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Friday, February 18, 2011

House GOP Budget Proposal Slashes Energy Innovation Investments

The House Republican's Continuing Resolution proposal to fund the government through the rest of FY11 would recklessly slash energy innovation investments across federal agencies. The bill, H.R. 1, was introduced last Friday as the GOP's misguided attempt to reduce the deficit, a proposal that would strip highly leveraged dollars from important federal programs, while representing merely a drop in the bucket of the $1.3 trillion federal deficit.

The Continuing Resolution as it stands would slice over two billion dollars from the DOE's budget alone and would have detrimental impacts on the state of American energy innovation. The budget cuts would force the layoffs of scientists and engineers, shrink the capabilities of laboratories and universities to perform the most critical cutting-edge energy research projects, and, by cutting funds for highly-leveraged loan guarantee programs, steer private sector funds away from American entrepreneurs and small businesses looking to demonstrate and deploy their innovative energy technologies on American soil.

The Continuing Resolution proposes cuts of at least 17% as compared to FY10 levels in each of the most innovation-oriented offices in the Department of Energy:

  • The agency which would be hardest hit would be the Advanced Research Projects Agency-Energy (ARPA-E), which funds both the riskiest and most transformative, early-stage energy innovation projects, and would lose a staggering 75% of its budget under H.R. 1.
  • The Office of Science, which funds critical early-stage energy innovation research, would see a 20% decline in its budget. Office of Science devoted 20% of its 2010 budget to energy innovation funding, while supporting additional fundamental physical science research.
  • The Office of Nuclear Energy, which devoted 41% of its funds to energy innovation projects in 2010, would lose 23% of its budget.
  • Meanwhile, the Office of Fossil Energy would see an 11% reduction in its budget. 43% of the office's 2010 budget was devoted to energy innovation efforts.
These are the offices and programs that fund the most critical and innovation energy technology projects, and such broad budget cuts would be detrimental to their operations. As the graph below illustrates, these proposed budgets stand in sharp contrast to President Obama's proposed budget for FY12, which would responsibly ratchet up critical energy innovation investments in each of these offices.

Budget of Selected DOE programs, ($ US)
Screen shot 2011-02-18 at 2.34.26 PM.png

To make matters worse, the budget would cut funding for several of the DOE's loan guarantee programs, which aim to fill the gap left by the private sector in financing the development and deployment of innovative renewable energy and energy efficiency technologies. For instance, the DOE's Advanced Technology Vehicles Manufacturing Loan Program's budget would drop 50%, or by $10 million.

And the Continuing Resolution rescinds all unobligated ARRA funds, effectively stripping away financing for 20 DOE loan guarantee applications that are currently in review, but have not yet been finalized. Further, six innovative energy projects have received conditional loan guarantee commitments from the DOE and secured developer financing, but, because the OMB will not consider loan guarantee funding to be obligated until loans have closed, these projects, too, will be cancelled.

As Rhone Resch of the Solar Industries Association wrote in an open letter to the House,
All of these projects would be cancelled by H.R. 1, not only eliminating the construction jobs associated with these projects, but also impacting the manufacturing orders to our domestic US solar industry... In today's economic climate, these programs are critical to attract investment in nuclear, clean coal and renewable energy projects. Until the financial community witnesses the successful completion of several of these projects, it will continue to charge substantial premiums or not lend to those projects at all.
This Continuing Resolution, if passed, would not just eliminate jobs from the solar industry, or from construction or manufacturing orders, but would eliminate jobs across the energy innovation cycle and across various innovative energy technology sectors. This, in turn, would drive private sector funds away from the American market and towards overseas soils, where governments are recognizing the importance of investing in energy innovation, manufacturing, and markets.

Obama's proposed FY12 demonstrated a clear understanding that budget cuts, while important and necessary, need to be strategic. At a time when other countries are actively investing in energy innovation to remain competitive, the House Continuing Resolution proposal would weaken the engine of American growth - innovation. Far from fiscally responsible, these untargeted and sweeping cuts to energy innovation budgets are short-sighted and will amount to no long term gain for the country, our economy, or the deficit situation.

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