Advanced Energy Technologies: Budget Trends and Challenges for	 
DOE's Energy R&D Program (05-MAR-08, GAO-08-556T).		 
                                                                 
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.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-556T					        
    ACCNO:   A81211						        
  TITLE:     Advanced Energy Technologies: Budget Trends and	      
Challenges for DOE's Energy R&D Program 			 
     DATE:   03/05/2008 
  SUBJECT:   Alternative energy sources 			 
	     Budget authority					 
	     Cost analysis					 
	     Crude oil						 
	     Energy conservation				 
	     Energy consumption 				 
	     Energy costs					 
	     Energy industry					 
	     Energy legislation 				 
	     Natural gas					 
	     Nuclear energy					 
	     Renewable energy sources				 
	     Research and development				 
	     Tax expenditures					 
	     Policies and procedures				 
	     Supply and demand					 

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GAO-08-556T

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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 
fuelsï¿½oil, 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. DOEï¿½s Office of Science has also funded basic 
energy-related research. 

This testimony addresses (1) funding trends for DOEï¿½s 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 GAOï¿½s 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 DOEï¿½s 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, DOEï¿½s 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. DOEï¿½s 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. DOEï¿½s 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 nationï¿½s energy portfolio has not 
dramatically changedï¿½fossil energy today provides 85 percent of the 
nationï¿½s energy compared to 93 percent in 1973. Because DOEï¿½s 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 nationï¿½s 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.gov/cgi-bin/getrpt?gao-08-556T]. For more information, contact Mark 
E. Gaffigan, at 202-512-3841 or [email protected] 

[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 [email protected]. 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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