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Innovation Policy Blog

Innovation Policy Blog

The Innovation Policy Blog features pragmatic ideas from some of today's most distinguished thought leaders about innovation's crucial role in our economic, social and political…

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Renewable Energy Must Look to Natural Gas for Guidance

Natural gas is now tied with coal as the United States’ top source of electricity. It’s a milestone that caps a historic upheaval in the energy industry. Natural gas did what renewable energy has been trying to do on and off for almost four decades. And it did so by winning the race to cost and performance competitiveness: natural gas is cheaper and of equal performance to coal and renewable energy is simply not. For climate and renewable advocates, the rise of natural gas should be more than just the next fossil fuel boogeyman or a short-term cut in greenhouse gases – it should play the role as model for making renewable energy the dominant source of electricity in America (and the world).

Natural gas is just the latest in a long history of the government supporting and investing in breakthrough technologies. Sustained federal government support since the 1970s has proven essential to the industry being able to tap into shale gas with new drilling techniques and technologies. The Breakthrough Institute, a non-partisan think tank, released a study on this very subject last year detailing how decades of government investments in R&D, tax credits, and public-private partnerships made today’s natural gas boom possible. The Associated Press finally picked up the story this week and observes that the Department of Energy invested roughly $137 million in gas research over three decades and that the federal tax credit for drillers constituted $10 billion between 1980 and 2002.

Of course, this is counter to the narrative developed by some that the shale gas revolution is a triumph of the free market. A recent blog post by the American Enterprise Institute’s (AEI) Mark Perry, for example, insists on solely crediting “market forces” for the revolution. Another by AEI’s Steven Hayward characterizes it as occurring “away from the greedy grasp of Washington.” And IER’s Daniel Simmons in this very blog series perpetuates this narrative. The fact is even stakeholders in the shale gas industry recognize that the government was crucial to the natural gas boom happening at all. “[The Department of Energy (DOE)] did a hell of a lot of work, and I can’t give them enough credit for that,” notes geologist and former Mitchell Energy Vice President Dan Steward. “DOE started it, and other people took the ball and ran with it. You cannot diminish DOE’s involvement.”

It’s also counter to the narrative by many that renewable energy is ready for primetime and all that’s needed is more deployment incentives. Unfortunately, renewable energy is not cost-competitive with fossil fuels in most circumstances without significant government subsidy and won’t be without more innovation. Nor is it a mystery as to what kinds of renewable energy innovations are needed. “We need to invent new energy technologies. As one example, we can’t store energy worth a damn at the moment,” Nathan Myhrvold noted earlier this year. “We need higher efficiency in solar. We need new kinds of nuclear technology…We need lower cost for all of these things. It would be nice if carbon capture and sequestration would work — unclear how well it does, since it has never been tried at scale. So there is a lot of energy invention to do.” Fostering those innovations, however, will require the same kind of government policies that proved so successful in the case of natural gas: government R&D, public-private partnerships, smart deployment incentives that support emerging technologies, assistance with technology testing and demonstration, and the like.

Taking the long-view, the most important role for natural gas is to be a useful example for renewables to follow. Natural gas is becoming the dominant source of electricity in America because dedicated public support for innovation created cheap new technologies. The same is needed for renewable energy if we are to see a second historic upheaval in the energy industry over the next decade.

By. Clifton Yin and Matthew Stepp


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