The need to renew America’s economy, foster its energy security, and respond to global climate change compels the transformation of U.S. energy policy. Innovation and its commercialization must move to the center of national reform. Not only must a broad range of carbon pricing and regulatory responses be adopted, but major increases in federal R&D are essential along with the deployment of bold new research paradigms. To that end, the federal government should establish a national network of regionally based energy discovery-innovation institutes (e-DIIs) to serve as the hubs of a distributed research network linking the nation’s best scientists, engineers, and facilities. Through such a network, the nation could at once increase its current inadequate energy R&D effort and complement existing resources with a new research paradigm that would join the unique capabilities of America’s research universities to those of corporate R&D and federal laboratories.

In addition to the full report available above, a short policy brief is available »

America’s Challenge
Massive sustainability and security challenges plague the nation’s energy production and delivery system. Transformational innovation and commercialization will be required to address these challenges. However, current innovation efforts remain inadequate to ensure the development and deployment of clean energy technologies and processes. States and localities lack the wherewithal to make the needed investments. Additionally, numerous market failures prevent private firms from investing sufficiently in clean energy. Because firms cannot capture all the benefits of their innovative activity, they underinvest and focus on short-term, low-risk research and product development.

Limitations of Existing Federal Policy
Federal energy efforts, meanwhile, suffer from two key shortcomings. First, the federal government spends less than 1 percent of its R&D budget on energy—a level less than one-fifth of expenditures in the 1970s and 1980s—clearly insufficient in light of coming challenges. Beyond that, federal energy efforts are also based on an obsolete research paradigm. Most federal energy research is conducted within “siloed” labs that are too far removed from the marketplace and too focused on their existing portfolios to support “transformational” or “use-inspired” research targeted at new energy technologies and processes.

A New Federal Approach
The federal government should create a national network of several dozen e-DIIs. An interagency process should establish the network and competitively award core federal support of up to $200 million per year for each major e-DII operated by university or national laboratory consortia, along with funding for smaller e-DIIs and distributed energy networks connected to the large e-DII “hubs.” Federal funding would be augmented with participation by industry, investors, universities, and state governments, for a total federal commitment growing to roughly $6 billion per year (or 25 percent of a recommended total federal energy R&D goal of $20 to $30 billion per year). The e-DIIs would:

  • Foster partnerships to pursue cutting-edge, applications oriented research among multiple participants and disciplines
  • Develop and rapidly transfer highly innovative technologies into the marketplace
  • Build the knowledge base and human capital necessary to address the nation’s energy challenges
  • Encourage regional economic development by spawning clusters of nearby start-up firms, private research organizations, suppliers, and other complementary groups and businesses