Boosting taxpayer-funded energy R&D is easy to justify – e.g., for the USA, by 10x from about USD 3 to 30 billion/annum. Why? Because, energy research and development is a perfect illustration of an underinvested public good. The challenge is that the return to the innovator is often far less than the return to society – hence the normal market incentives do not work very well, especially if the payoff is very long term (typical for electrical generation).
Last year in the Washington Post the former CEOs of Microsoft and Dupont argued for a big increase in energy R&D:
(…) Why can’t the private sector do this? What makes energy different from, say, electronics? Three things.
First, there are profound public interests in having more energy options. Our national security, economic health and environment are at issue. These are not primary motivations for private-sector investments, but they merit a public commitment.
Second, the nature of the energy business requires a public commitment. A new generation of television technology might cost $10 million to develop. Because those TVs can be built on existing assembly lines, that risk-reward calculus makes business sense. But a new electric power source can cost several billion dollars to develop and still carry the risk of failure. That investment does not compute for most companies.
Third, the turnover in our power system is very slow. Power plants last 50 years or more, and they are very cheap to run once built, meaning there is little market for new models.
It is understandable, then, why private-sector investments in clean energy technology are so small. Yet, while it may make sense for individual companies to make these choices, accepting the status quo would condemn our country to very bad options.
This is why we have joined other concerned business leaders (…) to create the American Energy Innovation Council (AEIC).
The AEIC members are Bill Gates, chairman and former chief executive of Microsoft; Norm Augustine, former chairman of Lockheed Martin; Ursula Burns, chairman and chief executive of Xerox; John Doerr, partner at Kleiner Perkins; Chad Holliday, chairman of Bank of America and former CEO of DuPont; Jeff Immelt, chief executive of GE; and Tim Solso, chairman and chief executive of Cummins.
With all those heavy hitters I don’t know why we have heard so little from AEIC since its founding H1 2010.