An Innovation Agenda for Hard-to-Decarbonize Energy Sectors | Issues in Science and Technology

Clean energy innovation has bipartisan public support and has proved successful in expanding the use of solar and wind power. Now it’s time to tackle the hard stuff.

Technological innovation is essential for
fighting climate change. In the United States, both political parties actually
agree on this key point, but neither party has yet developed an innovation
agenda that matches the scale and urgency of the climate challenge.

For progressives, the Green New Deal (GND) has
elevated climate change and clean energy as a national priority, prompting
multiple hearings on climate change in the Democratically controlled House and
forcing all major candidates for the Democratic presidential nomination to
develop their own climate policy.

But the GND is silent on the role of innovation.
The resolution offered by Senator Ed Markey (D-MA) and Representative
Alexandria Ocasio-Cortez (D-NY) acknowledges the limits of existing
technologies, using the phrase “to the extent technologically feasible” to
qualify its ambitious emissions reductions goals. But the GND does not diagnose
those limits, nor does it offer a plan to expand what is technologically
feasible through innovation.

Congressional Republicans have responded to the
GND by touting innovation to fight climate change. But their proposals
generally consist of tax cuts or deregulation that would deepen the nation’s
fossil-fuel dependency, possibly coupled with modest increases in funding for
research and development (R&D) for select technologies.

Although neither camp has outlined a
comprehensive innovation agenda, congressional leaders could yet come together
around a grand bargain for clean energy innovation that is both ambitious and
politically viable—if not in this presidential campaign year, then starting in
2021.

Clean energy innovation is overwhelmingly
popular, with polling finding that the vast majority of Americans support
greater investment in clean energy R&D. And lawmakers have already taken
modest, bipartisan steps to advance energy innovation. They boosted funding for
research, development, and demonstration (RD&D) in clean energy, and
supported loan programs for first-of-a-kind projects, including an advanced
nuclear plant and a clean methanol production facility. And they are currently
debating a flurry of bills to create new programs that would accelerate
innovation in energy storage; atmospheric carbon removal; carbon capture,
utilization, and storage (CCUS); next-generation renewable energy; and advanced
nuclear power.

Congress should build on these successes, and
elevate innovation in clean energy as a national priority. Many technologies
that now make major contributions to both US and global energy systems were
created through federal investments and public-private cooperation. Federal
support for shale-gas resource characterization and directional drilling in the
1970s and 1980s led to the boom in production of low-cost natural gas that
helped it supplant coal as the nation’s number one source of electricity
generation. And decades of federal investment in solar power have helped drive
cost reductions to the point where solar power is now the cheapest source of
electricity in parts of the country with good solar resources.

But current funding levels do not match the
urgency and scale of investment needed to put the United States and the world
on a path to net-zero carbon emissions, and there are signs that the clean
energy transition is beginning to stall, just when the nation needs it to
accelerate. The US Department of Energy (DOE) currently invests about $7
billion annually in RD&D, of which about $2.8 billion is in basic research
and $4.2 billion is in applied research. This investment is well below
historical levels—Congress invested nearly $10 billion (in 2017 dollars) in
DOE’s energy RD&D programs when the department was created in 1978—and far
from the level needed to address climate change. Globally, the majority of new
energy demand is being met with fossil fuels, a sure sign that clean energy
remains more expensive than fossil fuels for most applications and in most
parts of the world. And after peaking in 2012, global patent applications in
clean energy have been declining, suggesting that the pace of innovation is
slowing down.

Clearly, more investment will be needed to close
the gap between the current emissions trajectory and a pathway that would take
the United States to a net-zero emissions energy system by midcentury. But more
funding by itself will not be enough. Policy-makers will have to tackle
hard-to-decarbonize sectors of the economy and create new programs that address
gaps in the current federal clean energy RD&D portfolio.

