Innovation Uptake: The Final Frontier for Energy Policy
U.S. climate policy is focusing more sharply than ever on accelerating the development of technologies that will make energy cleaner, more affordable, and more reliable. Yet, such innovations do the climate no good unless they are widely deployed.
The Biden administration and Congress should adopt innovation uptake policies to ensure that the remarkable products of federal investment and American ingenuity are not left moldering on the shelf. Key action items include creating a market-facing Office of Innovation Uptake in the Department of Energy (DOE) and redesigning clean energy tax incentives.
The bipartisan infrastructure bill that passed in November is the latest and most significant expression of the nation’s commitment to clean energy innovation. It gives DOE more than $40 billion for research, development, and demonstration (RD&D) to advance technologies like clean hydrogen, energy storage, and carbon capture over the next five years.
This step-change is long overdue. Individual actions like carpooling more and eating less meat will not stop climate change. Policies that dramatically raise the cost of dirty energy might work in principle, but they aren’t politically viable. The only way to reduce the force of future hurricanes and avert other disasters is to make clean options more attractive to energy consumers
With expanded federal backing, America’s scientists and technologists are primed to devise these options. DOE has already announced three ambitious “Earthshots” that take aim at major gaps in the clean energy technology portfolio, like clean hydrogen and long-duration energy storage. Several more are in the works. The full weight of the national laboratory complex created for the Manhattan Project is being put behind such efforts, amplified by collaborators in academia and industry.
Once the researchers have performed their magic, though, the market must swing into action. But that is hardly a sure thing, even for breakthroughs that wow the experts. Electric utilities, for example, are notoriously conservative at taking up new technologies. That is as it should be, given the complexity of power systems and the importance of the services they supply. Individual consumers, too, may justifiably be wary about buying new kinds of cars, home heating systems, and other essential durable goods.
And the truth is that technologies emerging from RD&D are not necessarily ready for everyday use. Just as battle plans must be revised after first contact with the enemy, innovations must typically be modified once they are put into practice. Experience in the field reveals the need for tweaks that no amount of experimentation in the lab can. Yet, if early adopters are scarce, these tweaks, which enable the mainstream market to take off, will never be made. The innovation race may be lost just before the finish line.
Uptake policies can bring workable innovations through the tape. Uptake-oriented financial incentives, such as grants, loans, or tax breaks, may cut an innovation’s price temporarily to encourage early adoption. Federal procurement allows agencies to become early adopters themselves. Standards and certification programs may strengthen early adopters’ confidence that an innovation will perform as promised. Mandates assure adopters that all competitors will have to take the same risks.
Whether they take the form of tax incentives, public procurement, certification programs, mandates, or something else, innovation uptake policies ensure that innovators get feedback from early adopters, giving them a chance to put the final touches on their offerings and ensuring that clean energy RD&D investments are not wasted for want of a fair market test.
Sadly, the federal government’s past clean energy innovation uptake policies have often been slapdash. Tax incentive and regulatory policies, for instance, have frequently been inconsistent and arbitrary, failing to reward innovators while subsidizing incumbents.
The Biden administration could set them on a better track by creating a new DOE Office of Innovation Uptake (OIU) to implement key portions of the infrastructure bill and future policies that may emerge from the Build Back Better package or successor legislation. OIU would focus on what early adopters want and need, facing downstream toward the market, rather than upstream toward basic science, which is DOE’s usual orientation. It would build relationships and skills that complement and extend the Department’s current capabilities.
OIU could include DOE units that support early adopters with grants, loans, and other financial assistance to build facilities and factories, including the Loan Programs Office and Office of Clean Energy Demonstrations. Some of DOE’s regulatory functions, such as standard setting for energy-efficient equipment, might fit, too. DOE offices that provide technical assistance on innovation uptake, including advising other federal agencies on procurement, tax, and regulatory policies, should be included. Programs that enable early adoption by supporting complementary infrastructure, like transmission lines and pipelines, might also be incorporated.
Congress could also turbocharge innovation uptake policy. Build Back Better includes funding for clean manufacturing, net-zero buildings, and transmission planning and construction, among other things, that might be salvaged. The bill’s clean energy tax incentives, too, could be revised to support innovation uptake more effectively. New initiatives would be welcome as well, such as programs that support state and regional strategies for clean energy innovation uptake.
President Biden announced to the world at November’s climate summit in Glasgow that “the United States is back.” Clean energy innovation uptake policies are vital to turn that promise into a reality.
David M. Hart (@ProfDavidHart) is the director of the Center for Clean Energy Innovation at the Information Technology and Innovation Foundation and a professor at George Mason University’s Schar School of Policy and Government.
