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
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