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Leveraging Department of Energy Authorities and Assets to Strengthen the U.S. Clean Energy Manufacturing Base

03.28.22 | 14 min read | Text by


The Biden-Harris Administration has made revitalization of U.S. manufacturing a key pillar of its economic and climate strategies. On the campaign trail, President Biden pledged to do away with “invent it here, make it there,” alluding to the long-standing trend of outsourcing manufacturing capacity for critical technologies — ranging from semiconductors to solar panels —that emerged from U.S. government labs and funding. As China and other countries make major bets on the clean energy industries of the future, it has become clear that climate action and U.S. manufacturing competitiveness are deeply intertwined and require a coordinated strategy.

Additional legislative action, such as proposals in the Build Back Better Act that passed the House in 2021, will be necessary to fully execute a comprehensive manufacturing agenda that includes clean energy and industrial products, like low-carbon cement and steel. However, the Department of Energy (DOE) can leverage existing authorities and assets to make substantial progress today to strengthen the clean energy manufacturing base. 

This memo recommends two sets of DOE actions to secure domestic manufacturing of clean technologies:

  1. Foundational steps to successfully implement the new Determination of Exceptional Circumstances (DEC) issued in 2021 under the Bayh-Dole Act to promote domestic manufacturing of clean energy technologies.
  2. Complementary U.S.-based manufacturing investments to maximize the DEC’s impact and to maximize the overall domestic benefits of DOE’s clean energy innovation programs.

Challenge and Opportunity

Recent years have been marked by growing societal inequality, a pandemic, and climate change-driven extreme weather. These factors have exposed the weaknesses of essential supply chains and our nation’s legacy energy system. 

Meanwhile, once a reliable source of supply chain security and economic mobility, U.S. manufacturing is at a crossroads. Since the early 2000s, U.S. manufacturing productivity has stagnated and five million jobs have been lost. While countries like Germany and South Korea have been doubling down on industrial innovation — in ways that have yielded a strong manufacturing job recovery since the Great Recession — the United States has only recently begun to recognize domestic manufacturing as a crucial part of a holistic innovation ecosystem. Our nation’s longstanding, myopic focus on basic technological research and development (R&D) has contributed to the American share of global manufacturing declining by 10 percentage points, and left U.S. manufacturers unprepared to scale up new innovations and compete in critical sectors long-term.

The Biden-Harris administration has sought to reverse these trends with a new industrial strategy for the 21st century, one that includes a focus on the industries that will enable us to tackle our most pressing global challenge and opportunity: climate change. This strategy recognizes that the United States has yet to foster a robust manufacturing base for many of the key products —ranging from solar modules to lithium-ion batteries to low-carbon steel — that will dominate a clean energy economy, despite having funded a large share of the early and applied research into underlying technologies. The strategy also recognizes that as clean energy technologies become increasingly foreign-produced, risks increase for U.S. climate action, national security, and our ability to capture the economic benefits of the clean energy transition. 

The U.S. Department of Energy (DOE) has a central role to play in executing the administration’s strategy. The Obama administration dramatically ramped up funding for DOE’s Advanced Manufacturing Office (AMO) and launched the Manufacturing USA network, which now includes seven DOE-sponsored institutes that focus on cross-cutting research priorities in collaboration with manufacturers. In 2021, DOE issued a Determination of Exceptional Circumstances (DEC) under the Bayh-Dole Act of 19801 to ensure that federally funded technologies reach the market and deliver benefits to American taxpayers through substantial domestic manufacturing. The DEC cites global competition and supply chain security issues around clean energy manufacturing as justification for raising manufacturing requirements from typical Bayh-Dole “U.S. Preference” rules to stronger “U.S. Competitiveness” rules across DOE’s entire science and energy portfolio (i.e., programs overseen by the Under Secretary for Science and Innovation (S4)). This change requires DOE-funded subject inventions to be substantially manufactured in the United States for all global use and sales (not just U.S. sales) and expands applicability of the manufacturing requirement to the patent recipient as well as to all assignees and licensees. Notably, the DEC does allow recipients or licensees to apply for waivers or modifications if they can demonstrate that it is too challenging to develop a U.S. supply chain for a particular product or technology.

