Advanced Energy Technologies
Budget Trends and Challenges for DOE's Energy R&D Program
Gao ID: GAO-08-556T March 5, 2008
For decades, the nation has benefited from relatively inexpensive energy, in the process growing heavily reliant on conventional fossil fuels--oil, natural gas, and coal. However, in the current wake of higher energy costs and environmental concerns about fossil fuel emissions, renewed attention is turning to the development of advanced energy technologies as alternatives. In the United States, the Department of Energy (DOE) has long conducted research, development, and demonstration (R&D) on advanced renewable, fossil, and nuclear energy technologies. DOE's Office of Science has also funded basic energy-related research. This testimony addresses (1) funding trends for DOE's renewable, fossil, and nuclear energy R&D programs and its Office of Science and (2) key challenges in developing and deploying advanced energy technologies. It is based on GAO's December 2006 report entitled Department of Energy: Key Challenges Remain for Developing and Deploying Advanced Energy Technologies to Meet Future Needs (GAO-07-106). In doing that work, GAO reviewed DOE's R&D budget data and strategic plans and obtained the views of experts in DOE, industry, and academia, as well as state and foreign government officials.
Between fiscal years 1978 and 1998, DOE's budget authority for renewable, fossil, and nuclear energy R&D fell 92 percent when adjusted for inflation (from its $6 billion peak in fiscal year 1978 to $505 million in fiscal year 1998). It has since rebounded to $1.4 billion in fiscal year 2008. Energy R&D funding in the late 1970s was robust in response to the 1973 energy crisis caused by constricted oil supplies. However, R&D funding plunged in the 1980s as oil prices returned to their historic levels. DOE's fiscal year 2009 budget, as compared with 2008, requests slightly less budget authority for renewable energy R&D, while seeking increases of 34 percent for fossil energy R&D and 44 percent for nuclear energy R&D. In addition, DOE is requesting $4.7 billion for basic research under its Office of Science. The development and deployment of advanced energy technologies present key technical, cost, and environmental challenges. DOE's energy R&D program has focused on reducing high up-front capital costs; improving the operating efficiency of advanced energy technologies to enable them to better compete with conventional energy technologies; and reducing emissions of carbon dioxide, a greenhouse gas linked to global warming, and pollutants that adversely affect public health and the environment. However, while DOE has spent $57.5 billion over the past 30 years for R&D on these technologies, the nation's energy portfolio has not dramatically changed--fossil energy today provides 85 percent of the nation's energy compared to 93 percent in 1973. Because DOE's energy R&D funding alone will not be sufficient to deploy advanced energy technologies, coordinating energy R&D with other federal energy-related programs and policies will be important. In addition, other governments and the private sector will play a key role in developing and deploying advanced energy technologies that can change the nation's energy portfolio.
GAO-08-556T, Advanced Energy Technologies: Budget Trends and Challenges for DOE's Energry R&D Program
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Testimony:
Before the Subcommittee on Energy and Environment, Committee on Science
and Technology, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EST:
Wednesday, March 5, 2008:
Advanced Energy Technologies:
Budget Trends and Challenges for DOE's Energy R&D Program:
Statement of Mark E. Gaffigan, Acting Director Natural Resources and
Environment:
GAO-08-556T:
GAO Highlights:
Highlights of GAO-08-556T, a testimony before the Subcommittee on
Energy and Environment, Committee on Science and Technology, House of
Representatives.
Why GAO Did This Study:
For decades, the nation has benefited from relatively inexpensive
energy, in the process growing heavily reliant on conventional fossil
fuels”oil, natural gas, and coal. However, in the current wake of
higher energy costs and environmental concerns about fossil fuel
emissions, renewed attention is turning to the development of advanced
energy technologies as alternatives. In the United States, the
Department of Energy (DOE) has long conducted research, development,
and demonstration (R&D) on advanced renewable, fossil, and nuclear
energy technologies. DOE‘s Office of Science has also funded basic
energy-related research.
This testimony addresses (1) funding trends for DOE‘s renewable,
fossil, and nuclear energy R&D programs and its Office of Science and
(2) key challenges in developing and deploying advanced energy
technologies. It is based on GAO‘s December 2006 report entitled
Department of Energy: Key Challenges Remain for Developing and
Deploying Advanced Energy Technologies to Meet Future Needs (GAO-07-
106). In doing that work, GAO reviewed DOE‘s R&D budget data and
strategic plans and obtained the views of experts in DOE, industry, and
academia, as well as state and foreign government officials.
What GAO Found:
Between fiscal years 1978 and 1998, DOE‘s budget authority for
renewable, fossil, and nuclear energy R&D fell 92 percent when adjusted
for inflation (from its $6 billion peak in fiscal year 1978 to $505
million in fiscal year 1998). It has since rebounded to $1.4 billion in
fiscal year 2008 (see figure). Energy R&D funding in the late 1970s was
robust in response to the 1973 energy crisis caused by constricted oil
supplies. However, R&D funding plunged in the 1980s as oil prices
returned to their historic levels. DOE‘s fiscal year 2009 budget, as
compared with 2008, requests slightly less budget authority for
renewable energy R&D, while seeking increases of 34 percent for fossil
energy R&D and 44 percent for nuclear energy R&D. In addition, DOE is
requesting $4.7 billion for basic research under its Office of Science.
