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GAO: U.S. energy R&D, policy are inadequate

Key Challenges Remain for Developing and Deploying Advanced Energy Technologies to Meet Future Needs

Why GAO Did This Study

Despite periodic price shocks and related energy crises, the United States is even more dependent on crude oil and natural gas than it was almost 30 years ago. And, without dramatic change, the nation will become ever more reliant on imported oil and natural gas with attendant threats to national security.

The nation has also become concerned about global warming, which has been linked to carbon dioxide emissions from burning coal and oil. To address these concerns, the Department of Energy (DOE) has funded research and development (R&D) on advanced renewable, fossil, and nuclear energy technologies.

GAO 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 interviewed DOE officials and scientists, U.S. industry executives, independent experts, and state and foreign government officials.

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Conclusions:

It is unlikely that DOE's current level of R&D funding or the nation's current energy policies will be sufficient to deploy alternative energy sources in the next 25 years that will reverse our growing dependence on imported oil or the adverse environmental effects of using conventional fossil energy.

The United States has generally relied on market forces to determine the nation's energy portfolio, primarily conventional supplies of oil, natural gas, coal, and nuclear energy. In contrast, advanced energy technologies have higher up-front capital costs that make them less cost competitive than conventional technologies.

As a result, despite periodic energy price spikes caused by disruptive world events and about $50 billion (in real terms) in energy R&D funding since 1978, the United States has made only steady incremental progress in developing and deploying advanced renewable, coal, and nuclear technologies that can compete with conventional energy technologies.

However, continued reliance on conventional technologies leaves the United States vulnerable to crude oil supply disruptions, with economic, energy security, and national security consequences.

The nation is once again assessing how best to stimulate the deployment of advanced energy technologies in response to recent high energy prices--caused by the growing world demand for energy, wars in the Middle East, and last year's hurricanes—and concerns about the adverse environmental effects, particularly greenhouse gas emissions, of using conventional fossil energy.

Reducing the nation's dependence on oil and carbon dioxide emissions in the next 25 years is not unlike the 1960s challenge to put a man on the moon. Without sustained high energy prices or concerted, high-profile federal government leadership, U.S. consumers are unlikely to change their energy-use patterns, and the United States will continue to rely upon its current energy portfolio.

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 the adverse environmental effects of burning fossil fuels.

The nation’s current energy portfolio has raised concerns about the adverse environmental effects of energy generation—particularly greenhouse gas emissions from coal-fired and oil-fired power plants and the long-term storage of spent nuclear fuel.

In addition, the duration of certain federal tax incentives has been insufficient to stimulate investment decisions to deploy advanced energy technologies. For example, renewable energy industry representatives have stated that the 2-year extension of the production tax credit in the Energy Policy Act of 2005 does not provide sufficient certainty to stimulate investment. In providing a production tax credit to stimulate the construction of projects using advanced technologies, the credit’s duration is key to encouraging companies and their lenders to undertake the substantial investments and build an industry over time.

Several states have taken the lead in encouraging the deployment of advanced energy technologies, particularly in renewable energy. For example, in the past 7 years, Texas tripled its renewable energy use as a result of its renewable portfolio standard. Similarly, Minnesota’s ethanol program has displaced 10 percent of gasoline consumption with ethanol. Many other states have initiatives to stimulate renewable energy generation as well. States’ initiatives that diversify our energy portfolio and reduce harmful emissions are positive steps.

Similarly, foreign countries, including Brazil, Denmark, and Germany, have sustained longterm efforts using mandates and/or financial incentives to deploy advanced energy technologies that are providing, or are expected in the future to provide, significant amounts of energy. Approaches taken by these countries may provide useful insights and opportunities for fostering the deployment of advanced energy technologies.

Recommendation to the Congress

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, the Congress should consider further stimulating the development deployment of a diversified energy portfolio by focusing R&D funding on advanced energy technologies. DOE had no comment on this recommendation.

Editorial Notes: The original is a 73-page PDF file. Associated Press just published a story on the report: GAO says Energy needs bigger budget -BA

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