FIGURE 3-1 U.S. energy R&D and the price of oil, 1972-2005.

SOURCE: Department of Energy.

3.1
TRENDS IN ENERGY RESEARCH AND DEVELOPMENT

The federal commitment to energy research and development in the United States has undergone significant swings in the nearly 30 years since the enabling legislation creating the Department of Energy was signed into law by President Carter on October 1, 1977. Spikes in the price of oil in 1973 and 1979 drove a surge in energy R&D spending in the late 1970s and into the start of the Reagan administration. However, starting in 1981, shifting budgetary priorities favoring military technology investments and a subsequent collapse of the price of oil drove a sharp drop in commitments to energy R&D that lasted through the 1980s (See Figure 3-1). By the mid-1990s, investments in energy R&D were, in real terms, less than half their level at their 1979 peak.2 Federal and industry R&D comprised only 0.5 percent of all sales in the industry—the lowest percentage of any industry, with the exception of primary metals.

Weak support for energy technology in the late 1990s is reflected in the data on venture capital activity. The boom in venture capital disbursements from 1995 to 2000 did result in a growth in funding by venture capital firms in energy technology companies, but at a far less-than-proportional rate. Where in 1995, disbursements to energy companies accounted for only 6.8 percent of the venture

2

National Science Foundation, Federal R&D Funding by Budget Function: Fiscal Years 2003-2005 (historical tables), Arlington, VA: National Science Foundation.



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