A new legislative package on energy is working its way through the U.S. Senate. The American Energy Innovation Act (AEIA) is a compilation of dozens of energy bills that have passed the Senate Committee on Energy and Natural Resources, most with bipartisan support.

The sponsors do not cast this as a comprehensive climate change or clean energy bill. The AEIA is not the sole solution to decarbonizing the U.S. economy, but it would be the first major energy bill in over a decade and could provide incremental building blocks toward progress on an issue where bipartisan support has been evasive. It doesn't replace the need for additional emissions reduction mandates, infrastructure spending, tax incentives and a carbon price to ensure the United States decarbonizes at a pace consistent with the findings from the Intergovernmental Panel on Climate Change and goals of the Paris Agreement.

Acknowledging that not all building blocks are equal, and more are needed, here are five bright spots within the AEIA for rapid decarbonization of the U.S. economy, and two areas of concern:

Bright Spots for Decarbonizing the U.S. Economy

1. Novel Clean Energy Research and Development

Wind and solar power are mature clean energy technologies that get a lion's share of attention. They currently contribute 10% of total electricity generation, and could provide up to 30% by 2050 according to the U.S. Energy Information Administration. Other analysts think this contribution will be much larger. Meanwhile, electricity from other renewable sources has remained niche. Geothermal power is currently less than half a percent of annual generation, and marine and hydrokinetic power (MHK) — energy from tides, waves and river currents — barely registers.

In an "all of the above" technology strategy, the AEIA makes a down payment on these two sources of renewable energy. It requires the Department of the Interior to update its 2008 assessment of geothermal potential in the United States, which found over 500 GW of potential capacity from traditional and enhanced geothermal technologies. This is significant considering the current U.S. installed capacity of nearly 1100 gigawatts in 2019. The AEIA authorizes $165 million annually over five years to research, develop and demonstrate enhanced geothermal technologies, while providing financial assistance for state, local and tribal governments, as well as nonprofit and other organizations, to deploy traditional geothermal technologies.

Additionally, the AEIA authorizes $320 million over two years to research and develop MHK at economies of scale — which the Department of Energy estimates could generate approximately 1250–1850 terawatt-hours per year, equivalent to 30-45% of net power generation from 2019 across all fuels in the United States. Geothermal and MHK are potentially large sources of clean energy, and tapping into them requires investments now to lower their cost and promote their deployment.

In a second win for clean energy innovation, the AEIA reauthorizes the Advanced Research Projects Agency-Energy (ARPA-E), which has been characterized as a successful engine of innovation since its inception in 2009. AEIA extends the agency through 2025, authorizing another nearly $3 billion to invest in technologies that can improve energy efficiency across all sectors, reduce energy-related emissions and reduce energy imports.

Finally, the clean energy economy will require a workforce to match the scale and pace of deployment. The AEIA authorizes $45 million for a pilot grant program for on-the-job training and apprenticeships in careers related to energy efficiency, renewable energy and grid modernization. The provisions specifically prioritize minorities, women, veterans and individuals transitioning from fossil energy sector jobs — a nod to a just transition.

2. Better Energy Storage Technology

A noted challenge of an energy system reliant on intermittent renewable energy is energy storage. One study estimated a flexible energy system requires at least 100 gigawatts in new batteries and other storage, including long-duration storage. To address this, the AEIA incorporates the bipartisan Better Energy Storage Technology (BEST) Act.

The BEST Act aims to encourage grid-scale energy storage in the United States by authorizing $270 million per year through 2024 in research, development, demonstration and other regulatory incentives programs. This includes storage solutions for buildings, transportation and the power grid. It also establishes technical and planning assistance for electricity cooperatives and utilities to procure energy storage systems.

3. Modernizing the Electricity Grid

Bringing all that clean energy and storage onto the national electricity grid requires new investments in planning and infrastructure. The AEIA takes the first step by authorizing research and demonstration in two key areas, in addition to grid storage.

The first area is performance improvements to the power distribution systems across the country that would help grid operators demonstrate they can integrate and operate multiple forms of energy and storage technology with efficiency and flexibility. The second priority is in microgrid and hybrid renewable-conventional energy systems — acknowledging that the grid of the future will be a mosaic of interconnected and stand-alone power systems that need to provide clean and reliable energy. Under the AIEA, the federal government would provide state, local and tribal governments with support in demonstrating the feasibility of microgrid and hybrid systems.

4. Carbon Removal and Sequestration

The United States cannot reach net-zero greenhouse gas emissions by the middle of this century (which scientists say is necessary to limit the worst impacts of climate change) without both deeply cutting emissions and removing emissions from the atmosphere. This involves developing and deploying technology that can capture emissions before they enter the atmosphere, remove carbon dioxide or other greenhouse gas directly from the air, and store or utilize the captured carbon.

