Monday, March 10, 2014

The US Department of Energy’s 2014 Budget Request: Implications for Renewable Energy Funding

Monday, March 10, 2014
U.S. President Obama signed the $1.1 trillion compromise spending bill that funds the government through September 2014 on January 17, 2014. The bipartisan budget temporarily brought an end to forced budget cuts and constant infighting over funding in Congress. The new budget eases many of the sequester-imposed spending cuts while reducing the federal deficit by about a trillion dollars over the next ten years.

While not all federal agencies were happy with the outcome, the budget is mostly good news for those in the renewable energy sector. For example, the National Science Foundation, which supports a number of renewable energy initiatives, received a 4.2 percent boost in funding. Similarly, with funding of $5.07 billion, the Department of Energy’s (DOE) Office of Science saw an increase of 9.7 percent over 2013 levels. Overall, many of the DOE’s renewable energy-focused programs saw at least a slight increase in funding over 2013 levels.

The increase in funding for energy projects is in part driven by President Obama’s updated “Blueprint for a Secure Energy Future,” which outlines out an investment strategy for his “all-of-the-above” approach to develop American energy sources in a safe and responsible way. This includes investing in new clean energy technologies while also expanding oil and gas production. The goals of the blueprint include:

Reducing our overall dependence on oil by more than 2 million barrels a day by 2025, and reducing oil imports by half by 2020 Doubling renewable electricity production from wind, solar and geothermal by 2020 Doubling energy productivity by 2030

In total, the White House says that $2.4 billion in DOE funds will be appropriated for energy-related research and development activities. This is 21.3 percent lower than what the President had requested but 29.9 percent higher than 2013 figures and 16.9 percent higher than the 2012 budget. The majority of renewable energy research and development activities are funded through the DOE’s Office of Energy Efficiency and Renewable Energy (EERE). The EERE program receives a total of $1.9 billion in 2014, which is significantly lower (by 31.5 percent) than what the President had outlined in his budget request. While not as much as hoped for, the 2014 allocation is 10.3 percent higher than what was available in 2013 and 6.8 percent higher than 2012 figures.

Through its funding and support efforts, the Office of Energy Efficiency and Renewable Energy seeks to help ensure an American leadership position in the transition to a global clean energy economy. EERE funding supports research, development, demonstration, and deployment (RDD&D) through partnerships with United States businesses and research institutions. The program has the explicit goal of making a wide array of clean energy technologies directly cost-competitive (without subsidies) with conventional energy technologies in use today.

Toward that end, EERE investments are directed towards high-impact activities in the areas of sustainable transportation, renewable electricity, and end-use energy efficiency in buildings and factories. In prioritizing its RDD&D efforts, EERE utilizes the framework of its “5 Core Questions,” which include:

High Impact: Is this a high-impact problem? Additionality: Will the EERE funding make a large difference relative to what the private sector (and other funding entities) is already doing?Openness: Has EERE made sure to focus on the broad problem that is being solved and is EERE open to new ideas, new approaches, and new performers?Enduring Economic Benefit: How will the EERE funding result in enduring economic benefit to the United States?Proper Role of Government: Why is what you are doing a proper high-impact role of government versus something best left to the private sector to address on its own?
Within EERE funds are directed towards specific technologies and project focuses. A breakdown of the EERE’s total budget by program area is as follows:

Hydrogen and Fuel Cell Technologies: $93 million (7 percent lower than the budget request)Bioenergy Technologies: $232 million (17.6 percent lower than the budget request)Solar Energy: $257 million (27.9 percent lower than the budget request)Wind Energy: $88 million (38.8 percent lower than the budget request)Geothermal Technology: $46 million (23.7 percent lower than the budget request)Water Power: $59 million (6.5 percent higher than the budget request)Vehicle Technologies: $290 million (49.6 percent lower than the budget request)Building Technologies: $178 million (40.7 percent lower than the budget request)Advanced Manufacturing : $181 million (50.5 percent lower than the budget request)Electricity Delivery and Energy Reliability: $147 million (12.8 percent lower than the budget request)Nuclear Energy: $889 million (20.9 percent higher than the budget request)Fossil Energy Research and Development: $562 million (30.9 percent higher than the budget request)Advanced Research Project Agency-Energy (ARPA-E): $280 million (26.1 percent lower than the budget request)Race to the Top for Energy Efficiency and Grid Modernization: $0 (the President had requested $200 million for this program)

For the renewable energy sector, the news is both good and bad. On the positive front, the news is good because EERE received more money in 2014 than it did in 2013 ($1.7 billion) and 2012 ($1.8 billion). But on the downside, nearly all of the renewable energy-focused programs received less funding than what was requested in the President’s budget. Furthermore, both Nuclear Energy and Fossil Energy Research and Development received significantly more funding than what the President included in his budget request. The President had requested $735 million for Nuclear Energy ($889 million received) and $429 million for Fossil Energy R&D ($562 million received).

The Race to the Top for Energy Efficiency and Grid Modernization initiative did not receive any funding for 2014. The idea behind this program was to challenge states to cut energy waste, support energy efficiency and modernize the nation’s grid. The program would have provided funding to encourage states, tribes, local governments with public power authorizes, and cooperatives to implement effective policies to cut energy waste and modernize the grade. While this initiative was not specifically directed towards renewable energy, it could have support some degree of renewable-focused policy development or deployment.

Despite these setbacks, the EERE program holds tremendous promise for advancing renewable energy technologies. A recent assessment on the impact of six EERE programs showed that these efforts have generated hundreds of billions of dollars in net economic benefits over the last few decades, including:

20-year EERE investments in combustion efficiency R&D brought about $70.2 billion dollars in total economic benefits According to the DOE, virtually every one of the 2.5 million hybrid elective vehicles on the road today has EERE-developed technology inside. This technology is an improved nickel-metal hydride battery that provides up to a 50 percent increase in fuel economy as compared to non-hybrid vehicles. Thanks to EERE-funded R&D, the estimated production cost of electric vehicle batteries has been reduced by 50% in just the last four years. This has helped push Plug-in electric vehicle (PEV) sales to more than 50,000 units last year.Back in 2012, EERE achieved its 10-year goal of demonstrating cellulosic ethanol at the pilot scale at an estimated production-scale cost of just $2.15 per gallon.EERE’s R&D solar-focused investments are estimated to have accelerated the solar industry’s technological progress by about 12 years.

Continued successful demonstrations of EERE-funded projects will hopefully spur additional funding of the DOE’s renewable energy-focused research and development programs. But with little hope of intensive political infighting ending soon, the struggle to secure funding to support renewable energy research and development will likely continue for at least a few more years.

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