US Corporate Energy R&D Declines 50% From 1991 To 2003 - AFP

At a time of soaring gas prices, public concern over the country's dependence on foreign oil, and mounting evidence of global warming, the nation's investment in energy research and development is declining, according to a report by scientists at the University of California, Berkeley.

In a paper in the journal Issues in Science & Technology, Dan Kammen, a UC Berkeley professor and co-director of the campus's Berkeley Institute of the Environment, and doctoral student Greg Nemet, marshal statistics to show that both the federal government and private business investments in energy research and development have declined significantly since the 1980s. They use data on patents, federal and industry spending, and emerging venture capital funds to examine the relationship between federal investment and innovation.

Despite the current administration's expressed concern about the nation's energy problems, the 2005 federal budget reduced energy research and development by 11 percent below the 2004 level, Kammen and Nemet note. Equally worrisome is the 50 percent decline in U. S. companies' investments in energy research and development between 1991 and 2003.

"Energy issues facing the country warrant a massive increase in energy spending, and our findings indicate that this can be done while bolstering the economy," said Kammen, who will present his results at a Capital Hill briefing later this fall.

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http://www.terradaily.com/news/energy-tech-05zzzzzzi.html

http://phys4.harvard.edu/~wilson/energypmp/Kammen&Nemet.pdf

June 29, 2005
In press: Issues in Science & Technology
Address Energy and Environmental Security


<snip>Although the Bush administration lists energy research as a ‘high-priority national need’,and points to the energy bill as evidence of action, the most recent U.S. federal budget recommends reducing energy R&D by 8% in 2005 from the previous year, and AAAS projects declines in federal energy R&D of 18% by 2009. Meanwhile, and arguably most troubling, the ongoing lack of vision on energy is damaging the business environment for existing and start-up energy companies: investments in energy R&D by U. S. based companies fell by 50% between 1991 and 2003. In either an era of declining energy budgets, or when economic or environmental needs justify a significant increase in investments in energy research, we must have the tools, and use them, to evaluate approaches to re-invigorating our energy research sector. In this brief paper we do just that.

We examined the effectiveness of investments in research and development in the energy sector, and observe significant declines in funding since the mid-1990s, with particularly large reductions in private sector investment. Strong correlations exist between public and private sector R&D, and innovation as represented by patenting activity. These results are described in the accompanying figures, and serve to reinforce the earlier finding by Margolis and Kammen (1999) that the U.S. is dramatically underinvesting in our energy future. To put these declines in perspective, consider that in the early-1980s energy companies were investing more in R&D than were drug companies, and today investment by energy firms is an order of magnitude lower than that by drugs, with total private sector energy R&D less than that of a single large biotech company. Our ability to respond to the challenges of climate change, or to the economic vulnerability of the nation to disruptions in our energy supply have both been significantly weakened by the lack of attention to long-term energy planning. In light of this looming crisis, is an expansion of the U. S. energy research portfolio to much higher levels feasible? and what might be the returns on such an effort? The American people recognise this threat, and in the recent national energy survey by the Yale School of Forestry, responded overwhelmingly that far greater attention to energy security and to energy leadership is needed. We reviewed spending patterns of the six previous major federal R&D initiatives since 1940 and compared them to scenarios of increasing energy R&D by factors of five and ten. Based on IPCC assessments of the cost to stabilize atmospheric CO2 at 550 ppmv, and other studies that estimate the probable success of energy R&D programs and the resulting savings from the technologies that would emerge, $15-30 billion/year in the U.S. would be sufficient. We found that the fiscal magnitude of a large energy research program – dramatically increasing our meagre $3 billion annual national investment in energy research -- is well within the range of programs in other sectors, each of which have produced demonstrable economic benefits as well as meeting their direct program objectives. U.S. energy companies could also increase their R&D spending by a factor of ten and still be below average relative to the R&D intensity of U.S. industry overall.

The decline in energy R&D seen over the past three decades is pervasive and, sadly, a continuing trend. While government funding is essential in supporting early stage technologies and sending signals to the market, evidence of private sector investment is an important indicator of expectations of technological possibilities and market potential. The dramatic declines in the private sector are thus particularly concerning if we are to keep our technological options open as we confront the major energy related challenges society now faces. R&D is an essential component of a broad innovation-based energy strategy that includes transforming markets and reducing barriers to the commercialization and diffusion of nascent technologies. The evidence we see from past programs indicates that we can effectively scale up our energy R&D effort substantially—we recommend a sustained increase in funding by at least a factor of five – to meet the energy challenges of the 21st Century. The economic benefit of such a bold but long overdue move, would repay the country in job creation and global economic leadership—as well as being the scale of investment seen as needed to transform our economy into what at one time seemed impossible: a vibrant, environmentally sustainable engine of growth.


Figure 1 Declining energy R&D investment by both the public and private sectors Energy R&D as a percentage of total R&D in the U.S. has fallen from 10% to 2%. Since the mid-1990s, both public and private sector R&D spending has been stagnant for renewables and energy efficiency, and has declined for fossil fuel and nuclear technology. The lack of industry investment in each technology area suggests that the public sector needs to play a role of not only increasing investment directly but also correcting the market and regulatory obstacles that inhibit investment in new technology. Sources: R. M. Wolfe, “Research and Development in Industry” (National Science Foundation, Division of Science Resources Statistics, 2004); M. Jefferson, et al., “Energy Technologies for the 21st Century” (World Energy Council, 2001); R. L. Meeks, “Federal R&D Funding by Budget Function: Fiscal Years 2003-05” NSF 05-303 (National Science Foundation, Division of Science Resources Statistics, 2004).