Energy Innovation Will Define the 21st Century

June 20, 2019 Topic: Security Region: Global Governance Tags: EnergyCommerceChinaTechnologyResearch

Energy Innovation Will Define the 21st Century

Energy innovation could have considerable multiplier effects for both America’s prosperity and its military capabilities.

Despite conservative reluctance to accept any expansion in U.S. government spending or in the federal government’s role in the energy sector, at least since the end of the Cold War, it is indisputable that Beijing is vigorously backing China’s energy sector. China’s actions have included domestic investment, support for state companies at home and abroad, and theft or forced acquisition of U.S. and other foreign intellectual property, among other means. Perhaps the strongest testament to China’s unfair practices—and their costs to the United States and U.S. firms—is that the American business community has remained relatively silent as the Trump administration has pursued an expanding trade war with China, though many appear anxious over Trump’s handling of the dispute and some fear that he seeks to decouple the world’s two largest economies. Notwithstanding these concerns, U.S. companies today seem to have accepted that Washington cannot afford the economic policy equivalent of unilateral disarmament in competition with a near-peer. Among other steps, Washington would do well to create better conditions for U.S. firms to do what they do best: innovate and compete.

In a long-term U.S.-China competition, each nation will have to balance its domestic economic, political and social aims against the requirements of military rivalry, something that is easier for a more efficient and prosperous economy. Innovation will be a key aspect of this contest as it was during America’s Cold War competition with the Soviet Union. In view of energy’s role as a critical input across the American economy, energy innovation could have considerable multiplier effects for both America’s prosperity and its military capabilities. The competition to develop the new energy technologies that will power the future is one that America can and should win.

AMERICA HAS the tools to succeed in discovering, developing and commercializing new energy technologies. The U.S. private sector is large and robust, with extensive experience in key functions including research and development, financing and manufacturing. Moreover, according to the World Bank, America’s generally stable and efficient regulatory environment makes it one of the top countries in the world in ease of doing business—not to mention the highest-ranked large economy. Despite a downward slide in some international rankings, the U.S. education system continues to attract researchers and students from around the world. America has a strong track record in innovation and in energy, having developed foundational technologies including nuclear reactors, solar panels and, more recently, hydraulic fracturing. The United States also has an impressive array of seventeen National Laboratories within the Department of Energy conducting cutting-edge research, although some of these are focused primarily on supporting the U.S. nuclear weapons arsenal.

And there are many promising technologies to pursue—some known and others doubtless still unknown. Advanced nuclear power, including small modular reactors (SMRs) as well as so-called micro-reactors that produce fewer than ten megawatts of electricity (enough to power roughly 2,000 households) could support efforts to deploy safe, clean and reliable electricity. Some advanced nuclear projects, like NuScale’s SMR, are increasingly well-developed; NuScale is preparing to build an SMR at the Idaho National Laboratory for Utah Associated Municipal Power Systems and expects the unit to be operating commercially by 2026. Micro-reactors could become especially attractive for military bases, isolated communities and other niche markets on a path to wider use. The Silicon Valley start-up Oklo’s micro-reactor—designed to be about the size of a shipping container—is technically impressive but further from operation than NuScale’s larger and more conventional design.

Despite setbacks, such as in Southern Company’s Kemper project, carbon capture, use and sequestration (CCUS) technologies continue to merit further exploration in view of growing global demand for low and zero-carbon electric power. For example, NET Power’s revolutionary Allam Cycle process uses fossil fuels to generate electricity while eliminating air emissions and producing nearly pure, compressed carbon dioxide that is discharged into pipes and suitable for industrial use or geologic sequestration. Other firms are exploring ways to capture carbon dioxide from the air and even experimenting with chemical processes to store captured carbon dioxide in manufactured stone construction materials. Considering the scale of existing U.S. and global coal-fired electric generation, the availability of coal as an inexpensive and energy-dense fuel, and America’s expanding reliance on natural gas, expanded CCUS research makes sense.

Energy storage technologies, especially batteries, are widely-discussed in the media given their essential role in facilitating extensive adoption of intermittent power sources like wind and solar energy and in powering electric cars. Lightweight and efficient energy storage could also have widespread military applications and accordingly has won close attention from the Department of Defense. Storage should be a higher priority too.