And now for the hard part

The energy innovation agenda of the past 10
years has focused, with considerable success, on reducing the cost and
expanding the use of wind and solar resources for electricity generation. These
trends appear likely to continue. Greater penetration of wind and solar may
result in near-term carbon emissions reductions in the electricity sector
(though their impact could be muted by any loss of carbon-free generation from
closing nuclear plants).

It is now time for policy-makers to expand the
clean energy portfolio to address gaps in the current innovation agenda. In
particular, a recent study published in the journal Science on net-zero emissions energy systems identified three
sources of difficult-to-eliminate emissions that will require fundamental
breakthroughs and greater attention from policy-makers as they seek to develop
low-carbon solutions: firm, dispatchable electricity; hard-to-electrify
transport; and industrial-sector emissions.

Firm, dispatchable electricity. As costs
of electricity from wind and solar are continuing to decline, they are
projected to meet a growing share of electricity demand in the coming decades.
But there are limits to the amount of variable generation from wind and solar
that the grid can accommodate. Nearly all deep decarbonization studies identify
the need for “firm” low-carbon electricity to balance both variability in
electricity demand and variable output from wind and solar. Firm electricity
refers to electricity that can be generated and dispatched as needed in all
seasons and over periods of weeks or longer.

Batteries combined with variable generation may
be able to help manage shorter-term imbalances on hourly and sub-hourly scales,
and the present enthusiasm in the climate and energy communities about systems
that combine lithium-ion (Li-ion) batteries with renewables is understandable.
These batteries can fill in gaps of up to a few hours when the sun is not
shining or the wind is not blowing. But battery storage technologies using
current Li-ion chemistries are unlikely to be able to manage the large weekly
and seasonal variations in generation from wind and solar. For example, in 2017
California experienced 90 days with little to no wind, including 10 consecutive
days in December when output from wind turbines was essentially zero.
Similarly, the solar resource in a California winter is on average less than
half what it is in the summer.

Variability on these timescales has traditionally
been balanced by flexible generation from natural gas power plants. However,
full decarbonization of the electricity system will require low-carbon firm,
dispatchable electricity that can manage variability across all timescales,
from hourly, to weekly, to seasonal.

Hydropower plants with high-capacity reservoirs,
geothermal power, and biomass- and biogas-fueled power plants can all provide
firm, dispatchable low-carbon electricity. But hydropower and geothermal are
constrained by geography and have limits on the total capacity that can be installed
with current technologies. And large-scale reliance on biomass for power
generation competes with other land uses, including agriculture, as well as the
use of biomass for fuels in the transportation and industrial sectors.

Maintaining reliable grid operations will require
new, low-carbon suppliers of firm, dispatchable electricity. Options include
long-duration energy storage that can store large quantities of electricity on
weekly and seasonal timescales; nuclear power plants that are operated flexibly;
and fossil fuel power plants equipped with CCUS technologies.

Hard-to-electrify transport. In the
transportation sector, low-carbon electricity is emerging as a promising
alternative for petroleum fuels for light-duty cars and trucks. Market analysts
project that as the cost and performance of Li-ion batteries continue to
improve, electric vehicles will capture growing shares of new sales for
passenger vehicles. The Electric Power Research
Institute projects that the annualized total cost of ownership for electric
passenger cars and other light-duty vehicles will reach cost parity with
conventional internal combustion engine vehicles between 2020 and 2030.

However, batteries will not be able to replace
petroleum-based fuels in all transportation sectors. Petroleum-based fuels have
both high volumetric energy density (energy per volume) and high gravimetric
energy density (energy per weight), both of which are important for
transporting large volumes of goods or numbers of people. The Li-ion batteries that
enable electrification of light-duty passenger vehicles are several orders of
magnitude away from matching the energy density of current liquid fuels, and
are unlikely to ever meet the performance requirements for aviation, shipping,
and long-distance road transport.

Instead, air travel, shipping, and long-haul
trucking will likely continue to rely on liquid fuels for the foreseeable
future. Biofuels may offer a lower-carbon bridge to a net-zero transportation
system, but they are not carbon-neutral themselves. The fertilizer used to grow
energy crops, the energy used to harvest and transport crops to a biorefinery,
the energy used to drive the biomass conversion process, and the fermentation
of biomass all result in net-positive greenhouse gas emissions, which are
themselves difficult if not impossible to completely remove.

