The Department of Defense (DoD) is the largest single consumer of energy in the United States. In 2007, it consumed 1100 trillion btu—more than the entire country of Nigeria, and at a higher per-capita rate than all but three countries in the world. At the same time, energy is the key enabler of US military combat power. Huge energy consumption, increased competition for limited energy supplies, ever increasing energy costs, and no comprehensive Energy Strategy or oversight of energy issues within the DoD have created vulnerabilities. These include potential fuel and electricity supply disruptions to battle zones and other global deployments , as well as foreign policy and economic vulnerabilities. The DoD needs a comprehensive energy strategy that (1) improves National Security by decreasing US dependence on foreign oil, (2) maintains or improves combat capability.

Both current foreign wars (Iraq 2003-, Afghanistan 2001-) have been, at one point or another, defended on the grounds that they strategically secure liquid petroleum reserves, pipelines, export points and refining stations that are critical to U.S. energy needs (mostly those in Iraq) and those of American allies. In particular, Afghanistan contains the most direct and efficient access points to transport oil and natural gas supplies to and from Central Asia and China through the Khyber Pass. Its border with Iran has also been thought to create strategic leverage against the world’s second-leading producer of oil. Though other factors—the “war on terror,” and “democratization”—have also been used to justify the continued American presence in these regions, the only strategic raisons d’etat for continuing to occupy these nations would seem to involve their relevance to current US energy needs. These wars have already exceeded a trillion dollars and sent thousands of American soldiers to their death. The costs of caring for wounded veterans returning from are sure to treble the fiscal impact of the wars in the future. By broadening our energy generation and storage options, the US can avoid these “wars of necessity” in the future, saving crucial dollars and preventing immeasurable losses of lives and loved ones—priorities within, and beyond, the DoD.

US combat capabilities also have much to gain from clean-energy innovation and investment. Napoleon talked of his army “marching on its stomach.” The meat and bread that provided the joules for the low-tech armies of the 19th century still power today’s modern militaries, only in the form of liquid carbon fuels. US power projection is entirely dependent upon its ability to generate, transport and store energy rapidly and securely. The “long tails” that supply and resupply current US global deployments are limited in their efficiently by the physics of liquid carbon: dozens of miles of gasoline trucks and protective humvees, jet-fueled C17s and oil-powered frigates are needed to transport energy to today’s frontlines. These deliver not only an inefficient yield, but are often slow and insecure as well. As wars become increasingly unconventional, and supply lines more complicated and vulnerable, the US is forced to squander much of its force potential to maintain these lines, and even abandon some aspects of its combat capacities altogether.

While much continues to be done within the DoD to improve the energy efficiency of its operations and the fuel effiency of its vehicles, to accomplish any of these broad goals the DoD must promote critical research for future energy technologies. The DoD has a long tradition of innovation spillovers into the consumer economy, stretching from recent breakthroughs in global positioning technology to the Internet (ARPANET). But even innovations as minor as developing lighter rechargeable batteries are estimated to the save the DoD hundreds of millions annually from the costs of replacing out-modeled batteries and reducing their “fully-burdened-costs.” Tactically, smaller more durable batteries enhance U.S. force capabilities in unconventional conflict zones that require lengthy and covert special operations missions (see: Afghanistan, Iraq).

As groundbreaking as these more modest projects can be, even more ambitious research projects have even greater potential not only for the military, but also for civilian market spillover that could greatly contribute to overall US economic growth and competitiveness. Two such projects standout: algae based jet fuels and micro-nuclear reactor technology. This spring, the Defense Advanced Research Projects Agency (DARPA) successfully extracted oil from algal ponds at a cost of just $2/gallon, and has been working to begin large-scale refining of that oil into usable fuels at a cost of less $3/gallon. Though private industry has invested nearly $600 million into the project, DARPA’s hopes of expanding the breakthrough into a 50 million gallon annual refining operation to begin supplying the Air Force with 50-50 fuel blends by 2013 will require significant public investment.

Similarly, the late-third/early-fourth generation nuclear reactors—smaller, safer and more efficient alternatives to the large 2G light-water reactors currently deployed—are promising for US military operations, as well as general US energy needs. Unfortunately, America’s symbolic aversion to developing nuclear technologies have stymied domestic innovation in these key technologies. With effective support and communication, however, the DoD could gain from these reactors as they strive to develop “net-zero” energy self-sufficient bases. Smaller “pocket-nukes” are still in development and, with investment support, could revolutionize the mobility of US forces as force deployments become increasingly unconventional.

