Volatility in federal funding of energy R&D

Energy Policy 67 (2014) 943–950

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Energy Policy journal homepage: www.elsevier.com/locate/enpol

Volatility in federal funding of energy R&D Beth-Anne Schuelke-Leech n The John Glenn School of Public Affairs, The Ohio State University Columbus, OH 43210, United States

H I G H L I G H T S


Funding for different areas of energy research and development varies significantly between 2000 and 2012, reflective of different policy priorities and energy needs.
Budget volatility can be as significant of a problem as overall funding levels.
Research programs may suffer as a consequence of budgetary volatility and resources may be wasted.

art ic l e i nf o

a b s t r a c t

Article history: Received 29 October 2013 Received in revised form 19 December 2013 Accepted 23 December 2013 Available online 18 January 2014

Funding for Research and Development in any given industry or technology is considered essential to its ongoing competitiveness and longevity. This paper analyzes the allocation of federal R&D funding for energy between 2000 and 2012. The results show that funding for energy R&D is very volatile for both the aggregate energy research types, such as coal or nuclear power, and specific research areas, such as carbon capture and sequestration or nuclear waste reprocessing. While overall funding levels are often sources of frustration, budgetary volatility may be as much of a problem. & 2014 Elsevier Ltd. All rights reserved.

Keywords: Energy policy Energy R&D R&D funding

1. Introduction Advanced technologies are considered essential for ensuring sufficient energy availability to meet growing global demands and reduce the harmful effects of fossil fuels (Lester and Hart, 2012). Research and development (R&D) are foundations for innovation. Federal expenditures are an essential component of R&D funding in energy. In recent years, there have been calls to significantly increase federal investments in energy R&D in order to provide the foundation for technological advancements (see for example, Peters, 2011; Schario, 2013). President Obama called for a doubling of R&D funding in his 2013 State of the Union Address (Sargent and John 2012; Jones, 2013; U.S. DOE, 2013a). Overall federal R&D investments in energy as a percentage of overall R&D budgets have been declining since the 1980s (Nemet and Kammen, 2007; Dooley, 2008). In 2001, Department of Energy R&D expenditures were $4.2 billion in 2012 dollars. By 2011, Department of Energy R&D expenditures had increased to $4.99 billion in 2012 dollars (U.S. GPO, 2013).

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While important, the aggregated funding levels for energy do not provide a complete picture of the effects on specific areas of research. Inconsistent funding and changing requirements can be just as problematic as declining amounts. That is, the productivity and outcomes of investments in energy R&D are not just about the total amount of funding, but also how this funding is allocated and the consistency with which it occurs. Volatility in funding can be just as much of a problem as the overall funding levels (Freeman and Van Reenen, 2009). Rapidly increasing budgets can create perverse incentives as researchers and public administrators scramble to use the funds during the appropriation period (Stephan, 2012). Institutions and programs may expand graduate programs even when there is no long-term improvement in employment prospects for the graduates (Stephan, 2012). The investments made in graduate student education and knowledge creation may be wasted when researchers cannot get funding to continue their research or support all of the new students. In addition, momentum in a particular research field may be lost as budgets are cut or funding priorities change. This can make it very difficult to create the critical foundation for technological innovation and advancement. With the critical need for energy innovation, it is worth considering how energy research is being funded and whether the lessons from the National Institutes of Health (NIH) budget volatility over the

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past decade apply. This paper explores the implications of Federal R&D volatility across all energy sectors. This empirical study will show that like the health research funded by the NIH, research funding into various areas of energy have experienced the same (or worse volatility in federal funding. Therefore, we infer that the progress of energy innovation is impeded by the consequences of extreme volatility in R&D funding.