The development and deployment of advanced energy technologies present
key technical, cost, and environmental challenges. DOE‘s energy R&D
program has focused on reducing high up-front capital costs; improving
the operating efficiency of advanced energy technologies to enable them
to better compete with conventional energy technologies; and reducing
emissions of carbon dioxide, a greenhouse gas linked to global warming,
and pollutants that adversely affect public health and the environment.
However, while DOE has spent $57.5 billion over the past 30 years for
R&D on these technologies, the nation‘s energy portfolio has not
dramatically changed”fossil energy today provides 85 percent of the
nation‘s energy compared to 93 percent in 1973. Because DOE‘s energy
R&D funding alone will not be sufficient to deploy advanced energy
technologies, coordinating energy R&D with other federal energy-related
programs and policies will be important. In addition, other governments
and the private sector will play a key role in developing and deploying
advanced energy technologies that can change the nation‘s energy
portfolio.
Figure: Budget Authority for Renewable, Fossil, and Nuclear Energy R&D,
Fiscal Years 1978-2008:
This figure is a line graph showing budget authority for renewable,
fossil, and nuclear energy R&D, fiscal years 1978-200. The X axis
represents the fiscal year, and the Y axis represents the dollars (in
millions).
[See PDF for image]
Source: GAO analysis of DOE data.
Note: Budget authority is in real terms, adjusted to fiscal year 2008
dollars to account for inflation.
[End of figure]
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-556T]. For more information, contact Mark
E. Gaffigan, at 202-512-3841 or gaffiganm@gao.gov
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss the challenges that our nation
faces in meeting its future energy needs. The United States has
primarily relied on market forces to determine its energy portfolio.
The market has generally succeeded in providing us with plentiful,
reliable, and inexpensive conventional fossil fuels--oil, natural gas,
and coal--to power our vehicles and run our homes and businesses.
However, as shown in figure 1, the nation's energy portfolio today has
not dramatically changed since 1973. In 2006, fossil fuels accounted
for 85 percent of the nation's energy supply as compared with 93
percent in 1973--the primary difference in the portfolio was the growth
of nuclear power in the 1970s and 1980s. Oil continues to account for
97 percent of the energy consumed for transportation and fossil fuels
continue to generate 71 percent of the nation's electricity; renewable
energy grew slightly during this period to 7 percent of U.S. energy
consumption.
Figure 1: Comparison of the U.S. Energy Portfolio in 1973 and 2006:
This figure is a combination of two pie graphs comparing the U.S.
energy portfolio in 1973 and 2006.
1973;
Fossil energy: 93%;
Renewable energy: 6%;
Nuclear: 1%.
2006;
Fossil energy: 85%;
Renewable energy: 7%;
Nuclear: 8%.
[See PDF for image]
Source: GAO analysis of EIA data.
[End of figure]
While conventional fossil fuels have provided us with relatively
inexpensive and plentiful energy, they present economic and national
security risks and have adverse health and environmental impacts. For
example, about two-thirds of the oil we consume is imported, and supply
constrictions have contributed to major energy price shocks several
times since 1973. More recently, decreased domestic production and
increased world consumption of oil have pushed prices upward, nearly
doubling the amount American consumers have paid for oil in just the
past 3 years. In addition, DOE projects that U.S. transportation demand
will increase by 31 percent and U.S. electricity demand will increase
by 35 percent by 2030. Furthermore, emissions from the conventional
burning of fossil fuels have contributed to health problems--about 50
percent of Americans live in areas where levels of one or more air
pollutants are high enough to affect public health. Also, the
combustion of fossil fuels account for most of the greenhouse gas
emissions--particularly carbon dioxide--that have been linked to global
warming.
Since its inception in 1977, the Department of Energy (DOE) has had
leadership responsibility for energy research, development, and
demonstration (R&D) to deploy advanced renewable, fossil, and nuclear
technologies. DOE's energy R&D goal is to develop technologies for
meeting future energy demands, addressing health and environmental
issues, and diversifying the nation's energy portfolio.[Footnote 1]
During the past 30 years, DOE has spent about $57.5 billion for R&D in
renewable, fossil, and nuclear technologies. In addition, DOE's Office
of Science has spent about $34.3 billion from fiscal year 2000 through
fiscal year 2008 on related basic energy research in such areas as high
energy and nuclear physics, basic energy sciences, and fusion energy.
DOE's fiscal year 2009 budget requests $1.8 billion for renewable,
fossil, and nuclear energy R&D and $4.7 billion for the Office of
Science. In addition, several other federal agencies perform R&D to
develop advanced energy technologies. For example, the Department of
Agriculture funds R&D on ethanol and biodiesel production and energy
crops that maximize ethanol production. The Department of Defense is
the nation's largest consumer of transportation fuels, spending $13.6
billion on energy in fiscal year 2006. The Department of Defense is
conducting R&D--some of it in collaboration with DOE--to develop
alternative fuels to displace oil. One Air Force program has already
certified a new fuel for the B-52 bomber, a 50/50 blend of the standard
oil-based JP-8 jet fuel and a new synthetic fuel currently derived from
natural gas that may be derived from biomass in the future.