At the same time, the Navy is studying cheaper and more efficient alternative energy propulsion systems for its carriers, submarines and frigates, and is also considering proposals to create an “all-nuclear fleet” in the next 20 years. With broader federal investments within the DoD’s research and development budget, a breakthrough in either of these technologies would enable U.S. naval forces to extend farther, faster and cheaper into critical seas, straits and oceans than any other naval force in the world. This strengthens U.S. “off-shore balancing” capabilities, the essential instruments of a status-quo global power. The benefits, moreover, of producing, distributing, installing and marketing industrial-domestic versions of these technologies would be a boon for the U.S. energy sector, job creation and overall economic growth.

In addition to serving as a crucial locus of clean energy innovation (CEI) through federal investment, DoD can play a critical role in creating markets for emerging technologies through direct procurement. Without a reliable demand for new energy technologies, private firms will not aggressively pursue energy technology innovation, nor will they find public-private partnerships with DoD/DARPA worthwhile. In the US, most attempts to create demand for low-carbon energy technologies have focused on establishment of a carbon price. While this approach could push some innovation in the long run, there are serious political-economic complications within carbon pricing that make it a less than comprehensive solution. By contrast, direct government procurement coupled with direct government investment are powerful ways for the federal government to stimulate CEI. DoD’s unique purchasing capacities can create, on its own, a sufficient market with credible sustainability for many capital-intensive investments that remove risky “bet-the-company” labels from CEI projects—projects that, as noted above, are likely to benefit the DoD as much, if not more, than anyone else.

At the moment, the National Training Center in Fort Irwin, CA, Fort Carson in Colorado, and Nellis Air Force Base in Nevada all host cutting-edge solar photovoltaic energy generation arrays. The array at Nellis was at one point the world’s largest and the 15 MW it produces cover approximately one-third of the bases total power needs. More broadly, the Air Force is the largest renewable energy power purchaser in the U.S, and the third largest procurer in the world. Four Airforce bases currently rely entirely on renewable energy for power, while several others use a combination of solar and wind. As only 9% of current power for military facilities rely on alternative energies, there is much room for future procurement and the potential forum for market introduction that DoD presents has only begun to be tapped.

For more than two decades, federal energy policy has been afflicted by paralysis. Although much energy legislation has been passed into law during this period, America’s energy security has grown worse with each passing year. This deteriorating condition has created enormous economic and national security vulnerabilities. The time for action arrived long ago. We must not waste another moment. The DoD has much to gain from CEI, and its role in promoting it will not only resolve critical concerns central to the Department, but also a gathering crisis confronting the nation as a whole.

Photo Courtesy of "Action Sports" via the New York Times

China did not participate in this year’s World Cup and has actually qualified for the tournament only once, in 2002. Nevertheless, 2010 saw a solar energy company – Yingli Green Energy Holding Company – become the first firm from that country to secure global marketing rights to the sporting event. Viewers and fans would have seen the company’s name and logo displayed on the digital billboards ringing the fields, alongside more familiar consumer brands such as McDonald’s, Budweiser, and BP Castrol. Yingli Solar’s investment also made it the first renewable energy company to ever sponsor the World Cup.

The exact cost of the sponsorship has not been disclosed due to a confidentiality agreement, but the benefits have been extensive, as reported by the New York Times:

The “Leading Off” section of photographs in the July 5 issue of Sports Illustrated had a shot from the England-Germany match on June 27 that showed several Yingli Solar electronic signs interspersed with ads for McDonald’s…Helena Kimball, head of marketing communications at the San Francisco office of Yingli Green Energy Americas [said]: Traffic to the Yingli Web site has increased to the point where “the site did end up crashing a few times.” In addition to the presence on the billboards, the sponsorship entitles Yingli to set up displays of its products at the Soccer City Stadium in Johannesburg. Among the ways that Yingli is promoting the sponsorship, Ms. Kimball [said], are ads on the Yingli Web site; television commercials on flights of Chinese airlines like Air China; ads in Chinese and South African airports; and banner ads on Chinese Web sites like sina.com and sohu.com.

The paper previously noted that China recently became the world’s largest manufacturer of solar panels – Yingli Solar, in fact, only became listed on the New York Stock Exchange in 2007. The Breakthrough Institute and Information Technology & Innovation Foundation report, “Rising Tigers, Sleeping Giant,” similarly, closely examined the rapid development of clean energy technology in China, Japan, and South Korea. To be sure, American solar panel companies maintain an edge in their perceived quality, but if Yulin Solar’s bold sponsorship strategy is any indication, you can be sure that company and the rest of China’s indigenous solar innovators are working hard to make up the difference.

The United States must do all that it can to encourage innovation and competition in the domestic solar power industry in particular and clean energy industry in general, lest the jobs and businesses of the future be located elsewhere. Elizabeth Economy of the Council on Foreign relations put it best: “If Yingli wants to eat lunch at McDonald’s, great. I just don’t want them to eat G.E.’s lunch as well.”