2. Lessons from the National Institutes of Health budget expansion The NIH budget doubled between 1998 and 2003 (Levin, 2007). However, this massive increase in resources was not without problems. With the increase in funding, there was push by institutions to expand facilities and research capacity spurred by the expectation of substantial grant funding (Brinard, 2004). There was an enormous increase in positions for graduate students and postdocs. This, in turn, led to greater competition for funding and grant applications (Monastersky, 2007). Rather than restructuring programs and policies to ensure that the new resources were most effectively utilized, the NIH and research institutions scrambled to absorb the additional funds (Levin, 2007). When the annual increases to approximately 15% and suddenly decreased to a much more modest 3% per year in 2003, researchers and institutions struggled to adjust (Levin, 2007). Between 2003 and 2007, funding in real terms declined by 13% for the NIH (Agres, 2007). Thus, funding has become more difficult to get, despite the 1998–2003 doubling of the overall NIH budget. The success rate for grant applications actually decreased from 31% in 1998 to 18% in 2011 (National Institutes of Health, 2012). As a result, researchers spend more effort seeking grants, with decreased likelihood of success. This problem has been exacerbated by the federal budget sequestration and automatic spending cuts in 2013, forcing many researchers to cut graduate student and post-doc positions and abandon potentially fruitful research projects (Gore, 2013; Printz, 2013). The volatility of R&D funding from the NIH has inadvertently created an environment in which researchers are frustrated and concerned about future funding (Gore, 2013; Printz, 2013). Rapidly doubling the NIH budget in five years and then stabilizing it at the new increased level actually fostered uncertainty among researchers and instability in research (Freeman and Van Reenen, 2009). Rather than focusing on creating knowledge and training graduate students, researchers are confronted with greater competition and greater difficulties in securing funding. In considering the implications of doubling R&D spending for the physical sciences, Freeman and Van Reenen (2009) draw lessons from the doubling of the NIH budget. The authors conclude that there are substantial adjustment costs to large and rapid R&D budget increases. The authors also argue that increased spending may not address problems in the research environment. Instead, funding agencies must more carefully consider how they are funding research and what their overall objectives are. In addition, gradual and sustained increases may be much more effective in ensuring long-term stability and research productivity. The fundamental problem with large increases in R&D budgets is the substantial budgetary volatility and distorted incentives that they create. The empirical results of this paper show that changing policy priorities and shifting political agendas are creating the same budgetary volatility within the energy R&D community. 3. Research budget volatility The allocation of public resources is an indication of policy priorities and strategy. Governments must decide how to allocate

their limited resources. Research and development expenditures are typically considered long-term investments in the scientific infrastructure and an important component of future economic growth. Though there is a perception that all R&D funding is done through peer-reviewed grants, the amounts allocated to different programs are reflective of policies. Thus, energy R&D funding is really an indication of energy policy, even if prevailing rhetoric indicates otherwise. At the level of funding for particular energy sources, the allocation of R&D funding indicates the priorities for innovation. Theory that would help to explain and justify budgetary allocations is weak. Incrementalism, originally applied to public budgeting in the 1960s (Davis et al., 1966), is still the dominant theory. The literature on the process and effects of budgetary declines and cutback are centered on a few articles (Levine, 1978, 1979; Levine et al., 1981). Despite a body of literature on the budgetary process, there is little prescriptive guidance on how to allocate resources so as to minimize political conflict while maximizing policy outcomes. Thus, public budgets are statements about the political agenda and policies. Within the field of energy, this has included substantial debates about the existence, causes, and potential solutions for climate change, as well as the proper mix of renewables and carbon-based energy, and how to deal with the negative externalities of the energy production process (see for example, Smil, 2010; Levi, 2013). Like science and technology policy (Sarewitz, 2007), energy policy is really about politics. The recent problems with the federal budget have included forced budget cuts through sequestration and a government shutdown in October 2013. These budgetary conflicts show the difficulty of getting political agreement on the allocation of public resources and the particular policies that should be funded. Thus, a closer examination of R&D expenditures on different components of the energy system can reveal both policy priorities and potential problems.

4. Data The data on R&D expenditures in this analysis comes from the federal government agency and department reporting website USAspending.gov. Each U.S. federal agency or department must report its external expenditures, which are then compiled into a searchable database. Though this database may be incomplete because some agencies are slow to report or fail to fully report their expenditures, it does provide a good source of data on government expenditures in specific areas of research. Aggregated data provided by a government agency such as the Department of Energy or the Energy Information Administration does not provide enough details about individual projects or technology development. Individual contract and grant data, on the other hand, provide a means for examining the types of projects and organizations that are being funding. Getting consistent and accurate energy R&D expenditures for the federal government can be difficult. Different sources use different components of the federal budget and then discount them or inflate them. Often the numbers from the Department of Energy0 s Science budget published by the U.S. Government Printing Office are used. This understates the R&D expenditures since other departments and agencies in the federal government fund energy research (e.g., the Department of Energy, the Department of Homeland Security, the Nuclear Regulatory Commission, the National Science Foundation). Occasionally, the total Department of Energy budget is used, but this overstates the amount spent on R&D by the Department of Energy and still misses the funding from other departments and agencies. Another common method is to report R&D funding relative to the National GDP. This can be

