The 2017 Budget: Impacts on Energy Efficiency & Renewable Energy

The Environmental and Energy Study Institute (EESI)—in partnership with the House and Senate Renewable Energy and Energy Efficiency Caucuses—held a briefing on the energy efficiency and renewable energy provisions of the President's budget request for Fiscal Year (FY) 2017.

Speakers from the Department of Energy, the National Renewable Energy Laboratory, and the Congressional Research Service (CRS) gave an overview of the Office of Energy Efficiency and Renewable Energy's (EERE) budget request, explained the EERE Office budget priorities, and provided context on how these priorities and trends compare to prior years.

The 2017 proposed budget seeks $7.7 billion for clean energy research at 12 federal agencies, with the Department of Energy receiving the bulk of the funding (80 percent). The proposed budget would increase DOE's budget 10 percent over 2016 estimated levels, to $32.5 billion. It recommends increasing the budget for DOE's Office of Energy Efficiency and Renewable Energy 40 percent over 2016 enacted levels, to $2.9 billion. The proposed budget also would increase funding for the Advanced Research Projects Agency – Energy (ARPA-E) by 72 percent (ARPA-E funds the development of energy technologies that are not deemed ready for market investment).

Highlights

David Friedman, Principal Deputy Assistant Secretary, Office of Energy Efficiency and Renewable Energy (EERE), DOE

• David Friedman explained that EERE's core areas are sustainable transportation, energy efficiency and renewable energy. It is important to have people working on similar but different issues in the same office so their ideas cross-pollinate. Friedman says they accomplish a lot more by all being in the same place.
• Crosscutting initiatives, by further encouraging collaboration, are essential to DOE's overall work. DOE combines technologies and considers their policy implications through cross-cutting initiatives.
• EERE's track record has been good so far:
  • EERE's research and development (R&D) efforts achieved a 14:1 benefit-to-cost ratio, with an annual return on investment of 20 percent, from 1976-2012.
  • Solar photovoltaic (PV) R&D achieved a 3:1 benefit-to-cost ratio from 1975 to 2008. According to Friedman, we are still in the early years of solar PV development, and DOE expects to reach a 9:2 benefit-to-cost ratio.
  • Combustion engine R&D achieved a 66:1 benefit-to-cost ratio from 1986 to 2007.
• DOE has published A Revolution Now, a report showing how fast things are changing in the clean energy field.
  • In just the last five years, we have seen drastic improvements in electric vehicles and renewable energy—things that seemed far out in the future are here now. Focused RD&D has driven these technologies forward.
  • We've seen growth in the electric vehicle market of one-third last year – even as gas prices were low at $2/gallon.
  • We've see tremendous cost reductions in different technologies: wind (40 percent cost reduction), solar PV (50-60 percent cost reduction), batteries (70 percent cost reduction) light-emitting diode (LED) lights (90 percent cost reduction)...
  • Government R&D helped to cut these costs, making it possible for the marketplace to accelerate the rollout of new technologies. DOE would like to encourage the adoption of new technologies by funding pilot projects.
• There is more work to do if we want to meet the national energy goals set by President Obama, such as:
  • Reducing greenhouse gas emissions 26-28 percent by 2025 (which we are on track for), and more than 80 percent by 2050. We need another technological revolution or two to ensure we meet the 80 percent reduction target.
  • Doubling energy productivity by 2030, which is essentially an economic target, not just an efficiency target. Businesses can make a lot of money off efficiency, by reducing their spending on energy.
  • Reducing net oil imports by half by 2020 – we're definitely on track for that.
• There is an international R&D investment competition.
  • Investment in clean energy is not just driven by the need to address climate change, but also by the desire to boost American jobs and competitiveness.
  • When looking at R&D investment in terms of GDP percentage, one sees the United States is falling behind other countries. We have amazing researchers and scientists, but we need more investment in research.
  • There is a clean energy race among countries. Winning means positioning yourself for more jobs and more economic growth.
  • Private investment in R&D in the energy sector is less than 0.5 percent of total sales – which looks especially small compared to R&D investments in the pharmaceutical industry (20.5 percent), aerospace and defense (11.5 percent), computer and electronics (7.9 percent) and automobiles (2.4 percent).
• There is an average 30 percent increase in the 2017 budget request for DOE's EERE office. Overall, EERE's budget strategy is the following:
  • DOE wants to double clean energy R&D over the next five years as part of U.S. participation in a 20-country public-private cooperative project called Mission Innovation. This isn’t just about government R&D; the cooperative aspect is also important. Key major investors are looking also to fund these efforts, including Bill Gates, Mark Zuckerberg, etc. To enhance efforts to overcome market barriers, the projects should be market-ready and attractive for private investors.
  • DOE wants to enhance its efforts to overcome market barriers
  • DOE wants to invest in a 21st century transportation system. There are some unique challenges in transportation R&D investment and infrastructure, so that area would receive a particularly large budget increase.
  • DOE wants to continue its cross-cutting initiatives. There is no one-size-fits-all solution.
• Friedman highlighted some of EERE's key projects.
  • Renewable energy
    • For distributed solar PV, DOE is seeking to reduce soft costs (such as red tape), in addition to tackling production and technical costs.
    • For offshore wind, DOE wants to increase funding for pilot projects to reduce costs and demonstrate viability.
  • Energy efficiency
    • Support agencies that are investing in energy efficiency efforts to meet the President's goal of cutting federal greenhouse gas emissions 40 percent by 2025.
    • Support five existing Clean Energy Manufacturing Innovation Institutes to make manufacturing more energy efficient.
  • Sustainable Transportation
    • Increase R&D to drive down the costs of batteries, especially for grid-scale battery storage and electric vehicles. DOE wants to help provide more affordable and convenient EV models.
    • DOE is seeking to drive down fuel cell costs and improve their durability while encouraging necessary infrastructure investments.
    • DOE wants to invest more in R&D to scale up current biofuels and find new biofuel fuel stocks.
• Friedman explained why the Administration has proposed a $32.4 billion 21st Century Clean Transportation Plan (CTP). The transportation sector still relies on oil. We need more technology innovation to increase efficiency and reduce emissions. We also need to invest in infrastructure for low-carbon fuels.

