Count Penzias among a growing cadre of thought leaders who are convinced that energy innovations will push the next wave of significant, worldwide social and economic change. Coming decades will be defined by a flowering of new energy technologies, just as computers and communications devices defined the recent past. Visualize your life before the advent of laptops and cell phones and then picture your life today, and you will better appreciate the magnitude of change that is coming in how we capture and utilize energy to move about, light our homes and spin the wheels of industry.

For the economically gigantic power and natural gas industries, the question of the moment is how to best prepare for the new epoch. To approach an understanding of the scale of spending that will be required, think Apollo space program or the erection of Egypt's pyramids. The Edison Electric Institute (EEI), the Washington arm of the power industry, recently reported that electric utilities last year spent $46.5 billion, up 13.5 percent from the preceding year, on new generation, improvements to transmission and distribution lines and compliance with fast-evolving environmental standards.

Daniel Yergin, chairman of Cambridge Energy Research Associates, a respected group of energy analysts, said generation resources must increase 20 percent by 2020. "The next couple of years will be a key period for companies to make a decision on what to build." Rising and unstable natural gas prices recently make that decision much more complex than it was a decade ago, when utilities built a fleet of natural gas power generating units. Now nuclear and clean coal technologies beckon.

Whatever new generation is built, some forecast that a 20 percent boost in electricity output by 2020 may not be adequate. Energy consumption by that time will increase by 50 percent, Jeffrey R. Immelt, CEO of GE, told industry leaders at EEI's annual meeting in June. Many believe a significant portion of a looming gap between power resources and demand can be addressed through leaps in efficiency.

"How do we create the future?" Immelt asked. "We have a responsibility to bring new innovation and technology to the marketplace." The end game, he said, is "To help make energy technology a core competency in this country."

Measuring Investment

By some yardsticks, America's struggle has been anemic. Energy research and development spending has declined in recent years. In the last federal fiscal year, it fell 11 percent from the preceding year, and a respected science group has predicted that federal energy R&D will drop 18 percent by 2009, Daniel M. Kammen, director of the Renewable and Appropriate Energy Laboratory at the University of California-Berkeley, reported in a co-authored report last fall.

"In the early 1980s, energy companies were investing more in R&D than were drug companies; today, drug companies invest 10 times as much in R&D as do energy firms," Kammen wrote in a fall 2005 article in Issues in Science and Technology, co-authored with Gregory Nemet.

Given the recent period of sustained high oil prices, there are some signs of growing political support for federally funded energy R&D. Venture capitalists and private investors are looking at energy investment opportunities like never before. But while the seed money may be starting to flow for R&D, some want to make sure that utility executives are actively preparing themselves, their organizations and their business strategies to champion emerging new technologies.

Among those worrying about that issue, count Daniel Arvizu, head of the National Renewable Energy Laboratory, perched in the hills of Golden, Colorado. NREL was established during the Carter administration after the Arab oil embargo in the 1970s, and it has seen its federal support wax and wane over the years. Yet it is on the global cutting edge in researching solar power, wind energy and alternative fuels. "I have talked to utility executives," Arvizu said. "I am encouraged by the amount of interest they have in renewables. But it really isn't central to their thinking. There is much more opportunity space there than many of them realize."

Utilities, generally, are not early adaptors. But, that iceberg of reluctance may be melting. Consider Peter Darbee, the chief executive officer of Pacific Gas & Electric who had worked in investment banking and telecommunications before heading to the San Francisco-based utility. Innovation, Darbee said, should be viewed as "a way of doing business." Innovative energy companies must assemble a diverse team of employees, encourage risk-taking and then work on the most promising and significant new ideas that emerge, he said.

Many utilities, aware that profound changes in the business are imminent, have appointed key executives to monitor and coordinate response to significant opportunities. TVA, for example, is helping develop a rooftop solar collector that uses fibers to transport light from outside to inside a structure.

Meanwhile, FirstEnergy, an Akron, Ohio-based utility with 4.4 million customers, says that utilities must figure out what to do with billions of dollars worth of aging infrastructure, cope with the imminent retirement of thousands of veteran employees and respond to growing public alarm about utilities' contribution to global warming and other environmental pressures.

Guys like Arno Penzias have it right. And many in the utility sector are following in his footsteps.

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