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White House budget slashes clean energy

In his most recent State of the Union address, President Bush stated that the United States needed "reliable supplies of affordable, environmentally responsible energy," and urged Congress to "pass legislation that makes America more secure and less dependent on foreign energy." However, there is a marked disconnect between the President's words and the funding priorities he laid out in the Fiscal Year 2006 (FY06) budget request he recently submitted to the U.S. Congress.

The President's proposed budget calls for significant cuts in renewable energy, energy efficiency, clean air, and climate change related-programs at the U.S. Department of Energy, U.S. Department of Agriculture, U.S. Department of Transportation, U.S. Environmental Protection Agency, and other agencies.

Swinging the Budget Axe

The FY06 budget request for the U.S. Department of Energy's (DOE) energy efficiency and renewable energy (EE/RE) programs envisions reductions totaling nearly $50 million - an overall cut of roughly 4 percent. This includes a 6 percent cut in Distributed Energy programs ($60,416 to $56,629); an 8 percent cut in the Geothermal Energy program ($25,270 to $23,299); an 18 percent cut in the Biomass/Biofuels program ($88,099 to $72,164); and a 90 percent cut in the Hydropower program ($4,862 to $500).

In fact, the Bush budget proposes to phase out DOE's hydropower program altogether and all support for the Advanced Hydropower Turbine, a joint program between DOE and the hydropower industry exploring fish-friendlier turbines, just at the time when full scale testing is about to begin at multiple locales.

Adding insult to injury for at least some of these programs, the cuts come on top of earlier reductions. The geothermal program, for example, had been funded at $28.4 million in FY03 and steadily reduced since then.

Less severely impacted is DOE's solar R&D budget which faces a reduction of only 1.3 percent, from $85.07 million in FY 05 to $83.95 million in FY 06. The solar industry has sought to put a positive spin on its reduction calling the budget request "essentially status quo funding" while applauding a "promising new initiative to advance the development of crystalline silicon solar power."

Overall, among DOE's core renewable energy programs, only wind energy is proposed for an increase - 3.4 million (from $40.8 million to $44.2 million), a relatively large expansion of nearly 9 percent.

In addition, funding for the Renewable Energy Production Incentive (REPI) program (which provides public power systems and rural electric cooperatives with a counterpart to the tax incentives that are available to for-profit utilities for renewable generation) would be just $5 million - an increase of $1 million but well below the cumulative $70+ million estimated as needed to fully fund past obligations under the program.

On the energy efficiency side of the ledger, DOE's funding would be cut back by nearly $21 million. Moreover, this decrease comes on top of earlier reductions. Since FY02, DOE research and development spending on efficiency has fallen by $50 million. Corrected for inflation, this represents a 15 percent drop in federal support for energy efficiency even though studies suggest that every dollar invested in DOE-administered energy-efficiency R&D returns $20 to the nation's economy.

The bottom-line reduction in DOE's EE/RE programs appears less drastic primarily because of significant increases for the hydrogen program (5%: $94,066 to 99,094) and the fuel cells program (12%: $74,944 to $83,600). And the hydrogen program, which has grown from $38,113 in FY03, is not a truly renewable energy program inasmuch as a portion of the budget supports hydrogen production from fossil fuel and nuclear sources.

On the tax side, the Bush Administration budget proposal for 2006 calls for extending the wind energy production tax credit (PTC) for two years, through the end of 2007. The two-year PTC for wind, biomass (other than agricultural livestock waste nutrients), and landfill gas would continue at 1.8 cents/kWh and would be adjusted annually for inflation. However, the proposal appears
to not include geothermal energy in the extension even though it was incorporated into the program last year -- arguably one of the few advances made in federal support for renewables in 2004.

Even if broadened to include geothermal and other renewables, a mere two-year extension would continue the stop-and-go unpredictability of the PTC which has hampered renewable energy development over the past decade - a problem not faced by fossil fuel technologies which are granted long-term incentives.

