Congressional briefing on Energy and economic growth

Yesterday (Tuesday Feb 15) I attended a Congressional briefing in Rayburn 2318 --the usual hearing room for the House Science and Technology Committee.

Here is my report on what they said and then my comments...

WHAT THEY SAID

The big challenge for the US right now is how to manage and change its economy, to try to do
the best we can on four key variables all at once -- jobs, deficits, economic growth and sustainability.

The "energy briefing" today was led by Rob Atkinson, president and founder of the Information Technology and Innovation Foundation,
www.itif.org. "My cochairs are Warner and Hatch -- nonpartisan." People described Atkinson as the nation's leading expert on long-term economic growth. Like Schumpeter before him, he has shown how most economic growth is due to technology and innovation, which tends to occur in major "waves" which can last 40 years or so. STARTING FROM THE GOAL OF ECONOMIC GROWTH -- he has concluded that new, sustainable energy technology will be the next big wave of economic growth. US economic growth in coming decades will depend above all on whether we can stay ahead of the tough competition in clean energy. He then asserted that Devon Swezey, Project Director for the Breakthrough Institute
http://www.thebreakthrough.org/,
is our top leader today in the "innovation space." He was proud of their joint report,
"Rising Tigers, Sleeping Giant"
http://www.itif.org/search/node/tigers, comparing the US with China, Japan and South Korea in being ready to ride
the next big wave. The key goal for innovation is to make sustainable energy CHEAPER; whoever makes it affordable first will capture a huge market.
He also expressed support for what was said in another briefing last week, Securing America's Future, especially by Blair (recent DNI) and on behalf of Fed Smith (FedEx), stressing the national security goal of independence from oil.

Swezey gave an overview with lots of striking numbers. Success in riding the wave depends on COMBINING strength
across three key areas:
1. R&D: who invents the new product;
2. deployment: who creates markets to buy it and use in volume;
3. manufacturing: who makes it. The US is now 'way behind the others on (2) and (3), but has kept a narrow lead -- under threat --
in the R&D. The success of the others is not due to some kind of cultural magic, but to well-documented public investments.
We spend slightly more in total in energy R&D for now, but the others spend much more as a share of GNP, and China has been raising
the R&D by 20% per year for 20 years; we have recently seen a huge wave of outsourcing of R&D to China. We need new action in three areas:
(1) more R&D spending, especially aimed at technology we can sell to developing economies, the biggest new open markets;
(2) a new explicit manufacturing agenda, integrated with the R&D agenda. Like Sherrod Brown's The Impact Act;
(3) a major new deployment effort, like Bingaman's Clean Energy Deployment (fund) idea. He gave some interesting examples of R&D outsourcing to China:
(1) Applied Materials, the world's leader technology in ability to make solar cells, just set up the world's biggest R&D center on that -- in Xian; (2) GE moving its leading power electronics and control R&D to China.

Atkinson cited NSF data to show that R&D outsourcing is not just in energy, but across the board. "17 is not enough": He said that the President's proposal to increase R&D tax credits to 17% would lift us from being the 17th ranked nation in OECD to being 13th.

William (Bill) Bonvillian, the Director of MIT's DC office, discussed why it will not be easy for the US to stay in the game. We have a good track record of innovation "on new open turf," but not in upgrading a large existing industry like energy. He expressed great optimism about what's going on in the R&D "front end," like ARPA-E, innovation hubs, and some new Chu initiatives. But we have a big problem with the deployment and manufacturing "back end."
Possible remedies: new financing; standards; creating initial markets; development of testbed markets and systems, especially at DOD, which could
be a great place for deploying and using new things from DOE.

Atkinson then mentioned his Clean Energy Working Group, which has frequent meetings, where Arun Majumdar, head of ARPA-E often speaks.