On June 19th, the Assistant Commissioner of the Chinese National Energy Administration Yin Wu said at China’s 12th Five Year Plan (125) Energy Development Forum that China is about to have six big revolutions in its long-term strategic energy plan, and one of them is to shift its resource-dependent energy development model to a high technology and innovation-driven model. [1] To meet these growing energy needs, China has made great efforts in recent years to expand its renewable and clean energy capacity.

China’s strong determination and serious commitment to win the global clean energy technology race is impressive. According to the several reports, China is about to invest $440 to $660 billion in the next ten years. [2]

While the rest of the world is pulling ahead in the global race by large-scale public investment in clean energy technology, the United States is still groping in the dark to untie global warming’s “Gordian Knot” at the starting line through pollution regulations.  It is time to take bold actions to solve the problems created by the regulation-centric approach, as an article in the Harvard Law and Policy Review put it. [3] The carbon pricing strategy alone will not guarantee the U.S. a promising clean technology future because it can neither close the price gap between emerging clean energy technologies and conventional alternatives, nor can it solve a variety of non-price-barrier problems in the clean energy technology sector.

From the table below, it is clear that carbon pricing is a dilemma itself because it is hard to make costly low-carbon clean energy as competitive as traditional dirty but cheap fossil fuels through a modest carbon price. According to a report of the Breakthrough Institute “Rising Tigers, Sleeping Giant”: [4]

“While it may help some lower-cost and more mature clean energy technologies (e.g., wind power) become more competitive with fossil fuels, it will do little for less mature and currently more expensive technologies such as solar energy or carbon capture and storage.”

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In 2009 British Petroleum earned $14 billion.  In 2009 the average oil company spent about $20 million combined on researching safety, accident prevention, and oil spill response.  That is 0.001% of BP’s annual profits or 0.0003% of what the oil spill in the Gulf is estimated to cost BP or 0.0002% of what the spill cleanup is likely to cost the United States (not including health costs or tourism and biodiversity losses).  Economists have long recognized that businesses underinvest in research, but the problem is that today the United States is not only failing to invest we are actually incentivizing the energy industry not to invest in research by providing them with tax exemptions for drilling.  Unless the United States seriously rethinks its energy investment strategy we’ll be stuck shooting golf-balls and garbage at the problem instead of cultivating a leading American industry.

Imagine that you walk into a bank holding a $100 bill.  The first teller says: “I’ve got a great offer for you.  If you give me $100 today I’ll repay you $90 tomorrow and give you a $5 gas card.” Then you move to the second teller who says: “If you give me $100 today, I’ll give you $110 tomorrow and lower your energy bills.”
If you don’t like the idea of making money you’ll go back to the first teller and you’ll wake up tomorrow $5 in the red.  But if you have an interest in your future and in saving money for you and your children, you’ll take the second teller up on his offer.  The decision seems to be a simple one, yet everyday Americans give their hard-earned cash to energy companies like BP, Exxon, and Shell in the form of tax exemptions instead of investing in America’s energy future.
.This is not a new problem — the American energy industry has been idle for years and innovation has come to a standstill.  The energy industry only invests 0.3% of their revenues on research and development, less than a tenth of what most US industries spend.  As a result the American consumer is paying higher prices, America is importing more Saudi oil, and Floridians are scraping tar off of their beaches.  A report recently released by the Center for American Progress (CAP) entitled, “How to Power the Energy Innovation Lifecycle” outlines the problem with energy research and development in the US:
“For every $1 million in profits the producer of an innovation earns, some estimate that ‘knowledge spillovers’ create as much as $4 million in hidden economic benefits for society. These spillover benefits manifest as the creation of new high-wage jobs, the establishment of new businesses that use the new technology, and the benefits to future innovators who can build on the new knowledge in unexpected and advantageous ways.”
When you hear that society gets $4 for every $1 of profit motive there should be bells going off in your head.  If the United States gains $4 for every $1 that a company earns as a result of energy research and innovation, then we are clearly under-investing.  The next question should be, “why are we under-investing?”  The short answer is that since companies only profit that $1, they have no reason to chase the extra $4.  The long answer has to do with the innovation lifecycle and the unique conditions of energy R&D.

John Wayne and the "Cowboy Narrative"

Last Tuesday night President Obama took to the Oval Office to reassure the nation of the government’s concerted efforts to solve the oil spill problem in the Gulf Coast. In between hitting the right measure of sympathy for Gulf victims and scorn for BP executives, the president managed to briefly mention his not-so-distant vision for America. We heard the calls for America to wean itself off of its obsession for fossil fuels and a short point on creating a stronger clean energy industry. Most outstanding however, was how the president noted that this time signifies a chance to, “seize the moment.” But what moment are we supposed to be seizing and how?

