Successful Government-Industry Partnership: The U.S. Department of Energy's Role in Advancing Energy-Efficient Technologies

Howard Geller & Scott McGaraghan

February, 1996

Executive Summary

The U.S. Department of Energy (DOE) has played a critical role in the development and dissemination of some important energy-efficient technologies. Three of the most successful technologies that DOE contributed to—low-emissivity (low-E) windows, electronic ballasts, and high-efficiency supermarket refrigeration systems—are reviewed in detail in this report. In all three cases, DOE initiated R&D projects and worked in partnership with private companies to develop, refine, and demonstrate innovative energy efficiency measures. Without DOE's financial and technical assistance, it is unlikely that the companies would have actively pursued what were then perceived as high-risk, uncertain technologies. In some cases, DOE also helped to remove barriers that inhibited the adoption of the new technologies once they were commercialized.

These three case studies and other successful DOE projects show that smaller entrepreneurial companies have been enthusiastic and effective partners with DOE and its national laboratories. Once the new technology was technically and commercially proven, the larger manufacturers became interested. The major glass/window, ballast, and supermarket refrigeration system manufacturers eventually offered these energy-efficient devices, in some cases by purchasing a successful entrepreneurial firm. The larger manufacturers then made further technical refinements, achieved economies of scale, and expanded marketing of the energy-efficient products on their own.

The three main technologies reviewed in this paper are yielding large benefits to manufacturers, consumers, and the environment. Figure ES-1 summarizes the economic impacts for each technology. The three technologies combined provided U.S. manufacturers with about $3.5 billion in additional sales revenues cumulatively through 1995. The primary energy savings from use of the three technologies reached about 250 trillion Btus per year as of 1995 (including about 18 billion kWh per year of electricity savings). The value of this energy savings is about $1.5 billion per year based on current energy prices. Moreover, consumers should realize net economic savings of around $10 billion over the lifetime of low-E windows, electronic ballasts, and high-efficiency supermarket refrigeration systems produced and sold in the United States through 1995.

Considering that these three projects combined cost DOE around $24 million, the benefits to the nation already outweigh the cost to taxpayers by over 400:1. And this return is increasing every year as more of these products are sold and used. Furthermore, the nation is benefitting from additional income tax revenues and from a more productive economy due to the widespread adoption of these energy-efficient technologies. We estimate that sales of the three main technologies reviewed in this report have resulted in about $150 million in federal tax receipts, about six times the amount of money spent by DOE to support these technologies.

Low-E windows, electronic ballasts, and high-efficiency supermarket refrigeration systems are cutting pollutant emissions mainly as a result of less fuel consumption by power plants. Based on the typical emissions rates of fossil fuel-fired power plants, we estimate that the three technologies combined reduced annual pollutant emissions by approximately the following amounts as of 1995: CO2 emissions—18.5 million metric tons, SO2 emissions—100,000 metric tons, NOx emissions—76,000 metric tons, CO emissions—814 metric tons, particulate emissions—3,700 metric tons, and VOC emissions—485 metric tons. The environmental impacts for each technology are shown in Figure ES-2.

Federal funding of applied R&D in general and energy-efficient technology development in particular has been attacked as being "corporate welfare." These case studies show that this criticism is unfair. Corporate welfare implies large-scale, long-term federal subsidies for particular companies or industries. This is clearly not the nature of DOE support for energy-efficient technologies. DOE spends limited amounts of money to perform specific functions such as developing new technologies in partnership with entrepreneurial smaller firms, testing prototypes in the lab or field, obtaining and disseminating design tools and performance information, and removing barriers that are inhibiting adoption.

As these success stories illustrate, DOE's support for energy-efficient technologies has been narrowly targeted, has served a catalytic function, and is of limited size and duration. While DOE made very important contributions, the private sector expended far more than DOE to develop, produce, and market low-E windows, electronic ballasts, high-efficiency supermarket refrigeration systems, and the other successful energy-efficient technologies briefly reviewed in this report. If policy makers are serious about cutting "corporate welfare" in the energy arena, they should focus on the multi-billion dollar annual subsidies and tax breaks to the massive fossil fuels, electric utility, and corn ethanol industries rather then attack highly beneficial energy efficiency R&D programs.

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25 pp., 1996, $10.00, E961