After massive government spending on clean energy via the stimulus package, which will not be repeated, an ongoing debate is emerging around the appropriate role of the government in research and development spending. Today’s GR Energy and Climate Brief looks at the impact of this debate on the field as a whole as well as the specific impacts by technology source, and on investors, innovators, small businesses, and large companies.

In the wake of the unprecedented stimulus spending on clean energy and the fallout from the Solyndra scandal, the government’s role in research, development and deployment has become a central ideological battleground in the budget debate. How this plays out is going to create winners and losers, and could significantly change the role of government in innovation. Today’s GR Energy and Climate Brief looks at the debate over the appropriate role of the government in supporting energy innovation, and how this might change.

Support for Basic Science and Early Stage R&D Remains Strong: One area of political and ideological consensus that remains strong concerns the government’s role in investing in basic and early-stage technology R&D. Republicans have long supported this type of research for both its defense applications as well as its importance to nuclear energy, while Democrats consider it both an appropriate role for the federal government and a source of significant Federal monies for colleges and universities. Both view it as an important mechanism for addressing the lack of financing in early stage basic R&D from the private sector, which does not make these investments because of the low level of expected returns. The key to the strong consensus, according to David Kreutzer of the Heritage Foundation, is that “the further the research is from commercialization, the less likely that the benefits can be privately captured". The majority of funding for basic research comes from the Federal government – 57% in 2008, according to a Joint Economic Committee report. This funding goes to high energy physics, advanced nuclear research, fusion energy, hydrogen, next generation fuels that are well over the horizon, and advanced coal. While Federal funding for basic research has support from both political parties and in the private sector, overall R&D spending has leveled off in recent years. If overall funding for energy innovation decreases, funding for early-stage R&D will likely remain a priority, soaking up a greater percentage of innovation spending. This would be of greatest benefit to technologies that are costly, not near on the horizon, and require large breakthroughs, particularly advanced nuclear, grid-scale storage, micro-energy, and very advanced fuels and batteries.

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