American energy innovation’s big moment

T THE OPPORTUNITY greening the covid-19 recovery has been squandered. A new analysis of more than $14 trillion in pandemic stimulus, injected by 19 countries and the European Union, finds that just 6% went to programs likely to cut emissions. The United States fared particularly poorly: Hardly any of its $6 trillion splurge was climate-friendly. Perhaps the best that can be said of the catastrophe in Ukraine is that the energy crisis that followed has provided an opportunity to reverse that failure.

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The first answers, it is true, have been somewhat discouraging. As European countries look for substitutes for Russian oil and gas, short-term solutions are the need of the hour, leading to higher oil prices and likely higher oil and gas production. The Joe Biden administration, which has billed itself as the greenest in history, is urging growers to drill, baby, drill. Meanwhile, his trademark climate politics is tangled up in Congress. Biden spoke about both diabetes and climate change in his recent State of the Union address. However, there are also reasons for hope, especially in the United States.

Its cleantech sector is bubbling. The administration used one of the world’s largest energy talks, held in Houston this month, to broadcast its call for more hydrocarbons. Less publicized, notes Daniel Yergin, an energy guru and one of the WAXorganizers of the week, was the fact that the energy innovation section of the summit drew more crowds than the main event. Cleantech attracted more than $87 billion of investment from venture capital and private equity firms in the year to June 2021 alone. And there is little expectation, even as interest rates rise, that the boom fade away It is being driven by three forces that seem most likely to grow: society’s fear of climate change, long-term corporate commitments to decarbonization, and the underestimated impact of astute legislation.

The latest includes the bipartisan Energy Policy Act of 2020, which greatly expanded the Department of Energy’s role in research and development, and the Infrastructure Act of 2021, which amplified that effort. The climate components of the stalled Build Back Better bill are better known and, indeed, essential to Mr. Biden’s time frame for decarbonizing the economy. However, they are largely dedicated to accelerating the deployment of mature technologies such as solar and wind power. The two previous laws focused more on the development of innovative technologies on which most of the world’s decarbonization effort will depend.

The Department of Energy, until now best known for watching over the country’s nuclear weapons, has been restructured for the task. One of its undersecretaries has dedicated himself to innovation. Among its new cleantech programs are three climate “Earth-shots,” the first of what appears to be a promising series. One aims to reduce the cost of hydrogen production by 80% in a decade; another to reduce the cost of network storage by 90%; and a third to develop affordable ways to absorb carbon from the atmosphere.

Skepticism about how far such efforts will go is warranted. The department’s network of 17 national laboratories has always been excellent. Yet America’s record in commercializing its inventions is abject. Having invented photovoltaic cells, the United States let Japan, Germany and then China, where more than 70% of the panels are now made, bring them to market. Having poured public money into electric vehicles, especially after the 1973 oil crisis, he allowed Japanese, Chinese and European companies to market them.

The problem, suggests Nikos Tsafos of the Center for Strategic and International Studies, is that while politicians share an almost ideological belief in America’s genius for innovation, those on the right, especially, struggle to understand that it is as much about deployment as inventive. Implementing clean technology quickly requires two things that the United States still mostly lacks. One is a national climate policy to increase the cost of pollution, thus creating demand. The other is an industrial policy sufficient to boost supply.

The optimistic case for the energy crisis is that it could help deal with these two shortages. It is already driving European demand for American clean technology. And it could possibly persuade Congress to spend more political and public capital on accelerating America’s ability to meet that demand: more urgently by passing the climate parts of Build Back Better; and thinking more creatively about industrial policy in the bills being drafted by members of both parties.

In Eastern Europe, fear of Vladimir Putin had made the energy transition a geopolitical imperative even before he invaded Ukraine. Poland and Romania are among the countries most interested in small modular nuclear power plants, an unproven technology that US companies are experimenting with. The war has made his promise of faster, cheaper and safer nuclear power seem more attractive, and the current leaders in nuclear technology, Russia and China, less attractive. Even as Germany and others make hasty plans to invest in new fossil fuel infrastructure, they also promise to retrofit it to non-fossil alternatives. By committing to build two new LNG import terminals, for example, Olaf Scholz, the chancellor of Germany, suggested that they would later be converted to green hydrogen, another potential US strength.

Having exhausted all alternatives…

This represents a clear opportunity to connect the world’s most advanced clean technology with the continent’s most advanced climate policies. The Biden administration claims to be seized by her. “The whole government now wants to speed up the energy transition on the basis of energy security as well as climate,” says one of its leading members. “Even foreign policy pundits, who don’t usually talk about climate change, are obsessed with it.”

The question is whether at least some of the spirit will emerge in Congress. Don’t hold your breath. But don’t rule it out either. National security, supply chain, energy, and climate policies are constantly changing, deeply interconnected, and capable of inspiring surprising coalitions even there.

Read more from Lexington, our columnist on American politics:
The Shameful Mrs. Thomas (March 19)
The Indispensable Leadership of Joe Biden (March 12)
The end of Putin’s delirium (March 5)

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This article appeared in the US section of the print edition under the headline “The Big Moment in Energy Innovation.”

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