The American Interest
Analysis by Walter Russell Mead & Staff
Is Anyone Funding US Energy R&D?

Yesterday the Financial Times reported that in the energy sector neither private firms nor the government are spending as much on R&D as is spent in other tech-reliant industries:

US Energy firms reinvest less than 1 per cent of revenues in research, development and demonstration. In contrast, sectors such as IT, semiconductors and pharmaceuticals typically reinvest 15 to 20 per cent of turnover in RD&D and product development. . . .

US federal RD&D spending on energy . . . has typically been in the range of $4bn-6bn a year—a modest sum compared with the $19bn a year spent on Nasa and the $33.5bn each year put into health research, primarily through the National Institutes of Health.

Private energy companies might have good reasons for this, given how capital-intensive and painstaking developing new projects can be. But why should the government spend three to five times more on NASA than it does on energy research?

The Obama administration will tell you that the U.S. government is spending a lot on energy, especially on renewable energy. The problem is that rather than funding research they’re propping up nascent green technologies. According to an Energy Information Agency report, in fiscal year 2010 direct expenditures (subsidies for new wind farms and solar plants) and tax breaks made up 83 percent of renewable energy electricity production funding. Just 9 percent went to research and development. These subsidies lend themselves to crony capitalism and fiascos like the Solyndra bankruptcy, and they waste money that could otherwise fund the research to make green tech competitive on its own.

Just as fracking and horizontal drilling, the technologies that gave us the shale energy boom, were developed with the help of significant government research dollars, the next big, disruptive energy breakthrough may be delayed if vested interests manipulate green concerns to push for subsidies for inefficient tech at the expense of new energy R&D.

Published on January 29, 2013 5:47 pm