In addition to R&D funding, the federal government can attempt to tap
the vast resources of the private sector through tax incentives, such
as tax credits to companies that make certain types of energy
investments. These tax preferences--which are legally known as tax
expenditures--result in forgone revenue for the federal government. The
revenue losses can be viewed as spending channeled through the tax
system. The federal government provides the energy industry and
consumers with 20 tax expenditures affecting energy supply, totaling
$6.3 billion in fiscal year 2007 and $4.9 billion in fiscal year
2008.[Footnote 2] While the tax subsidies were historically directed
toward the conventional energy sector, they have also been directed
toward stimulating the deployment of advanced energy
technologies.[Footnote 3] For example, the Energy Policy Act of 2005
provided a (1) 2-year extension of the production tax credit for
renewable technologies, (2) new investment tax credit of up to $1.3
billion for constructing new clean-coal power plants, and (3) new
production tax credit of 1.8 cents per kilowatt-hour for up to 6,000
megawatts of new nuclear power capacity lasting 8 years after each
qualifying nuclear reactor begins service. The Energy Policy Act of
2005 also authorized DOE to implement a new loan guarantee program for
energy projects that decrease air pollutants or greenhouse gases,
employ new or significantly improved technologies, and have a
reasonable prospect of repayment. In February 2007, the Congress
authorized DOE to guarantee loans of up to $4 billion.[Footnote 4] In
December 2007, the Congress directed DOE to make loan guarantees of up
to $38.5 billion in fiscal years 2008 and 2009.[Footnote 5]
Moreover, the federal government can enact standards and mandates that
could impact the nation's energy portfolio. For example, the federal
government has recently revised the renewable fuels standards to
require the use of 36 billion gallons of biofuels by 2022.[Footnote 6]
For electricity, the Congress has considered renewable portfolio
standards that require a percentage of electricity be generated from
renewable sources. Consideration has also been given to either a carbon
tax or a carbon cap and trade program to reduce the environmental
impact of carbon emissions and to better enable the market to compare
total costs of conventional fossil energy sources with advanced energy
technologies. Many states and foreign governments have enacted energy
portfolio standards, mandates, and financial incentives to stimulate
the deployment of renewable energy technologies that address their
growing energy needs and environmental concerns. In particular, 29
states have established renewable portfolio standards requiring or
encouraging that a fixed percentage of the state's electricity be
generated from renewable sources. For example, in response to the Texas
renewable portfolio standard's requirement that 5,880 megawatts of
renewable capacity be installed by 2015, electric power companies had
installed over 1,900 megawatts of new renewable capacity by September
2006--about 3 percent of Texas' total electricity consumption.
Similarly, to develop a sustainable energy supply and protect the
environment, Germany established a goal to increase the share of
renewable energy consumption to at least 4.2 percent of its total
energy requirements by 2010 and 10 percent by 2020.
Within this broader context, I will discuss today (1) funding trends
for DOE's renewable, fossil, and nuclear energy R&D programs and its
Office of Science and (2) key challenges in developing and deploying
advanced energy technologies. My remarks are primarily based on our
December 2006 report on key challenges to developing and deploying
advanced technologies for using renewable, fossil, and nuclear
energy.[Footnote 7] I will also highlight findings from our recent
reports on DOE's R&D for oil and natural gas and the Hydrogen Fuel
Initiative.[Footnote 8] We conducted our work for these reports from
October 2005 through December 2007 in accordance with generally
accepted government auditing standards. Those standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence
to provide a reasonable basis for our findings and conclusions based on
our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives.
In summary, DOE's budget authority for renewable, fossil, and nuclear
energy R&D dropped by 92 percent (in inflation-adjusted terms) between
fiscal years 1978 and 1998 before bouncing back in part during the past
10 years. Specifically, DOE's budget authority for renewable, fossil,
and nuclear energy R&D of about $6 billion was near its high point in
fiscal year 1978, when the nation faced severe energy crises. DOE's
budget authority subsequently declined in the 1980s and 1990s as energy
prices returned to historical levels reaching its lowest level in
fiscal year 1998 at $505 million (in inflation-adjusted terms). Since
then, DOE's budget authority for renewable, fossil, and nuclear energy
R&D has increased to $1.4 billion in fiscal year 2008. The Office of
Science's budget authority also grew by 16 percent from fiscal year
2000 through fiscal year 2008.
Further development and deployment of advanced renewable, fossil and
nuclear energy technologies faces three key challenges. First, there
are technology-specific challenges. For example, high-wind sites have
generally been developed using current wind turbine technology. To
further expand the use of wind energy, DOE is working with industry to
develop new wind turbine designs and materials that exploit low-wind
and offshore sites. Second, there are cost challenges. These advanced
energy technologies often face high up-front capital costs and the need
to improve operating efficiency so they can better compete with
conventional energy technologies. The nuclear industry, for example,
projects that new nuclear power plants will likely cost between $4
billion and $6 billion each, about twice the cost of comparable
conventional coal power plants. Finally, these technologies face
challenges in addressing emerging concerns related to public health and
the environment. For example, DOE is working with electric power
companies to demonstrate coal gasification and carbon sequestration
technologies designed to enable coal plants to reduce carbon dioxide
and mercury emissions.
