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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Summary

Electricity, supplied reliably and affordably, is foundational to the U.S. economy and is utterly indispensable to modern society. The National Academy of Engineering has called electrification the greatest engineering achievement of the 20th century (Constable and Somerville, 2003). Generating electricity also creates pollution, however, especially emissions of air pollutants. While the most severe and life-threatening pollution from electric power plants is largely a thing of the past in America, power plant emissions of particulates as well as oxides of nitrogen and sulfur (NOx and SOx)1 still cause harms and contribute to increases in morbidity and mortality (Bell et al., 2008; Laden et al., 2006; Pope et al., 2009). Those harms include premature deaths, contributions to illnesses such as asthma, and increased hospitalizations, and electricity prices do not fully incorporate the costs of those harms (NRC, 2010b). Harms from greenhouse gas (GHG) emissions—to which the power sector is an important contributor, accounting for nearly 40 percent of all domestic emissions (EPA, 2016)—remain almost completely unpriced and thus above the level they would be if market prices reflected their full costs.

While the precise impacts of climate change are uncertain, plausible extreme and costly economic and environmental harms create a growing urgency to reduce GHG emissions substantially. Uncertainty is not a reason for inaction in this as in many other areas of life, such as buying home insurance even though it may never be needed (NRC, 2011). Rather, the challenge for society is to acknowledge uncertainty and respond accordingly. As has been the case in prior Academies reports, this report focuses on the United States while recognizing that climate change is inherently an international concern. Effectively addressing climate concerns may require responses from all countries, as well as technologies that are globally scalable and affordable.

Intense interest in low- and nonpolluting electric power generation technologies started in earnest during the oil embargoes of the 1970s. The desire to mitigate climate change impacts has both revived and intensified that interest.

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1 These are often called “criteria pollutants” because of their regulated status under the Clean Air Act.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Yet wind produced less than 5 percent, solar produced less than 1 percent, and other renewables combined (mostly hydroelectric) produced about 8 percent of all U.S. electricity in 2015, while nuclear accounted for 20 percent, coal 33 percent, and natural gas 33 percent.

In this context, the Department of Energy (DOE) commissioned the National Academies of Sciences, Engineering, and Medicine to convene a committee to undertake a study examining the determinants of market adoption of advanced energy-efficiency and increasingly clean energy technologies, focusing primarily on the electric power sector. The principal goal was to understand what barriers exist to greater market penetration of such technologies and what actions governments—federal and state—can take to reduce or eliminate those barriers and accelerate market adoption. To carry out its task, the committee studied the widest possible range of technologies currently available for the production of electricity, as well as a robust suite of technologies for increasing the efficiency of use of electric power. Key considerations included whether a technology is sufficiently mature, as well as the expected price to consumers of the electricity produced. Also in accordance with its statement of task, the committee deliberated on what policies, legislation, or other actions—current and plausible—would best encourage adoption of increasingly clean power technologies, taking into account market conditions, likelihood of impact, and at what cost.

During the course of the study, the committee concluded that a binary categorization of technologies as “clean” or “dirty” may be counterproductive given that producers are compelled to use the most abundant and affordable primary energy resources they can readily access and use for power generation. All electricity generation technologies have some environmental effects. Thus for purposes of this report, the committee classifies an “increasingly clean” technology only on the basis of emissions of criteria pollutants and GHGs produced in the generation of electricity (rather than other environmental effects or those associated with the mining or extraction and transport of the primary energy source). By that token, solar, wind, nuclear, and fossil fuel-fired combustion with carbon capture and storage (CCS) are low-polluting technologies; conventional natural gas is a medium-polluting technology for criteria pollutants such as NOx and particulate matter and emits less carbon dioxide (CO2) than conventional coal-fired generation; and conventional coal-fired generation is a high-polluting technology.

