Well, thank you to all the students in the energy club for they have been doing and are doing today.
I have to say it’s great to be back on campus at this energy conference in what, for me, is a brief window between a two-year recusal of appearing at MIT to January 20th, 2017. So this is a good time to get here.
It’s also great to read from a distance and to – and to see up close how the energy initiative still goes strong in research and in energy policy analysis. And I do want to just give a little warning to beware to those of you in energy policy analysis. I just went through a set of studies – future of studies, the PCAST study, the Blue Ribbon Commission – and sometimes you get condemned to try and execute the studies that you have written.
In fact, the PCAST study that Maria referred to was about accelerating the pace of change in energy technology. And the few remarks I’ll make here before sitting down with Bob for our chat will actually focus on two of the principal areas that were part of that PCAST report. One was the call for a substantially increased focus and increased resources for innovation in the energy, science and technology space – that report calling for a public investment two to three times that which was the case at that time. And secondly, again, Maria mentioned the Quadrennial Energy Review and the Quadrennial Technology Review, and I’ll just make a few comments about that as well.
You know, clearly the major event in Paris in December, the COP21 meeting, was, in my view, enormously successful within any realistic bounds of expectations. And for this conference, I think an important point to make is that innovation was placed at the heart of the climate response agenda. And I’ll say a little bit more about that, but that really at a high level I think was a very, very important step. It had not been the case in previous discussions at this level. So now you have nearly 200 countries committed to a pathway to lower carbon. Sure, they are nationally determined contributions. There may be some unevenness in the implementation. But it should not mask the overarching point that essentially every country in the world is going to be driving to a lower-carbon trajectory.
And what you’re just talking about what that means in terms of building the new energy system over the next years and decades, the International Energy Agency, for example, estimates that we’re talking about, on average, say, roughly trillion-dollar-a-year scale investment in the countries, all the countries who are pursuing their low-carbon futures. So it’s really a big deal.
And, as I said, the innovation getting placed at the heart of this agenda was evident in that the very first day of the two weeks of Paris meetings – November the 30th, the day at which leaders from a large fraction of the world’s countries were present – the big announcement of that day was called Mission Innovation. And that really set off the two-week meeting towards what proved, of course, to be, I think, a very successful conclusion.
The Mission Innovation Coalition is 20 countries. It was really kind of put together with U.S., French as the hosts, and Indian leadership. Then it grew to 20 countries – which, I have to tell you, far exceeded our expectations because, again, you know, the innovation agenda just really caught hold. And what the Mission Innovation commitment is is to seek a doubling of energy R&D over a five-year period in each of those 20 countries. That’s some big leveraging opportunities, particularly when you realize that the 20 countries represent somewhere between 80 and 85 percent of the world’s public energy R&D. So that will be doubled over this five-year period.
The call for this kind of major increase is not new. I mentioned the PCAST report. But even before that, the American Energy Innovation Council, which is a group of CEOs of major American corporations from multiple sectors, in their – they already in 2010 talked about the importance of this with really three major points: one, innovation being at the essence of America’s strength; second, the critical role of public investment in energy R&D, particularly in laying the foundation for disruptive energy technologies; and, third, the very high benefit-to-cost ratio of these RD&D investments. So, again, they recommended a tripling. We are taking the modest step of a doubling over five years. And this is – this is really a major – a major advance.
Now, in parallel with the development of the Mission Innovation Coalition, very importantly, an independent – and yet linked, if that’s not oxymoronic – another coalition was formed – and this was through constant communication going back to to last spring and summer – is the Bill Gates-led Breakthrough Energy Coalition. So the Breakthrough Energy Coalition has started and it’s going to be growing. It is a group of 28 investors from 10 countries. Almost all, all but one of the original group, individual investors.
That’s important, because that allowed them to come together to put billions of dollars on the table to capture the benefits of the increased innovation pipelines in those 20 countries in a way that will maximize risk tolerance and be extremely patient in waiting for returns. This is the energy business, after all. Furthermore they are prepared to fund some of the key technology developments. Many people in this room probably have run up against a whole bunch of barriers in terms of getting past early stages when capitalization becomes more challenging. So they want to combine all of this together in supporting this enhanced public funding of R&D.
I’m happy to say that the – in terms of this doubling commitment, the President’s budget request to Congress for fiscal year 2017 satisfied the commitment, actually in spades. Just the Department of Energy baseline is about $4.8 billion. And the request for appropriations is for a 21 percent increase – which is easy to calculate it’s on the trajectory for doubling in five years – but actually, in addition, the request proposes some new mechanisms, what are called mandatory spending, that if all of this were done would actually raise the increase to about 34 percent.
