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Investing in Innovation is an American Tradition

By Jason Grumet, Norman R. Augustine

Friday, November 20, 2015

Innovation is the heart of the U.S. economy. Technological progress and entrepreneurial spirit have enabled American global leadership in medicine, aviation, agriculture, biotech, and energy.

The energy sector has benefited greatly from smart federal investments in research and development. For example, horizontal drilling and advanced seismology, commercialized by industry leaders like George Mitchell using government-funded R&D breakthroughs, helped create shale oil and gas development that adds $430 billion every year to U.S. GDP. Aeroderivative natural gas turbines from military R&D investments in jet engines enabled electric utilities to utilize new natural gas supplies to lower costs. Super-efficient diesel engines, developed by industry in partnership with our National Laboratories, have doubled truck fuel efficiency and provided a 7,000 percent return on federal investment. Cost reductions in photovoltaic solar technology, propelled by numerous public-private partnerships, have transformed the solar industry. Time and time again, federally-supported innovation has provided a foundation for American economic prosperity.

The economic uncertainty of the past several years has created a temptation to forget this connection. Since 2010, investments in federal government energy R&D have declined, adjusted for inflation. If we are to support American economic prosperity, it’s critical our leaders invest in our ability to compete in the $6 trillion global energy industry. Over the next several decades, the U.S. and the world must confront a variety of energy related challenges ranging from national security to economic security to climate change. At present, we simply do not have the suite of technologies that will enable us to confront these challenges while simultaneously bringing reliable and affordable energy to billions of people who currently live in a state of deprivation. Moreover, as demand for energy grows dramatically in the developing world, American innovations will find new markets creating high-paying, domestic jobs in the process.

Indeed, our economic competitiveness is at stake; other nations such as China are making investments to rival or surpass ours in many technologies. The United States currently ranks 11th in the amount we spend on energy R&D as a percentage of GDP. At current growth rates, China’s total investment in energy innovation will surpass our own by 2022, further eroding the very advantages that helped the U.S. economy grow over the last century. The scale of our current investments simply aren’t enough to support the millions of American jobs that will rely on our ability to compete in an increasingly globalized economy.

Capitalizing on enormous economic opportunities in technologies like large-scale electricity storage, breakthroughs in materials science and efficiency, next-generation biofuels and advances in renewable energy and nuclear power will require smart public investments that enable the private sector to translate those ideas into products. The energy sector presents unique challenges as individual companies cannot capture all of the energy security, environmental and economic benefits of their investments, particularly early stage research. In fact, the energy sector spends less than half of one percent of sales on R&D, whereas other industries like pharmaceuticals (21 percent) and aerospace/defense (12 percent) spend considerably more. There remains a clear need for government support of energy innovation, which has proven over and over again to provide tremendous economic returns on taxpayer investments.

That’s why the American Energy Innovation Council (AEIC) was formed. AEIC has released several reports urging our leaders to invest in American economic competitiveness. Doing so will ensure we don’t lose out on an opportunity to reap the economic benefits of leadership in what is arguably the largest and most pervasive technology sector in the world.

KEYWORDS: GEORGE MITCHELL, AMERICAN ENERGY INNOVATION COUNCIL (AEIC), NUCLEAR POWER