The committee’s findings and recommendations fall into three prioritized categories: overarching, key, and other. In the first category are 2 recommendations that the committee concludes are more important than all the others. Also included in this summary are 10 key recommendations and 8 key findings. The 12 other recommendations are presented in the appropriate report chapters.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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OVERARCHING RECOMMENDATIONS

The committee concluded that there are two significant barriers to accelerating greater penetration of increasingly clean electricity technologies. First, as noted above, the market prices for electricity do not include “hidden” costs from pollution, stemming mainly from negative impacts on human health, agriculture, and the environment. Levels of criteria pollutants declined over the past three decades, but still cause harms. Harms from GHGs are difficult to estimate, but if accounted for in the market, could be considered by consumers.

In most locations within the United States, prices for increasingly clean power technologies are higher than those for less clean, incumbent technologies. While costs have declined over the past several years for some increasingly clean technologies—notably solar photovoltaics—natural gas supplies have opened up, causing dramatic decreases in natural gas prices. There are notable locations where unsubsidized wind- and solar-generated electricity is competitive with or cheaper than electricity from other sources. Yet for most of the country, most of the time, the prices of dirtier incumbent electric power generation technologies are lower than those of increasingly clean technologies, in part because their price does not include their full costs. Thus they are built and utilized more often and in turn produce more pollution than would be the case if their prices were correct.

Inaccurate price is an example of a “market failure” where government action is often justified. In this case, the solution to correct the market failure is intellectually simple but politically difficult: governments can require that market actors include the price of pollution in their decision making. This has been done in some form with SOx and NOx since the early 1990s and in limited ways for GHGs since the late 2000s.

The second barrier is that the scale of the climate change challenge is so large that it necessitates a significant switch to increasingly clean power sources. In most of the United States, however, even with a price on pollution, most increasingly clean technologies would lack cost and performance profiles that would result in the levels of adoption required. In most cases, their levelized costs are higher than those of dirtier technologies, and there are significant challenges and costs entailed in integrating them into the grid at high levels. This means that reducing the harmful effects of emissions due to electricity generation will require a broader range of low-cost, low- and zero-emission energy options than is currently available, as well as significant changes to the technologies and functionality of the electricity grid and the roles of utilities, regulators, and third parties.

Lastly, the committee notes that even if the technological and institutional barriers to greater adoption of increasingly clean power technologies were overcome but their prices were not competitive, an adequate scale of deployment would require tremendous public outlays, and in many parts of the world would be unlikely to occur. While learning by doing can lower some

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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costs, deployment incentives are likely to be insufficient as the primary policy mechanism for achieving timely cost and performance improvements.

The committee formulated two overarching recommendations to address the above challenges.

Recommendation 2-1:2 The U.S. federal government and state governments should significantly increase their emphasis on supporting innovation in increasingly clean electric power generation technologies.

Simply put, the best way to encourage market uptake is first to have technologies with competitive cost and performance profiles. The need for increased innovation and expanded technology options is especially important given the global picture. In many parts of the world, coal remains the cheapest fuel for electricity generation. China, India, and the nations of Southeast Asia are expected to continue rapidly adding new electricity generation facilities, most of them coal-fired and with minimal pollution controls. Thus there is a need for technological innovations that are affordable outside the United States as well. These improvements in performance and cost will be essential to achieve long-term GHG reductions, such as the reduction called for in the COP21 agreement, 3 without significantly increasing electricity prices. While the challenge may be great, it also creates an opportunity for the United States to continue to lead in the pursuit of increasingly clean, more efficient electricity generation through innovation in advanced technologies.

Recommendation 2-2: Congress should consider an appropriate price on pollution from power production to level the playing field; create consistent market pull; and expand research, development, and commercialization of increasingly clean energy resources and technologies.

Correcting market prices will encourage more deployment of increasingly clean technologies. Where such technologies are already the lowest-price choice, they will become even more so; in other locations, a pollution price will make these technologies the most affordable option or narrow the gap. In

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2 The committee’s findings and recommendations are numbered according to the chapter of the full report in which they appear.

3 COP21 refers to the 21st yearly session of the Conference of the Parties to the 1992 United Nations Framework Convention on Climate Change. Under that agreement, the “United States intends to achieve an economy-wide target of reducing its greenhouse gas emissions by 26%-28% below its 2005 level in 2025 and to make best efforts to reduce its emissions by 28%.” Full text available at http://www4.unfccc.int/Submissions/INDC/Published%20Documents/United%20States%20of%20America/1/U.S.%20Cover%20Note%20INDC%20and%20Accompanying%20Information.pdf.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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addition to providing this market pull for the deployment of mature increasingly clean technologies, pollution pricing can be expected to spur the development of new, even more effective and competitively priced technologies.

