What Peaks and Dips in US Funding of Energy R and D Mean for Innovation

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​President Joe Biden submitted his budget request on March 9. Although the numbers are bound to change before Congress approves it, federal funding of research and development — a small but significant corner of the US budget — could top $200 billion for the first time. That’s in today’s dollars, but adjusted for inflation it would also be an all-time high. And 2023 could be a very notable year for one sliver of that corner of the budget: energy R&D.

Federal research dollars follow a long wave pattern, rising in the 1960s, the 2000s and now the 2020s as well. Peaks in total R&D have generally corresponded with peaks in defense outlays, although that has changed in the past five years — both defense and non-defense spending have been increasing, and non-defense outlays have taken a sustained lead for the first time.

There have been two stretches since the 1950s when R&D was flat in constant dollar terms, first in the 1970s and again in the 1990s. The former of these seemingly quiet intervals hides something important and provides us with lessons for today.

During the 1970s, the R&D outlays for space and general science declined, as did defense R&D. Health R&D increased by nearly $5 billion. But the big winner was energy. Energy R&D was only $1.72 billion in 1972, before the first oil price shock; by 1979, it was nearly $11 billion, bigger than the health outlay, nearly the spending on space and a quarter of defense.

In fact, energy R&D hit its all-time peak in the late 1970s and still has not recovered. The ask in Biden’s budget request this year, for nearly twice the funding given last year, is getting close (if it survives political wrangling).

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