Government-sponsored research, development, and demonstration programs have been critical to innovations in energy technologies in the past. If we want to continue to lead the world in these fields, reforming America’s innovation programs is essential. Rather than abandon these efforts in the face of policy missteps, we rely on historical experience to identify both the strengths and limits of government’s ability to accelerate innovation.
The two most important new energy generation technologies of the second half of the twentieth century—nuclear power and the combined cycle gas turbine—were derived almost entirely from federally funded research. And the shale gas revolution that is transforming America’s energy landscape today is, in large part, a product of federal research as well—the intersection of advances in hydraulic fracturing (“fracking”), horizontal drilling, and the development of highly efficient combined cycle gas turbine engines for natural gas power plants.
The civilian nuclear energy industry is a byproduct of federally-funded research, and every aspect of the industry is heavily regulated.
Hydro-fracking and horizontal drilling technologies were significantly advanced with Department of Energy funds during the 1970s and 1980s, developed further at the Gas Research Institute, a publicly funded industry research association, and then fielded and refined by the private sector.
Natural gas power plants are the technological descendants of the Department of Defense’s development of military jet engines. The technology was then refined for power generation by a public-private partnership, the Department of Energy’s Advanced Turbine Initiative.
The government was integral to the development of these technologies because the private sector is poorly positioned to do such ambitious R&D itself. Absent public support, the private sector may underinvest in expensive, long-term R&D projects that have important public benefits that individual companies cannot easily capture.
This is not to diminish the crucial role of private-sector innovators; rather, it is to emphasize that the public part of the public-private partnership was indispensable as well—and is likely to be in the future in some respects.
Another barrier to innovation is the fact that the capital requirements of major advanced energy innovation projects (such as advanced reactor designs) are unique. It is difficult for publicly traded companies to make “bet-the-company” scale investments in innovative energy technologies. Government programs are no substitute for entrepreneurs, but they can be a crucial complement to enable private sector innovation.
Despite these stories of success, the federal government’s record in sponsoring energy research, development, and demonstration remains decidedly mixed. Rather than abandoning such efforts altogether, we believe reform can help focus government resources where they will be the most effective.