KEY FINDINGS AND RECOMMENDATIONS

In addition to the above overarching recommendations, the committee formulated key findings and recommendations related to a number of important, specific barriers to innovation in increasingly clean energy technologies.

Energy Technology Innovation Process

The first set of barriers relates to the energy technology innovation process (ETIP). Overcoming these barriers and empowering private-sector flows of capital and research, development, and demonstration (RD&D) activity are key because it is clear that reducing the cost and improving the performance of increasingly clean energy technologies in many cases will require more than incremental changes to current technology. Entirely new technologies, sufficiently compelling in cost and performance to be globally deployable, will likely be needed, along with changes to the way the electricity grid is engineered and operated.

The ETIP is a complex network of market and nonmarket institutions and incentives, and each stage of the innovation process presents a range of obstacles to the would-be innovator. The most important priorities for strengthening the system relate to identifying and creating new options, developing and demonstrating the efficacy of these options, and setting the stage for early adoption of those that are most promising.

Finding 3-1: Market failures and nonmarket barriers for increasingly clean power technologies exist at all stages of the innovation process.

Finding 3-5: Regional efforts that leverage regional energy markets and initiatives by states, universities, entrepreneurs, industry, and others can complement federal actions to help bridge funding and commercialization gaps.

Finding 3-6: Funding and commercialization gaps for innovations in energy technologies tend to be most acute in, and most closely associated with, the early to intermediate innovation stages.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Proof-of-concept and pilot projects need to have clear missions and goals. A proven means to this end is sector-specific road mapping and challenge funding developed with specific technology development milestones. DOE could advance innovation in energy technologies by using these techniques for sponsored projects, recognizing that doing so might require redirecting DOE and national laboratory research and development (R&D) programs toward the achievement of more ambitious cost and performance objectives. DOE also could consider further use of inducement prizes featuring specific milestones and goals, possibly through a dedicated Office of Innovation Prizes within the Office of the Under Secretary, as a complement to patents, grants, procurement contracts, and other types of support for energy innovation. While not suited to all research and innovation objectives, prizes can spur innovation when the objective is clear even if the pathway to achieving that objective is unclear.

The intermediate stages of innovation are among the most critical and often overlooked, and are where promising technologies face their greatest challenges. Once a concept has been proven, it faces a range of scale-up, systems integration, manufacturing, regulatory, and market challenges to commercialization. Private investment often is restricted because capital requirements typically increase rapidly and significantly, while times to return often are longer than private investors can wait. The Small Business Administration’s Small Business Investment Company (SBIC) program has a tremendous opportunity to help overcome these funding barriers to demonstration, early-adoption, and scale-up activities. For example, allocating up to 20 percent of current SBIC funding to create new venture capital funds focused on early-stage increasingly clean power technologies could stimulate significant levels of private investment.

Regional variation within the United States is important, and the federal government could leverage that variation by supporting a network of local, state, or regional public/private partnerships, called regional energy innovation and development institutes (REIDIs), that would help spur the development of innovations showing the most promise. Where capabilities already exist, this network would facilitate access; where capabilities do not already exist, it would help identify likely development needs for promising technologies and fund or plan and create the support capabilities, physical infrastructure (where applicable), and translational relationships that might be needed for simulation, testing, standards development, and certification.

Simulation and testing are key capabilities, and it would be important for DOE to take the lead in assessing the availability of public and private simulation and testing capabilities, identifying any gaps and weaknesses, and supporting or incentivizing the creation of capabilities needed to fill those gaps. Linking simulation and testing facilities into a network that worked closely with federal road mapping and challenge funding would help align these facilities with and achieve targeted objectives. This initiative would provide streamlined

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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access to new and existing federal, state, regional, and private testing resources; simulation modeling and testing laboratories, and preconfigured test sites.