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misleading since changes in the percentages are not necessarily reflective of absolute changes in funding level. They may be the result of the changing GDP. This is another reason that using data from individual projects can be useful in providing an alternative source for analyzing R&D funding. For each energy source, searches were done looking for R&D expenditures on relevant technologies, research areas, and components. R&D expenditures were identified two ways: first, by looking for all expenditures that were classified as “Research and Development;” and second, by searching for any expenditure that included “Research” in its abstract or description. The nature of the searches does exclude research that presently does not have an application in a particular area, but may in the future. In order to be included in the data, R&D projects must include the specific energy application area. For instance, research on carbon capture and sequestration must in some way identify this application in the title, abstract, or project description to be included in this area. This necessarily excludes potentially applicable research unless it is specifically identified as such. Thus, the results may understate the expenditures in a particular area of energy research. The results are dependent on the thoroughness of the search parameters. Searches for general energy R&D expenditures were done initially. Next, substantial searches were done in each area of energy research: coal; oil and gas; alternative energy; renewables; and nuclear. For coal R&D, searches were done for coal; coal extraction, mining, and production; carbon sequestration; carbon capture; clean coal technologies; gasification. Oil and gas searches included petroleum; fossil fuel: oil; natural gas; methane; and drilling technologies, such as hydraulic fracturing, horizontal drilling, and deep water drilling. Nuclear power R&D included nuclear reactors; nuclear physics; turbines; generators; fission; fusion; radiation; nuclear detection; nuclear waste; spent fuel; and specific nuclear technologies, such as Molten Salt Reactors, Small Modular Reactors, Thorium, Uranium, and Plutonium. Energy Efficiency and Conservation searches included efficiency; conservation; climate change; alternative energy technologies; energy quality; smart grids; and power systems. Alternative energy and renewables research included searches for renewable; alternative sources, such as solar, photovoltaic, wind, fuel cells, and hydrogen; energy storage; battery technologies; wood; biomass; and biofuels. The results include any federal government expenditure to an external organization. This includes R&D contracts and grants. Contracts are generally more restrictive than grants, and carry the legal obligation to fulfill the contract. Grants, on the other hand, serve as structured incentives for performing some activity or research rather than requirements to do so. Therefore, grants often have greater flexibility and provide more discretion for the researchers. Contracts are more typically used when there is a desire to have specific outcomes from the research, as opposed to curiosity-driven research. As such, contracts are rarely peerreviewed in the competitive process, as many grants are. Instead, contracts are compared based on cost, quality, and compliance to contract specifications. In total, 19,664 contracts and grants related to energy R&D research were issued between 2000 and 2012. Coal research, for example, included 2093 contracts and grants. Oil and gas research included 1749 contracts and grants. Nuclear power R&D included 5310 contracts and grants. Energy efficiency and conservation included 5535 contracts and grants. Alternative and renewables had 5654 R&D expenditures. Once the federal R&D expenditures were captured, it was necessary to classify each of the expenditures and ensure that any duplicate entries were eliminated. An Energy Systems Engineer familiar with the energy innovations and technologies reviewed each grant abstract and contract description and classified the expenditure according to its

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main research focus. Each expenditure was classified into one category. Research that covered multiple research areas, such as the efficiency of fuel cells, was allocated to the type of research that seemed most appropriate to the research (“Alternatives” in this example). R&D expenditures have a broad range of definitions and can include activities and research that does not really support the advancement of knowledge or applications. Often organizational overhead is included in R&D costs, as are other non-technical costs. The funding of national laboratories is particularly problematic since expenditures are typically lump-sum payments to cover annual operations. This payment does not break down the use of the funds and it also includes funding for general laboratory management and administration rather than specific R&D projects. Thus, it can be difficult to ascertain the exact nature and focus of the work. National Laboratories typically receive both individual funding and bulk funding. The lump-sum payments were excluded from the final dataset. Any individual projects were retained. This likely resulted in an under-reporting of federal expenditures in any particular area of energy research. Nonetheless, there is a value to analyzing individual federal expenditures in this way.