Many of the greatest achievements in American history are all related to “defining moments” that follow a specific narrative. The Manhattan Project was commissioned under FDR as a response to the perceived potential of the Nazi regime’s destructive power. As a narrative, it was a moment where the U.S. could harness its greatest minds to defend U.S. soil. An imminent threat was involved in large-scale modern warfare and the U.S. was ready to face that challenge with a modern response: science and technology. Subsequently, the Manhattan Project planted the seed for the first real modern national laboratory system, which today still includes many non-weapons-research laboratories.

After Sputnik was launched in 1958, the U.S. mobilized in an effort to beat the Soviets and win the upper hand in the Cold War. The ensuing 1950’s and 60’s space race revolved around a push to the “final frontier,” a narrative that invoked the same frontier spirit that led to the mid-19th century expansion of the United States. Its invocation of the “American cowboy” was accessible to Americans who were already drawn to this same narrative through Hollywood westerns and the ubiquity of its fearless hero, John Wayne. In the 1950’s and 60’s, “the expansion” in this case was not only landing a man on the moon, but also the expansion of funding for engineering initiatives, scientific research, and technological innovation.

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The United States needs to invest in energy.  Global and domestic energy demand is set to skyrocket in the coming years and the US is still heavily dependent on foreign imports, inefficient technologies, and fuels that are polluting our planet and threatening massive political and economic upheaval in the coming century.  Throughout our history the US has turned to the unique power of technology and government investment when private industry was not enough: the Manhattan Project, Apollo Project, DARPA, the oil crises of the 1970s, and today’s energy crisis is no different.

Clean and sustainable energy technology will create American jobs, establish the United States as a world leader in energy technology, benefit our national security, improve our overall health, reduce long-term energy costs, benefit the environment, and reduce the threat of climate change.  It is also important that this investment not follow any single technological path.  We need to diversify our approach and invest in wind, solar, nuclear, carbon-capture and storage, geothermal, energy efficiency, and other technologies.  This diversity will ensure that the United States explores all possible routes to energy independence, to discover the best approach, and that we stoke a vibrant and competitive sustainable energy industry.

Currently ARPA-E is seeking to develop varied, and in some cases competing, technologies to find short and long-term answers for our energy challenges, but due to underfunding we are still falling behind.  My purpose here is to explain why it is essential that this investment come from the government.  The market alone cannot provide the level or direction of investment in energy that is needed.

The free market can be seductive.  The first chapter of any economics textbook explains how in the market you sell an orange, buy an apple, sell a bike, buy a house; until everyone is happy.  Unfortunately, unregulated markets fail in reality.  This is where the rest of the textbook comes into play.  Market failures such as monopolies, externalities, and uncertainty affect all markets.  At best they make the market wasteful, at worst they make the market completely dysfunctional.  As my college economics professor would say, “You have to read past chapter one!”

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Just a week ago the Department of Energy announced that $612 million dollars from the American Recovery and Reinvestment Act are going towards three large-scale carbon capture and storage demonstration projects.  These funds, along with $386 million dollars in private funding, represent one of the most controversial investments in clean energy technology to date.

Simultaneously, the New York Times “Green” blog posed a rarely uttered question, is this the “Twilight of the Coal Era?”  The story focuses on a Siemens contract to build two natural gas turbines for power plants in North Carolina.  The catch is that these power turbines are being built to retrofit old coal plants.  Randy H. Zwirn, president of the Siemens Power Generation Group, believes that this is in fact indicative of a larger trend, America moving away from coal fired plants.  While orders for new natural gas turbines are up, Siemens has no new coal related contracts for America in the pipelines.

So the question becomes, in the face of potentially dwindling demand for coal-burning power plants, should large sums of government money for research, development, and deployment of clean energy solutions go towards carbon capture and storage?  The arguments for both sides are abundant, but at the heart of the issue is that coal is one of the world’s cheapest energy sources and also one of its dirtiest.

While coal may be on the out in America, investment in CCS is still a necessary part of the United States’ energy plan. Unlike the politics which govern energy policy, the economy and environment are international issues.  Today 1.6 billion people in the world don’t have access to power.  When these people do get access to power it will be in the form of the cheapest and most accessible technology, which today has proven to be coal. The Finance Minister of South Africa, defending his nation’s decision to build a new coal plant with World Bank money, summed up the conundrum perfectly in an op-ed in the Washington Post:

If there were any other way to meet our power needs as quickly or as affordably as our present circumstances demand, or on the required scale, we would obviously prefer technologies — wind, solar, hydropower, nuclear — that leave little or no carbon footprint. But we do not have that luxury if we are to meet our obligations…to our own people…

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