Energy and Manufacturing: Maintaining the US’s Competitive Edge

on December 13, 2013 at 12:00 PM

White House Officials Tour Chevy Volt Plant

The U.S. is not the clear, go-to nation for energy manufacturing. But it’s no longer the nation that businesses automatically leave when it comes time to scale up innovations to commercial production, said Gene Sperling, Director of the National Economic Council, and it’s critical that the U.S. seize the opportunity that presents.

Speaking to the American Energy and Manufacturing Competitiveness (AEMC) Summit in Washington, DC, December 12, Sperling said the cost advantages of locating overseas are shrinking as wages and living conditions improve in emerging economies and as U.S. energy costs drop with increasing natural gas production.

Add to that the costs of long supply chains, currency fluctuations, and transportation, and more companies are deciding not to chance overseas factories but instead are bringing their innovations to commercial production here, he said.

“It’s not a slam dunk, but it is a close call,” Sperling said, noting the shift has come just in the last five years.

The opportunity to advance American manufacturing is arising just as a wide array of innovative energy technologies are approaching cost-competitiveness, said Secretary of Energy Ernest Moniz.

The U.S. is a world leader in research and innovation, and DOE is the largest funder of energy R&D. Moniz said DOE is exploring how to best help accelerate commercial deployment of innovative technologies DOE has helped to develop in the lab.

The U.S. now has “the potential for an American manufacturing revolution,” said Assistant Energy Secretary David Danielson, as advances are being demonstrated in renewable, fossil and nuclear technologies.

Wherever new technology is manufactured, it brings a new supply chain, multiplying its direct economic benefits, Sperling said. “Manufacturing punches above its weight,” he said.

Danielson said research has shown that innovation is maximized when designers and manufacturers are co-located and work together. If manufacturing locates elsewhere, he said, both supply chains and, eventually, innovators will follow.

A key issue several speakers identified is financing to bring new technologies from the lab to market. Creating a new technology can take 10 years and billions of dollars in long-term investment, Danielson said, and “our financial ecosystem is not set up to fund” such large, lengthy investments.

He said the government role in ensuring financing is available to keep the economy competitive needs to be rethought. He pointed out that the massive innovation that has followed computers and the Internet is all based on huge investments originally made by the Department of Defense.

Deborah Wince-Smith, President of the Council on Competitiveness, which cosponsored the AEMC Summit with DOE, said her group has been recommending a National Infrastructure Bank that could provide long-term debt financing, a model used successfully in Brazil.

Peter Davidson, Executive Director of DOE’s Loan Program Office, said his program has a $30 billion portfolio and 97% of its loans are performing, despite intense criticism of the few that failed. His office’s job, he said, is to work with developers to prove the technology and then “get out of the way” of private industry.

One step, said Danielson, will be an initiative DOE is launching in January to dramatically increase the use of experts from DOE’s national laboratories in resolving concrete scientific problems faced by industries. A number of partnerships are already in place at labs around the country, Danielson said, and DOE is looking at how to double the number of successful commercial engagements between industry and the labs in the next three years.