Grumet Details Obama’s Plan: $150 Billion in Energy Research

The Tech: In Washington, nothing gets done unless it is put on the agenda. How will Senator Obama make energy a priority for his administration?

Jason Grumet: He’s consistently said throughout the campaign that his two principle domestic policy priorities — of course in addition to the economy — are energy and health care and he was active in the negotiations that were seeking to advance a comprehensive energy policy bill in the Senate this fall and has made it clear that as president he will seek to bring the Congress together and see if we could in fact make real progress.

TT: You had mentioned a couple times in the debate about Senator Obama’s proposal of $150 billion over 10 years to promote alternative energy and create several million jobs. This includes investing $10 billion a year in creating what he called a “Clean Technologies Deployment Venture Capital Fund.” How much would be allocated to universities such as MIT? Where would the money come from?

JG: [The] small point … is that the plan was to have $5 billion a year to the Clean Venture Deployment Fund and $50 billion over ten years. The principal purpose of that fund is to accelerate the commercial scale deployment of the key low-carbon technologies. My sense is that a fine research institution like MIT is more likely to play a role in the R&D side of the energy innovation equation than on the commercialization.

TT: Will there be funds towards research?

JG: Senator Obama has indicated that [he would] at minimum double the funding of traditional energy R&D and that would, I think, present the opportunity for significantly increased public-private collaboration, both with universities through the national labs and with the private sector.

TT: Where would the money be coming from?

JG: The money will be coming from two places. Initially it will come from the removal of wasteful subsidies to highly profitable mature industries like the petroleum sector, but ultimately the funding will be sustained by directing revenues from the auctioning of carbon permits.

TT: There was a lot of talk at the debate as well as each campaign on new cleaner technologies. Setting aside where the energy source [is], the fact of the matter is that Americans consume about 25 percent of the energy produced in the world. Is energy consumption behavior a concern? If so, how will Senator Obama address this issue?

JG: It’s a tremendous concern. Senator Obama is aware that on average Americans use three times as much energy as we used in 1973 and that the failure to take advantage of efficiency opportunities is one of the factors impairing our economy and energy sector.

So he believes we need to do a couple of different things. One is that we need to develop policies that will consistently encourage efficiency gains. Key one is to change the way the power sector is compensated. This is the so called de-coupling of the electricity sector. Right now, while we ask them to promote efficiency, we pay them based on how much power they sell, which is fundamentally at odds with the goal of reducing wasteful consumption. That would be one type of policy that we need to put in place.

The second is that [Obama] will set stringent efficiency standards on both buildings and new building and appliances which the DOE is presently behind its obligation … to set. They are behind about 30 … over 30 different appliance efficiency standards. He will provide the resources to DOE and the clarity of mission so that they proceed quickly to catch up with their obligations.

And then finally I think he believes that while people don’t necessarily need to sacrifice, they do need to start to pay greater attention to our energy uses and recognize that our individual actions when taken collectively do have a significant impact on our national security and economy and the health of the planet.

[Obama] believes that in addition to proposing sound policies, the president has an opportunity and obligation to use the bully pulpit to engage the American people in a serious conversation about the need to reexamine our energy use.

TT: There was talk about governments picking favorites among technologies. How does your candidate advocate supporting a certain technology without disrupting the market forces, i.e. how does the government know who the winners are?

JG: Well, I believe he thinks that the government’s job, principally, is to set technology-neutral performance standards and obligate the marketplace to respond. So his support for a renewable portfolio standard, his support for low-carbon fuel standards, are perfect examples of technology-neutral performance obligations that he has championed [and] Senator McCain has opposed. Those are not technology-picking standards, they are government fulfilling its role to say that we desire lower carbon energy and allow the marketplace determine how to meet it.

When it comes to trying to provide incentives to help certain promising technologies overcome barriers to entry, [Obama] believes again these should be competitive processes, but there are some technologies … with the potential benefit so significant like zero-carbon coal technology, that he believes that it is in the public interest to provide direct investment to determine whether that technology in fact can be commercialized effectively.

And I think he believes government has to be thoughtful and prudent. We need to be better at knowing when to pull the plug and move on, but [Obama] believes that the scientific enterprise is one of success and failure, and if you are not willing to explore and invest resources in an idea that will ultimately fail, you will never have a portfolio that will in fact provide success.

If you look at analogy to any other industry, I think the idea of generic support which was being advocated by the McCain camp last night — we as a nation don’t say we are allocating a hundred billion dollars to generic national defense technologies — we identify that we have certain resources for air power, certain resources for naval power, we make choices.

Government is not a blind and neutral exercise. The challenge is to find that right balance and Senator Obama believes that if we lead with performance standards then provide targeted support for the most promising technologies that require competitive bidding processes and transparency and accountability, we have an opportunity to make real progress.

TT: How will Senator Obama engage developing countries such as India and China in reducing carbon emission, balancing development and environmental/energy concerns?

JG: [It’s] not a short question, but I’ll give you a quick overview. [Obama] believes that the only effective and equitable solution to climate change will require mandatory reduction commitments by all major emitting countries. He has committed to convene a global climate forum that will bring all the major emitting nations together.

While he believes that China and India must also make mandatory reduction commitments, [Obama] recognizes those commitments will not look like, in the first instance, those made by the U.S. and other highly developed countries … [this is] the notion of differentiated commitments.

[Obama] believes that there is a tremendous opportunity for the U.S. and other nations to try to [bring] advanced … clean technologies to China and other developing countries and that is an opportunity for both our manufacturing base but also a critical opportunity to help China modernize in ways that are more efficient and environmentally protective.

[Obama] believes the U.S. should be involved in partnerships [with developing] countries to provide funding and access to intellectual property that developing countries need and desire. He is supportive of international offsets but not to an unlimited degree.

[Obama] also believes that after the U.S. acts, countries like China will certainly be given a period of years to demonstrate they can make commensurate actions. In addition to support an incentives there will have to be some repercussions if other countries don’t take responsible actions down the road.