DOE's Budget Authority for Renewable, Fossil, and Nuclear Energy R&D
Has Substantially Declined in Real Terms Since 1978:
DOE's budget authority for renewable, fossil, and nuclear energy R&D
dropped by 92 percent from $6 billion in fiscal year 1978 to $505
million in fiscal year 1998 (in inflation-adjusted terms) before
bouncing back to $1.4 billion in fiscal year 2008. As shown in figure
2, R&D budget authority in renewable, fossil, and nuclear energy peaked
in the late 1970s and fell sharply in the 1980s. Since fiscal year
1998, R&D budget authority for renewable and nuclear energy R&D have
grown, while fossil energy R&D funding has fluctuated in response to
coal program initiatives.
Figure 2: DOE's Budget Authority for Renewable, Fossil, and Nuclear
R&D, Fiscal Years 1978-2008:
This figure is a combination line graph showing DOE's budget authority
for renewable, fossil, and nuclear R&D fiscal years 1978 through 2008.
The X axis represents the fiscal year, and the Y axis represents the
dollars (in millions). One line represents nuclear, another represents
fossil energy, and the last line represents renewables.
[See PDF for image]
Source: GAO analysis of DOE data.
Note: Budget authority is in real terms, adjusted to fiscal year 2008
dollars to account for inflation. The budget data focuses on
development of advanced energy technologies and excludes such R&D areas
as Vehicle Technologies because its focus is improving the energy
efficiency of vehicles.
[End of figure]
Nuclear energy R&D, which received no funding in fiscal year 1998,
experienced the largest increase, rising to $438 million in fiscal year
2008. During this period, budget authority for renewable energy
increased by 89 percent and fossil energy increased by 116 percent. A
comparison of DOE's fiscal year 2009 budget request with the fiscal
year 2008 appropriation shows that renewable energy R&D would decline
slightly, while fossil energy R&D and nuclear energy R&D would increase
by 34 percent and 44 percent, respectively (see app. I).
As shown in figure 3, budget authority for the Office of Science
increased by 16 percent from $3.4 billion in fiscal year 2000 to $4
billion in fiscal year 2008. The budget request for the Office of
Science for fiscal year 2009 is $4.7 billion, a 19-percent increase
over the fiscal year 2008 appropriation. Because the Office of Science
funds basic research in materials sciences, for example, many of its
R&D programs may have useful applications for energy R&D. In fiscal
year 2009, the Office of Science has requested $69.1 million for
research related to the solar energy R&D program, $42.9 million related
to biomass R&D, and $60.4 million for the Hydrogen Fuel Initiative. The
Office of Science also funds fundamental research in such areas as high
energy physics, nuclear physics, and fusion energy.
Figure 3: DOE's Budget Authority for Office of Science, Fiscal Years
2000-2008:
This figure is a line graph showing DOE's budget authority for office
for science, fiscal years 2000 through 2008. The X axis represents the
year, and the Y axis represents dollars in millions.
[See PDF for image]
Source: GAO.
Note: Budget authority is in real terms, adjusted to fiscal year 2008
dollars to account for inflation.
[End of figure]
DOE Faces Key Challenges in Developing Advanced Energy Technologies for
Deployment:
There are key technical, cost, and environmental challenges in
developing advanced renewable, fossil, and nuclear energy technologies
to address future energy challenges.
DOE's R&D Challenges for Advanced Renewable Energy Technologies:
DOE's recent R&D focus in renewable energy has been in (1) biomass-
derived ethanol, (2) hydrogen-powered fuel cells, (3) wind
technologies, and (4) solar technologies. The primary focus of ethanol
and hydrogen R&D is to displace oil in the transportation sector. The
primary focus of wind and solar technologies is to generate
electricity. DOE also conducts R&D on geothermal and hydropower to
generate electricity, but they have reflected a small proportion of the
R&D budget in prior years and are not discussed here.
Biomass-derived ethanol. DOE's short-term R&D goal is to help meet the
administration's "20 in 10" goal of substituting 20 percent of gasoline
consumption in 10 years with alternative fuels, primarily biomass-
derived ethanol. DOE's longer-term R&D goal is to develop new
technologies to allow the ethanol industry to expand enough to displace
30 percent of gasoline requirements--about 60 billion gallons--by 2030.
In 2007, industry produced over 7 billion gallons of ethanol,
displacing about 3 percent of the nation's oil consumption.[Footnote 9]
Ethanol, however, faces high production and infrastructure costs,
creating challenges in competing with gasoline nationally.[Footnote 10]
Ethanol refiners in the United States rely mostly on corn as a
feedstock, the use of which has contributed to price increases for some
food products, and ethanol's corrosive properties create challenges in
developing an infrastructure for delivering and dispensing it. DOE's
R&D focuses on (1) developing a more sustainable and competitive
feedstock than corn, primarily by exploring technologies to use
cellulosic biomass from, for example, agricultural residues or fast-
growing grasses and trees; (2) reducing the cost of producing
cellulosic ethanol to $1.33 per gallon by 2012 and $1.20 per gallon by
2017; (3) converting biomass to biofuels through both biochemical and
thermochemical processes to help the industry expand; (4) contributing
to a strategy to develop a national biofuels infrastructure, including
demonstration projects for integrated biorefineries to develop multiple
biomass-related products; and (5) promoting market-oriented activities
to accelerate the deployment of biomass technologies. Although DOE has
made progress in reducing ethanol production costs, cellulosic ethanol
in 2007--based on current corn prices--still cost about 50 percent more
to produce than corn ethanol.