Widening the Swath

Elsewhere the pattern is the same. At the U.S. Department of Agriculture (USDA), funding for the Federal Procurement of Biobased Products program and the Biodiesel Fuel Education program held steady at $1 million each. However, the RBS Renewable and Energy Efficiency Grant/Loan Guarantee Program would be scaled back to $10 million from $23 million in FY05, the NRCS Biomass Research and Development Program would be cut by $2 million to $12 million, and the CCC Bioenergy Program would be slashed $40 million from $100 million in FY05 to $60 million in FY06 - and down from $150 million in FY04.

For the U.S. Environmental Protection Agency, the President's budget calls for an overall cut of $517 million (a 6.4 percent reduction from FY05 appropriations). The cut includes a $42 million cut in the Clean Air and Global Climate Change Program (a 4.2% cut from the FY 05 President's
budget). Funding for EPA's Energy Star program would be essentially level with FY05 but even this may be considered penny-wise and pound-foolish inasmuch as every dollar invested in the program cuts energy costs by $75 and sparks $15 of investment in new efficiency technologies, according to the Alliance to Save Energy.

At the U.S. Department of Transportation, the Urbanized Area Formula Program and the Fixed Guideway Modernization Program will see a $300 million cut in funding from $5.3 billion in FY _05 to $5.0 billion. These programs help promote clean bus deployment through the funding of
innovative technologies and, capital projects to replace, rehabilitate, and purchase buses and related equipment. These cuts would be on top of the elimination of $1.2 billion in subsidies for Amtrak which would essentially eliminate the rail service.

Policy of Slowly Bleeding Support

Taken together, the cuts or anemic funding levels proposed for many federal sustainable energy programs reflect a continuation of the policy of slowly bleeding support for renewable energy and energy efficiency. - a policy correctly characterized by the Alliance to Save Energy as being the
'wrong approach at the wrong time.'

The United States is now facing rising oil and natural gas prices and imports with negative consequences for the economy, the national trade deficit and national security, rapidly worsening climate change plus other energy-related environmental problems, and increasing evidence of the public health impacts of fossil energy use.

For all of these reasons, the White House's policy of steadily chipping away at the cross-section of federal sustainable energy programs reflects misplaced priorities and is bad for jobs, the economy, national security, and the environment.

Recognizing this, the member groups of the Sustainable Energy Coalition more than a year ago called for reversing the downward spiral of federal support for renewable energy and energy efficiency programs and instead doubling funding levels for them over the next five years.

However, given the size of the federal budget deficit, which is placing ever-greater stresses on all discretionary funding programs, the likelihood of seeing significant budget increases in the near future appear remote - even if the political environment becomes more friendly.

More likely, sustainable energy advocates will be forced to compete with supporters of many other social programs for a piece of an ever-diminishing pie. But no matter how many different ways one tries to divide and reallocate crumbs, one still ends up with crumbs.

Some Budgetary Solutions

Other than hoping that the economy will somehow rebound or that the nation's tax policies or military expenditures will be revised, the only likely long-term prospect for expanding the fiscal resources available for renewable energy and energy efficiency programs may be through developing a new, independent revenue stream.

One option is to revisit proposals that have been considered but set aside due to strong political opposition. These would include some form of a carbon and/or other pollution-based tax or oil import fee. Similarly, higher royalty fees on federal lands leased for oil and natural gas drilling
might be an option. Another would be a revolving fund that reinvests savings from federal energy efficiency programs (e.g., the Federal Energy Management Program) back into sustainable energy R&D programs. And yet another is to reprogram back into renewable energy and energy efficiency a portion of the nearly $6 billion from a variety of programs such as "clean coal," advanced nuclear power generation, non-renewable hydrogen, and carbon sequestration that the White House has cobbled together and euphemistically labeled as its "Climate Change Initiative."

Barring some such policy change, however, the prospects for sustaining, if not expanding, the funding levels for federal energy efficiency and renewable energy programs in FY06 and beyond appear daunting.

About the Author...

Ken Bossong is the coordinator of the Sustainable Energy Coalition, a coalition of more than 80 national and state business, environmental, and energy policy organizations advocating increased support for energy efficiency and renewable energy technologies. The views expressed in this article, however, are solely those of the author and do not necessarily reflect the position of the Sustainable Energy Coalition or its member groups.

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