5. Energy R&D funding To get a complete picture of energy R&D investments, it is necessary to look beyond federal government sources of funding. For the past 15 years, industry-funded R&D accounted for an average of approximately 65.2% of all R&D in the United States. The federal government funded an average of 28.8%. The remaining 6% of the funding came from other sources, such as state and local governments, non-profit foundations, and academic institutions. Energy companies have generally invested less in R&D than have other industries. A study by the Boston Consulting Group found that energy companies in the United States invested less than 1% of their revenues in R&D and product development, compared with the 15–20% invested by other sectors such as Information Technologies, semiconductors, and pharmaceuticals (Chazan, 2013). Electric utilities were particularly unlikely to invest in innovation. Utilities are typically highly risk adverse, with an older and more conservative workforce. Consequently, stability and consistency are more important than innovation and change. The Boston Consulting Group study found that only 64% of energy companies viewed innovation as a priority, whereas innovation was a priority for 91% of automotive industry respondents and 85% for entertainment and media respondents. Between 2000 and 2012, government expenditures in external energy R&D projects were approximately $16.011 billion (in constant 2012 dollars), as shown in Table 1. These expenditures were allocated to different energy sources, depending on policy priorities and perceived problems. Of the $16.011 billion: $2.9 billion (13.3%) went to coal R&D; $879 million (8.5%) went to oil and gas, $4.29 billion (35.2%) funded nuclear R&D; $2.75 billion (18.5%) went to renewables; $344.9 million (1.8%) went to alternative fuel R&D; and $5.2 billion (24.4%) went to energy efficiency and conservation R&D. Looking at the overall energy R&D expenditures during the past decade reveals that the Bush administration was more focused on fossil fuels and funded less climate change research than the Obama administration, which has been more focused on green energy and renewables. Expenditures in 2009 and 2010 were significantly higher than other years since energy R&D was a specific focus of President Obama0 s stimulus expenditures. R&D expenditures for coal research almost tripled between 2000 and 2012, from $48.8 million to $143.7 million in 2012. R&D

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Table 1 Total R&D expenditures in each area of energy research (in millions of 2012 U.S. $). Year

Coal ($)

Oil and gas ($)

Nuclear ($)

Renewables ($)

Alternatives ($)

Energy efficiency ($)

Total ($)

2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Total

143.72 177.03 1860.07 147.36 74.02 91.01 73.01 57.01 75.01 82.67 74.30 57.32 48.78 2961.30

79.49 64.66 93.52 92.52 98.47 79.23 38.64 47.93 59.06 62.60 84.74 44.65 34.09 879.60

185.11 247.33 582.41 526.96 433.58 524.55 707.87 251.86 178.46 263.12 103.12 85.37 170.18 4259.92

643.09 356.58 590.63 221.51 137.14 173.39 115.88 118.41 81.73 108.26 62.29 61.07 55.81 2725.80

62.00 110.80 108.89 14.98 12.19 18.19 4.53 3.54 3.89 2.05 0.52 1.34 1.99 344.92

506.00 246.77 3015.79 286.39 155.19 109.88 111.94 146.06 149.10 143.23 114.25 104.33 95.91 5184.85

1557.41 1092.37 6142.42 1274.74 898.39 978.07 1047.35 621.27 543.36 659.88 438.70 352.74 404.77 16,011.47

100%

Percentage of Funding

Energy Efficiency

80% Alternative Fuels

60%

Renewables

40%

Nuclear

Oil and Gas

20% Coal

2012

2011

2009

2010

2008

2006

2007

2004

2005

2003

2002

2001

2000

0%

Year Fig. 1. Percentage of energy R&D funding.

in oil and gas has also increased substantially from $34.1 million in 2000 to $79.5 million (or by 2.33 times). R&D expenditures in renewables and alternatives have grown even faster. Energy efficiency R&D grew by 5.28 times (from $95.9 million to $506.0 million), renewables grew by 10.8 times (from $53.8 million to $581.1 million), and Alternative fuels grew by 31.12 times (from $1.99 million to $62.0 million). Nuclear research, however, was virtually unchanged during this period, increasingly slightly from $170.2 million to $185.1 million. This shows that although the U.S. federal government is not substantially increasing its funding of nuclear R&D, it is not substantially decreasing it either. This indicates that there was fairly consistent political and budgetary support for nuclear R&D between the Bush and Obama administrations. However, these numbers are misleading unless the volatility of the funding is taken into account, as shown in Fig. 1 and Table 2. Fig. 1 shows the annual percentage of funding allocated to each research area between 2000 and 2012. Table 2 shows the percentage of change in funding over the previous year. Taken together, these show the significant volatility in funding for main areas of research over the decade. Coal R&D, for instance, experienced rapid growth between 2000 and 2003, then significant decreases in funding, then large increases, followed by significant decreases after 2010. These changes in annual funding range from an annual increase of 1162.3% in 20101 to an annual decrease of 90.5% in 2011. Oil and Gas R&D, on the other hand, experienced significant

