Energy R&D slowdown: The stimulus bill will boost public-sector spending on energy research and development, which has been on the decline for decades.
Beyond helping companies in the energy sector survive the recession, the stimulus bill could–supporters hope–jump-start fledging technology sectors such as the smart grid, the effort to modernize the electricity infrastructure so that energy can be distributed more cost-effectively and used more efficiently. Federal spending on an improved power grid could, in turn, increase industry’s spending on electric vehicles and renewable power, advocates argue. And it will begin to spur further investments in improving the electric grid. The $4.5 billion that the legislation devotes to smart-grid technology is barely enough for one utility to build up its transmission system, says Martin Fleming, IBM’s vice president of corporate strategy. However, he says, by “providing incentives for the progress to begin,” the bill could give smart-grid technology the market momentum it needs to survive when the incentives go away.
Indeed, what happens when the stimulus spending ends will largely determine the bill’s real impact on technology. The danger, of course, is that while the federal dollars could help renewable-energy companies survive the recession, they could also prop up existing technologies that would not be competitive in an open market. Not only could the federal spending support uneconomical energy sources (as has been the case with ethanol), but the resulting backlash could discourage policy makers, investors, and the public from embracing newer, more efficient technologies. As the stimulus runs its course in two to three years, pressure to reduce the federal budget and cut government spending could make such a backlash even worse.
One renewable sector that could be particularly vulnerable in such a scenario is the solar industry. Photovoltaics “still have a way to go on the learning curve,” says Henry Lee, director of the Environment and Natural Resources Program at Harvard’s Belfer Center for Science and International Affairs. Not only are they still too expensive, but researchers need to develop longer-lasting, more efficient solar cells that can handle higher voltages. Though Lee is encouraged by the stimulus bill’s emphasis on solar and wind energy, he fears that by funding the construction of extensive solar capacity using existing photovoltaic technology, it could distract attention from the effort to improve renewables. “What you want to stimulate is learning to build better wind turbines and solar collectors,” says Lee. Instead, he says, much of the funding is focused on “how many windmills and solar panels you can erect.”
By the end of this year, Congress is likely to debate–and perhaps pass–ambitious legislation that will, like the stimulus package, help redefine the economics of energy technology for decades to come. While the specifics are still being considered, the legislation is likely to introduce a cap-and-trade program to set pricing for carbon-based energy sources, establish nationwide standards for renewable electricity, and provide provisions to modernize long-distance electricity transmission systems. In such a context, the stimulus bill is just one part of a larger energy agenda that will, arguably, be the most important change in technology policy for a generation.
Such laws could help address global warming. But few energy experts believe that renewable technologies will be reliable and cheap enough to replace fossil fuels on a large scale anytime soon. Electricity produced by existing solar technologies is likely to remain relatively expensive. Advanced biofuels are also too expensive, and they’re years away from significantly cutting into gasoline consumption. Overhauling the electricity grid will take years, cost at least a hundred billion dollars, and require new storage technologies in order to be fully effective. In testimony before Congress this March, Secretary of Energy Steven Chu stressed the importance of finding “transformational technologies” in all these areas. He noted, among other things, the need for “photovoltaic solar power that is five times cheaper than today’s technology.”