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Will We See a Revolution in Energy Technology?

Mark Marich

Today the world celebrates Earth Day. This year, advocates of policies to contain climate change probably see hope in the increased federal funding for energy R&D coming from the stimulus bill and this year’s budget.  

Charles Weiss (Georgetown University) and William B. Bonvillian (MIT) remind us in their new book Structuring an Energy Technology Revolution that increased funding, while certainly helpful, will not alone stimulate technological innovation in energy. Speaking at the Woodrow Wilson Center, the authors discussed the energy R&D funding thrust in the new Administration, and laid out their roadmap to institutional innovations that need to accompany the increased funding.  

In terms of the size and scope of energy R&D funding, Weiss and Bonvillian argue that it is well short of what it ought to be given the high rate of return on investment in this area. This is true in both the public and private realms. The private energy sector invested less than 1 percent of annual revenues in R&D from 1988-2003. Other high tech sectors invest much more. Biotech, for example, invested almost 39% of their annual revenue in R&D. The authors argue that this apparent lack of interest in new energy technology is due to the traditional American reluctance to innovate in established sectors. They call for funding of a scale and scope comparable to that of the Manhattan Project. 

In terms of the way an energy program should be organized, Weiss and Bonvillian see market launch as the toughest step. They recommend, among many other things, policies addressing the funding gap for commercialization and private sector leadership through public-private partnerships. 

The audience at the Woodrow Wilson Center raised an issue that is always of concern: how will we know when to reduce support in order to avoid picking winners? The authors replied that avoiding picking winners should always be a goal, but that, realistically, occasional deviations from this goal are likely to occur. The important thing is to always return to the preferred path of letting the market pick the winners.  

This new book offers an approach to the design of an effective energy program rightly marries innovation and entrepreneurship. It presents at least two concepts that we can all agree on. First, funding for technologies that will never reach the market offers little hope of palliating our pressing environmental problems. Second, if well-designed program and policies are not established, spending will be inefficient.

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