The Problem
Following the research and development phase, new energy technologies are real-world tested in the demonstration phase, which analyzes performance and explores commercial viability. Demonstrations are both costly and fraught with uncertain outcomes, and private industry routinely limits investment in this phase, which stymies potential innovations before they enter the marketplace.
The Proposal
A new Energy Technology Corporation (ETC)—an independent board–led government entity that would select and manage demonstration projects for a ten-year period—would address this market failure. With one-time funding of $60 billion, the ETC would (1) conduct an open competition to identify promising energy technologies for demonstration and (2) finance the difference between project costs and anticipated market revenues. The resulting technical, economic, and environmental outcomes would be widely disseminated to promote investment, adoption, and further innovation.
Abstract
Energy innovation is critical to solving many of the energy and environmental challenges we face today, from reducing the risks of climate change to lowering the costs of alternative energy sources. While there is no shortage of ideas that could be a part of our energy future, a major obstacle stands in the way of implementation: proving that these good ideas actually work and are, therefore, worth an investment. The private sector underinvests in technology demonstration because of the expense and uncertainties involved; at the same time, previous demonstration programs carried out by the Department of Energy have met with mixed results. This paper proposes a series of best practices for government support of U.S. technology demonstration and a new institution, the Energy Technology Corporation, that would be responsible for managing and selecting technology demonstration projects. A well-designed technology demonstration program carried out by an organization with the appropriate authority, tools, and expertise would go a long way toward accelerating the process of energy innovation.