The DEC is designed to maximize return on investment for taxpayer-funded innovation: the same goal that drives all technology transfer and commercialization efforts. However, to successfully strengthen U.S. manufacturing, create quality jobs, and promote global competitiveness and national security, DOE will need to pilot new evaluation processes and data reporting frameworks to better assess downstream impacts of the 2021 DEC and similar policies, and to ensure they are implemented in a manner that strengthens manufacturing without slowing technology transfer. It is essential that DOE develop an evidence base to assess a common critique of the DEC: that it reduces appetite for companies and investors to engage in funding agreements. Continuous evaluation can enable DOE to understand how well-founded these concerns are.

Yet, the new DEC rules and requirements alone cannot overcome the structural barriers to domestic commercialization that clean energy companies face today. DOE will also need to systematically build domestic manufacturing efforts into basic and applied R&D, demonstration projects, and cross-cutting initiatives. DOE should also pursue complementary investments to ensure that licensees of federally funded clean energy technologies are able and eager to manufacture in the United States. Under existing authorities, such efforts can include: 

These complementary efforts will enable DOE to generate more productive outcomes from its 2021 DEC, reduce the need for waivers, and strengthen the U.S. clean manufacturing base. In other words, rather than just slow the flow of innovation overseas without presenting an alternative, they provide a domestic outlet for that flow. Figure 1 provides an illustration of the federal ecosystem of programs, DOE and otherwise, that complement the mission of the DEC.

Figure 1

Programs are arranged in rough accordance to their role in the innovation cycle. TRL and MRL refer to technology and manufacturing readiness level, respectively. Proposed programs, highlighted with a dotted yellow border, are either found in the Build Back Better Act passed by the House in 2021 or the Bipartisan Innovation Bill (USICA/America COMPETES)

Figure 1Programs are arranged in rough accordance to their role in the innovation cycle. TRL and MRL refer to technology and manufacturing readiness level, respectively. Proposed programs, highlighted with a dotted yellow border, are either found in the Build Back Better Act passed by the House in 2021 or the Bipartisan Innovation Bill (USICA/America COMPETES).

Plan of Action

While further Congressional action will be necessary to fully execute a long-term national clean manufacturing strategy and ramp up domestic capacity in critical sectors, DOE can meaningfully advance such a strategy now through both long-standing authorities and recently authorized programs. The following plan of action consists of (1) foundational steps to successfully implement the DEC, and (2) complementary efforts to ensure that licensees of federally funded clean energy technologies are able and eager to manufacture in the United States. In tandem, these recommendations can maximize impact and benefits of the DEC for American companies, workers, and citizens.

Part 1: DEC Implementation

The following action items, many of which are already underway, are focused on basic DEC implementation.

Part 2: Complementary Investments

Investments to support the domestic manufacturing sector and regional innovation infrastructure must be pursued in tandem with the DEC to translate into enhanced clean manufacturing competitiveness. The following actions are intended to reduce the need for waivers, shore up supply chains, and expand opportunities for domestic manufacturing:

The Bayh-Dole Act of 1980 codified the patent rights granted to nonprofits, universities, and businesses that enter into funding agreements with the federal government. The act enables these entities to obtain title to and license “subject inventions” funded by the government, so long as the licensees agree to certain conditions to protect the government’s interests, report on invention utilization, pursue commercial applications (i.e., not simply sit on the patent), and substantially manufacture in the United States products intended for domestic sale. If a licensee fails to uphold these requirements, the federal government has “march in” rights to force the licensee to license the application for practical use and public benefit. The Department of Commerce’s National Institute of Science and Technology (NIST) oversees standard patent rights under Bayh-Dole, but individual agencies have some latitude to expand requirements in “exceptional circumstances.”