Finding the energy for research

Richard L. Hudson

Everybody wants more energy research – so why isn’t it coming fast enough?

On 8 January, the European Commission released one of its periodic soundings of the continental psyche – this time, on the subject of energy. The conclusion of the Eurobarometer survey: 60 per cent of Europeans consider energy research a high priority.

No surprise there, given the price of gasoline and the fear of global warming. The surprise is elsewhere: Why isn’t that public priority reflected in massive energy-research budgets? That question takes more than a survey to answer.

First, consider this excerpt from a report on the problem last year from some energy experts at the Organisation for Economic Cooperation and Development:

“While public budgets for R&D have been on the rise in the past decades, public expenditure on energy R&D has been declining. This decline has not been compensated by private sector expenditures which have also declined in absolute terms. If we measure R&D intensity (R&D expenditure as a percentage of total turnover) in the energy sector, the level has more than halved from an already low level as opposed to a trend of slightly rising R&D intensity in other sectors.”

They speak of the long-term trend since the 1970s; short-term, in just the past few years, there has of course been an uptick in energy research. The European Commission, alone, last November pushed through Parliament a new R&D programme that includes more than €6 billion for energy research. And in the private sector, a plethora of alternative energy and cleantech investment funds have cropped up around the globe, to bankroll promising new approaches.

But those sums are still small compared to global R&D expenditure in aerospace and defense, chemicals and pharmaceuticals, or information and communications technologies. And tiny, indeed, if you consider that the bulk of that energy R&D is into hydrocarbons, rather than fuel-cells, solar energy or other alternatives to which the world is looking to escape global warming.

The problem is the long-term trend: So far in history, our interest in energy research has risen or fallen with the price of oil. Take a look at the accompanying chart, comparing energy research spending in the developed world (the vertical bars) and the price of oil (the black line.) The two are clearly correlated. The chart doesn’t come up to the present day, but you don’t have to be a professional cynic to doubt whether the current uptick in research will survive the recent drop in oil prices below $60 a barrel – particularly research at trendy little start-up companies that rely on private investors.

The rise and fall of energy research in the developed world.
(Bars represent energy R&D spending. Black line is the price of oil.)


Source: OECD

The reasons for the long-term underinvestment are many. Tax incentives in this industry are short-term: For instance, the US government has long emphasized tax policies to reduce dependence on foreign oil (which, in the short frames of reference of most politicians, means incentives to pump more domestic oil and gas, rather than build more labs.) Laws can be counter-productive: In Europe, while electricity deregulation is economic good news, it is also environmental bad news as monopoly profits no longer feed big R&D or conservation programmes. And, of course, the oil industry itself has no real wish to put itself out of business. (Russia, riding a wave of oil and gas riches, recently announced a $500 million high-tech investment fund. How much of that will go to solar energy start-ups?)

What’s it going to take to break this pattern of under-investment? There are no lack of suggestions, some very subtle. From here, it seems that the obvious answer is best: Start by spending more public money on energy R&D. The Commission is starting: As part of an ambitious new energy policy unveiled 10 January, it notes that its energy R&D spending under recently approved Framework program will rise 50 per cent, to €886 million a year. The problem with most alternative energy technologies is that they can’t yet compete with oil and gas, and the bulk of the energy industry has little incentive to change that. In such a vacuum, it’s for governments and public-sector researchers to act.