In December, the Energy Act of 2020 passed into law with bipartisan support. The law authorized research, development and demonstration (RD&D) funding for advanced technologies that have the potential to make waves in our country’s energy infrastructure. The earmarked technologies, among them advanced nuclear, carbon capture and energy storage, have considerable potential to reduce electricity supply costs and pollutant emissions.
But these benefits could easily go unrealized, since many advanced energy technologies are currently not cost-competitive. Helping them become competitive depends, at least for the moment, on Congress providing the appropriations authorized for them in the Energy Act of 2020. Doing so could be a game changer, at least for the five technologies my colleagues and I have studied. Our rigorous research for Resources for the Future recently found that this additional RD&D funding would increase the estimated likelihood of future cost-competitiveness for each technology by an average of 20 percentage points.
We had little idea in advance what our study would say about the value of proposed additional funding. But in our analysis of five technologies covered by the Energy Act — advanced nuclear, energy storage, direct air capture, advanced geothermal and natural gas with carbon capture — we found that the act would provide striking economic and environmental benefits for Americans. We conducted multi-hour cost projection surveys of 26 technology experts, followed by electricity sector modeling based on the survey answers. The resulting estimates indicate that, for each dollar invested in technology innovations, society would benefit by an average of $7 through electricity bill savings and climate and health benefits. And this is without any additional federal climate policies.
If a new federal climate policy was enacted, like the clean electricity standard proposed in the CLEAN Future Act of 2021, those average projected benefits would increase to $10 per dollar invested. Those benefits would be mostly in the form of lower electricity rates from lower compliance costs of meeting clean energy targets.
The electricity bill savings would be especially beneficial for low-income Americans, who face an “energy burden” three times higher than other households (energy costs can make up 10 percent of income or more). More low-cost technologies competing in the market benefit consumers in the form of lower electricity prices.
Funding for these technologies is also likely to have benefits outside of the power sector and in other countries. Each of the technologies may be important for decarbonizing or reducing costs in other sectors of our economy like industry and transportation, both of which are more difficult to decarbonize than the power sector.
Our research is also encouraging about possible additional funding beyond the Energy Act of 2020: Each dollar of cost reduction tends to produce larger benefits than the last because it applies to an increasingly large amount of generation. This implies that the benefits per dollar of RD&D funding could actually grow larger as funding amounts increase. The very high benefit-to-cost ratios that we found, which we would argue are likely conservative, are indicative of the large net benefits to society that these investments would be likely to create.
As the United States moves towards lower emissions, innovation policy can play an important role. From improved vaccines and agriculture to the rise of the internet, innovation has been a critical part of improving lives. Our research indicates that clean energy presents a similarly promising opportunity. I hope that members of Congress will keep this in mind as they consider fulfilling the funding authorized in the Energy Act of 2020 and providing additional clean energy innovation funding beyond that.
Daniel Shawhan is a fellow at Resources for the Future, an independent nonprofit research institution in Washington, D.C. He is also an adjunct faculty member in the Dyson School of Applied Economics and Management at Cornell University.