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The Importance of Federal Investment in Clean Energy Innovation

August 20, 2017

America’s clean energy economy is growing: about 3 million people in the United States work in the clean energy economy, one out of 50 new jobs in 2016 was in the solar industry, and solar industry jobs are expected to increase another 10 percent in the next year. [1]

Yet President Trump’s budget proposal, released in May, would cut $3.1 billion in funding for research programs at the U.S. Department of Energy—an 18 percent cut from last year’s funding level. [2]While some conservative groups are in favor of a more limited government role in working with companies to commercialize energy technologies, [3] critics from both sides of the aisle have expressed concern that these cuts will hamper energy innovation in the United States and slow progress towards reducing greenhouse gas emissions.

The Department of Energy’s research programs are housed in several offices, including the Office of Energy Efficiency and Renewable Energy (EERE), which invests in clean energy research and technology, as well as the Office of Nuclear Energy, and the Office of Fossil Energy. The Department also includes the Advanced Research Projects Agency-Energy (ARPA-E), which invests in high-potential energy technologies which are not yet established enough for private sector investment, and operates a network of 17 national laboratories which conduct basic research. 

These programs have played a role in developing new energy technologies and have contributed to recent trends in clean energy becoming more widely available and significantly cheaper. Since 2008, LED light bulbs have become 94 percent cheaper, the costs of wind and solar have fallen by half, and the cost of advanced batteries have dropped by 75 percent. [4] Experts say that federal investment has contributed to these innovations, and that continued funding is critical to ensuring that the United States continues to be a leader in clean energy innovation. In the words of the American Energy Innovation Council, “private-sector innovation cannot address the nation’s energy challenges on its own.” [5]

For example, the Department of Energy’s investments in developing unconventional methods of gas production in the 1970s laid the groundwork for today’s natural gas boom. [6] In addition, the department’s vehicle technology programs have, since the 1990s, accounted for “a steady increase in technological accomplishments and progress toward performance, reliability, and cost targets for batteries, fuel cells, and other key enabling technologies for advanced light-duty vehicles.” [7] Under President Obama, the department increased its emphasis on making renewable energy technologies cheaper. One major program, the SunShot initiative, helped reduce the price of utility-scale solar by more than 70 percent from 2010-2016. [8] The Office of Energy Efficiency and Renewable Energy also invests in the research and development of more cutting edge energy sources, such as algal biofuels. [9]

The department also funds cutting edge technologies that later become commercialized. In 2013, ARPA-E gave out $95 million in funding to 22 projects, which collectively raised more than $625 million in private-sector investment. [10]The department’s Advanced Technology Vehicles Manufacturing program committed $8 billion in loans to Ford Motor Company, Nissan North America, and Tesla under the Obama administration [11]—loans which, according to the department, have “supported the production of more than 4 million fuel-efficient cars and more than 35,000 direct jobs across eight states.” [12]

While supporters of retaining energy funding at the Department of Energy point to this track record, the Heritage Foundation, a conservative think tank, argues that the department should only fund basic research, and leave the commercialization of new technologies to the private sector. [13] The proposed budget changes reflect this attitude. For example, while President Trump’s proposed budget would cut 31 percent of the funding at the Office of Nuclear Energy, this cut would preserve some basic research in nuclear fuels while eliminating cost-sharing agreements with private firms working to design new nuclear reactors. [14]

The Office of Energy Efficiency and Renewable Energy’s budget would be cut by a total of 69 percent, including a 71 percent cut to solar energy programs, and a 67% cut to wind energy programs. [15] The budget also proposes to reduce the number of full-time employees in EERE by about 30 percent. [16] The Office of Fossil Energy would be cut by 54 percent total, with a 85 percent cut to research on carbon capture and sequestration (so-called “clean coal” technology). Funding for the Office of Nuclear Energy would be cut by 31 percent. And funding for ARPA-E would be eliminated. 

Policymakers on both the right and the left have expressed concern about the proposed cuts. Senator Maria Cantwell, ranking member of the U.S. Senate Committee on Energy and Natural Resources, said that the cuts would “devastate an emerging sector of our economy by killing thousands of clean-energy jobs all over the country — all in a misguided effort to hold onto the past at the expense of our future.” [17] Six Senate Republicans, led by Senator Lamar Alexander (D-Tenn.), wrote a letter to President Trump expressing support for the Department of Energy’s research programs, and urging him to maintain funding for the “critical” programs. [18] And seven former leaders of the Office of Energy Efficiency and Renewable Energy—every Senate confirmed leader of the office between 1989 and 2017—wrote in a letter to Congress that “cuts of this magnitude … will do serious harm to this office’s critical work and America’s energy future.” [19]

Members of the renewable energy industry also expressed disappointment with the proposed cuts. Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, noted that “clean energy research programs have been priorities of both Republican and Democratic administrations and Congresses and the investments have paid off many times over.” [20]

President Trump’s budget is just a proposal: none of the changes his budget proposes will take effect unless they are part of a budget passed by Congress, and it is not clear that Congress has an appetite for making cuts of this magnitude to the Department of Energy’s research programs. However, research conducted by E&E News suggests that the Trump administration has already begun to scale back investment in energy research. In the first three months of the administration, the department made only $117 million of research funding available through “funding opportunity announcements”—one-fifth of the funding made available by the Obama administration during the same time period last year. These funds go to universities, private industry, and the government’s national labs, and “are the most direct and visible connection between DOE and the larger research community.” [21] Of the funds made available in the first three months of the Trump administration, none were from the National Energy Technology Laboratory, ARPA-E, the Office of Nuclear Energy, or the Office of Energy Efficiency and Renewable Energy. [22] 