Recommendation 3-1: DOE should direct funds to a broader portfolio of projects than will ultimately prove viable and should tolerate the inevitable failure of some experiments, while at the same time winnowing at each stage of the innovation process.

In addition to being essential to limit costs, downselecting at each stage would provide opportunities to identify at earlier stages of the innovation process technologies that are unlikely to succeed commercially (in their current form). The most important objective would not be to avoid failure, but to ensure that failure is recognized, understood, and addressed without delay. This could be accomplished by ending funding for projects that failed to meet preset cost and performance improvement targets.

Energy Efficiency

Beyond technologies for generating or delivering electricity, the committee focused on the promise and opportunities of reducing use. Americans today spend almost $400 billion annually on electricity to power their homes, offices, and factories, with a large share of electricity being used in residential and commercial buildings. There is evidence that energy-efficiency measures have been effective at reducing energy consumption. At the same time, the committee considered evidence for an “energy-efficiency gap”—the difference between projected savings from avoided energy use due to energy-efficiency measures and the actual measures undertaken. The committee noted that more work is needed to improve measures of projected savings and to ensure that programs are cost-effective. The committee also identified potential barriers to fully utilizing opportunities for energy efficiency and formulated recommendations to remove those barriers.

Recommendation 4-5: The federal government, state and local governments, and the private sector should take steps to remove barriers to, provide targeted support for, and place a high priority on the development and deployment of all cost-effective energy-efficiency measures.

One barrier to higher utilization of energy-efficiency measures is the above-noted failure of electricity prices to incorporate the costs of pollution. Second, even if prices were corrected to include the costs of pollution, other market imperfections might limit consumers’ purchases. Information about

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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energy use and price is not always readily available to consumers, and when it is, they may be unable to translate it into actual costs or savings. Additionally, consumers may be reluctant to make new purchases because of inertia or limited attention. Moreover, the effectiveness of increases in the price of electricity in inducing conservation is limited by the very low measured price elasticity of demand for electricity, especially in the short term. The committee found evidence that appliance standards can help overcome these problems by improving the efficiency of all appliances available to consumers.

Recommendation 4-1: DOE should on an ongoing basis set new standards for home appliances and commercial equipment at the maximum levels that are technologically feasible and economically justified.

The committee also found great opportunity for innovation in the energy-efficiency sector. One such opportunity is to improve the accuracy of predictive models of energy savings. Seeking how to do so, DOE has issued a request for information (RFI), and it could do more in this regard. DOE also is ideally poised to support research on how to translate insights from behavioral science into interventions that reduce electricity usage. That knowledge would be valuable for designing effective and cost-effective policies where appropriate and could be made available to relevant stakeholders.

Recommendation 4-3: DOE should increase its investments in innovative energy-efficiency technologies; improve its ability to forecast energy savings from these technologies; and, in conjunction with other agencies, obtain data with which to develop behavioral interventions for improving energy efficiency.

Beyond DOE, the rest of the federal government is positioned to lead by example through direct efforts to promote energy efficiency. The federal government owns or operates more building space than any other entity in the world, and the administration has issued an executive order requiring the head of each federal agency to promote building energy conservation, efficiency, and management. The federal government could carry out this order by

  • continuing to lead in the development of procurement practices for appliances and equipment that take life-cycle costs into account;
  • evaluating the benefits of improving the energy efficiency of the Department of Housing and Urban Development’s 1.2 million units of public housing; and
  • taking the lead on contracting for services that provides incentives to third parties to invest in energy efficiency.
Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Nuclear Power, Fossil Fuels, and Renewable Energy

The committee also examined specific challenges for developing the next generation of power generation technologies utilizing nuclear, fossil, and renewable fuels. An expansion of nuclear power is almost certainly required to produce the reduction in GHGs likely needed to avoid the most costly climate change scenarios. Nonetheless, nuclear power faces three major obstacles to expansion and innovation.

First, absent a price on GHG pollution, current nuclear technologies are more expensive than technologies based on other fuels, especially natural gas and wind in some areas of the United States. These high costs highlight the need for significant innovation in next-generation reactor designs. Second, the business and regulatory risks of designing innovative nuclear technologies are currently quite high. Capital costs of R&D for any energy technology are typically much higher than those for other sectors, and nuclear power is the extreme example of this.