increases in funding in 2002 and in 2007, but received virtually no additional funding in 2010. Differences in R&D expenditures are a function of many factors. Some of the differences can be explained by accounting and administrative procedures. Though expenditures are required to be spent in the year in which the appropriations are made, delays in the appropriations or implementation of the budget do occur, as do accounting errors and corrections. These are assumed to be randomly distributed. However, they cannot explain all of the volatility. Unquestionably, some of the variation is reflective of changing policy priorities. Energy efficiency and conservation, for example, received comparatively more funding after President Obama took office than it did during the Bush administration. While aggregated data can be useful in highlighting trends, it is important to take a fine-grained look at individual research areas to determine if they are also affected by the volatility that is evident within the larger sectors. To do this, several specific areas are investigated. These are Carbon Capture and Sequestration; Coal Gasification; Biomass; Hydrogen Fuel Cells; Wind Power; Nuclear Safety; and Nuclear Waste and Reprocessing. Table 3 shows the annual R&D expenditures in specific areas of research in 2012 constant dollars. Table 4 shows the percentage change in R&D expenditures from the previous year. 5.1. Carbon capture and sequestration Coal is an important source of energy. It is also a source of substantial amounts of carbon dioxide (CO2), a major greenhouse gas. Each year approximately 18 billion tonnes of CO2 are emitted in the process of using 6 billion metric tonnes of coal (Chu, 2009). Carbon Capture and Sequestration (CCS) is one proposed method of dealing with the CO2. CCS essentially prevents CO2 produced during the burning of coal from going into the atmosphere. CCS isolates the CO2 and then stores it in some way, such as injecting the CO2 into a geological repository (MIT, 2007). Capturing and holding CO2 for long periods of time presents significant technological challenges. R&D expenditures on carbon capture and sequestration have grown steadily in the past decade. In 2000, federal government R&D expenditures were approximately $5.9 million (in 2012 constant dollars). By 2012, expenditures had grown to $58.4 million. There were significant changes in funding of CCS R&D projects, ranging from an increase of 1151.1% in FY 2010 with the ARRA stimulus funding to a 5.7% decrease in 2008. 5.2. Coal gasification

1

During fiscal year 2010, significant extra energy R&D expenditures were made as a component of the economic stimulus spending, known as the American Recovery and Reinvestment Act (ARRA).

Gasification converts solid matter into a synthetic gas, allowing it to be used in place of natural gas (MIT, 2007; Higman and van

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Table 2 Percentage change in R&D expenditures over the previous year. Year

Coal (%)

Oil and gas (%)

Nuclear (%)

Renewables (%)

Alternatives (%)

Energy efficiency (%)

Total (%)

2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

 18.8  90.5 1162.3 99.1  18.7 24.7 28.1  24.0  9.3 11.3 29.6 17.5

22.9  30.9 1.1  6.0 24.3 105.0  19.4  18.8  5.6  26.1 89.8 31.0

 25.2  57.5 10.5 21.5  17.3  25.9 181.1 41.1  32.2 155.2 20.8  49.8

80.3  39.6 166.6 61.5  20.9 49.6  2.1 44.9  24.5 73.8 2.0 9.4

 44.0 1.8 626.8 22.9  33.0 301.6 28.0  8.9 89.1 298.1  61.4  32.9

105.0  91.8 953.0 84.5 41.2  1.8  23.4  2.0 4.1 25.4 9.5 8.8

42.6  82.2 381.9 41.9  8.1  6.6 68.6 14.3  17.7 50.4 24.4  12.9

Table 3 R&D expenditures in specific research areas (in millions of 2012 U.S. $). Date

Carbon capture and sequestration ($)

Gasification ($)

Biomass ($)

Fuel cells ($)

Wind power ($)