Now, we’re not cashing that yet. We do have an issue of working with Congress to get this funding. But I want to emphasize that the request for the appropriations to the Congress from the President was made despite the need to respect an agreement of a funding cap that has the total discretionary budget flat from ’16 to ’17. So make no bones about it, this was a priority choice to get a significant increase despite an overall flat budget.
So, anyway, obviously, we’re excited about it. And we’ll be working with the Congress throughout this year to hopefully realize what we’re talking about.
I would just say that the – that budget, of course, increase will go in many directions. Energy Frontier Research Centers, for example. In the first round, MIT has received two of those, two that I think have been very successful, as have others. And so, for example, in this first year of increase, the 20 percent step, we would add five new ones to the – to the 32 that currently exist.
It would put ARPA-E on the track to the billion-dollar number that was originally proposed by the National Academy of Sciences in 2005. It’s been very successful. Again, MIT certainly has had a major presence in that – in the ARPA-E programs.
But just this week we announced the new statistics for what I would call the intermediate indicators of success. The true indicators of success are getting out and scaling big time in the marketplace. That’ll take a few more years. But in the five years, basically, of operation of a – of a process, of the 200 completed projects – typically, three-year projects – first of all, a quarter of them, roughly, have received $1.25 billion of private follow-on financing, resulting in 36 companies and approximately – and something like 10 commercial products already. That’s a pretty good track record.
However, last year the third open call was made for ARPA-E. Two percent of the projects were funded. It’s a pretty good indication that we are still leaving a lot of innovation on the – on the table. And so that’s part of what this Mission Innovation is. So clearly, as you can tell, this is going to be a major focus for us for the rest of this administration, for sure, to have this put down roots and really push this innovation agenda domestically and globally.
Solar is one of the great stories about innovation. And I just want to mention – of course, I read this week that our friend Vladimir Bulovic had a very, very thin photovoltaic which had the innovation of simultaneously growing the substrate and the device. Whether that scales, we will see.
But just as an indicator about the impacts, I just wanted – we will soon be publishing something we’ve been working on for a year, and that’s trying to actually define what energy jobs are and how many of them are there, et cetera. And just as one indication, you know, I think out in the society there may still a lot of ideas that the clean energy technologies, renewables and others, are still some kind of sideline. Well, I think that’s got to – that’s changing and it’s got to change. It does not reflect reality.
For an example, in this jobs dimension, we – according to this report that will be coming out, we now have 200,000 direct, fulltime solar jobs in the United States, and another 100,000 part-time employment. That is a big industry compared to just about anything else in this country.
OK. In finishing up these first remarks, I just wanted to take a minute about the Quadrennial Energy Review and the Quadrennial Technology Review. I’m not going to explain them in great detail, just to say that this is a a message to students interested in policy and analysis. The message is a good one: Do the job well and you actually can have influence. So this was a new way of going about doing government policy development based upon real extensive analysis, hard work, 22 agencies involved in the first round, focused on energy infrastructure. But I just want to say this new way of doing business based upon really deep and sound analysis was intended to open up a serious dialogue about energy policy, even in these politically turbulent times.
These recommendations directly impacted the highway bill that came out last year. Two billion dollars allocated for infrastructure. Many provisions directly from that into the current energy bills being developed by the House and the Senate. And we have copies sitting on just about on every state energy office desk. So I just wanted to kind of put this out as an encouragement, that I think that when one really goes into this deeply we really can help shift the system. And I think – I think these efforts are.
On the Quadrennial Technology Review, that mapped out a lot of the opportunities that we see, basically in six areas: electric power system modernization; clean electric power technologies; building systems and technologies with an efficiency focus; advanced manufacturing; cleaner fuels, systems and technologies; and clean transportation and vehicle systems and technology. It gives you an idea of a couple things. Those are some of the areas where we see a lot of opportunity, clearly, and also note the very strong emphasis on systems in addition to the individual technologies.
So, to conclude, look, this is an exciting time. Mission Innovation is obviously going to be consuming us for the rest of this year. But it’s a very exciting time in so – in so many ways. And I think that sometimes we don’t look up enough and recognize how things are coming at us so fast in the – in the space. I would posit that there’s a lot of discussion about storage is still too expensive. But look what’s actually happening in terms of the introduction of storage – grid-scale storage, et cetera. It’s actually happening. Look at – look at driverless cars. I don’t think two years ago very many people would have thought that we could see what we are seeing with this. And when you put those kinds of thing together, imagine what it could mean for revised urban systems and highly electrified cities, et cetera.
So things are happening really fast. We’ve got to look at innovation in science, innovation in technology, innovation in policy, innovation in business models. And that’s why, when we put MITEI together several years ago, we made sure every school and every discipline at MIT was engaged.
Thank you.