Finding 5-2: Pilot- or full-scale nuclear reactor demonstration projects are likely to cost hundreds of millions of dollars or more.

In addition, the licensing process is currently an open-ended, all-or-nothing regulatory development process designed for existing light water technologies without certainty of outcomes or even clear milestones along the way. Developers face having to spend up to several hundred million dollars without knowing until the very end whether they will be granted a license.

Recommendation 5-1: The U.S. Nuclear Regulatory Commission, on an accelerated basis, should prepare for a rulemaking on the licensing of advanced nuclear reactors that would establish (1) a risk-informed regulatory pathway for considering advanced non-light water reactor technologies, and (2) a staged licensing process, with clear milestones and increasing levels of review at each stage, from conceptual design to full-scale commercial deployment.

A third obstacle that uniquely deters nuclear innovation in the United States is the continued lack of progress in resolving the spent fuel management issue. The absence of a national policy and plan for interim storage and final disposal of spent fuel is a major impediment to private investment in the development of advanced nuclear power plant technologies.

Credible forecasts also suggest that fossil fuels, especially natural gas, will continue to be available in high quantities and at low prices for decades, and

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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thus will make up a significant fraction of the fuels used to generate electric power for years to come. Coupled with the dramatic reductions in GHGs that can be realized through CCS technologies, the development, demonstration, and deployment of these technologies for both coal and natural gas generators remain critical. While some prototype carbon capture units have been built or are under construction or in development, continued efforts will be needed to bring down the costs of the current technologies and to develop, pilot, and demonstrate novel technologies. Continued efforts also will be needed to resolve institutional challenges, including liability and ownership issues for CO2 stored in deep saline aquifers or other underground structures.

Current and past federal support for RD&D efforts has been either insufficiently funded or insufficiently robust given the scope of the challenge. One way to generate funding would involve an industry-led CCS technology development and demonstration program supported by funding from utility ratepayers. Given the size of the U.S. electricity market, even a tiny fee levied against every kilowatt hour (kWh) of electricity sold in retail markets could yield billions of dollars for RD&D of a range of increasingly clean energy technologies with minimal impact on the electricity bills of residential ratepayers.4

Finding 5-6: The risks involved in transporting and storing CO2 and the lack of a regulatory regime are key barriers to developing and deploying technically viable and commercially competitive CCS technologies for the power sector at scale.

Recommendation 5-3: Congress should direct the Environmental Protection Agency to develop a set of long-term performance standards for the transport and storage of captured CO2. This effort should include establishing management plans for long-term stewardship and liability for storage sites once they have been closed, as well as GHG accounting programs.

Expanding the deployment of renewable generation technologies to make them a major source of energy will also be critical to addressing the pollution challenge. Doing so will require new technologies for the generation of electricity, as well as new grid technologies for its transmission and delivery (NRC, 2010b).

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4 The United States saw approximately 3.7 billion megawatt hours of retail electricity sales in 2014. A one-tenth of a cent charge on each kWh sold would yield $3.7 billion. The impact of such a charge on a typical residential ratepayer consuming 911 kWh per month (the U.S. average in 2014 according to the Energy Information Administration) would be less than a dollar per month.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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The diversity of U.S. renewables markets due to the range of renewable resources, regional electricity markets, state-specific policies, regulatory and market structures, and several thousand utility jurisdictions provides opportunities to learn from the most robust markets. Leveraging these opportunities through ongoing government support for innovation and encouraging private-sector investment can create opportunities for the United States to be a technology leader in rapidly growing global markets for renewable technologies. Domestically, prices continue to decline, but some prices, particularly for solar photovoltaics, remain high compared with those in other countries, including developed economies in Europe.

