The United States must increase support for research and development to remain competitive in the global clean energy economy

The Clean Energy Opportunity

"Energy innovation is a commitment to long-term prosperity."

-American Energy Innovation Council

The global clean energy economy is rapidly expanding for a variety of reasons, including falling prices; growing demand for power, especially in emerging economies; the desire to create jobs and economic opportunities; and the need to reduce local and global air pollutants. Since 2004, private investment in such technologies has grown by more than 600 percent, and the sector could expand to $1.9 trillion in revenues between 2012 and 2018.

According to the U.S. Energy Information Administration, worldwide energy demand is likely to increase 47 percent over 2010 levels by 2035. Demand in developing nations will grow by 72 percent, compared with 18 percent in developed nations. The International Energy Agency forecasts that clean energy will provide half the electricity generation capacity installed over the next 25 years. During that period, renewable energy could attract up to $5.9 trillion worth of investment.

This is a significant economic opportunity for countries that innovate, enhance, manufacture, and export new renewable energy technologies. Pew’s research concludes that nations whose policies promote a culture of innovation will be well positioned to reap the economic benefits. China, Germany, South Korea and other countries are focusing government investments and adopting policies to attract private investment, create jobs and businesses, and protect the environment. Whether the United States can maintain a leadership role in the expanding sector will be evident in its commitment to invest in innovation for clean energy technologies.

Innovation Is An Economic Engine

In the 20th century, the United States made a strategic choice to use federal investments for profound innovation in the defense, health, agriculture, and information technology industries. For example, the U.S. government funded more than half of research and development (R&D) at IBM in the 1950s. As a result, this country has one of the best industry-university R&D collaborative systems in the world. Energy R&D has produced such groundbreaking technologies as nuclear power, solar photovoltaic, and hydraulic fracturing.

However, the U.S. role as a leader and innovator in renewable energy technologies is being challenged.

Annual funding in energy research now totals just $5 billion—its lowest point since the 1970s. Although energy comprises almost 9 percent of the country’s gross domestic product (GDP), less than 2 percent of federal R&D is directed to energy.

By comparison, the health and defense sectors receive approximately $32 billion and $80 billion, respectively, in federal R&D funding. Other nations are also promoting innovation so they can realize the clean energy sector’s
economic benefits. South Korea expects R&D investment to exceed 5 percent of GDP by 2019. China’s annual R&D growth rate was 18.6 percent between 1992 and 2009, three times the U.S. rate.

Policymakers and entrepreneurs around the world are seeking to capture the benefits from developing, manufacturing and exporting clean energy technologies, which are attracting private capital and creating jobs at higher rates than other sectors. If the United States is to continue as the world’s leading energy innovator, the same focus and commitment must be directed to the sector as it was in other industries.

Planning For Success

Leading organizations such as the Brookings Institution, the American Enterprise Institute, and the American Energy Innovation Council agree that maximizing U.S. potential in clean energy means aggressively pursuing partnerships between government and industry. They recommend investing at least $15 billion annually in energy technology R&D activities—three times current funding.

“Innovation spending must relate to the size of our energy market and its importance in driving our economy,” explains the American Energy Innovation Council. Without a national policy and priorities that promote clean energy
innovation, it is unlikely that the United States will realize the benefits of this sector.

With appropriate federal investment, entrepreneurs and government can achieve technological breakthroughs that will grow the clean energy sector in the United States and abroad. The Department of Energy’s network of national laboratories, the Advanced Research Projects Agency for Energy, Energy Innovation Hubs, and the National Science Foundation are examples of effective partnerships between government and industry.

With trillions of dollars in potential investments, nations with strong clean energy policies are at an advantage in the global race. For the United States, a national policy includes a commitment to research and development, especially for clean energy technologies. Gradually increasing spending on federal energy R&D to $15 billion a year will help American entrepreneurs continue as the world’s best innovators.

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