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Energy Technology: Cultivating Clean Tech

New Models for Energy RD&D: A new ‘Clean Energy Institute’ could lead the industry’s war on climate change.

Fortnightly Magazine - May 2008

RD&D directly and consistently, for a long period of time.

Several models could support that endeavor. In addition to GRI, another model might be to revise state regulatory commission rules to allow R&D investments by individual utilities to be rewarded financially.

But even if FERC were to approve a surcharge on wholesale, interstate sales, regulatory hurdles would remain. State utility commissions would have to approve adding such costs to rate base for intrastate sales in states that are not deregulated. These approvals might be difficult to acquire. The surcharge would have to be mandatory to assure full cooperation and compliance.

Other problems might result. Garman worries that if energy RD&D obtained new sources of funding, such as surcharges, Congress might be tempted to cut existing DOE funding. Ongoing DOE support would still be critical for basic R&D, plus the loans and tax guarantees that support demonstration projects where first-time costs are highly uncertain or costly, as in nuclear power plants.

R&D Management Models

If a new revenue stream for clean-energy RD&D were to be approved, who would manage the new funds and the program? Should DOE’s mandate be broadened? Or would it be more appropriate to create a public corporation with representatives of industry and public interest groups, funded by a surcharge approved by a public agency such as FERC? Or could an existing private entity, or a combination of public and private interests assume the mantle to manage substantial new private industry investment?

Each model offers certain advantages and disadvantages:

• A Bigger DOE: When asked whether the DOE should lead the expanded RD&D efforts, utility industry veterans worry about DOE’s ability to direct, manage and fund any enhanced clean-energy RD&D program. These doubts mirror Darman’s list of DOE constraints. The doubters point out that DOE’s program goals are not focused sufficiently on the near-term commercialization of required technologies. They also observe that DOE’s current program is not robust enough to invest in multiple options to assure emergence of viable commercial options by 2020. DOE’s limited experience with commercial practices is also a major concern.

Further, utility executives confirm Darman’s observations that DOE’s program funding is sometimes dictated by political considerations rather than by potential commercial viability. By way of example, critics point to DOE’s proposal for seven carbon sequestration projects with regional partnerships, which in 2007 shared a relatively meager budget of about $37 million. A more narrowly focused program, with three or four better-funded projects, might more quickly develop sufficiently detailed knowledge of the major types of geologic formations required for sequestration in the United States.

Most of the industry experts consulted for this report believe that any new clean-energy RD&D program would have to integrate with DOE’s current programs. DOE still would play the key role in support of basic research. Academics argue that new ideas will be critical to help shape the gigantic leap from carbon fuels to low-carbon emissions energy. There is a potential army of graduate students eager to do their doctoral work on such new ideas for clean energy, but funds are needed to