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National Laboratory Reform PRIORITY INNOVATION POLICIES | REFORMING THE NATIONAL LABORATORY SYSTEM PRIORITY INNOVATION POLICIES Reforming the National Laboratory System Overview 1 Clean energy technologies must be developed, commercialized, and tested before they can be deployed on a large scale. However, when it comes to energy innovation, this process often stalls. The commodity nature of electricity and other forms of energy, the expensive and long-lived capital assets this kind of innovation requires, and the structure of electricity-market regulation all reduce research and development (R&D) spending from industry and other private sources. That means the government has a major role to play in promoting and developing energy innovation— and the Department of Energy’s (DOE’s) National Laboratory system is a critical component of a federal approach to commercializing clean energy technologies. 1. The research underpinning this brief, The 17 National Laboratories owned by DOE are sometimes called the crown including most of the findings, figures, and jewels of the U.S. innovation system. Over 100 Nobel Laureates have been related recommendations, were initially affiliated with DOE and its labs, which employ more than 20,000 scientists and published in reports and publications perform about $14 billion of R&D each year.2 Today, the National Laboratory emerging from an initiative at the Harvard system makes essential contributions to the national defense, advances Kennedy School’s Belfer Center for Science and International Affairs. The initiative fundamental science, and—crucially—plays a large role in promoting energy was supported by the Environment and innovation. This track record means the labs can play a significant role in Natural Resources and Science, Technology, mitigating climate change.3 and Public Policy Programs. The individual researchers involved were Professor Venkatesh Narayanamurti of Harvard University, Professor Laura Diaz Anadon, currently at the University of Cambridge, Professor Gabriel Chan, currently at the University of Minnesota, Sarah Jane Maxted, currently on staff at the Massachusetts Institute of Technology, and Dr. Amitai Bin-Nun, currently at Securing America’s Future Energy (SAFE). 2. Department of Energy (2017). Annual report on the state of the DOE National Laboratories. U.S. Department of Energy. 3. Westwick, P. J. (2003). The National Labs. Harvard University Press. | US Federal Policy Playbook Disclaimer PRIORITY INNOVATION POLICIES | REFORMING THE NATIONAL LABORATORY SYSTEM Locations of the DOE National Laboratories Fermi National Idaho National National Renewable Accelerator Laboratory Energy Laboratory Laboratory National Argonne Energy Ames Laboratory National Technology Pacific Northwest Laboratory Laboratory National Laboratory Brookhaven National Lawrence Laboratory Berkeley National Laboratory Princeton Plasma Physics Laboratory SLAC National Accelerator Thomas Jefferson Laboratory National Accelerator Facility Lawrence Livermore National Laboratory Sandia National Laboratory Los Alamos National Oak Ridge Laboratory National Laboratory Source: U.S. Department of Energy However, Labs were not specifically designed to work on commercializing energy innovations, so there will need to be significant policy reform to help them accomplish these goals.4 In fact, there is broad acknowledgment from DOE leadership that while the Labs have had notable successes, the system can do far more to help commercialize technologies that can contribute to decarbonizing the energy system.5 This assessment has been echoed in a series of high-profile examinations of the Lab system. These assessments have found that, while the Labs offer the nation “inestimable value” as an executor of R&D, there are “significant opportunities” to create more value in partnership with the private sector.6 Policy interventions include: 1. Encouraging public-private collaboration within the National 4. Anadon, L. D., Chan, G., Bin-Nun, A. Y., & Narayanamurti, V. (2016). The pressing energy Laboratory system. innovation challenge of the US National 2. Using incentives and assessment to focus research in the National Laboratories. Nature Energy, 1(10), 1-8. Laboratory system on technology transfer and the development of 5. Department of Energy (2016). commercial products. “Departmental Response to the Final Report of the Commission to Review the Effectiveness 3. Aligning incentives and funding to improve the quality and quantity of the National Energy Laboratories.” U.S. of technology transfer between the National Laboratory system and Department of Energy. Available at: https:// outside partners. www.energy.gov/sites/prod/files/2016/02/f29/ CRENEL%20Response%20-%20FINAL%20 4. Focusing DOE funding on commercializing energy