Nuclear safety ($)

Nuclear waste and reprocessing ($)

2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Total

58.42 68.19 941.83 81.82 37.19 39.45 22.61 15.02 19.44 13.09 9.41 4.18 5.88 1316.52

5.69 8.67 36.07 14.44 26.46 38.46 33.58 30.97 40.40 51.64 46.45 38.45 12.19 383.47

171.74 163.43 494.89 432.73 181.00 111.90 68.92 66.01 55.66 43.88 36.40 28.17 33.39 1888.11

13.02 8.53 83.57 17.69 8.96 74.71 33.84 37.22 20.72 19.02 15.76 5.33 3.25 341.62

18.30 29.07 141.45 34.39 8.22 1.28 11.64 9.97 5.86 3.82 4.42 1.96 0.35 270.72

85.71 110.20 107.73 93.05 121.80 187.30 54.35 34.57 12.83 17.75 9.37 10.88 12.57 858.12

3.45 19.33 15.02 33.12 59.74 66.31 33.64 29.84 17.29 1.82 8.25 5.87 68.47 362.15

Table 4 Percentage change in R&D expenditures in specific research areas over the previous year. Year

Carbon capture and sequestration (%) Gasification (%) Biomass (%) Fuel cells (%) Wind power (%) Nuclear safety (%) Nuclear waste and reprocessing (%)

2012  14.3 2011  92.8 2010 1051.1 120.0 2009  5.7 2008 74.4 2007 50.6 2006 2005  22.7 48.5 2004 39.1 2003 124.9 2002 2001  28.8

 34.4  76.0 149.8  45.4  31.2 14.5 8.4  23.3  21.8 11.2 20.8 215.5

5.1  67.0 14.4 139.1 61.8 62.4 4.4 18.6 26.9 20.5 29.2  15.6

52.7  89.8 372.4 97.4  88.0 120.8  9.1 79.7 8.9 20.7 195.3 64.3

der Burgt, 2008) or to be used in the production of a variety of chemicals, such as ammonia, hydrogen, methanol derivatives, and ethanol. Gasification is done most typically on coal and, more recently, on biomass. The process is done in commercial gasifiers, which can also be coupled with technology to capture CO2, to ensure that the process emits as little carbon dioxide as possible (Higman and van der Burgt, 2008). Like R&D expenditures for carbon capture and sequestration, R&D expenditures for gasification have been fairly volatile since 2000. Expenditures have ranged from a high of $51.6 million in 2003 to a low of $5.7 million in 2012. Yearly fluctuations in R&D funding can be high. In 2001, funding was 215.5% higher than it had been in 2000 (in constant dollars). There were significant declines in funding in 2008, 2009, 2011, and 2012. Between 2001 and 2008, there was relatively stable funding, which would indicate political support for gasification during the administration of President Bush. During the Obama administration, support has

 37.0  79.5 311.3 318.4 542.7  89.0 16.7 70.3 53.5  13.6 125.6 461.6

 22.2 2.3 15.8  23.6  35.0 244.6 57.2 169.3  27.7 89.3  13.9  13.4

 82.1 28.7  54.6  44.6  9.9 97.1 12.7 72.6 848.1  77.9 40.6  91.4

been less consistent. With the 2010 stimulus, funding in 2010 was temporarily restored to approximately the funding levels that had existed during the Bush administration, before it dropped sharply in 2011 and again in 2012. 5.3. Biomass Biomass is the term used for any plant-based (organic) substance (McKendry, 2002). Biomass can be converted to usable energy in a variety of ways by producing either liquid or gaseous fuels (McKendry, 2002). The quality of the fuel produced is dependent on the type of organic material used. R&D, thus, explores a myriad of issues around the types of organic materials that can be converted and the most effective way to process them (McKendry, 2002). Biomass R&D expenditures have increased significantly since 2000. Expenditures grew from $33.4 million in 2000 to over $171.7

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million in 2012. With a couple of exceptions, expenditures on biomass R&D have increased each year over the previous year. Sometimes the changes have been relatively modest, as it was in 2012 at 5.1%. In other years, the growth has been dramatic, as it was in 2009 at 139.1%. Interestingly, the change in 2010 was comparatively small at only 14.4%. Unlike other energy research areas, biomass has generally not seen significant funding declines.

