DOE’s Budget Authority for Renewable, Fossil, and Nuclear Energy R&D Has Declined by Over 85 Percent in Real Terms Since 1978

Despite growing dependence on foreign energy sources, DOE’s budget  authority for renewable, fossil, and nuclear energy R&D dropped from $5.5  billion (in real terms) in fiscal year 1978 to $793 million in fiscal year  2005—a decline of over 85 percent. As shown in figure 3, renewable, fossil,  and nuclear energy R&D budget authority each peaked in the late 1970s  before falling sharply in the 1980s. DOE is exploring thin-film technologies to reduce the manufacturing costs  of photovoltaic cells, which convert sunlight into electricity. Beginning in fiscal year 1999, DOE’s nuclear energy R&D program shifted  from improving safety and efficiency of nuclear power reactors to  developing advanced reactor technologies by focusing on (1) the Nuclear  Power 2010 initiative in an effort to stimulate electric power companies to  construct and operate new reactors; (2) the Global Nuclear Energy  Partnership, or GNEP, to develop and demonstrate technologies for  reprocessing spent nuclear fuel that could recover the fuel for reuse,  reduce radioactive waste, and minimize proliferation threats; and (3) the  Generation IV Nuclear Energy Systems Initiative, or Gen IV, to develop  new fourth generation advanced reactor technologies intended to reduce  disposal requirements and manufacture hydrogen by about 2020 to 2030. Advanced Renewable, Fossil, and Nuclear Energy Technologies Face Key Barriers to Market Deployment

Advanced renewable, fossil, and nuclear energy technologies all face key  challenges to their deployment into the market. For advanced fossil technologies,  the primary challenge is controlling emissions of mercury and carbon  dioxide generated by conventional coal-fired plants by using coal  gasification technologies that cost about 20 percent more to construct  than conventional coal-fired plants and demonstrating the technological  feasibility of the long-term storage of carbon dioxide captured by a large- scale coal-fired power plant. DOE is exploring technologies to use  cellulosic biomass from, for example, agricultural residues or fast-growing  grasses and trees. Ethanol also needs to become more cost competitive. For the wind industry to expand from high-wind sites to low-wind and  offshore locations, DOE needs to also develop bigger wind turbines with  longer blades mounted on taller towers, requiring improved designs and  materials for blade and drive train components. The wind  industry also faces concerns about environmental impacts, including bird  and bat fatalities caused by wind turbines. Solar energy also faces a challenge of developing inexpensive photovoltaic  solar cells. The States and Countries We Reviewed Have Implemented a Variety of Initiatives to Encourage the Development and Deployment of Advanced Energy Technologies

While federal R&D has declined in recent years, the states have enacted  legislation or developed initiatives to stimulate the deployment of  renewable energy technologies, primarily to address their growing energy  demands, adverse environmental impacts, and their concern for a reliable,  diversified energy portfolio. For example, renewable energy  accounts for 3 percent of Texas’ electricity consumption because Texas  enacted legislation in 1999 and 2005 that created a renewable portfolio  standard requiring electric utilities to meet renewable energy capacity  standards. Through mandates and incentives, Brazil  initiated an ethanol program in 1975 that eventually led to an end to  Brazil’s dependence on imported oil. Denmark focused on wind energy  and, in 2005, derived 19 percent of its electricity from wind energy. However, it is  unlikely that DOE’s current level of R&D funding or the nation’s current  energy policies will be sufficient to deploy advanced energy technologies  in the next 25 years. Specifically, government leadership  is needed to overcome technological and market barriers to deploying  advanced energy technologies that would reduce the nation’s vulnerability  to oil supply disruptions and adverse environmental effects of burning  fossil fuels. To meet the nation’s rising demand for energy, reduce its economic and  national security vulnerability to crude oil supply disruptions, and  minimize adverse environmental effects, our December 2006 report  recommended that the Congress consider further stimulating the  development and deployment of a diversified energy portfolio by focusing  R&D funding on advanced energy technologies.
Why GAO Did This Study

For decades, the nation has benefited from relatively inexpensive energy, but it has also grown reliant on fossil fuels--oil, natural gas, and coal. Periodic imported oil supply disruptions have led to price shocks, yet the nation's dependence on imported energy is greater than ever. Fossil fuel emissions of carbon dioxide--linked to global warming--have also raised environmental concerns. The Department of Energy (DOE) has funded research and development (R&D) on advanced renewable, fossil, and nuclear energy technologies. GAO's report entitled DOE: Key Challenges Remain for Developing and Deploying Advanced Energy Technologies to Meet Future Needs examined the (1) R&D funding trends and strategies for developing advanced energy technologies; (2) key barriers to developing and deploying advanced energy technologies; and (3) efforts of the states and six selected countries to develop and deploy advanced energy technologies. GAO reviewed DOE 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

DOE's budget authority for energy R&D, when adjusted for inflation, fell 85 percent from its peak in fiscal year 1978 to fiscal year 2005. Energy R&D funding in the late 1970s was robust in response to constricted oil supplies and an ensuing energy crisis, but R&D funding plunged when oil prices returned to their historic levels in the mid-1980s. DOE's R&D efforts have resulted in steady incremental progress in reducing costs for renewable energy, reducing harmful emissions of coal-fired power plants, and improving safety and efficiency for nuclear energy. Nevertheless, the nation's dependence on conventional fossil fuels remains virtually the same as 30 years ago. Further development and deployment of advanced renewable, fossil, and nuclear energy technologies face several key challenges. High Capital Costs: The high capital costs of advanced energy technologies worry risk-averse investors. For example, solar cells made to convert solar energy into electricity for homeowners and businesses have been typically too expensive to compete with fossil fuels. DOE's R&D efforts include developing new materials for solar cells that could decrease manufacturing costs. Environmental Concerns: Advanced energy technologies need to address harmful environmental effects, including bird and bat fatalities cause by wind turbines, carbon dioxide and mercury emissions by coal-fired power plants, and spent nuclear fuel from nuclear power reactors. Technology-Specific Challenges: Challenges that are unique to each technology also create barriers to development and deployment. Ethanol, for example, will need to be manufactured with more cost-competitive technologies using agricultural residues or other cellulosic materials in order to expand beyond corn. Other challenges include developing new wind technologies to expand into low-wind and offshore locations; developing advanced coal gasification technologies to further reduce harmful emissions and high capital costs; and working with the nuclear power industry to deploy a new generation of reactors and develop the next generation to enable reactors to reprocess highly radioactive spent nuclear fuel or produce hydrogen. Many states and foreign countries have forged ahead of the federal government by successfully stimulating the deployment of renewable energy technologies. For example, renewable energy accounts for 3 percent of Texas' electricity consumption because Texas enacted legislation in 1999 and 2005 requiring its electric utilities to meet renewable energy capacity standards. Similarly, Denmark has used mandates and financial incentives to promote wind energy, which provided 19 percent of its electricity in 2005.