Majumdar began by noting that there is a huge growth going on right now in world population and in income per capita, which the US cannot change.
That creates a huge new market for energy.. if we can make it cheap enough. That's a key goal at ARPA-E.. to "go for a few home runs."
A small team of energetic people, all engineers, many from industry. He gave four examples:

(1) plants are a great source for fuel (biomass), but natural photosynthesis is only 1% efficient; there is a clear opportunity to get much more fuel from the same amount of sunlight through developing new life forms ("black leaves instead of green");
(2) to replace oil by using electric cars, we need to get the cost of batteries down -- not by tweaking today's best batteries (Li-ion, staunchly supported by Li in the politburo of China), but by breakthroughs like rechargeable lithium-air, zinc-air and manganese ion. 50 teams are now competing for funds in this space from ARPA-E, and he has no idea who will win yet...
(3) electric cars could also benefit from futuristic ideas like inductive recharging on the highway... instead of plugging in, receiving power beamed from the road.
(4) cleaning up coal...

Finally, Reed Hundt said: "Yes, double Arun's budget, I'd support that, but I'm working the back end. The US is the only important nation which lacks a
government-sponsored fund (bank) aimed at clean energy technology. We have a detailed plan..."

In Q&A, Layne of Gifford's office asked about how to get more investment in renewable energy, and asked whether smart grid might help.
Hundt was asked whether he has legislative language for his plan; "not yet, but it should be easy enough..."

===========================

ASSORTED COMMENTS

I agree with the overall story here, far more than I usually do with this kind of event. Their overall sgory fits with other sources.
For example, I have seen the remarkable outsourcing of R&D to China myself. There are many areas where China
is already ahead of the US -- but many where they have blinders, political and other, where they are 'way behind. It is certainly not all
about dollars. In many cases, overly large well-funded vested interests are what keep either nation behind.

With wind -- China's big numbers are due in great part to Europeans paying for it, through their carbon trading systems, which
have already been changed recently in response to scandals.

With R&D -- we certainly ARE NOT capturing so much as half of what we could be doing, even without raising total investment.
DOE has NOT been too basic and adventurous as some asserted. By giving priority either to industry linked
work, or to some very blue sky fundamental science, they have missed the "middle zone." ARPA-E is an important effort to try to fill in, but
it is still missing most of the major opportunities I have seen in this space. Majumdar's first two examples really were VERY exemplary,
but there are other unmet opportunities, and I have seen at least one very big hole in getting to rechargeable lithium-air
this past year. (An unmet opportunity at Excellatron.) The extra cost of plug-in hybrids over conventional cars is due to BATTERIES and to POWER ELECTRONICS about equally; there have been major breakthroughs in power electronics, in recent NSF funding, which also cry out for much
more rapid insertion and follow-on. A new kind of ARPA-E/NSF partnership might be important to fill in in such opportunities.
For low-cost renewable energy -- solar farms using solar thermal look like THE best hope for now, but we don't have anything like
an effective strategic effort to capture our best opportunities (through R&D) to cut that cost in half or more. Majumdar rightly noted that
TODAY's smart grid efforts do little to cut the total costs of renewables or plug-in cars, but there are unmet, hardly funded opportunities
for more advanced type of smart grid efforts that could fill in. (NSF has funded a little of that, but the relevant pot of money has been decreasing
thorough time; it is too small to be a "BIG STAKEHOLDER.")

For deployment -- a lot of what we need for the car part of that is new legislation, which we have discussed in great detail already.
Another possible way to improve "integration" of R&D with deployment might be to have some kind of liaison system at places
like ARPA-E and NSF. In 1990, when electric utilities were permitted to send up to 1% of their revenues to the Electric Power Research Institute
and include it in their rate base, EPRI had a permanent liaison in the NSF building, looking for good opportunities. Perhaps
some larger clean energy investment consortium or the like could do something similar.

The DOD testbed is certainly important. I have had long discussions with people in that space.... There are great opportunities, but also some very problematic barriers we could discuss in more detail later.