Hydrogen-powered fuel cells. The long-term R&D goal of DOE's Hydrogen
Fuel Initiative is to provide hydrogen fuel cell technologies to
industry by 2015 to enable industry to commercialize them by 2020. To
be commercialized, hydrogen fuel cell technologies must be competitive
with gasoline vehicles in terms of price, convenience, safety, and
durability. Hydrogen is the preferred fuel for vehicle fuel cells
because of the ease with which it can be converted to electricity and
its ability to combine with oxygen to emit only water and heat as
byproducts. Let me clarify, however, that hydrogen is not an energy
source, but, like electricity, is an energy carrier. Furthermore,
because hydrogen is lighter than air, it does not exist on earth and
must be extracted from common compounds. Producing hydrogen through the
extraction process requires energy from renewable, fossil, or nuclear
sources, adding to the challenge of developing hydrogen technologies.
Our January 2008 report concluded that DOE has made important progress
in developing hydrogen fuel cells, but the program has set very
ambitious targets and some of the most difficult technical challenges-
-those that require significant scientific advances--lie ahead.
Specifically, R&D for vehicles includes reducing the cost of commercial-
scale manufacturing of fuel cells by nearly fourfold, storing enough
hydrogen on board a fuel-cell vehicle to enable a 300- mile driving
range, and increasing the durability of fuel cells by more than
threefold to match the 150,000 mile life-span of gasoline vehicles. DOE
also conducts R&D on stationary and portable fuel cells which could be
used, for example, to replace batteries on fork lifts and diesel
generators used for back-up power. We recommended that DOE update its
overarching R&D plan to reflect the technologies it reasonably expects
to provide to industry by 2015 to accurately reflect progress made by
the Hydrogen Fuel Initiative, the challenges it faces, and its
anticipated R&D funding needs. I would also note that developing the
supporting infrastructure to deploy the technologies nationally will
likely take decades, tens of billions of dollars in investments, and
continued R&D well beyond the 2015 target date.
DOE's fiscal year 2009 budget request would reduce funding for the
Hydrogen Fuel Initiative by 17 percent from $283.5 million in fiscal
year 2008 to $236 million in fiscal year 2009. The budget also proposes
to increase the proportion of longer-term R&D by increasing the funding
for basic research. Although the Hydrogen Program Manager told us that
funding is sufficient to meet target dates for critical technologies,
other target dates for supporting technologies--such as hydrogen
production from renewable sources--would be pushed back.
Wind technologies. DOE is assessing its long-term vision of generating
20 percent of the nation's electricity using wind energy by 2030. Its
current R&D efforts, however, are focused on more immediate expansion
of the wind industry, particularly on utility-scale wind turbines. More
specifically, DOE has focused its R&D efforts on improving the cost,
performance, and reliability of large scale, land-based wind turbines,
including both high-and low-wind technologies; developing small and mid-
size turbines for distributed energy applications, such as for
residential or remote agricultural uses; and gathering information on
more efficient uses of the electricity grid and on barriers to
deploying wind technology and providing that information to key
national, state, and local decision-makers to assist with market
expansion of wind technologies.[Footnote 11] For example, one of DOE's
targets is to increase the number of distributed wind turbines deployed
in the United States from 2,400 in 2007 to 12,000 in 2015. Although
wind energy has grown in recent years, from about 1,800 megawatts in
1996 to over 16,800 megawatts in 2007, the wind industry still faces
investors' concerns about high up-front capital costs, including
connecting the wind farms to the power transmission grid.
Solar technologies. DOE's R&D goal is for solar power to be
unsubsidized and cost competitive with conventional technologies by
2015 by, for example, developing new thin-film photovoltaic
technologies using less expensive semiconductor material than
crystalline-silicon to reduce the manufacturing cost of solar cells.
Specifically, DOE is working to reduce the costs of photovoltaic
systems from about 18-23 cents per kilowatt hour in 2005 to about 5-10
cents per kilowatt hour in 2015. DOE is also conducting R&D to reduce
the cost and improve the reliability of concentrating solar power
technologies, which use various mirror configurations to convert the
sun's energy to heat to generate electricity. In addition, DOE has
expanded R&D to address low-cost thermal storage to allow solar thermal
systems to be more valuable to utility grid power markets. Along these
lines, both the photovoltaic and concentrated solar power activities
have ramped up efforts in the areas of grid integration and reliability
to facilitate the transition to larger scale, centralized solar
electric power plants. Investors' concerns about high up-front capital
costs are among the most significant challenges in deploying
photovoltaic or concentrating solar energy technologies. This requires
both technologies to have lower costs for installation and operations
and maintenance, better efficiency of converting solar power to
electricity, and longer-term (20 to 30 years) durability.
DOE's R&D Challenges for Advanced Fossil Energy Technologies:
Since fiscal year 2006, DOE has proposed eliminating its R&D in oil and
natural gas and, in January 2008, announced a restructuring of its coal
R&D program.
Increased oil production. Since fiscal year 2006, DOE has proposed to
terminate its oil R&D. In November 2007, we reported that DOE has
focused its R&D on increasing domestic production primarily by
improving exploration technologies, extending the life of current oil
reservoirs, developing drilling technology to tap into deep oil
deposits, and addressing environmental protection. DOE officials stated
that if the oil R&D program continues, it would focus on such areas as
enhanced oil recovery technologies and expanding production from
independent producers. Independent producers account for about 68
percent of domestic oil production.