Eliminating emissions from air travel, shipping,
and long-haul trucking will therefore require carbon-neutral fuels. Hydrogen
produced from water electrolysis (using carbon-free electricity from renewables
or nuclear power), synthetic fuels made from ambient carbon dioxide, and
carbon-neutral ammonia are all possible solutions.

Industrial-sector emissions. The
industrial sector is especially challenging to decarbonize, due to two sets of
emissions sources that are difficult, if not impossible, to eliminate using
existing technologies.

First, the high-temperature heat used in many
industrial processes is primarily generated by combusting fossil fuels.
Calcination of limestone to make cement requires temperatures of roughly 2,500
degrees Fahrenheit, melting iron ore to produce steel requires roughly 2,200
degrees, and steam cracking to produce ethylene, a key feedstock for plastics
and other petrochemicals, requires roughly 1,500 degrees—and all use fossil
fuel combustion to generate the high temperatures. There are few low-carbon
options capable of generating heat at these temperatures. Electrification of
heat can be used for lower-temperature applications, such as washing and
sterilizing, but electrification of high-temperature heat, generally considered
anything over 750 degrees Fahrenheit, poses cost and technical barriers, and
may require significant changes to industrial processes.

Second, “process” or “feedstock” emissions result
directly from industrial processes and are independent of the source of energy
used to drive the process. For example, the calcination of limestone to make
cement releases carbon dioxide directly, regardless of the source of energy
used. Fermentation of corn to produce ethanol also releases carbon dioxide. And
ammonia production, which uses natural gas as a feedstock, results in direct
emissions of carbon dioxide. Because these emissions are the result of chemical
transformations and are independent of the energy used, they cannot be
eliminated by switching to low-carbon energy sources.

Carbon capture, utilization, and storage may be
the only option for mitigating these types of process emissions. Hydrogen
produced from electrolysis of water using zero-carbon electricity (or other
carbon-neutral fuels) could be combusted to generate high-temperature heat.
Additionally, some advanced nuclear concepts operate at higher temperatures
than the current light-water reactor designs, and could provide heat for some
industrial processes.

Technology for hard-to-decarbonize sectors

These three hard-to-decarbonize sectors are not
sufficiently represented in the federal energy RD&D programs, and
constitute gaps in the federal clean energy innovation agenda. To fill these
gaps, I propose six key areas for expanded federal investment. In many cases, a
single technology can address more than one set of hard-to-decarbonize sectors.

Long-duration
grid storage.Technologies that
can store large quantities of electricity from daily to seasonal timescales
could enable variable renewables to provide firm, dispatchable low-carbon
electricity year-round.

But current RD&D programs at the Department
of Energy and the Department of Defense focus primarily on short-duration
(hourly) storage across a limited range of technologies. To accelerate
innovation in long-duration grid storage, policy-makers will need to establish
new R&D programs across a diverse portfolio of alternatives—such as flow
and liquid-metal batteries, thermal storage, and new approaches to pumped
hydropower storage—so viable options are available when Li-ion batteries reach
their limit. Additionally, policy-makers will need to help promising
technologies make the transition between lab-scale prototype and
first-of-a-kind commercial demonstration, and between demonstration and
widespread deployment.

Energy storage enjoys broad support within the
administration and across both parties. But current proposals to stimulate
innovation lack the appropriate scale of ambition or pursue a limited set of
technologies. The administration under DOE Secretary Rick Perry has proposed
new crosscutting storage initiatives in the past two budget cycles—the Beyond
Batteries initiative in 2019, and its successor, the Advanced
Energy Storage Initiative in 2020—that have done a good job of identifying
connections across the technology silos to enable greater synergies.
Additionally, Congress has begun debating investment in tax credits for
storage, and the Senate Energy and Natural Resources Committee at its June 2019
hearing examined grid-scale energy storage options. But long-duration storage
will need a broader coalition of supporters and a sustained commitment from
Congress—likely for more than a decade—to realize its potential role in
decarbonizing the nation’s energy system.

