Briefing Book

The Budget’s Harmful Cuts to Energy

Every part of DOE’s energy and science enterprise will be hit, and likely hit hard.

By Jeff Navin

Tagged Climate ChangeDepartment of EnergyDonald TrumpenergyJobsTrump Administration

In recent years, the Department of Energy (DOE) has played a key part in the debate about America’s infrastructure and economic future. One would think a President who campaigned on the need for investment in outdated infrastructure, and as a champion of blue-collar job creation, would see an opportunity to upgrade our sagging energy infrastructure and create manufacturing jobs in growing markets. Given that Trump proposed budget cuts to the non-national security parts of DOE by 17.9 percent, it seems the ideological wing of the Trump Administration has prevailed over the supposedly more practical economic wing. And while this is a missed opportunity to better the lot for America’s workers, the broader consequences are graver still.

Although the specific details are sparse, achieving 17.9 percent cuts to the energy and science programs will require deep cuts throughout the agency. He proposed eliminating two programs—the Advanced Research Projects Agency-Energy (ARPA-E) and the Loan Programs Office—but those programs are, in terms of budget, two of the smallest programs at the agency. Every part of DOE’s energy and science enterprise will be hit, and likely hit hard.

The result of these cuts will be felt around the world. The United States is, by far, the world leader in energy R&D, both in terms of size of investment, as well as its global impact. As part of the historic agreement in Paris, 22 countries, and the European Union, announced Mission Innovation—an agreement to double R&D spending to spur more rapid development of energy technology. If enacted, this budget will cripple those efforts. The United States’ energy R&D budget constituted 40 percent of Mission Innovation, largely through work carried out at our extraordinary national laboratories. However, this budget not only fails to fulfill America’s commitment to double our R&D, it makes a significant move backwards.

As discussed, the most catastrophic effect of this proposal is obviously for climate change, but there are other reasons to protect energy R&D programs—ones even a conspiracy-minded climate denier could embrace. As the global population increases from 7 billion to 9 billion people, and as the developing world looks to increase its standard of living, the market for energy will grow dramatically. These markets include cities in China that are working now to reduce horrific levels of air pollution, communities in India seeking comforts like air conditioning, and growing communities in Africa looking for reliable electricity to run their homes and businesses. The International Energy Agency (IEA) estimates that this market opportunity will reach $90 trillion by 2030.

In virtually every country, the market is focusing in on cleaner forms of energy. Last year, according to the IEA, wind and solar constituted more than half of all new electricity-generation in the world. The rapid rise of renewables on the grid means that technologies used to store energy, more efficiently transmit energy, and manage demand and load will have massive new global markets. Rapidly growing economies like China and India are in the market for clean base load technologies, such as next-generation nuclear power. Many countries with fossil resources are looking for ways to generate power from gas and coal without emitting CO2. But instead of investing in our best and brightest to develop the technologies we can sell to the world, we’re making deep cuts that will cede much of this market to our competitors. It will be a far cry from the “winning deals” we heard so much about last year.

Office of Energy Efficiency and Renewable Energy
The Trump outline estimates $2 billion in “savings” in the Office of Energy Efficiency and Renewable Energy (EERE), the largest clean energy R&D organization in the world. EERE’s R&D efforts have included the SunShot Initiative, which worked to dramatically reduce the cost of solar energy, the Solid-State Lighting Program, which worked to decrease the cost of energy-efficiency LED lights, and programs on battery storage to increase the range and decrease the cost of electric vehicles.

These efforts have been tremendously successful. Since 2008, the cost of utility-scale solar has decreased by 64 percent. In that same time frame, the cost of battery storage has dropped by 73 percent. LED lighting costs have decreased by 91 percent since 2008. We’ve seen solar become the largest component of new energy generation in the United States. The increased efficiency from products like LED lights have flattened demand for electricity in the United States, and, with lower costs, over 200 million LEDs were sold in 2015. This year, we’ll see two electric vehicles, designed and built in the United States, with a range over 240 miles at a cost to consumers of roughly $30,000. All of these markets have grown exponentially in the past few years, and U.S. companies like Tesla and GE are even manufacturing their products in the United States. These proposed budget cuts will make it more difficult for our country to compete internationally as these markets continue to grow.

Office of Electricity Delivery and Energy Reliability
The Office of Electricity Delivery and Energy Reliability (OE) is working on research to increase the resiliency and efficiency of the nation’s aging electrical grid, and it is the primary federal agency that responds to massive power outages due to extreme weather events. The office houses programs to modernize the electricity grid to make it more flexible, which is critical as we continue to add more intermittent sources of renewable electricity generation, and as the number of distributed sources of energy increases. Our twenty-first century energy system needs a twenty-first century grid, and OE is working to make that a reality. In addition, OE is the primary federal agency working to harden the grid against cyber attacks and other vulnerabilities that could put our nation’s critical infrastructure at risk. These cuts will make the United States more vulnerable to cyber attacks and widespread power outages, and will make it more difficult for us to adapt to a changing energy mix.