Natural gas technologies. Since fiscal year 2006, DOE has proposed to
terminate its natural gas R&D.[Footnote 12] Our November 2007 report
noted that DOE's R&D focuses on improving exploration technologies,
reducing the environmental impact of natural gas operations, developing
drilling technology to tap into deep gas reservoirs, and developing the
technology for tapping into natural gas in naturally occurring methane
hydrate found in permafrost regions on land and beneath the ocean
floor.
Clean coal technologies. DOE's R&D goal is to reduce harmful power
plant emissions to "near-zero" levels by 2020. For new power plant
applications, DOE is developing and demonstrating advanced integrated
gasification combined cycle (IGCC) technologies. In 2003, DOE announced
plans to construct a near-zero emissions commercial scale R&D facility
called FutureGen with an alliance of coal mining and coal-based
electric generating companies. DOE had originally pledged about three-
quarters of the estimated $1 billion cost of the FutureGen project (in
constant fiscal year 2004 dollars). With escalation costs and rising
price of materials and labor, the estimated project costs rose to
nearly $1.8 billion. As a result, DOE announced in January 2008 that it
is restructuring FutureGen to focus on multiple, competitively selected
projects that demonstrate carbon capture and sequestration at
commercially viable power plant project sites. The impact of DOE's
restructuring on FutureGen at this time is not known, but an industry
official from the FutureGen Alliance noted that the project cannot go
forward without federal government assistance. Separate from the
FutureGen project, DOE also conducts R&D on near-zero emission power
plants--including carbon capture and sequestration--through its fuels
and power systems programs and its Clean Coal Power Initiative.
DOE's R&D Challenges for Advanced Nuclear Energy Technologies:
DOE has focused nuclear energy R&D in the following three areas:
* The Nuclear Power 2010 program focuses on reducing regulatory and
technical barriers to deploying advanced "Generation III" nuclear power
reactors, which are designed to be more efficient than currently
operating reactors. Because over the past 30 years, no electric power
company had applied to the Nuclear Regulatory Commission for a license
to construct a new nuclear reactor, Nuclear Power 2010 shares the costs
with industry of preparing early site permits and or construction and
operating license applications for submission to the Nuclear Regulatory
Commission. Nuclear Power 2010 also regulates the risk insurance
authorized by the Energy Policy Act of 2005 that protects industry from
certain regulatory delays during licensing and construction.
* The Global Nuclear Energy Partnership program--an extension of the
Advanced Fuel Cycle Initiative--develops proliferation-resistant
nuclear fuel cycles that maximizes energy output and minimizes waste.
Specifically, the program is designed to reduce the threat of global
nuclear proliferation by developing advanced technologies for
reprocessing spent nuclear fuel in the 2030 time frame. One of the
critical elements of this effort is to develop a sodium-cooled fast
reactor designed to burn a wide variety of nuclear fuels to reduce the
total amount, temperature, and radiotoxicity of the spent fuel that
might otherwise have to be stored for thousands of years in a
repository.
* Beginning in fiscal year 2008, the Generation IV Program is focusing
solely on the Next Generation Nuclear Plant (NGNP), designed as a
versatile, efficient, high-temperature reactor capable of generating
electricity and producing hydrogen. DOE collaborates with 12 other
international partners on R&D related to fuels, materials, and design
methodologies as part of the Generation IV International Forum.
Concluding Observations:
In the current wake of higher energy costs and the growing recognition
that fossil energy consumption is contributing to global climate
change, the nation is once again assessing how best to stimulate the
deployment of advanced energy technologies. While still considerably
below its peak in the late 1970s, DOE's budget authority for renewable,
fossil, and nuclear energy R&D has rebounded to $1.4 billion during the
past 10 years after hitting a low point in fiscal year 1998. However,
despite DOE's energy R&D funding of $57.5 billion over the last 30
years, the nation's energy portfolio remains heavily reliant on fossil
fuels. Many technical, cost and environmental challenges must be
overcome in developing and demonstrating advanced technologies before
they can be deployed in the U.S. market. Our December 2006 report
suggested that the Congress consider further stimulating the
development and deployment of a diversified energy portfolio by
focusing R&D funding on advanced energy technologies. However, because
it is unlikely that DOE's energy R&D funding alone will be sufficient
to significantly diversify the nation's energy portfolio, coordinating
energy R&D with other federal programs, policies, incentives,
standards, and mandates that can impact the nation's energy portfolio
will be important for targeting any desired goals to change the
nation's energy portfolio. In addition, state and local governments and
other nations, along with a worldwide private sector, will play a role
in developing and deploying advanced energy technologies both here and
throughout the global energy market. A key factor to any sustainable
deployment of advanced energy technologies will be to make them cost
competitive, while addressing technical and environmental challenges,
so that the market can support a more diversified portfolio. Otherwise,
without sustained higher energy prices for our current portfolio, or
concerted, high-profile federal government leadership, U.S. consumers
are unlikely to change their energy-use patterns, and the U.S. energy
portfolio will not significantly change.
[End of section]
Appendix I Comparison of DOE's Fiscal Year 2008 Appropriations with Its
Fiscal Year 2009 Budget Request:
Table 1:
(Millions of dollars).
