Electricity-Related R&D Funding Is Declining Due to Budget Reductions and Deregulation Prospects

Electricity-related R&D funding was generally reduced in 1996 by the federal government, the electric utility industry, and most states that we reviewed. 3). Utilities Are Shifting Away From Long-Term, Advanced-Technology R&D

According to many utility R&D managers, their companies are also shifting the focus of their R&D away from long-term, advanced-technology R&D, like the advanced gas turbine and new fuel cells, to short-term projects that will be profitable and provide a competitive edge in the near term. R&D Managers Propose Alternative Funding Mechanisms

Utility R&D managers and industry, DOE, and state government officials who expressed concerns about the funding of electricity-related R&D suggested alternative funding sources. They are (1) a state-administered surcharge on all retail sales of electricity within the state and (2) a nationwide non-bypassable wires charge that could provide an alternative funding source for EPRI. Under this proposal, a small charge would be assessed on all electricity entering the transmission grid, whether it be interstate or intrastate. Objectives, Scope, and Methodology

Our objectives were to determine (1) what changes have occurred in the amount of electricity-related research and development (R&D) funding and the primary reasons for these changes and (2) what has been the impact of these changes on the types of R&D being funded. Projects in these six technologies are beginning to be delayed, scaled down, or canceled as a result of funding reductions, according to DOE, state, and industry officials that we contacted. DOE’s budget requests for big and small turbines increased from fiscal year 1995, but approval for smaller increases is expected.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on: (1) changes in the amount of funding for electricity-related research and development (R&D); and (2) the impact of these changes on the types of R&D being funded.

What GAO Found

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