 

Kelsi Bracmort, Specialist in Agricultural Conservation and Natural Resources, Congressional Research Service

• Bracmort noted that the 2017 budget proposal for EERE includes increases in all top-level areas: a 34.1 percent increase for sustainable transportation (including a 51.1 percent increase for vehicles), a 27.5 percent increase for energy efficiency (including a 44.1 percent increase for buildings), a 29.8 percent increase for renewable energy (including 63.4 percent for wind) and a 22.2 percent increase for corporate support. There are some subprogram cuts and funding eliminations.
• Bracmort flagged three new initiatives.
  • A $15 million Metropolitan Systems Initiative is proposed under the Building Technologies for Energy Efficiency program. The goal is to enable cities to meet their climate and energy targets.
  • A $26 million Cities, Counties and Communities Energy Program (3C Energy Program) is proposed under Weatherization and Intergovernmental Programs to help local governments, public housing authorities, nonprofits and other locally-focused entities to help catalyze clean energy in community development.
  • The new 21st Century Clean Transportation Plan (CTP) includes $1.335 billion in mandatory funding for EERE, including $750 million to develop regional low-carbon fueling infrastructure and $200 million for clean transportation R&D. EERE’s role under the plan would be to scale-up R&D, provide more infrastructure for low-carbon fuels, and run the Clean Fleets Competition grant program.
• Bracmort said that there are some issues of concern regarding the Clean Transportation Plan. In particular, whether DOE has the administrative capacity to handle such a large program.
• Bracmort also noted that there are questions regarding the government's role in clean energy research, and whether its investments will be sustainable if Congress seeks to reduce the deficit.

 

Scott Sklar, Chair, Steering Committee, Sustainable Energy Coalition; President, Stella Group

• Sklar emphasized that history has shown we can achieve economic growth while driving down the use of energy. U.S. energy use declined 2.4 percent from 2007 to 2014 while GDP increased 8.2 percent.
• Clean energy investments hit a new record in 2015 of $329 billion.
• Clean energy represented 6.5 million jobs in the United States in 2013. There are more jobs in the solar industry than in the coal industry.
• According to Sklar, the government needs to fund clean energy R&D for many key reasons:
  • Energy is the single largest cause of our trade debt, the single largest cause of air and water pollution, the single largest cause of greenhouse gas emissions, the single largest source of income for terrorism, and the largest user and waster of water.
  • Funding clean energy R&D improves our national security, environmental sustainability, and economic growth
• Two recent renewable energy reports highlight the progress of renewable energy:
  • The Energy Information Administration reported that more renewable energy was put on the grid in 2015 than any other source of energy, a multi-year trend. Renewables accounted for 64 percent of new electrical generating capacity installed last year.
  • The Energy Information Administration also recorded a two percent increase in the renewable energy industry from 2014 to 2015; it accounted for more than 13.5 percent of utility-scale electricity generation in the United States last year. The industry as a whole (including distributed generation) represents 20 percent of U.S. electricity capacity.
• According to Sklar, DOE's EERE budget does not cut funding for any of the different types of renewables, which is welcome news. It does, however, overlook biomass power. The budget is good for biofuels, but it doesn't do enough to help fund thermal energy and power generation from sustainable biomass, which can use waste streams and convert them into energy.