response capabilities. Many of the new technologies being developed are designed to have passive safety systems that do not require shortterm active human intervention. However, the Fukushima-Daiichi accident and corresponding public concerns over the safety of nuclear energy did not result in significant increase in R&D expenditures in this area. 5.7. Waste management

5.4. Fuel cells Fuel cells can be used for both stationary and mobile applications. Hydrogen fuel cells have been employed on vehicles as a clean transportation option. However, the availability of hydrogen is a problem for the widespread adoption of fuel cells (Sorensen, 2012). Hydrogen is not naturally available. Therefore, any hydrogen used for energy applications must be produced. This can be costly in both economic and energy terms (Rifkin, 2003). Fuel cells R&D has experienced extremely volatile funding since 2000. Overall, expenditures have increased from approximately $3 million to $13 million in 2012. However, funding ranges from a high of 83.57 in 2010 to a low of $3.25 million in 2000. Most years have seen double digit changes in funding levels, often by 80% or more. In the past decade, fuel cells for transportation have faced substantial competition from electric batteries (Van Mierlo et al., 2006; Campanari et al., 2009; Thomas, 2009; Thomas and Sandy, 2009; Offer et al., 2010). With the increased availability of natural gas because of horizontal drilling and hydraulic fracturing, fuel cells are now facing competition from natural gas as a transportation fuel (Schuelke-Leech et al., 2013). 5.5. Wind power Wind power is an important source of renewable energy. Installed wind power capacity has grown significantly in the past decade (Patel, 2006; U.S. DOE, 2013b), partially driven by the associated federal tax credit (DSIRE, 2013; U.S. DOE, 2013c). Wind Power received relatively little R&D funding during the early Bush administration. During the first four years that President Bush was in office, Wind power received less than $5 million in funding annually. With the election of President Obama, R&D expenditures for wind power increased substantially to $18.3 million in 2012. Year-over-year changes have been considerable in the past decade. Though in absolute terms, many of the changes in expenditures have been relatively small, numerous years have also seen triple digit growth. 5.6. Nuclear safety R&D Safety is an area of concern in nuclear power. Research in the area includes work on reactor core and containment strategies and technologies; sensors, instrumentation, automation, and control technologies; radiation shielding; modeling and simulation; improvements in reactor designs; and nuclear detection technologies. On average, 19.6% of all nuclear R&D funding goes to safety. After the Fukushima Daiichi accident on March 11, 2011, there was a substantial focus on the topic of safety. Nevertheless, the R&D expenditures in the area of nuclear safety show little change during this period. Safety-related R&D expenditures in FY 2011 are $110.2 million, a 2.3% increase over FY 2010. FY 2012 expenditures actually decreased by 22.2%, or by approximately $25 million. The accident at the Fukushima-Daiichi power plant was a major setback to the nuclear renaissance. Reports have shown that the operators at the plant were completely overwhelmed and that human error and communication problems played a large part in the accident. Cultural and political issues affected design modifications and

The safety concerns over nuclear power are intimately connected to the issue of the long-term radioactivity of the spent fuel from nuclear reactors (i.e., the waste problem).2 Currently, there is approximately 70,150 metric tons of heavy metal (MTHM) of U.S. discharged used nuclear fuel (UNF) (i.e., nuclear waste) being stored around the United States (Nuclear Energy Institute, 2013). There are numerous potential solutions for dealing with nuclear waste, from long-term storage of the waste to reprocessing. No solution has gained sufficient political and public support to be implemented. Thus, R&D expenditures continue for numerous potential alternatives. Waste management and reprocessing research includes work on understanding, modeling, and controlling the fuel cycle; remediation; storage containers and systems; advanced fuels; and research support for repository design and siting. Between 2000 and 2012, waste management received 9.8% of the funding for all nuclear energy R&D. In 2000, it received almost 40% of the nuclear R&D funding at $68.47 million dollars (in constant 2012 dollars). In contrast, in 2001, 2002, and 2003, R&D expenditures dropped below $10 million. By 2007, R&D expenditures had increased to over $60 million. Five years later, expenditures fell below $3.5 million. Volatility in R&D expenditures is particularly pronounced in this area. When the controversy around Yucca Mountain3 came to a head in 2007–2008 (Walker, 2009), there was an increase in funding for both nuclear safety and Nuclear Waste Management and Reprocessing. Once President Obama came into office, the budget for Yucca Mountain was eliminated and funding for this area of research was decreased significantly.