The AEIA contains provisions to advance this development. It would authorize $600 million for a carbon storage program aimed at the discovery of natural rock formations underground suitable for large-scale sequestration of gas. It would establish a carbon utilization program to demonstrate novel uses for carbon dioxide in commercial and industrial products. Lastly, it would authorize a program to develop and demonstrate technologies and strategies to remove carbon dioxide from the atmosphere — known as direct air capture — at scale. While direct air capture has no theoretical upper bound, one WRI study estimates it could capture between 200 and 1,400 megatons of carbon dioxide per year by 2050 with the right federal policies in place.

The key question will be whether the technologies that come from these programs become cost-effective for large-scale deployment, and capture carbon at a rate high enough to reach net-zero emissions in time. Some technologies are at the research and development stage; others are just being deployed and are likely to become cheaper as they scale up and incorporate early lessons. Some of the most promising applications are in industries like cement and steel where options for reducing emissions are more limited.

In the U.S. power sector, there are a wide variety of options for decarbonizing electricity generation that are likely to be more cost-effective than retrofitting fossil fuel plants with carbon capture technology. On the other hand, there are many recently-built fossil fuel power plants in Asia that may need to be retrofit with carbon capture. A research and development program could position U.S. firms to provide that technology, enhance U.S. competitiveness and support global decarbonization.

5. Industrial Emissions and Manufacturing

Emissions from the industrial sector cannot be ignored. In 2018, this sector accounted for 22% of emissions in the United States — driven by the use of fossil fuels for energy and emissions from chemical, manufacturing and other industrial processes. While the AEIA will not itself drive deep decarbonization of the sector, it could set the foundation of a program to do that in the future. It would establish the Industrial Emissions Reduction Technology Development Program for the research, development, demonstration and commercial application of technologies that reduce emissions in the industrial sector.

Related, successfully decarbonizing the U.S. economy requires additional decentralized support and capacity-building for industry. Universities and national laboratories could provide innovation hubs. In this spirit, the AEIA would also establish the "Future of Industry" and "Sustainable Manufacturing" programs, as well as industrial research and assessment centers across the country. These federally funded programs at universities would provide research, development and training for alternative energy, efficiency and sustainable solutions for manufacturing, industry, supply chains and energy systems.

Concerns for Decarbonizing the U.S. Economy

1. Benchmarks Needed for Fossil Fuel Investments

Despite the strong emphasis of this bill on clean energy, efficiency and lower emissions, some provisions could result in investment in fossil technologies that are not consistent with a deeply decarbonized economy. For instance, the AEIA would authorize $4 billion — one of the largest authorizations in the bill — to a new Coal and Natural Gas Technology Program whose goal would be to "ensure the continued use of the abundant domestic coal and natural gas resources through the development of transformational technologies that will significantly improve the efficiency, effectiveness, costs, and environmental performance of coal and natural gas use."

While the federal government should continue investing in next generation technologies, benchmarks are needed to ensure that those investments do not simply double down on high-carbon technologies that will eventually be stranded assets. Such could also be the fate for AEIA provisions that expedite the import and export of small-scale liquified natural gas — which has a sizable greenhouse gas footprint — or a study for building ethane and other petrochemical infrastructure near Appalachian oil and gas deposits.

2. Energy Efficiency is a Missed Low-hanging Opportunity

Energy efficiency is a central tenet of any serious plan to decarbonize the U.S. economy. There is little rationale that energy efficiency is not featured more in this bill, given the associated energy and cost savings, and emission reductions for governments, businesses and households. The federal government has numerous levers to ensure the market takes advantage of these benefits, including equipment performance standards; tax and fiscal incentives; technical assistance; public procurement; and funding for research, development and deployment.

For example, the Energy Savings and Industrial Competitiveness Act of 2019 is one of the bills that informed the AEIA. While many of the industrial sector provisions survived, what didn't were provisions to develop stronger building energy codes and to support states and local governments in implementing better codes. Considering the lifetimes of buildings can reach a hundred years, efforts are needed now that set a floor of efficiency for new and existing buildings before more fossil fuels emissions are locked into U.S. communities.

When efficiency has the potential to cut U.S. emissions in half by 2050, more meaningful investments are needed across industry, buildings and homes, appliances and equipment, and electricity distribution.

More is Needed, Including Appropriations

While it doesn't lay down the complete path to decarbonization, the 500-page AEIA contains provisions that could move the needle on U.S. energy and emissions, including on energy efficiency, renewable energy, energy storage, carbon capture, grid modernization and other relevant topics.

Additional proposed amendments — despite tenuous prospects — would strengthen the Act's climate impact, including a set of clean energy tax credits for renewable energy, electric vehicles and storage, as well as a bipartisan bill to phase out the strong greenhouse gases called hydrofluorocarbons. There are several additional parliamentary hurdles to get the bill through the Senate, the House and a Conference Committee — not to mention appropriating new funding.

This all means the AEIA will likely look different before it could become law and not everything will be funded to a level of effectiveness. Still, in a time of renewed optimism and debate on climate and energy legislation, this Act may be another bright spot where the partisan logjam has broken. It sets in place several meaningful building blocks to put the United States economy on a path to deep decarbonization.