Office of Nuclear Energy
The Office of Nuclear Energy is the world’s largest advanced nuclear innovation organization, and is in the midst of a transformation that will allow it to support the more than 45 private companies in North America that are currently developing cheaper, safer advanced nuclear technologies. As the Obama Administration’s Mid-Century Strategy, released in Marrakesh last year, makes clear, the United States will need nuclear power to achieve its 2050 decarbonization goals. Any strategy to deeply decarbonize by 2050 that does not include nuclear power is very likely to fail, and innovation in the sector presents a unique set of challenges. Because nuclear technology is not the kind of thing you can tinker with in a garage, eliminating the federal role in nuclear innovation will essentially cede the market to the Russians and Chinese, who are working to build their own reactors, building off of plans created in our national labs. So in addition to losing those jobs, when their technology becomes the global standard, we will also lose our standing in the world on issues like safety regulation and non-proliferation.

Office of Fossil Energy

The Office of Fossil Energy and its laboratories funded the research that helped usher in the shale gas revolution; its recent R&D efforts have centered on ways to capture carbon dioxide—a technology that the IPCC says will be important in solving climate change. In fact, the UN and U.S. scenarios with the highest likelihood of keeping climate change below 2 degrees Celsius require net negative power sector emissions. The most likely candidate for net negative power production is electricity produced from biomass coupled with carbon capture technology. Cuts of this magnitude to the Fossil Energy budget will essentially mean that R&D in this area stops in the United States. If Trump is wrong about the Chinese conspiracy, we may need options on ways to use fossil energy and capture carbon. At an absolute minimum, we ought to continue our research efforts.

Loan Programs Office
The Loan Programs Office (LPO) is the primary energy deployment policy tool at the Department of Energy, and one of the most successful programs in any federal agency for creating blue-collar manufacturing and construction jobs. But even though the budget score for these programs is relatively small, the Trump Administration has proposed eliminating the programs altogether for ideological reasons. While conservatives love to pick out the small number of companies that have received failed loans, overall the program has been a stunning success. It is expected to return in excess of $5 billion to the Treasury over its lifetime. The program launched both the electric vehicle manufacturing industry and a utility-scale solar industry in the United States. It has helped build factories for Tesla, Ford, and Nissan, as well as some of the biggest energy construction projects in the country—including the nearly 3,500 jobs at the Vogtle Electric Generating Plant. The program provides debt to fossil energy projects with lower greenhouse gas emission profiles, and is an essential funding mechanism for new nuclear-power generation in the United States.

In short, the program is a net-benefit to the Treasury, supports manufacturing and construction jobs, and is essential for new nuclear construction and cleaner fossil projects in the United States. Yet the Administration, for ideological reasons, has chosen to gut the program. Ironically, this would mean that U.S. energy companies doing business abroad can access U.S. government backed debt for projects, and, as is often the case, foreign companies doing business in the United States may have access to government debt for projects from their home countries. But under the proposal laid out by the Trump Administration, U.S. energy companies wanting to build things in the United States won’t have access to the same kinds of debt products. This proposal stifles both innovation and job creation, including the kind of blue-collar jobs Trump promised so emphatically.

Advanced Research Projects Agency – Energy
ARPA-E invests a relatively small amount of money in high-risk, high-reward energy programs that have the potential to transform the energy sector. Trump proposes eliminating the program. Although the program is only eight years old, the companies it has invested in have received $1.8 billion in follow-on funding. Fifty-six projects have formed new companies, and 68 have partnered with other government agencies for further development. ARPA-E also represents a new way for government and small companies to collaborate, with some of the best and brightest minds from around the country serving in short-term roles with the agency where they bring their expertise to serve the American people.

While there is strong bipartisan support for many of the programs, laboratories, and missions at the Department of Energy, Trump’s opening bid makes clear that we will indeed have a fight on our hands over the next four years. It is not a surprise that he is scaling back the policies put in place to fight climate change in the near term, but his proposed crippling of our energy R&D enterprises could have disastrous effects over the long term—for climate change, of course, but also for our competitiveness in the massive, growing market that is the modern energy sector.

Read more about Climate ChangeDepartment of EnergyDonald TrumpenergyJobsTrump Administration

Jeff Navin served as the Acting Chief of Staff and Deputy Chief of Staff at the United States Department of Energy. 

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