technologies. COMBINED_0.pdf 5. Changing the research culture at National Laboratories to boost 6. Glauthier, T.J. et al. (2015). Securing technology-transfer outcomes. America’s Future: Realizing the Potential of the Department of Energy’s National 6. Encouraging entrepreneurial culture among individual scientists at Laboratories. Office of Scientific and National Laboratories. Technical Information (OSTI), Oak Ridge, TN (United States). | US Federal Policy Playbook Disclaimer PRIORITY INNOVATION POLICIES | REFORMING THE NATIONAL LABORATORY SYSTEM Legislative Principles and Policy Recommendations 1. Encourage public-private collaboration for energy innovation and commercialization within the National Laboratory system. All DOE National Laboratories, with the exception of the National Energy Technology Laboratory (NETL), are government-owned and contractor-operated (GOCO). Current lab operators include the University of California, Honeywell, and the Battelle Memorial Institute. (Past Management and Operating (M&O) contractors in the National Laboratory system have included AT&T, Lockheed Martin, and Dupont.) At the project level, too, the Labs collaborate with hundreds of companies. These operational models allow more flexible personnel and incentive policies and tap into the research-management expertise of large entities. GOCO labs and the M&O contractors who operate them could play a big role in fostering a research culture focused on commercialization and improving Lab relations with industry.7 However, increased Congressional oversight and highly prescriptive budgeting and approval processes have limited the flexibility of M&O contractors to run their labs in accordance with the industry’s best practices. It is impossible to improve energy-commercialization outcomes without close relationships with industry. For this reason, bringing in industry partners in appropriate roles for the Labs should be an important federal priority. Their activities should focus on energy-innovation activities that the private sector cannot perform well. For their part, since many National Labs are in remote areas outside of large coastal cities, they can help seed local innovation ecosystems and develop new industries. Congress and DOE should place the work of commercializing energy technologies at the center of the National Labs’ strategic focus. This means moving to less restrictive and expensive oversight models for the Laboratory system, which will make it easier to find and keep industry partners and develop collaborative strategic plans for energy innovation. Congress and DOE should also leverage their investments in National Labs to build regional innovation ecosystems that match federal technological competencies with the capabilities that already exist in local business, industrial, and academic communities. 2. Use incentives and assessment to focus research at National Labs on technology transfer and the development of commercial products. In the private sector, corporations used to spend significant sums on early-stage R&D—sometimes even on topics relatively far afield from their industry’s focus. This work served as the backbone of the nation’s innovation system. However, 7. Jaffe, A. B., & Lerner, J. (2001). Reinventing public R&D: Patent policy the corporate central laboratory no longer plays this role—especially not when and the commercialization of national it comes to energy innovation. While the National Laboratory system cannot laboratory technologies. RAND Journal of compensate for this decline more broadly, Congress and others agree that it Economics, 167-198. can complement and augment private-sector investments in energy innovation. | US Federal Policy Playbook Disclaimer PRIORITY INNOVATION POLICIES | REFORMING THE NATIONAL LABORATORY SYSTEM Currently, however, there is no way to measure National Labs’ performance on technology transfer and commercialization—processes that are essential to bringing energy innovation to market. DOE offices evaluate the labs they sponsor using an annual Performance Evaluation and Measurement Plan (PEMP), but the PEMP evaluates tech-transfer strategy only as a subcategory of another, higher-level goal. DOE should evaluate any National Lab that receives funding for energy R&D with a focus on technology-transfer outcomes, and the results of these evaluations should impact performance incentives and M&O contract renewal. Also, when appropriate, DOE could encourage the M&O contractors operating National Labs to take a share of licensing fees in lieu of a fixed fee for Lab operation. This gives contractors an incentive to spin out Lab inventions into commercial products. 3. Align incentives and funding to improve the quality and quantity of technology-transfer outcomes between the National
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