How to Turn Clean Energy into a Powerhouse

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Bigger, Bolder R&D

The reality is that the money applied to R&D is currently well below where it could be. In the past, universities have led the development of technologies that have made the U.S. the leader in technology and innovation, in concert with NASA, the National Institutes of Health, and the Defense Advanced Research Projects Agency. Federal funding for basic energy and applied energy research and development has fallen 60% in real dollars from 1978 to 2004.

Clean tech could be a bold new frontier to address one of our most pressing long-term challenges. But the U.S. doesn't support research at anything like the levels necessary to secure a long-term, stable supply of clean, reliable energy that is not dependent on oil from the Middle East. When we reached for the moon in the 1960s, we also laid the foundations for the semiconductor industry and paved the way for advances in computing, telecommunications, and digital imaging. Those efforts have spawned everything from modern microwave ovens to cell phones and digital cameras to many automotive-safety systems that save lives—to the benefit of companies as varied as Intel (INTC), Motorola (MOT), Eastman Kodak (EK), and TRW Automotive Holdings (TRW) and their customers, employees, and shareholders. We should make the same commitment to energy-related research if we hope to see similar dividends later this century.

The federal government needs to establish a floor for renewable-energy use to provide predictable markets where investors and companies know demand will exist for their products. With these predictable markets and increased demand, capital investment will flow, and all will gain the benefits of decreased costs from larger volumes. So far, more than 20 states have told utilities that a certain percentage of their entire electric power requirements need to come from renewable sources. Among these programs, there is a wide disparity about how such goals are to be met, which leads to risk and ultimately increased costs for utility customers. The U.S. needs to be more forward-thinking. Although it is fair to speculate about its implementation, China's national renewable-energy law, passed in February, 2006, is more aggressive in setting mandates for the development and use of renewable energy than any U.S. federal law. The U.S. needs to create a ready market for innovation in renewable energy generation.

Protect Innovators' Ideas

The intellectual-property system for energy technologies should be improved to provide incentives for global deployment of energy technologies by strengthening protections for technology developers. For all their differences, China and the U.S. are inextricably linked in their common energy future. Both countries' efforts to curb climate change, maintain economic growth, and gain energy security depend on coal and low-emissions coal technology. However, without stronger intellectual-property protection, developers of new technologies are dissuaded from licensing or otherwise transferring their technologies to international markets. Instead of locking up new energy technologies, companies could be encouraged by aggressive intellectual-property protections to deploy new clean technologies worldwide.

The most exciting thing about clean tech is the world of opportunity that lies ahead: building new financial markets, solving global climate change and carbon risk, and pioneering the development of new technologies. Now the private and public sectors must come together to realize the enormous potential of clean technology. Success depends on a willingness to make a long-term commitment to the industry as investors, as regulators, and as innovators.

Blawie, Freeman-Gleason, and Glass are co-chairs of Heller Ehrman's Energy & Clean Technologies Practice.