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References:

  [1] Elizabeth Noll, “Trump Budget to Starve Clean Energy, Job Growth and More,” Natural Resources Defense Council, March 23, 2017, https://www.nrdc.org/experts/elizabeth-noll/trump-budget-starve-clean-energy-job-growth-and-more 

  [2] Brad Plumer and Coral Davenport, “Trump Budget Proposes Deep Cuts in Energy Innovation Programs,” New York Times, May 23, 2017, https://www.nytimes.com/2017/05/23/climate/trump-budget-energy.html?_r=0 

  [3] The Heritage Foundation, “A Blueprint for Balance: A Federal Budget for 2017,” http://thf-reports.s3.amazonaws.com/2016/BlueprintforBalance.pdf 

  [4] Elizabeth Noll, “Trump Budget to Starve Clean Energy, Job Growth and More,” Natural Resources Defense Council, March 23, 2017, https://www.nrdc.org/experts/elizabeth-noll/trump-budget-starve-clean-energy-job-growth-and-more

  [5] American Energy Innovation Council, “Partners in Ingenuity: Case Studies on the Role of Government in Energy Technology Innovation,” July 1, 2014, http://americanenergyinnovation.org/2014/07/partners-in-ingenuity-case-studies-on-the-role-of-government-in-energy-technology-innovation/ 

  [6] American Energy Innovation Council, “Unconventional Gas Exploration & Production,” March 2013, http://americanenergyinnovation.org/wp-content/uploads/2013/03/Case-Unconventional-Gas.pdf 

  [7] American Energy Innovation Council, “Partners in Ingenuity: Case Studies of Federal Investments Enhancing Private-Sector Energy Innovation,” July  2014,  http://bpcaeic.wpengine.com/wp-content/uploads/2014/07/AEIC-Partners-in-Ingenuity-2014.pdf 

  [8] Brad Plumer, “Looking for Trump’s Climate Policy? Try the Energy Department,” New York Times, May 25, 2017, https://www.nytimes.com/2017/05/25/climate/energy-department-climate-trump-budget.html 

  [9] U.S. Department of Energy Office of Energy Efficiency and Renewable Energy, Algal Biofuels, https://www.energy.gov/eere/bioenergy/algal-biofuels 

  [10] Julia Pyper, “Trump’s 2018 Budget: What’s on the Chopping Block for Clean Energy,” GreenTech Media, May 23, 2017, https://www.greentechmedia.com/articles/read/trumps-2018-budget-whats-on-the-chopping-block-for-clean-energy 

  [11] U.S. Department of Energy, “Obama Administration Awards First Three Auto Loans for Advanced Technologies to Ford Motor Company, Nissan Motors and Tesla Motors,” June 23, 2009, https://energy.gov/articles/obama-administration-awards-first-three-auto-loans-advanced-technologies-ford-motor-company 

  [12] U.S. Department of Energy, “Driving Economic Growth: Advanced Technology Vehicles Manufacturing,” https://energy.gov/lpo/downloads/driving-economic-growth-advanced-technology-vehicles-manufacturing

  [13] The Heritage Foundation, “A Blueprint for Balance: A Federal Budget for 2017,” http://thf-reports.s3.amazonaws.com/2016/BlueprintforBalance.pdf

  [14] Brad Plumer, “Looking for Trump’s Climate Policy? Try the Energy Department,” New York Times, May 25, 2017, https://www.nytimes.com/2017/05/25/climate/energy-department-climate-trump-budget.html 

  [15] Chris Mooney, “Trump plans a 69 percent budget cut, large staff reductions at clean energy office,” Washington Post, May 23, 2017, https://www.washingtonpost.com/news/energy-environment/wp/2017/05/23/trump-plans-a-69-percent-budget-cut-large-staff-reductions-at-clean-energy-office/?utm_term=.273c9a81e201 

  [16] Mark Hand, “Trump’s clean energy budget cuts would ‘devastate’ an emerging economic sector,” ThinkProgress, May 23, 2017, https://thinkprogress.org/trump-proposes-major-clean-energy-cuts-6556a4848ab9 

  [17]“Ranking Member Cantwell Statement On Trump Administration DOE Budget Proposal,” May 23, 2017,  https://www.energy.senate.gov/public/index.cfm/democratic-news?ID=080F772B-F19A-4937-B745-AB036234FA28 

  [18]Letter available at https://www.eenews.net/assets/2017/05/18/document_gw_03.pdf 

  [19] Letter RE: Fiscal Year 2018 Office of Energy Efficiency and Renewable Energy Budget, June 8, 2017, available at https://energy.stanford.edu/sites/default/files/ee-1_letter_re_fy18_eere_budget_6-8-17_congress_version_final_.pdf?wpisrc=nl_energy202&wpmm=1 

  [20]”SEIA Statement on Pres. Trump’s Budget Proposal,” May 23, 201http://www.seia.org/news/seia-statement-pres-trumps-budget-proposal 

  [21] David Ferris, “Trump’s energy research pipeline is running dry,” E&E News, April 20, 2017, https://www.eenews.net/stories/1060053325 

  [22] David Ferris, “Trump’s energy research pipeline is running dry,” E&E News, April 20, 2017, https://www.eenews.net/stories/1060053325

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