Many incentives are in place at the state level. While states have a range of pricing and procurement policies, incentives, standards, and models, many parts of the United States encourage competition for wind projects to win power purchase contracts and enable low-cost financing for their construction. Another common option is the renewable portfolio standard (RPS), which requires a minimum quantity of renewable energy supply or capacity. Many RPSs include a set-aside or carve-out that requires a minimum portion of the overall standard to be met using a specific technology, typically solar energy. In early assessments, RPSs have been found to reduce emissions while incurring only modest increases in electricity rates. Still, in regions with the most cost-effective renewable resources and market development efforts, competitive proposals for wind, solar, and other resources, including natural gas, may produce more efficient results. Pricing pollution, such as GHGs, would produce less costly reductions in GHG emissions and provide better incentives for innovation.

Across all technologies and scales, it is important to emphasize that deployment of renewables needs to take place in an increasingly competitive market, and to continue to reward learning and economies of scale, as well as projects with the best economics. Effective federal, state, and local policies need to be consistent with growing market signals that look forward at least 5 years to encourage innovation and development investment that will continue to bring down costs.

Finding 5-8: Consistent siting, streamlined permitting, clear and responsive interconnection processes and costs, training in installation best practices, and reductions in other soft costs can have a significant impact on lowering the cost of solar and other distributed generation renewable technologies.

Recommendation 5-5: As renewable technologies approach becoming economically competitive, states should seek to expand competitive solicitation processes for the most cost-effective renewable generation projects and consider the long-term power purchase agreements (PPAs) necessary to enable low-cost capital for project financing.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Recommendation 5-6: DOE and national laboratory programs should provide technical support to states, cities, regulators, and utilities for identifying and adopting best practices—such as common procurement methods, soft cost reduction approaches, PPA contracts, structures for subsidies and renewable energy certificates, and common renewables definitions (taking into account regional resources)—that could align regional policies to enable more consistent and efficient markets that would support the adoption of renewables.

Electric Power System

Developing and deploying cost-effective increasingly clean energy technologies will require an electric power sector with systems, regulation, and infrastructure that encourage and accommodate those technologies. Developing such a power sector will, in turn, require technological changes to the power system so that it is capable of integrating these new technologies and in greater quantities. To this end, utility regulators will need to incentivize utilities to become fully engaged in innovation and the demonstration of new technologies, with rules that permit reasonable and nondiscriminatory access to the transmission and delivery systems.

These shifts are under way, and as a result, the electric industry faces significant new expectations and requirements to replace aging infrastructure, possibly at costs of hundreds of billions of dollars. The industry also must work to mitigate the effects of storms and other disruptive events while securing the electric power system and critical infrastructure against cyber and physical attacks. Utilities and system operators must maintain system stability while retiring coal and some nuclear generation and integrating increasing amounts of variable and distributed resources. At the same time, current utility business models often rely on volumetric increases in sales to provide funds for new investments. Slowly growing or declining sales mean many utilities lack the revenue growth used historically to fund new investments. This trend could leave the United States with an outdated power system and prove costly to consumers.

While these challenges are substantial, there are also significant opportunities for improvement. Distributed resources, such as combined heat and power, photovoltaics, and efficient fuel cells, can improve reliability if integrated under appropriate regulatory and technological regimes. Technological innovation can reduce costs and improve load factors and asset utilization.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Finding 6-1: To expedite innovative solutions, it will be necessary to redesign business models and regulatory incentives currently designed for a centrally controlled system so they are built on a customer-driven model with multiple solutions.

Finding 6-3: Many state regulatory commissions require additional analytical tools, training, and other resources to develop and implement effectively regulatory models that support and encourage the development of increasingly clean energy and energy-efficiency technologies.

For example, DOE could provide additional resources and training, and perhaps serve as both a coordinator and repository for best practices and lessons learned, as states undertake regulatory reforms. Moreover, the electric power industry typically budgets very small amounts for innovation compared with other technological industries.

Recommendation 6-4: State regulators and policy makers should implement policies designed to support innovation. For example, they could evaluate approaches in which utility or energy customer funds are set aside to support state and regional innovation programs.

Two emerging parallel and potentially complementary business models for distribution utilities and/or other market participants are being considered—distribution system operators (DSOs) and customer energy service providers (CESPs). DSOs could efficiently integrate distributed energy technologies, distribution automation, volt/volt ampere reactive (VAR) optimization, and other characteristics of a smarter power grid with the robustness and flexibility necessary to maintain reliability and security. CESPs might be able to provide similar value, focused on customer-facing aspects of the industry. Full development and implementation of both of these models, however, would require overcoming a number of challenges.

