If you heard about the cap-and-trade energy bill that the U.S. House of Representatives passed and sent to the Senate, you may have asked, “How can any bill take 1000 pages?” The answer, as it turns out, is that only a small part of the bill creates a carbon cap-and-trade program. The remainder is consumed with two things: 1) spending the money that will be generated by the sale of carbon emission allowances under the cap-and-trade program; and 2) creating incentives and support for a myriad of technological changes and innovation that will be necessary to sync our economy to a low-carbon world while still maintaining much of the lifestyle that has attracted us to high carbon emissions: the single occupancy vehicle, lots of cool gadgets, and energy on demand.
Of course we don’t know if the Senate will pass any energy bill – much less one that looks like the bill the House passed. The Senate won’t take it up until it has dealt with health care, so at the earliest the Senate will start working on the energy bill sometime this fall. But it is a reasonable bet that some form of energy bill will ultimately pass. Because innovation will be critical if we are to convert to a low-carbon emission economy, the Puget Sound Region would be well-advised to use the time between now and when the Senate gets done with its work to make sure we are in a position to benefit from this bill.
One of the provisions that could have long-lasting influence on the character and quality of life of the Puget Sound region is Sec. 171 of the House bill, which requires the Secretary of Energy to select eight “energy innovation hubs,” within 9 months of the adoption of the bill, to be distributed around the United States. The energy innovation hubs will receive annual allocation of carbon emission allowances – which can in turn be auctioned for cash. The money from the allowances is to be distributed by the hubs to fund “translational research,” which means research “with technical and commercial applications to enable promising discoveries or inventions to attract investment sufficient for market penetration and diffusion.”
To be eligible to become an energy innovation hub there must be a consortium of two research universities with a combined annual research budget of $500 million and one or more additional research universities, state or federal institutions with a focus on clean energy technologies or a nongovernmental organization with research or commercialization expertise in clean energy technology development. The consortium must have established its legal and accounting structure; must receive financial contributions from the state, consortium participants or other non-federal sources; must operate as a nonprofit organization; and must demonstrate high potential for energy innovation.
Washington’s two largest state universities are ideal candidates to meet the “two research universities” criterion. The Battelle Institute or perhaps Seattle University could be the third part of the consortium. So we potentially have the pieces.
But what more will they need? We are at a disadvantage to many states in meeting the requirement for non-federal funding. Washington State’s constitution prevents the state from lending its credit, so it cannot do what California has done and borrow a billion dollars to finance energy innovation start-ups. The Puget Sound region will have to get that component from the private sector.
We are also at a disadvantage to some other regions in that we are not as energy-strangled as some parts of the country. Our utilities are not as dependent on old coal-fired power plants as in the Midwest and East Coast. That makes our utilities less needy of the innovations in electrical generation that the energy bill seeks to foster, and they have less incentive to invest in new technologies. We do not have the automobile industry here, so this is not the logical center of innovation in transportation. Neither the major oil companies nor the major coal companies are based here, so we do not have the reservoir of research talent and industry knowledge that is found in Denver or Houston.
But, we do have a deep reservoir of technological talent, and we have a culture of innovation. This region attracts brainpower because of its quality of life. And its public research universities are among the front ranks of public universities nationally. There is little that we have chosen to compete for that we have not been able to compete for effectively.
The question is: Will we be ready to compete? Accepting that there may never be an energy bill, and if there is one, the energy innovation hubs component may be taken out, we believe that now is the time for this region to be getting itself organized to compete to be an energy innovation hub.
Why does it matter? It’s about what we want this region to be 20 and 30 years from now. The Puget Sound region has benefited mightily from the fact that Bill Gates and Paul Allen happened to grow up here, and that Amazon started here. It has been a high-tech hub through luck of birth as much as anything. And that has made the average education in this region higher than other places, led to higher-paid jobs, and with that, a stronger economy, healthier arts community, and higher quality of life. Much the same could be said about our good fortune that Fred Hutchinson Cancer Research Center, Immunex (Amgen) and Zymogenetics located here and that the UW medical school outpaces most other medical schools in attracting federal research dollars. Being a biomedical research hub has been a huge asset for the economy and for the region.
Energy innovation will be the “next big thing.” It must be if the world as we know it is to continue as fossil fuels become scarce and expensive. If the Puget Sound region wants to maintain itself as a place that attracts innovators, attracts capital, and attracts an educated populace, then it must be part of energy innovation as well. But that bus will pass by regions that aren’t ready when the time comes to choose the energy innovation hubs. Areas that are selected are likely to see federal research dollars come their way for decades– the need for energy innovation won’t be a passing fad. On the other hand, areas that aren’t selected may never have the chance to step up later. So now is the time to be getting ready.