Program: Energy Efficiency and Renewable Energy: Biomass and
Biorefinery Systems;
Fiscal year 2008 appropriation: $198.2;
Fiscal year 2009 budget request: $225.0;
Percentage: change: 14.
Program: Energy Efficiency and Renewable Energy:Solar;
Fiscal year 2008 appropriation: 168.5;
Fiscal year 2009 budget request: 156.1;
Percentage change: (7).
Program: Energy Efficiency and Renewable Energy:Wind;
Fiscal year 2008 appropriation: 49.5;
Fiscal year 2009 budget request: 52.5;
Percentage change: 6.
Program: Energy Efficiency and Renewable Energy:Geothermal;
Fiscal year 2008 appropriation: 19.8;
Fiscal year 2009 budget request: 30.0;
Percentage change: 51.
Program: Energy Efficiency and Renewable Energy:Water Power;
Fiscal year 2008 appropriation: 9.9;
Fiscal year 2009 budget request: 3.0;
Percentage change: (70).
Program: Energy Efficiency and Renewable Energy:Hydrogen Technology
(Hydrogen Fuel Initiative)[B];
Fiscal year 2008 appropriation: 94.5;
Fiscal year 2009 budget request: 66.9;
Percentage change: (29).
Program: Subtotal;
Fiscal year 2008 appropriation: $540.4;
Fiscal year 2009 budget request: $533.5;
Percentage change: (1).
Fossil Energy: Oil;
Fiscal year 2008 appropriation: 5.0;
Fiscal year 2009 budget request: 0.0;
Percentage change: (100).
Fossil Energy: Natural gas;
Fiscal year 2008 appropriation: 19.8;
Fiscal year 2009 budget request: 0.0;
Percentage change: (100).
Fossil Energy: Coal: Clean Coal Power Initiative;
Fiscal year 2008 appropriation: 69.4;
Fiscal year 2009 budget request: 85.0;
Percentage change: 22.
Fossil Energy: Coal: FutureGen;
Fiscal year 2008 appropriation: 74.3;
Fiscal year 2009 budget request: 156.0;
Percentage change: 110.
Fossil Energy: Coal: Fuels and Power Systems;
Fiscal year 2008 appropriation: 324.9;
Fiscal year 2009 budget request: 372.7;
Percentage change: 15.
Fossil Energy: Coal: Fuels (Hydrogen Fuel Initiative)[B];
Fiscal year 2008 appropriation: 24.8;
Fiscal year 2009 budget request: 10.0;
Percentage change: (60).
Fossil Energy: Coal: Clean Coal Technology;
Fiscal year 2008 appropriation: (58.0);
Fiscal year 2009 budget request: 0;
Percentage change: (100).
Fossil Energy: Coal: Cooperative R&D;
Fiscal year 2008 appropriation: 5.0;
Fiscal year 2009 budget request: 0;
Percentage change: (100).
Fossil Energy: Subtotal;
Fiscal year 2008 appropriation: $465.2;
Fiscal year 2009 budget request: $623.7;
Percentage change: 34.
Nuclear energy[C]: Nuclear Power 2010;
Fiscal year 2008 appropriation: 133.8;
Fiscal year 2009 budget request: 241.6;
Percentage change: 81.
Nuclear energy[C]: Generation IV[D];
Fiscal year 2008 appropriation: 114.9;
Fiscal year 2009 budget request: 70.0;
Percentage change: (39).
Nuclear energy[C]: Advanced Fuel Cycle Initiative/ Global Nuclear
Energy Partnership[D];
Fiscal year 2008 appropriation: 179.4;
Fiscal year 2009 budget request: 301.5;
Percentage change: 68.
Nuclear energy[C]: Nuclear Hydrogen Initiative (Hydrogen Fuel
Initiative)[B];
Fiscal year 2008 appropriation: 9.9;
Fiscal year 2009 budget request: 16.6;
Percentage change: 68.
Nuclear energy[C]: Subtotal;
Fiscal year 2008 appropriation: $438.0;
Fiscal year 2009 budget request: $629.7;
Percentage change: 44.
Office of Science: High energy physics;
Fiscal year 2008 appropriation: 689.3;
Fiscal year 2009 budget request: 805.0;
Percentage change: 17.
Office of Science: Nuclear physics;
Fiscal year 2008 appropriation: 432.7;
Fiscal year 2009 budget request: 510.1;
Percentage change: 18.
Office of Science: Biological and environmental research;
Fiscal year 2008 appropriation: 544.4;
Fiscal year 2009 budget request: 568.5;
Percentage change: 4.
Office of Science: Basic energy sciences;
Fiscal year 2008 appropriation: 1,269.9;
Fiscal year 2009 budget request: 1,568.2;
Percentage change: 23.
Office of Science: Advanced scientific computing research;
Fiscal year 2008 appropriation: 351.2;
Fiscal year 2009 budget request: 368.8;
Percentage change: 5.
Office of Science: Fusion energy sciences program;
Fiscal year 2008 appropriation: 286.5;
Fiscal year 2009 budget request: 493.1;
Percentage change: 72.
Office of Science: Science laboratories infrastructure;
Fiscal year 2008 appropriation: 66.9;
Fiscal year 2009 budget request: 110.3;
Percentage change: 65.
Office of Science: Safeguards and security;
Fiscal year 2008 appropriation: 75.9;
Fiscal year 2009 budget request: 80.6;
Percentage change: 6.