Recommendation 6-5: DOE should undertake a multiyear R&D program to ensure the timely development of the capabilities needed for effective DSOs or CESPs through policy analysis; dialogue; and the sharing of experience and best practices among regulators, utilities, and other stakeholders to advance understanding of the emerging business models. DOE should strongly consider prioritizing the development of robust, well-designed

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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systems that incorporate appropriate security measures to guard against and respond to cyber attacks.

Utilities also face significant workforce challenges. Large numbers of skilled employees are eligible to retire soon. The anticipated industry changes discussed here imply that the future workforce likely will require a different set of skills and abilities, especially greater “niche” skills to support the implementation, maintenance, and operation of systems with many digital components. Power providers and system operators will need to provide new training programs, guidance documents, and training manuals. Industry and government could partner to develop programs that would help bridge the immediate gap in the skilled workforce and to attract talent in the future by creating and communicating a vision of the electric power industry as one that is attractive, stimulating, and worth celebrating for its vital role in people’s lives and the nation’s prosperity.

Financing Energy Technologies

Finally, with respect to government support for innovation in energy technologies and technological shifts, history suggests that such supports as direct subsidies and tax exemptions tend to continue well after technologies have matured and are market-competitive. While subsidies can serve important public policy functions in helping to establish industries, they work best when they are predictable and structured to be performance- or outcome-oriented without regard to specific technologies, and to include sunset provisions so they expire either after a specified length of time or once a certain performance has been achieved, as is the case with the recently renewed production tax credits for power from wind and solar. By contrast, the many subsidies for oil and natural gas have no sunset provisions despite the maturity of those industries.

Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
×
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
×
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
×
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Page 10
Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Page 11
Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
×
Page 12
Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
×
Page 13
Suggested Citation:"Summary." National Academies of Sciences, Engineering, and Medicine. 2016. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies. Washington, DC: The National Academies Press. doi: 10.17226/21712.
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Page 14
Next: 1 Introduction »
The Power of Change: Innovation for Development and Deployment of Increasingly Clean Electric Power Technologies Get This Book
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Electricity, supplied reliably and affordably, is foundational to the U.S. economy and is utterly indispensable to modern society. However, emissions resulting from many forms of electricity generation create environmental risks that could have significant negative economic, security, and human health consequences. Large-scale installation of cleaner power generation has been generally hampered because greener technologies are more expensive than the technologies that currently produce most of our power. Rather than trade affordability and reliability for low emissions, is there a way to balance all three?

The Power of Change: Innovation for Development and Deployment of Increasingly Clean Energy Technologies considers how to speed up innovations that would dramatically improve the performance and lower the cost of currently available technologies while also developing new advanced cleaner energy technologies. According to this report, there is an opportunity for the United States to continue to lead in the pursuit of increasingly clean, more efficient electricity through innovation in advanced technologies. The Power of Change: Innovation for Development and Deployment of Increasingly Clean Energy Technologies makes the case that America’s advantages—world-class universities and national laboratories, a vibrant private sector, and innovative states, cities, and regions that are free to experiment with a variety of public policy approaches—position the United States to create and lead a new clean energy revolution. This study focuses on five paths to accelerate the market adoption of increasing clean energy and efficiency technologies: (1) expanding the portfolio of cleaner energy technology options; (2) leveraging the advantages of energy efficiency; (3) facilitating the development of increasing clean technologies, including renewables, nuclear, and cleaner fossil; (4) improving the existing technologies, systems, and infrastructure; and (5) leveling the playing field for cleaner energy technologies.

The Power of Change: Innovation for Development and Deployment of Increasingly Clean Energy Technologies is a call for leadership to transform the United States energy sector in order to both mitigate the risks of greenhouse gas and other pollutants and to spur future economic growth. This study’s focus on science, technology, and economic policy makes it a valuable resource to guide support that produces innovation to meet energy challenges now and for the future.

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