Trump's Proposed Budget Attacks Energy Innovation
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Trump’s Proposed Budget Attacks Energy Innovation

by | published February 19th, 2020

In its detailed report released last Friday (February 14), the Information Technology and Innovation Foundation (ITIF) concludes that the proposed FY 2021 Trump budget would “slam the breaks on energy innovation.”

ITIF is a nonprofit, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. It is widely recognized as the world’s leading science and technology think tank.

The White House budget request would slash federal investments in U.S. Department of Energy (DOE) applied research, development, and demonstration (RD&D) programs by more than 44% -the largest single-year cut ever-from $5.4 billion to $3.0 billion.

It reinforces the conclusion that the administration’s primary approach to energy needs is a continued reliance on traditional hydrocarbons with some allowance of alternative sourcing.

Here’s why adopting this proposed budget would be disastrous…

Balance Would Go Right Out the Window

I’ve alwaysmaintained that the energy sector requires a balanced approach. In other words, while renewable and alternative energies have been rising in usage, meeting global demand requires continued reliance on oil, natural gas, and even coal for several decades to come.

Nonetheless, the combination of climate concerns and geopolitical hotspots has occasioned a concerted reexamination of what balances make sense moving forward. In turn, that has occasioned even some conservative legislators to consider energy innovation (for both traditional and new sources) as a doable alternative.

ITIF observes that an even more troubling problem in the proposed budget arises from the cuts coming as international competition intensifies their own investments in key clean energy technologies.

Among other moves, the president’s budget request would eliminate popular programs including the Advanced Research Projects Agency-Energy (ARPA-E), the Title XVII loan guarantee program, and the advanced vehicles manufacturing loan program. Even the DOE Office of Science, which includes programs in fusion energy and basic energy sciences and falls squarely within the definition of “early stage research” that the administration claims to support, would receive a 17% cut, from $7 billion in FY 2020 to $5.8 billion. If enacted, this budget would impose the largest single-year cut to energy RD&D investments in the history of the department, bringing federal energy RD&D down to its lowest level since 2007.

DOE RD&D Spending, FY 1978 – FY 2021 request

Source: ITIF

Out of a total budget of nearly $4.8 trillion, federal government DOE funding amounted to $38.6 billion in FY 2020. But only $8 billion-about 21% of DOE’s budget-supports energy innovation, with defense, environmental cleanup, and non-energy-related basic science research accounting for the rest. As a share of the economy, federal investment in energy research is about 0.04% of U.S. gross domestic product (GDP).

Federal Energy Research as a Share of Total FY 2020 (in $ billions)

Source: ITIF

On economic and national security grounds, Congress in 1978 invested more than $10.5 billion (in 2020 dollars) in energy RD&D, or 0.14% of GDP. Had federal investment kept pace with growth in the economy, DOE’s RD&D budget today would be $32 billion, on par with other national priorities such as health research.

A Little Energy Investment Has Yielded Big Rewards for the U.S.

Despite a comparatively small investment, federal energy RD&D has delivered significant returns. Federal investments were responsible for launching the private nuclear industry, which now contributes 20% of U.S. electricity. DOE support for shale-gas resource characterization and directional drilling in the 1970s and 80s-in tandem with a federal production tax credit-led to the shale gas revolution that turned the United States into the world’s top natural gas producer.

In 2011, the DOE loan programs office provided loan guarantees to the first five utility-scale solar photovoltaic power plants, sparking its takeoff. In 2017, DOE funds aided the world’s largest post-combustion carbon capture system at the Petra Nova power plant in Texas.

The ITIF report cites an internal departmental evaluation of energy efficiency and renewable energy RD&D concluding that a total taxpayer investment of $12 billion between 1975 and 2015 yielded more than $388 billion in net economic benefits, a remarkable return of over $32 for every federal dollar invested.

There are also warning signs that US competitiveness is at risk in the growing global clean energy industry. According to a previous ITIF analysis, nine other countries invest more in energy RD&D as a share of their economies than the United States.

Proposed Changes in the DOE Budget by Program Office

Source: ITIF

As the above table indicates, only fossil fuel funding would remain essentially unchanged year-on-year.

ITIF concludes that proposed cuts would hit the most important energy RD&D programs hardest. ARPA-E would be completely eliminated, while an additional $311 million in previously appropriated funding would be rescinded. But ARPA-E has proven to be a remarkably versatile catalyst, funding a wide range of innovative projects. DOE has acknowledged ARPA-E funded projects are five times more likely to produce a patent and scientific publication than projects funded by other research programs. In direct defiance of the White House, both House of Representatives and Senate committees have approved reauthorizing ARPA-E and increasing its budget to $750 million by 2024, nearing the $1 billion level that ITIF has proposed.

Within the applied energy programs, the largest cuts are reserved for the Energy Efficiency, Renewable Power, and Sustainable Transportation programs within the DOE Office of Energy Efficiency and Renewable Energy (EERE). Proposed cuts to these programs range from 70% for water-power technologies to 83% for bioenergy technologies. The State Energy Program, which provides funding and technical assistance for state energy offices, would be eliminated. The total budget for EERE would be cut by an astounding 74%, from $2.8 billion to $720 million.

In addition to the outright elimination of the ARPA-E) and Title XVII loan programs previously mentioned, other noticeable elements include the Office of Nuclear Energy cut by 21%, basic science research at the DOE Office of Science (SC) losing 17%, and the energy-related programs in Basic Energy Sciences (BES) and Fusion Energy Sciences (FES) down by 13% and 37%, respectively.

Fortunately, bi-partisan Congressional decisions in the last three budgetary cycles strongly rejected similar moves. Rather than adopting the administration’s proposals, Congress boosted energy RD&D programs by 14% in FY 2018, 5% in FY 2019, and 11% in FY 2020.

However, this year will prove more difficult. Overall spending is ceilinged by the agreement reached between Congress and the White House last July to cap non-defense discretionary spending to a 1% increase. That means there will be some broader budget challenges upcoming.

Sincerely,

Kent

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  1. February 19th, 2020 at 20:00 | #1

    Trump should propose Budgets that trim the fat. The DOE itself could easily be disbanded and it’s work outsourced to the private industry where real innovation occurs. Of course, Congress will whine and moan and in the end, slash and burn the President’s proposals and the endless spending spree will continue. Can’t help but remember Obama’s billion dollar gift to Solyndra, the can’t miss renewable energy company that went
    bankrupt.

  2. Frank Krecow
    February 20th, 2020 at 00:04 | #2

    It’s time for the major oil companies and large independents to step up and provide funding for technology innovation in the oil patch. They benefit directly from this research into new technologies, all of the majors have established R & D operations, and government spending is out of control and has been for quite a while. The American tax payer (including you and I) shouldn’t have to subsidize these research efforts.
    By the way, I’ve spent just over 40 years in the oil patch as a geophysicist in exploration, development, and research.

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