Advanced
small modular nuclear reactors. Nuclear power accounts for 20% of US
electricity generation and still produces more carbon-free electricity than
hydropower, wind, and solar combined. However, the development of nuclear
technologies has stagnated, and nuclear power capacity has not grown in
decades. High construction costs, site-specific designs, and inflexible grid
operations make the current large-scale baseload model a poor fit for the
electric grid of the future. New small modular designs can lower upfront
capital costs, provide more flexible grid operations, and, it is hoped, enable
the cost reductions from economies of replication that most technologies see
with greater levels of deployment.

To jump-start innovation in nuclear energy,
policy-makers should prioritize advanced small modular reactors with
standardized designs and lower capital costs, and should commit to the
demonstration of at least one advanced reactor concept at commercial scale. The
federal government should also provide the research infrastructure that can
unlock private-sector innovation, such as the construction of a versatile test
reactor user facility that will enable private companies to assess their
structural materials and fuel designs in a reactor environment. Finally, the
federal government should expand the nuclear research portfolio to include
other applications (beyond electricity generation) for nuclear energy,
including providing high-temperature heat for industrial processes such as
hydrogen production and desalination.

The political outlook for many of these reforms
is favorable. During the past budget cycle, the administration proposed a new
R&D program focused on advanced small modular reactors, which Congress
funded at $100 million in its 2019 budget. And a bipartisan group of 19
senators, led by Energy and Natural Resources Committee chair Lisa Murkowski
(R-AK) and Ranking Member Joe Manchin (D-WV), recently introduced the Nuclear
Energy Leadership Act, which adopts many of these proposals. However, the role
of nuclear energy in addressing other hard-to-decarbonize sectors, such as
carbon-neutral fuels production or heat for industrial processes, has received
less attention from lawmakers. And of course, lawmakers will have to find a
political and technical solution for safe geologic storage of used nuclear fuel
in order to ensure that nuclear energy remains a viable option in a low-carbon
future.

Carbon
capture, utilization, and storage. By capturing the carbon emissions from
fossil fuel combustion for subsequent use or sequestration, CCUS technologies
have the ability to turn fossil fuels into low-carbon energy sources, enabling
coal and natural gas power plants to provide low-carbon firm, dispatchable
electricity. CCUS is also currently the only option for decarbonizing many
industrial processes—such as the production of ethanol, fertilizers, plastics,
cement, and steel—for which low-carbon alternatives do not exist.

Current CCUS programs focus primarily on
coal-fired power plants. Policy-makers should now turn their attention to other
sources, and should prioritize carbon capture demonstrations at natural gas
power plants and cement and steel production facilities, to address the technical
challenges unique to each type of operation. Research to turn captured carbon
into fuels, building materials, plastics, and other products would expand the
market for carbon dioxide, essentially turning carbon dioxide emissions into a
valuable product. And DOE should continue to support geologic storage of carbon
dioxide in saline aquifers and depleted oil and gas fields.

Support for CCUS technologies is growing. Members
of Congress from states with large fossil fuel deposits are increasingly coming
to view carbon capture as a means of enabling the continued use of fossil fuels
in a low-carbon energy system. On the political left, skepticism about CCUS is
thawing, as prominent scientific bodies (such as the Intergovernmental Panel on
Climate Change) and respected nongovernmental organizations (such as the World
Resources Institute, Clean Air Task Force, and Center for Climate and Energy
Solutions) view CCUS as an essential part of a balanced mitigation strategy.
The result has been bipartisan legislation such as the USE-IT Act, the EFFECT
Act, and the LEADING Act, which would expand federal programs in carbon
capture, utilization, and storage. Though a positive sign, current proposals
are piecemeal, and they omit key industrial sources such as cement and steel
production that cannot otherwise be decarbonized.

