Federal Research

Congress earmarked about $1 billion for electricity-related research and development (R&D) in fiscal year 1996. Along with electric utilities, states, and manufacturers, the federal government has traditionally played a major role in this R&D, which includes such technologies as solar energy, fossil-fueled generating systems, and electric cars. The electric utility industry is undergoing deregulation and is becoming more competitive. At the same time, funding cuts are affecting electricity-related R&D. This report discusses (1) the changes that have occurred in the levels of electricity-related R&D and the reasons for those changes and (2) the impact of those changes on the types of R&D being funded. GAO provides information on the impact of reduced funding on six technologies--fuel cells, coal gasification, advanced gas turbines, wind power, photovoltaics, and electricity storage--in which the Energy Department participated. GAO also discusses alternative funding sources suggested by R&D managers and others.

GAO found that: (1) Department of Energy (DOE) funding for electricity-related R&D increased between fiscal years (FY) 1993 and 1995, but began to decrease by FY 1996 due to budget constraints and congressional appropriation committees' recommendations; (2) the electric utility industry began to reduce R&D funding in 1993, and R&D managers expect the decreases to continue as the industry prepares for deregulation and increased competition; (3) some state programs are also experiencing funding reductions, primarily due to decreases in contributions from utilities, oil overcharge revenues, DOE funding, and state appropriations; (4) proprietary data and industry restructuring make it difficult to assess the current level or project future levels of industry spending on electricity-related R&D; (5) many utilities are shifting their R&D focus from collaborative, long-term projects to proprietary, short-term projects to gain a competitive edge; (6) some R&D projects are being delayed, scaled down, or cancelled as a result of the funding reductions; and (7) DOE, industry, and state government officials who expressed concerns about electricity-related R&D funding suggested such alternative funding sources as a state-administered surcharge on all retail sales of electricity and a national wires charge on all electricity entering the transmission grid.