A DOE Review--What’s Working, What’s Not

December 2011 / January 2012 Volume 9 Number 6

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As recommended by the report of the President’s Council of Advisors on Science and Technology, the Department of Energy recently completed the first of its Quadrennial Technology Reviews.  This Review is intended to provide a framework for understanding, discussing and establishing energy technology priorities  and for advancing those priorities through the federal budget process.   Through the review of its own programs, DOE offers a look into areas in which federal programs are strong, as well as areas in which it suggests that the country is underinvested. A summary follows.

Access to clean, affordable, secure and reliable energy has been a cornerstone of  America’s economic growth. The nation’s systems that produce, store, transmit and use energy are falling short of  U.S. needs. Maintaining energy security, bolstering  U.S. competitiveness and mitigating the environmental impacts of energy are long-standing challenges. Governments, consumers and the private sector have worked for decades to address these challenges, yet they remain among the nation’s most pressing issues. President  Obama has articulated broad national energy goals for reducing U.S. dependence on oil, reducing pollution and investing in research and development for clean-energy technologies in the United States to create jobs. These include:
• Reducing oil imports by one-third by 2025.
• Supporting the deployment of 1 million electric vehicles on the road by 2015.
•Making non-residential buildings 20 percent more energy efficient by 2020.
• Deriving 80 percent of America’s electricity from clean-energy sources by 2035.
• Reducing greenhouse gas emissions by 17 percent by 2020 and 83 percent by 2050, from a 2005 base.
In response to the Report to the President on Accelerating the Pace of Change in Energy Technologies Through an Integrated Federal Energy Policy by the President’s Council of Advisors on Science and Technology, the Department of Energy has carried out its first Quadrennial Technology Review (QTR). The review sought to define a simple framework for understanding and discussing the challenges the energy system presents; establish a shared sense of priorities among activities in the department’s energy-technology programs; and  explain to the department and its stakeholders the roles that DOE, the broader government, the private sector, the national laboratories, academia and innovation itself play in energy transformation. This is a report on that review.

One of the remarkable facts about energy technology is that there are often many different technical approaches to solving the same problem—and more are being proposed every day. While a testament to the power of human ingenuity, there is a basic, practical problem: because we have limited resources and urgent problems to solve, how do we choose which subset of these many approaches to pursue? Private venture capital and corporate R&D laboratories face this question every day—it is of equal importance for government-led  technology development.
The QTR has been, at its core, about developing the principles that will guide difficult choices between different technically viable approaches that cannot all be pursued. Mere technical promise—that something could  work—is an unjustifiably low bar for the commitment of DOE R&D funds. As every dollar matters, DOE’s research portfolio will give priority to those technologies most likely to have significant impact on timescales commensurate with the urgency of national energy challenges.
The department will maintain a mix of analytic, assessment and fundamental engineering research capabilities in a broad set of energy-technology areas. Such activities should not imply DOE commitment to demonstration or deployment activities. The mix of analytic, assessment and fundamental engineering research will vary according to the status and significance of the technology, which can be judged by maturity, materiality  and  market potential:
•Technologies that have significant technical headroom, yet could be demonstrated at commercial scale within a decade.
•Technologies that could have a consequential impact on meeting national energy goals in two decades. We define “consequential” as roughly one percent per year of primary energy.
•Technologies that could be expected to be adopted by the relevant markets, understanding that these markets are driven by economics but shaped by public policy.
Additionally, we will apply two themes to the development of the overall R&D portfolio. First, we will balance more assured activities against higher-risk transformational work to hedge against situations where reasonably assured paths become blocked by insurmountable challenges. Second, because the department neither manufactures nor sells commercial-scale energy technologies, our work must be relevant to the private sector, which is the agent of deployment.
In the transportation sector, DOE will focus on technologies that significantly reduce oil consumption and  diversify fuel sources for on-road transportation. DOE recognizes that technology developments can help make vehicles more efficient and alternative fuels more economic, but the deployment of any technologies it helps develop is largely determined by policies, such as Corporate Average Fuel Economy standards. Impartial DOE research can help inform these standards. In setting priorities for our R&D activities, DOE will support technologies that can integrate with existing energy infrastructure to ease market adoption. Furthermore, DOE will only support technologies that emit less carbon than incumbents—in keeping with our national energy goals.
Recognizing the differences in the fleet, DOE will establish separate technology priorities for heavy-duty and light-duty vehicles.
There is significant headroom for DOE to work on increasing conventional vehicle efficiency by improving the internal combustion engine, by lightweighting and by improving the aerodynamics of heavy-duty vehicles. Electrification is the next greatest opportunity to dramatically reduce or eliminate oil consumption in the light-duty vehicle fleet. DOE’s most significant role in transport research is here. DOE’s investment strategy does not preclude the market from selecting mild or strong hybrid, plug-in hybrid, battery-electric, or even fuel cell  vehicles as the end point for electrification. Finally, DOE will support development of domestically produced, infrastructure-compatible biofuels to reduce carbon emissions from liquid transportation fuels where electrification is not viable (heavy-duty vehicles, marine, and air). Although biofuels have other economic or security advantages, DOE understands that any drop in liquid fuel will not insulate consumers from the global oil price.
As a result of this review, we find that DOE is underinvested in the transportation sector relative to the stationary sector (energy efficiency, grid, and electric power). Yet, reliance on oil is the greatest immediate threat to U.S. economic and national security, and also contributes to the long-term threat of climate change. Vehicle efficiency has the greatest short- to mid-term impact on oil consumption. Electrification will play a growing role in both efficiency and fuel diversification. DOE has particular capabilities in these areas. Within our transportation activities, we conclude that DOE should gradually increase its effort on vehicle efficiency and electrification relative to alternative fuels.