6. Conclusions Energy innovation, like all industrial innovation, is dependent on R&D. And R&D, in turn, is dependent on funding. All organizations must decide how to allocate resources in order to accomplish diverse goals. Government entities must also make these decisions in the face of competing priorities from various stakeholders who sometimes hold diametrically opposing viewpoints. Though it can be difficult to discern a consistent national energy strategy in the United States, looking at budget allocations and R&D expenditures provides insights into government priorities and strategies. Increased R&D expenditures may lead to more innovation and technological advancement, but there is no guarantee that this will be true. Significant volatility and inconsistency in funding can have important adverse effects as well. The results of this study show that energy funding for both large research fields (e.g., coal, nuclear power) and smaller research areas (e.g., carbon capture and sequestration, nuclear 2 The government is actually responsible for both low level nuclear waste from reactors and high-level waste from nuclear weapons. Though the government must find solutions for both types of waste, the focus of this paper is on nuclear waste from civilian power reactors. 3 For many years, Yucca Mountain in Nevada was slated to be the long-term repository for nuclear waste. However, the site was the source of significant political and technological debate (see Walker, 2009). In 2011, President Obama eliminated funding for Yucca Mountain, eliminating it as a nuclear was repository (World Nuclear News, 2009; Northey, 2011).

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safety) can change significantly from year to year. This can make it difficult for researchers in these areas to pursue long-term investigations that support significant technological changes. Instead, researchers are limited by what can be learned and transferred over a relatively short period of time. In addition, much effort and knowledge is wasted as resources and graduate students are shifted in response to changing funding opportunities. This limits the advances that can be made and the commitments that researchers make to any particular field of research. Alternative transportation fuels provides an excellent example of changing energy priorities. During the Bush Administration, the federal government emphasized and funded the development of hydrogen fuel cells as a mechanism for storing excess energy and creating a mobile, clean fuel for transportation (U.S. DOT, 2006). As the Bush administration ended and the Obama administration began, there was a shift towards electrical vehicles (U.S. DOE, 2011) and away from fuel cells (Biello, 2009). In the past few years, there has been another shift towards natural gas as a transportation fuel (SchuelkeLeech et al., 2013). For researchers who developed expertise in hydrogen fuel cells, there is comparatively less funding for this research and they must look to the areas where funding is more and readily available. Unfortunately, this also means that important research and knowledge foundations are lost. In addition, expensive capital equipment is either left unused, shifted to new applications if possible, or else discarded. In other words, lower benefits and returns are realized from the energy investments that have been made in particular areas of research when funding is volatile. If fuel cells return as a funding priority, for instance, many of the previous investments will need to be made again. Investments in R&D have been justified on the basis that companies would under-invest in technological R&D because they are not able to capture the full value of their investments (Arrow, 1962; Mansfield, 1977). With the exception of oil and gas exploration, energy companies have been less inclined to invest in R&D than companies in other sectors (Chazan, 2013). This has made government investments in energy R&D extremely important. However, inconsistencies and instability in funding may actually be leading to stagnation in technological innovation. Unlike information and communication technologies, energy technologies and systems change slowly. The large capital investments required for energy production translate into long payback periods. To realize financial returns, energy companies must often commit to the long-term use of a given technology, with only the possibility of small incremental changes. In addition, energy companies are often heavily regulated and incorporating new technologies may require regulatory (and costly) approvals. Thus, the volatility of R&D funding may be especially detrimental to the advancement of energy R&D. Without consistent funding for particular areas of research, advancements in energy technologies are slower. Researchers may have to seek employment outside of their primary field, where they can no longer use the knowledge gained during their training and research. Research and Development, demonstration, and marketization are important components of innovation. Innovation is, in turn, the foundation of continued economic prosperity and competitive advantage in the marketplace. Though more energy research would seem to be desirable, substantially increasing federal energy R&D expenditures would likely have unintended consequences, just as doubling the NIH budget did. However, these effects may already exist at a more local level as funding shifts in response to different political priorities and policy agendas. Rather than simply petitioning for more funding, researchers, administrators, policymakers, and companies need to ensure that we are all getting the maximum benefit from the current R&D funding. While it is impossible to remove the politics from government funding, ensuring that researchers have some relative stability in funding for their projects will help to reduce the costly losses that occur due to policy and budget volatility.

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