Carbon-neutral
fuels. Fuels such as hydrogen, ammonia, and synthetic hydrocarbons that are
made using energy from renewables or other low-carbon energy sources could play
a role in multiple hard-to-decarbonize sectors. Hydrogen made from splitting
water with excess renewable electricity can be stored and converted back to
electricity when needed, providing a form of long-duration electricity storage.
It can also be combusted to provide high-temperature heat for industrial
processes. Synthetic hydrocarbons made from carbon dioxide captured from the
air can be used as transportation fuels in conventional engines. And
ammonia—already synthesized in large quantities for fertilizer use—can be used
as a fuel in combustion turbines or fuel cells.

Until now, DOE’s clean fuels program has focused
primarily on fuel cell electric vehicles that use hydrogen. But plummeting
battery costs have made battery electric vehicles the most promising technology
for decarbonizing light-duty cars and trucks. Policy-makers should shift their
focus to applications of carbon-neutral fuels for which batteries are
ill-suited. In the transportation sector, this includes aviation, shipping, and
long-distance road transport. In the industrial sector, this includes using
carbon-neutral fuels as a source of high-temperature heat for industrial
processes. On the production side, policy-makers should expand existing
programs beyond hydrogen to develop low-carbon processes for manufacturing ammonia
and synthetic hydrocarbons.

But carbon-neutral fuels have not yet received
much attention from the administration or from Congress, and are unlikely to be
widely available in the near future. Support for such fuels, however, does not
appear to be politicized, so it may be possible to build bipartisan support for
more investment in R&D. The biggest challenge may be that policy-makers
will associate hydrogen, the most well-known carbon-neutral fuel, exclusively
with hydrogen fuel cell electric vehicles and write it off as a technology that
has not lived up to its potential. Climate and clean energy advocates will have
to continue to make the case to policy-makers and the public about the need for
these fuels in addressing hard-to-decarbonize sectors.

Carbon
dioxide removal. Carbon dioxide removal refers to a suite of technologies
and processes that remove carbon dioxide directly from the atmosphere for
subsequent use or storage. Carbon removal is distinct from CCUS and other
conventional mitigation approaches because it removes carbon dioxide that is
already in the atmosphere, rather than preventing the gas from being emitted in
the first place. Approaches range from technologies that capture carbon dioxide
directly from the air to natural solutions such as no-till agriculture that
increase the carbon dioxide absorbed in soils.

As greenhouse gas emissions have continued to
climb, awareness of the need for carbon removal is growing. Indeed, the most
prominent strategies for emissions reductions depend on the large-scale
deployment of these as-yet-unproven technologies for meeting these targets. And
even the most stringent emissions reductions scenarios cannot remove non-carbon
dioxide greenhouse gases (e.g., methane and nitrous oxide) from
hard-to-decarbonize sectors such as agriculture. Atmospheric carbon removal
will be necessary to counter such emissions.

Carbon removal technologies are far from
commercial, and current public investment in carbon removal RD&D is small
and sporadic. Congress will have to establish new programs across multiple
federal agencies to address all R&D needs. In October 2018, the National
Academies released a detailed RD&D agenda for carbon removal, providing
guidance to policy-makers as they seek to develop new federal programs. The
USE-IT Act and EFFECT Act bills that would expand RD&D in CCUS would also
create new programs in direct air capture and bioenergy with carbon capture and
storage. However, no proposals encompass the full suite of carbon removal
approaches at the funding levels recommended by the National Academies. A
comprehensive carbon removal program will require an interagency program that
builds on the skills and resources of multiple federal agencies, including DOE,
the Department of the Interior, the Department of Agriculture, the
Environmental Protection Agency, the National Science Foundation, and other
supporting agencies. The new interagency program—perhaps modeled after the
National Nanotechnology Initiative—should be structured to address all carbon
removal needs.

