This post on the remarkable level of investment in energy R&D in the US was written in September 2011. It is not my intent in these retrospectives to play the ‘I told you so’ card but given the egg on the faces of the current and recent Australian governments over energy security, it is pretty hard not to.
Did politicians really think that we have coal, oil and gas and so the job was done?
Emission notwithstanding, did they just sit back and let the end of life for major coal-fired power stations be someone else’ problem?
Well in Australia they did. In America too I suspect. Trump is not pulling the Paris pin because he is a climate sceptic, he’s keeping coal going so that, at least on his watch, the lights stay on across America. Nothing will kill your voter base faster than blackouts attributed to poor planning.
So here is what Alloporus thought in 2011 about energy R&D…
Investment in energy research
In the US Federal research funding into energy is $3 billion. This figure includes investment into oil, coal and gas as well as solar and other alternative energies.
Then there is a further $5 billion invested by the private sector for a total of $8 billion in an industry worth $1 trillion a year; making investment in R&D only 0.8% of revenues.
Apparently $8 billion pays for about 9 days of military involvement in Iraq – pretty scary and perhaps something they might look at when considering reducing budget deficit, but I digress.
The point here is that 0.8% is woeful. Any company that spent less than 1% of revenue on R&D would not last long. Given that energy is so critical to economic performance and given that we have reached peak oil and will eventually run out of coal and gas too, 0.8% seems irresponsible.
And then there is a huge global movement that believes we must tackle climate change by reducing emissions from greenhouse gases.
What should the investment be? In successful economies upwards of 3% of GDP is allocated to R&D, which is roughly $430 billion. This amount must cover many sectors but energy security should be worth at least 5% of the available budget or an order of magnitude more than the current allocation.
We are kidding ourselves if we think that energy security can be achieved when we invest peanuts.
There is money to be made from energy. There always has been. I bet that the first hunter-gatherers who figured out through trial and error how to transport fire with them as they wandered were revered and feared. The thinking and testing that went into creating and catching a spark to start fires was, well, gold to the people who mastered it.
The smart individuals who put a wheel into running water or threw a lump of coal onto the campfire might also have made a relative bob or two.
So it’s not about the returns. It is that it is future money. The power stations cornered the market for a period long enough to scorch the space for new investment. If end of life is 30 or 50 years away there is no market for anything else until then. There is no need to look forward as energy is secure.
This lack of foresight might just be our undoing.