Enhanced Geothermal Systems (EGS), also known as hot dry rock geothermal power, is among the lesser known technologies with the potential to transform the twenty-first-century energy landscape. Advances in drilling technologies and hydraulic fracturing may allow widespread adoption of a massive renewable power resource that has thus far been accessible (and economically viable) only in geologically rare locations. Much deeper drilling—up to and exceeding ten kilometers!—could radically change the business case for geothermal energy: a safe, sustainable, reliable and emissions-free source of energy. Among other opportunities: siting such systems at existing coal-fired generating plants might allow utilities to repower these facilities, using their existing turbines and other infrastructure, reducing costs, and helping utilities to avoid holding possibly stranded assets. Using supercritical carbon dioxide (rather than water) as the heat-exchange medium could simultaneously increase efficiency and decrease environmental impacts from EGS projects. These technologies merit greater attention and support.

THE FEDERAL policy approaches available to promote energy innovation are not mysterious. Broadly speaking, the federal government can improve the regulatory environment for emerging technologies and can direct money towards them. For greatest effect, it should do both—modernizing, easing or streamlining regulatory procedures while providing expanded federal funding for energy-oriented research, development and demonstration of innovative technologies. The Nuclear Energy Leadership Act, introduced in the Senate in March, is an example of the former. Increasing the Department of Energy’s R&D budget substantially—in a technology-neutral manner—is a key element in the latter.

Conservatives are right to resist government attempts to pick winners and losers in the marketplace—that is the market’s role, and U.S. energy and power markets will generally be more efficient in making such selections. Nevertheless, they should also recognize that the federal government has a crucial role in defining national priorities, especially in the energy and electricity sectors, which are among the most highly regulated sectors in the American economy and seem likely to remain so. In other words, the federal government should not arbitrate among commercially-viable technologies (beyond what is necessary in maintaining a diverse and reliable power system) but should be able to support the development of technologies that might prove critical to the national interest, spurring growth and promoting American competitiveness. Of course, all of this requires accepting that some projects will fail; while greatly feared in politics and bureaucracies alike, failure is an inherent and even valuable part of both scientific discovery and entrepreneurship.

What America has lacked so far is a political consensus to assign necessary priority to energy innovation as a national-level goal. However, this may be changing, as Republicans increasingly feel public pressure to develop policy responses to climate change. A recent survey by Yale University and George Mason University found that 69 percent of Americans are “somewhat worried” and 29 percent are “very worried” about climate change; a University of Chicago/AP survey found that 48 percent of Americans say that their views on the issue have shifted in part due to experiences with extreme weather. Even absent any effect from recent shifts in public opinion, Congress has already twice (under GOP leadership) rebuffed Trump administration attempts to slash the Department of Energy’s research and development budget (perhaps partially to protect states and districts that benefit from the work) and seems likely to do so a third time during the fiscal year 2020 budget process. Congress has also passed helpful legislation such as the Nuclear Energy Innovation and Modernization Act, which President Trump signed into law in January. In the 116th Congress, Republican leaders including Senate Energy and Natural Resources Committee Chair Lisa Murkowski have signaled support for legislation to advance energy innovation. Nuclear innovation is especially important in that it can simultaneously promote domestic energy security and economic competitiveness, contribute to America’s international nonproliferation goals  and U.S. exports, and help to reduce global greenhouse gas emissions.

Moreover, Republican support for policies to promote energy innovation—including increased spending on research, development and demonstration programs—seems likely to expand as national security conservatives increasingly consider key technology and other policy decisions within the context of U.S.-China competition. This has already begun to occur in information and telecommunications policy, where concerns about America’s slow adoption of 5G cellular technologies and about the national security implications of incorporating Chinese-sourced network equipment into critical communications infrastructure have intersected in producing simultaneous efforts to accelerate 5G deployment while excluding Chinese firms such as Huawei from the U.S. market.

The latter half of this dynamic is evident in the energy sector. A bipartisan group of eleven senators has asked the Departments of Energy and Homeland Security to consider banning Huawei from supplying solar inverters—which convert direct current from solar photovoltaic panels to the alternating current used in the electric grid—in the U.S. market. Considering simultaneous and longstanding frustration with China’s commercial espionage among American businesses and on Capitol Hill—which many see as a direct threat to America’s long-term success as an innovation economy—it would be quite surprising if technology does not soon emerge as a central front in the U.S.-China contest for global economic and political influence.