In my opinion, the U. S. must develop a positive policy to increase the resources available to individual innovators and to small businesses generally. An increased investment of federal R & D support in small business will bring a return that is unsurpassed by any other governmental spending. Furthermore, a properly structured program in the area of solar energy, an area of especial interest to me and of vital national import, could serve as a model for future small business and innovator programs.

The message I bring today is not an indictment of any individual or organization, but rather an illumination of the barriers confronting the small businessman trying to do business with the federal government in the solar energy field specifically, and in R & D generally. I come also to raise some larger issues.

My particular purpose is not simply to criticize a few government funded R & D projects, because in the course of letting thousands of grants and contracts it is quite likely that many will be of less than sound quality, and some even absurd. Incidentally, I would like to commend congress for its watch-dog efforts in pressuring for justification for many projects. Rather, my purpose is to demonstrate that the major federal R & D program manages to operate in such a way as to discourage innovation and produce results that are only of marginal value.

I would like to share with you a personal experience which I feel exemplifies the problems confronting a small businessman. MCI, in an area of technology we felt to be useful and in the national interest, sought governmental support for particular developments on which we have worked. Due to the need to protect my private investment in this technology I am not at liberty to provide all the details, however, Mr. John De Lorean has examined this technology on a preliminary confidential basis and has expressed to us the opinion that the technology has considerable merit. Information on this project is available on a basis that will protect our proprietary interests but disclose enough to allow for proper technical evaluation. I have tried, in vain, for almost three years for an opportunity to share this technology with a government agency in order that we could carry out a joint program of further engineering and development. I have also made it clear that MCI would be willing to share royalties with the federal government, although we would not give them up entirely. Further, MCI will license all producers interested in utilizing our innovations and inventions.

I have visited a large number of agencies and yet, to date, have not been able to interest a single person in our technology. Some wanted to receive a proposal that required a sizeable MCI contribution, another, although eager for a proposal, made it clear that MCI would be asked to forfeit all patent rights.

This is just one example of what small business must cont end with when seeking governmental support.

On the onset I want to make several things clear:

1) I strongly believe that science and technology have made valuable contributions to this nation.

2) I think it appropriate for the federal government to fund research and dcvelopment on a carefully selected basis.

3) Federal funding of research and development should not only be done to achieve certain limited technical objectives, but should also be consistent with broader national objectives. For example, the enhancement of a new and competitive industry which will be a substitute for a declining industry, i. c., solar for oil.

4) Private enterprise can only function in the national interest if there is
real, dynamic, and viable competition or appropriate regulation.

The personal experience I related previously and more I am about to relate suggest to me that over the last thirty years an industry/government relationship in R & D has developed which is not fully healthy. It is for this reason I appear here today to share my experiences and raise a series of broad policy questions regarding how R & D procurement is currently conducted. I do not wish to suggest that the entire tree needs to be pulled down, but that the time is ripe for a complete check-up of this system and the pruning of a few defective, or unbalanced limbs.

During the sixties the U. S. learned that technology was a mixed blessing; industry was not only producing goods in the form of products, but also "bads" in the form of air and water pollution. From my own direct experiences I have come to understand that federal R & D programs have often engendered adverse social impacts that are unplanned but could grow and become very serious if permitted to continue. I do not perceive this problem as being a simple conspiracy to direct the future of our society, but rather, by virtue of the similar nature of people and processes within the federal R & D establishment and the larger industries of the country, an emerging coalescence of political identification, attitudes toward technology, and a concurrence on what constitutes social progress that must be examined. Technology does have social impact and all too often it appears that this impact is not given the consideration of balanced judgement, but rather, is dismissed as being "political" while little by little society is moved into new directions.

Perhaps a few questions will provide a clearer picture of this theoretical position:

1) Of all the federal R & D funds directed toward solving specific problems, why is so little technology being directed toward the specific needs of low income citizens?

2) Why is so little federal effort being devoted to small scale technology as compared to large scale projects?

3) Why is so little federal funding going to small businesses?

4) To what extent will federal cost sharing requirements tend simply to pay for R & D by existing industries at the expense of the taxpayer and smaller innovative firms?

5) Why have there been no successful federal efforts to support individual innovators, when over the recorded history of this country the private inventor has been the great source of new products, ideas, and innovations?

6) To what extent has the funding of research in institutions of higher learning caused an undue emphasis on the abstract at the expense of the applied? Is innovation recognized as being important as the analysis of structured problems in education generally?