Office of Science: Science program direction;
Fiscal year 2008 appropriation: 177.8;
Fiscal year 2009 budget request: 203.9;
Percentage change: 15.
Office of Science: Workforce development for teachers and scientists;
Fiscal year 2008 appropriation: 8.0;
Fiscal year 2009 budget request: 13.6;
Percentage change: 70.
Office of Science: Congressionally directed projects;
Fiscal year 2008 appropriation: 123.6;
Fiscal year 2009 budget request: 0;
Percentage change: (100).
Office of Science: Small business innovation research;
Fiscal year 2008 appropriation: 0;
Fiscal year 2009 budget request: 0;
Percentage change: 0.
Office of Science: Use of prior year balances and other adjustments;
Fiscal year 2008 appropriation: (53.2);
Fiscal year 2009 budget request: 0;
Percentage change: [Empty].
Office of Science: Subtotal;
Fiscal year 2008 appropriation: $3,973.0;
Fiscal year 2009 budget request: $4,722.1;
Percentage change: 19.
Total;
Fiscal year 2008 appropriation: $5,416.6;
Fiscal year 2009 budget request: $6,509.0;
Percentage change: 20.
Source: DOE.
Note: Dollar amounts for the fiscal year 2009 budget request are not
adjusted for inflation. Differences may exist due to rounding.
[A] Excludes budget authority for Vehicle Technologies, which includes
the FreedomCAR and Fuel Partnership and the 21st Century Truck
Partnership. The Vehicle Technologies R&D program focuses on improving
the energy efficiency of vehicles by developing lightweight materials,
advanced batteries, power electronics, and electric motors for hybrid
and plug-in hybrid vehicles, and advanced combustion engines and fuels.
[B] The Hydrogen Fuel Initiative is funded separately through DOE's
Offices of Energy Efficiency and Renewable Energy, Fossil Energy,
Nuclear Energy, and Science and the Department of Transportation. In
addition to Hydrogen Technology R&D, Energy Efficiency and Renewable
Energy funds Fuel Cell Technology R&D, which historically has been an
energy efficiency program. The fiscal year 2008 appropriation for Fuel
Cell Technology R&D is $116.6 million, and DOE's request for fiscal
year 2009 is $79.3 million The Hydrogen Fuel Initiative received a
total of $283.5 million in budget authority in fiscal year 2008; the
administration is requesting $236 million for the initiative in fiscal
year 2009. During fiscal year 2008, Energy Efficiency and Renewable
Energy transferred some of the Hydrogen Fuel Initiative activities to
its Vehicle Technologies R&D program.
[C] Excludes the Mixed Oxide Fuel Fabrication Facility, which received
$278.8 million in fiscal year 2008. DOE is requesting $487 million for
fiscal year 2009.
[D] During fiscal year 2008, R&D on the sodium-cooled fast reactor was
transferred from the Generation IV program to the Accelerated Fuel
Cycle Initiative/Global Nuclear Energy Partnership Program.
[End of table]
Contacts and Acknowledgments:
For further information about this testimony, please contact me at
(202) 512-3841 or gaffiganm@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. Richard Cheston, Robert Sanchez, Kerry Lipsitz,
MaryLynn Sergent, and Anne Stevens made key contributions to this
statement.
[End of section]
Footnotes:
[1] DOE is also responsible for energy efficiency programs, which are
integral to addressing future energy challenges by reducing demand.
[2] Summing of tax expenditure estimates does not take into account
interactions between individual provisions.
[3] The alternative fuels production credit, the largest energy-related
tax credit, is a tax credit of $3 per oil equivalent barrel (in 1979
dollars) for gas produced from biomass or synthetic fuels produced from
coal.
[4] See Pub. L. No. 110-5 (2007).
[5] This direction appears in an explanatory statement to Pub. L. No.
110-161 (2007), published by the House of Representatives.
[6] Pub. L. No. 110-140 (2007).
[7] GAO, Department of Energy: Key Challenges Remain for Developing and
Deploying Advanced Energy Technologies to Meet Future Needs, GAO-07-
106, (Washington, D.C.: Dec. 20, 2006).
[8] GAO, Department of Energy: Oil and Natural Gas Research and
Development Activities, GAO-08-190R, (Washington, D.C.,: Nov. 6, 2007)
and GAO, Hydrogen Fuel Initiative: DOE Has Made Important Progress and
Involved Stakeholders but Needs to Update What It Expects to Achieve by
Its 2015 Target, GAO-08-305, (Washington, D.C.: Jan. 11, 2008).
[9] Biodiesel, electricity from batteries, and other technologies also
contribute to the displacement of oil. DOE's R&D efforts also include,
among other things, liquid fuels from biomass and plug-in hybrid
vehicles.
[10] See GAO, Biofuels: DOE Lacks a Strategic Approach to Coordinate
Increasing Production with Infrastructure Development and Vehicle
Needs, GAO-07-713, (Washington, D.C.: June 8, 2007).
[11] DOE continues to perform R&D on off-shore wind technologies as
well.
[12] In addition, the Energy Policy Act of 2005 provided for
commercialization of exploration and production technologies for ultra-
deepwater and unconventional natural gas and other petroleum through
fiscal year 2014 and authorized the use of $50 million per year from
federal oil and gas lease income for 11 years.
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