ROI, not IOU: Why federal investments in energy technologies will grow our economy

February 23, 2011 |

Digest columnist and ABO executive director Mary Rosenthal

By Mary Rosenthal, Executive Director, Algal Biomass Organization and Digest columnist

Last week, the White House presented its proposed budget for the 2012 fiscal year to Congress, and now the debates, the negotiations and the flip charts are out in full force across the Beltway. For good reasons, the need for fiscal restraint and reducing the deficit has dominated the national conversation.

But as members of Congress debate our fiscal future, I hope they recognize that targeted investments in clean energy technologies like advanced biofuels, including those derived from algae, will grow our country’s economy, foster the creation of new industries, create tens of thousands of jobs in the United States and in doing so, help reduce the nation’s budget deficit.

New technologies, new jobs, new industries

We need to draw a careful distinction between government spending and public investments in emerging technologies such as advanced biofuels that result in long-term economic returns. As a recent bi-partisan study on energy policy authored by experts from the American Enterprise Institute, Brookings, and the Breakthrough Institute put it, “Not all federal programs should be painted with a broad, deficit-cutting brush.”

Studies show there is a clear return on investment (ROI) in technology to the tax base and the national economy. The Nobel Prize-winning economist Robert Solow showed that more than 80 percent of growth in the first half of the 20th century was driven by advances in technology . More recent economic analyses have found that the same held true for the second half of the twentieth century. Whether in biotechnology, satellite technology, nuclear energy, or the internet, technological advances supported by public investment in RD&D have been the force behind the creation of entire industries and economic growth. And economic growth is one of the great deficit reduction tools we have at our disposal.

While the need for the nation to tighten its fiscal belt is real, it’s important we take the long view and recognize that federal investments in emerging forms of technology have driven innovation in countless industries over the last century. The ROI on these investments has been astounding, to say the least. It will be the same with algae-based energy.

Supporting energy technology innovation

The White House’s recently released 2012 budget is a promising step in that direction. The proposed Department of Energy (DOE) budget includes, among other important components, more than $8 billion for clean energy research, development and deployment (RD&D), establishes three additional DOE innovation centers, and provides $550 million to cutting-edge energy programs at the Advanced Research Projects Agency-Energy (ARPA-E). ARPA-E is working on advances in growth and extraction technologies for algae-based biofuels, among other promising clean energy technologies.

The budget would also remove billions of dollars in tax breaks for fossil fuels – a much-needed step if the government is serious about providing a balanced approach to supporting energy production. While all budgets are subjects to trade-offs and compromise, it reflects the important recognition that targeted investments in clean energy innovation will create jobs and provide a sustained source of economic growth.

RFS, RD&D, DOA?

Despite the long-term benefits, some in Congress want to slash spending on renewable energy RD&D. Numerous members of the House have offered amendments to the continuing budget resolution that, in total, would significantly curtail the ability of the federal government to accelerate the commercial deployment of advanced biofuels and provide balanced support to energy in the United States. In particular, two elements of their proposals would be devastating to the advanced biofuels industry.

They would eliminate the Department of Energy’s crucial loan guarantee program. Two sections of the House continuing resolution would eliminate the Department of Energy’s (DOE) Loan Guarantee Program for clean energy, which is in

the process of being reformed to apply more fully to biofuels producers. Elimination of this program would jeopardize the future of 31 existing clean energy projects that, during construction and operation, would employ more than 35,000 people.

They would block implementation of the Renewable Fuels Standard (RFS2). Pending legislation would block the Environmental Protection Agency (EPA) from setting 2012 levels, effectively stalling implementation of RFS for at least one year. This approach could become the boilerplate for eventually killing the entire program.

This penny-wise, pound-foolish approach would negate the tremendous progress and bi-partisan work that has been done to create a thriving domestic fuels industry. I will be asking our members to contact their Congressional representatives and voice their opinions about the cuts to these programs.

Innovation in algae is creating jobs and a whole new industry

The algae-to-biofuels industry is an instructive example of how federal support for RD&D can lay the foundation for the creation of entirely new industries that drive economic growth.  With numerous commercial-scale facilities coming online in the next two years, algae-based biofuels are being scaled up around the country. And that means job growth: by 2022, the industry could be supporting more than 220,000 direct and indirect jobs.

Much of the exciting progress towards wide-scale deployment of algae-based technologies owes its genesis to earlier federal investments in RD&D, including those through the DOE’s 18-year-long Aquatic Species Program. That important and innovative program paved the way for the companies, jobs and economic growth that our industry is creating today.

Just as important, ongoing research and development and financial support by the DOE, the national labs, and the USDA have been instrumental in spurring innovating in the industry and hastening the introduction of these technologies into the market. And several of our members are currently developing commercial-scale production facilities with the support of DOE and USDA programs, including loan guarantees, along with private capital.

In San Diego – one of the country’s centers for algae-to-biofuels RD&D – a program called the EDGE Initiative is training and inspiring new advanced biofuels and algae-for-energy innovators and ensuring that the region’s bourgeoning biofuels industry has access to a highly trained, world-class workforce. Funded through the state of California and the Federal Workforce Investment Act, the training program is being developed by the San Diego Center for Algae Biotechnology, with cleanTECH San Diego helping to integrate the program with the region’s commercial biofuels sector.  The program is training the next generation of algae leaders, including technicians, Ph.D.-level researchers and scientists, and engineers – jobs across the value chain.  The people and intellectual capital being invested in now in San Diego will be drivers of innovation and job growth in the future.

Historic opportunity

Federal investments in science and technology research, development and deployment have been a key long-term driver of national prosperity for the last 75 years. Clean technology RD&D, including in the next-generation of biofuels, can help create new industries and new jobs for the next 75.

I hope that Congress seizes this remarkable and indeed historic opportunity to invest in clean energy technologies and lay the foundation for a new era of economic growth and job creation. That is an opportunity we cannot afford to miss.

Mary Rosenthal is the Executive Director of the Algal Biomass Organization. Follow her on Twitter at www.twitter.com/AlgaeExec, or e-mail her at [email protected]

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