The nation’s greatest challenges in the stationary sector are economic competitiveness and the reliability and sustainability of energy production and use. DOE’s priority in energy efficiency will be to increase the energy  productivity of the Nation’s economy; efficiency measures that decrease household and business energy expenditures can help increase U.S. economic competitiveness. Improving data on real-world energy use will be a key enabler of efficiency. DOE will help improve building efficiency through coordinated R&D, standards development and market-priming activities that ease non-technological barriers to increased energy productivity.
DOE will help improve industrial efficiency by providing technical assistance for energy-intensive manufacturing and by developing new processes and materials. DOE’s next greatest impact is to enable modernization of the grid. The nation’s energy aspirations—from clean electricity to energy efficiency to transport electrification—require more active control of the grid by power producers, grid operators and energy consumers. Here, DOE will support data, communications, modeling, sensing, power electronics and the storage technologies necessary to enable grid control and security. DOE will also use its convening power to foster coherence in a highly fragmented regulatory framework comprised of states, local  governments, utilities and grid operators. Finally, in clean electricity, DOE will focus on reducing the costs of low-carbon technologies for economic deployment as markets become ready. Policies, such as a federal clean energy standard, would shape those markets. DOE’s clean electricity R&D fosters innovation that can position U.S. technologies for export to the growing international power-generation  market.
As a result of this review, we find that DOE is underinvested in activities supporting modernization of the grid and increasing building and industrial efficiency relative to those supporting the development of clean electricity. DOE has a unique role as a systems integrator and convener, giving it particularly high leverage in these information-poor and fragmented sectors. DOE will focus on accelerating innovation in currently deployed technologies to maximize its impact on national energy goals.

There is a tension between supporting work that industry doesn’t—which biases the department’s portfolio toward the long term—and the urgency of the nation’s energy challenges. The appropriate balance requires the department to focus on accelerating innovation relevant to today’s energy technologies, since such evolutionary advances are more likely to have near to mid-term impact on the nation’s challenges. We found that too much effort in the department is devoted to research on technologies that are multiple generations away from practical use at the expense of analyses, modeling and simulation, or other highly relevant fundamental engineering research activities that could influence the private sector in the nearer term. DOE also recognizes that new platforms—rather than the next generation of current technologies—could generate disruptive breakthroughs and will devote a fraction of its effort to their pursuit.
An important finding of this review is that the department impacts the energy sector and energy-technology innovation through activities other than targeted, technology development initiatives. Public comments indicated that DOE’s informational and convening roles are among its most highly valued activities. Information collected, analyzed and disseminated by DOE shapes the policy and decisions made by other governmental and private-sector actors. That expertise in energy-technology assessment gives DOE the standing to convene participants from the public and private sectors to coordinate a collective effort.
The department’s energy-technology assessments are founded upon its extensive R&D capabilities. By supporting precompetitive R&D and fundamental engineering research, DOE builds technical capabilities within universities and its national laboratories and strengthens those capabilities in the private sector. Also heard clearly from external stakeholders was that DOE’s technology-development activities are not adequately informed by how consumers interact with the energy system or how firms decide about technologies. As a result, DOE will integrate an improved understanding of applied social science into its technology programs to better inform and support the department’s investments.
Finally, the department will seek to develop a strong internal capability in techno-economic and policy analysis to support its energy R&D strategy and to provide a sound basis for future Quadrennial Technology Reviews. The department needs a professional group that can integrate the major functions of technology assessment and cost analysis, program planning and evaluation, economic-impact assessments, industry studies and energy and technology policy analysis. Such a group would harmonize assumptions across technologies and make the analyses transparent.
The QTR is not a substitute for the annual budget process; it is intended to inform budgets over a five-year horizon. Further, the QTR is focused on energy technologies and is not a national energy strategy. The economic and policy tools necessary to progress toward national energy goals would properly be the subject of a future government-wide review, building upon the QTR.