Basic
energy sciences. Each technology mission requires fundamental advances in
basic energy sciences. Better catalysts can lower the energy requirements for
hydrogen and ammonia production. New solvents and membranes could make carbon
capture—whether from power plants or directly from the atmosphere—cheaper and
more efficient. New battery chemistries will be needed to improve the energy
density and storage duration of batteries. Mission Innovation—an international
consortium of 24 countries and the European Union aimed at accelerating clean
energy innovation—recognizes the importance of fundamental research, and has
identified the discovery of new clean energy materials as one of its core
“Innovation Challenges.” Just as the basic science research conducted decades
ago is beginning to transform energy systems of today, investment in basic
science today is needed to seed new technologies and create new options for the
energy systems of the future.

But the political outlook for greater investment
in use-inspired basic research is mixed. Support for basic research spans the
political spectrum, but increases in the past few decades have mostly gone to
biomedical research at the National Institutes of Health and the broad academic
portfolio of the National Science Foundation. The uncertain payoffs and long
lag-time between fundamental research and technology breakthroughs make it
challenging to draw a connection between basic research in energy-related
sciences and reducing greenhouse gas emissions.

Beyond RD&D

Accelerating energy innovation requires a suite
of policies acting together across the innovation spectrum. For technologies
that are far from commercialization, public investment in basic and applied
research and technology development is necessary to improve the performance and
drive down the cost of emerging technologies to the point that entrepreneurs
and corporate R&D units jump in.

As technologies mature, successful demonstration
at commercial scale may be necessary to establish cost, reliability, and
performance characteristics and provide confidence to more risk-averse
investors and the public that the technology works as intended. Additional
tools such as loan guarantees for first-of-a-kind commercial projects,
time-limited tax incentives, and clean energy standards tend to incentivize
greater private-sector investment to commercialize technologies, which in turn
should push them further down the cost curve. Tax-advantaged structures such as
master-limited partnerships (combining aspects of publicly traded companies and
private partnerships) and private activity bonds (which are tax exempt but may
support projects carried out by private entities) can give innovative companies
access to low-cost capital. The Export-Import Bank can help expand markets for
domestic technologies overseas.

The dramatic cost decline in solar photovoltaic
(PV) technologies offers a classic example of smart public policy in
accelerating innovation, and the synergistic interactions between public and
private investment. In the 1970s and 1980s, government and university R&D
was responsible for most of the performance improvements and cost reductions in
solar PV modules. The nascent solar industry was supported by the emergence in
the public sector of niche applications—primarily for use in satellites—at NASA
and the Defense Department that were relatively insensitive to cost. As the
technology matured and the solar industry expanded, “market pull” policies such
as tax incentives, net metering, feed-in tariffs, and state portfolio standards
helped expand the market for solar and also incentivized greater private-sector
investment. In 2011, DOE provided loan guarantees to the first five
utility-scale solar PV facilities larger than 100 megawatts. Greater deployment
has enabled the solar industry to take advantage of economies of scale and
learning-by-doing, driving further cost reductions. The combination of
technological innovation, market-expanding policies in the United States and globally,
and China’s subsidies for solar manufacturing have driven a 99% decline in the
cost of solar PV over the past four decades.

The solar example serves as a guide for how to
accelerate innovation in other technologies. Public investment in R&D is
essential, but it’s not enough. The nation will need multiple policies acting
in tandem across the entire innovation system to help emerging clean
technologies reach commercial scale. This is especially the case for the
hard-to-decarbonize sectors where the emissions challenges cannot be solved by
today’s technologies, however affordable they may become.

Even in today’s political climate, innovation
policy offers the potential for bipartisan action. Legislators of both parties
recognize that innovation can be a win-win-win: it drives down energy costs for
consumers and businesses, enables domestic clean energy companies to compete in
the rapidly growing global clean energy sector, and reduces the greenhouse gas
emissions that cause climate change. The challenge now is to launch a
comprehensive innovation strategy that is appropriately scaled to the urgency
of the climate challenge, fills gaps in the clean energy portfolio while
building on current successes, and makes use of the full suite of policy tools
at the government’s disposal to accelerate innovation.