor the government are making investments in research even remotely commensurate to the vast opportunities in the $5 trillion global energy market. Energy innovation is a matter of national and economic security given oil reliance, nuclear power, climate change and related issues, and must be treated that way by Congress and the Administration in terms of investment priorities." 

    The AEIC report found an urgent need for government innovation investments due to the lack of private sector incentives for long-term energy research, and because neither government nor the private sector are investing adequately in energy technology today. The report proposes reforms of government programs to yield greater economic benefits, especially in concert with the private sector. Finally, the group outlines possible funding approaches for increased investment outside annual appropriations and that originate from revenues from the energy sector itself. Specifically, the report:

  • 1) Finds that a more robust government role in energy innovation is needed because: The energy sector has suffered from chronic under-investment in R&D; Energy technologies are capital-intensive and long-lived, requiring significant up-front cash with a slow return; Energy markets are not perfectly competitive; Government-funded R&D programs in a number of areas-such as defense, health, agriculture, and IT-have enabled the United States to lead not just in specific technologies but in entire industries.
  • 2) Proposes government reforms to more effectively leverage public research for private sector use, including: Developing and implementing a comprehensive, government-wide Quadrennial Energy Review (QER); Supporting "innovation hubs"; Supporting and expanding ARPA-E; Making DOE work smarter along the ARPA-E model; Develop a first-of-a-kind technology commercialization engine along the lines of the proposed Clean Energy Development Administration (CEDA).
  • 3) Outlines options for the federal government to pay for increased investment in energy innovation, including: Developing a funding regime that is dedicated, consistent, and not beholden to annual appropriations. In general, funds should originate from revenues from the energy sector itself rather than general federal revenues; Options to provide funding offsets for investments in energy innovation include: Diverting a portion of royalties from domestic energy production; Reforming and redirecting energy technology subsidies; Collecting a wires charge on sales of electricity; Levying fees on other energy or pollution sources; and Streamlining DOE
    AEIC said that it does not advocate for one revenue option over another; the only unacceptable option is to fail to make these investments, and said "support for innovation is an investment, not a cost." AEIC called for a three-fold increase in annual energy innovation investments and said maintaining that level "should be our country's target over the next decade. At the same time, the AEIC fully understands the gravity of the nation's current fiscal situation."
    The report states, "We know the federal government has a vital role to play in energy innovation. We know the federal energy innovation system can be structured effectively to achieve real results. And we know there are several ways to pay for public investments in this domain. If the U.S. fails to invent new technologies and create new markets and new jobs that will drive the transformation and revitalization of the $5 trillion global energy industry, we will have lost an opportunity to lead in what is arguably the largest and most pervasive technology sector in the world. However, if the U.S. successfully innovates in clean energy, our country stands to reap enormous benefits. It is time to embark as a country toward our clean energy goals."
    The Senate hearing will be webcast live on the Committee's website, and an archived video will be available shortly after the hearing is complete. Witnesses' testimony will be available on the website at the start of the hearing.
    Access the ENR hearing announcement and website (click here). Access a release on the report with more details (click here). Access the complete report and individual sections and the 2010 report (click here). [#Energy]
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