7) Is it possible that federal R & D programs, by their slant toward large scale technology, have tilted the competitive relationships of various industries and skills groups and have therefore, created unemployment among the less skilled who would otherwise remain usefully and competitively employed?

8) Should the U. S. continue to invest a sizeable portion of its R & D in large scale technology in spite of the large number of failures in this area?

9) With regard to federal R & D contractors, are the rich getting richer at the expense of the poorer ones?

10) Why is there such a disparity in federal R & D funding on a regional basis? Should this continue?

2.0 MCI INTEREST IN SOLAR ENERGY

In 1969, shortly after MC! was established, we conducted a special study to identify areas that would be of particular concern to society in the decade of the 70's. This study clearly showed that the rapid increase in energy consumption, coupled with smaller increases in the discovery of petroleum and natural gas, would lead to an increase in the United States' dependence upon the importation of foreign fuels.

In fact, our concern became so intense during 1970 that we prepared a fifty-two page document which was presented to the Senate Interior and Insular Affairs Committee on May 28, 1971. This report warned of impending energy supply problems and recommended a $1.7 billion dollar energy research, development, and demonstration program under the direction and funding authorization of a single agency. The MCI document recommended a vast increase in both coal and alternative energy technology R & D, including solar and wind. The suggested solar budget for the first year was $30 million and specifically mentioned heating and cooling of buildings as the first priority for development.

Needless to say our words were but a voice in the wilderness; the FY 1971 budget for energy was approximately a scant $300 million. Although this was significantly increased in FY 1972, unfortunately most of this increase was directed to the breeder reactor. However, MCI was so sure of its basic position that we decided to do what we could as a private firm by devoting our own resources to energy development.

Being a small firm it was clear that we could not develop a gasification or liquids plant, but indeed had to limit our efforts to projects of a size that even if we were unable to bring them to the market, at least we could demonstrate the feas ability of the technology.

The basic premises underlying our energy development program were as follows:

1) U. S. energy consumption was greatest in liquid and gascous hydrocarbons-which were in shortest resource availability.

2) Coal would have to be the primary hydrocarbon fuel simply because it is known to exist in the United States in large amounts.

3) The basic problems with coal were associated with mining and burning it in an environmentally and socially acceptable manner.

4) MCI knew nothing about mining, but we did feel we could make a contribu-
tion in the area of developing a small coal combustion unit that would en-
able the fuel to be burned directly, cleanly, automatically, and meet all
of the EPA regulations.

5) At present rates of consumption the U. S. coal supply is estimated to last another 800-1,000 years. However, since gas and oil will not be domestically available, an increase in coal production will become necessary. If all U.S. hydrocarbon energy supplies depend upon coal the supply would only last 160-200 years. Further, if we follow a 20 year doubling energy consumption, we have only 20-30 before all U. S. coal is consumed.

6) Therefore, the U. S. must limit the growth of hydrocarbon energy consumption, indeed, a programmed reduction in hydrocarbon consumption and/or a substitution of renewable energy for non-renewable energy would appear inevitable. As a best guess the world is using its hydrocarbon fuel reserves at a rate of 1, 000, 000 times as fast as they are being formed.

7) The switch from hydrocarbon to renewable fuels must be accomplished on an application by application basis. Solar energy, by virtue of its low energy density, would appear most adoptable for heating of buildings, later for cooling, and still later for electrical generation.

8) Because of the low intensity of the sun's rays that must be intersected, relatively large collector areas must be utilized, and thus sizeable amounts of material must be used.

9) Due to the requirement for sizeable amounts of materials it may be that solar energy will never appear cost effective to the homeowner. Materials are produced, fabricated, and delivered using existing hydrocarbon energy sources. Thus, at a given time it may always be less expensive to pay the fuel bills than to buy the larger amount of fuel in the form of a solar collector. Therefore, adoption depends upon not the absolute cost of fuel, but upon the rate at which fuel costs are increasing and the energy pay-back time for the collector system. Indeed, it is probably a fallacy to say that the U. S. can switch to solar heating after it has burned up its hydrocarbon fuel resources. There may not be energy left to fabricate the collectors needed, thus a clear national policy must be followed--not simply individual decision. A positive policy for the adoption of solar energy utilization must be pursued at the national level in the same way that the U. S. made the national decision to expand westward and improve its transportation system.

10) The individual homeowner will make the decision to buy or not to buy on the primary basis of cost and the availability of savings or loan funds to pay for solar heating systems. Thus a low cost for the total package will be his prime interest, consistent with long life and low maintenance costs.