Politics, Symbols and the Economy Drive Budget

On February 3, the Bush administration released its proposed budget for Fiscal Year 2004 (FY04). But before we get into details, the background or political backdrop is important to understand

RE Insider – February 10, 2003 [SolarAccess.com] . First, the administration is driving a war budget that increases military spending and homeland security measures on terrorism. Second, the budget deficit is rapidly increasing and concerns on discretionary spending programs such as energy research and development, appear to be getting increasing concern. Third, the energy activities by the administration (particularly at the Department of Energy) are focusing on long-term research and managing programs well, not “the vision thing” of the prior administration. In regard to the Department of Energy (DOE), the Bush budget has little new money for Renewable Energy. Many of the federal government’s Renewable Energy and energy efficiency research programs would see little new money or would be cut under the President’s proposed 2004 budget that was sent to Congress on, Monday, February 3. Wind and geothermal received light cuts and the Concentrated Solar Program (CSP) is proposed to be closed down. The CSP close-down continues in the face of a recent DOE-sponsored study of the RD&D program by Sargent & Lundy who projected the cost of solar tower technology to be between 3.5 and 5.3 cents/kWh by 2020 and troughs to be between 4.3 and 6.2 cents/kWh. But while the DOE program is intended to move to zero, the Italian CSP Program nears US$100 million and Spain’s increases as well. And in 2003, a Nevada utility in 2003 issued a power purchase agreement for 50 MW and an Arizona utility for 1 MW. The DOE Solar Buildings RD&D program was hoping for a US$10 million increase but was level funded at US$3.5 million. While the DOE photovoltaics (PV) RD&D budget was an essentially level US$77 million, it pales in comparison to the RD&D program in Japan which has just published the final FY 2003 Japanese budget bill for PV related activities totaling of ¥84.54 billion or US$712 million, representing a slight increase over what was originally requested. The US RD&D budget administered for PV RD&D is slightly over one-tenth of the Japanese government’s budget. The DOE Renewable Energy’s total budget is essentially unchanged from FY2003, but most existing programs face cuts to pay for the administration’s new hydrogen fuel cell research program, announced in President Bush’s State of the Union address last month. The approach is a crash, long-term program primarily focused on transportation utilization of hydrogen and fuel cell technology. But here, the program is essentially not focused on renewables and the President stated that the resource could also be coal and utilize nuclear power. The biomass research program, which funds research on biofuel, bioenergy and bio-based product research, faces a 28.5 percent cut from FY2003, with a request of US$78.5 million for FY04. President Bush’s fiscal 2004 budget request would cut funding for energy efficiency. The proposed Department of Energy overall budget for energy efficiency would be cut by 3.9 percent from the 2003 request (final appropriations for 2003 have not yet been decided by Congress) to US$875.8 million. Environmental Protection Agency’s (EPA) energy programs seemed untouched. The request for the EPA’s Energy Star program will remain relatively flat. Department of Agriculture (USDA) now has several Renewable Energy-oriented programs. The Renewable Energy System and Energy Efficiency Improvements program, as part of the new energy title to the 2002 Farm Bill (H.R. 2646), was to receive US$23 million a year in mandatory (non-discretionary) funds to provide grants and loans to farmers, ranchers, and rural small businesses for the development of Renewable Energy projects and energy efficiency improvements. The administration proposed spending US$18 million on the program in FY03, and proposes not to utilize any mandatory funds for FY04. Instead, USDA requests US$3 million in discretionary funds for the program in FY04, representing a US$20 million cut from Congressionally approved authorization levels. Also in USDA, the budget caps the Commodity Credit Corporation’s Bioenergy Program at US$100 million a year, but the funding for the energy title’s other mandatory programs appears to be unaltered. USDA did not request funding for any of the energy title’s discretionary programs (Sec. 9003 & 9005 of The Farm Bill). In addition to the energy title, the Value-Added Agricultural Product Also, the Market Development Grant within Rural Development title of the Farm Bill also faces severe cuts. The 2002 Farm Bill allocated $40 million a year in mandatory funding for this popular program, which awards grants to spur development of new value-added business ventures, including Renewable Energy projects. The administration’s FY2004 budget proposes to utilize no mandatory funds for 2004, and requests only US$2 million in discretionary funds, effectively a US$38 million cut from authorized levels. What is not clear in this new budget is what the new Republican-controlled Congress will do. Senator Pete Domenici (R-NM) now chairs the Senate Energy and Natural Resources Committee and the Senate Appropriations Subcommittee on Energy & Water Development which oversees the DOE Renewable Energy RD&D program. The new Chairman has not made any public announcements on his intentions other than to have an energy bill through the Senate by September. But Minority Chairmen Jeff Bingaman (D-NM) on Senate Energy and Harry Reid (D-NV) on Senate E&WD Appropriations are strong advocates of the Renewable Energy programs. Senator Conrad Burns (R-MT) and Robert Byrd (D-WV) as Chairman and Minority Chairman of the Senate Interior Appropriations Subcommittee have solid records supporting energy efficiency programs. Representative David Hobson (R-OH) now chairs the House Energy & Water Development Appropriations Subcommittee, and he is a new player, as is Rep. Charles Taylor (R-NC) has assumed the Chairmanship of the House Interior Appropriations Subcommittee which has oversight on DOE’s efficiency R&D programs – so we are unclear as to whether they will support these programs. The politics is still in the early stage as to what Congress will actually do to yhe President’s budget and how unified Republicans are on energy issues beyond the symbolic ones such as drilling of the Alaskan National Wildlife Reserve. But the looming potential of War on Iraq has made many Republicans ardent renewable supporters or at least open to the portfolio of domestic energy options as seen by the adoption of Renewable Energy Portfolio Standards in Nevada and New York, run by strong Republican Governors. The politics will gel this Spring and the test will be how unified the majority party will be on the budget details. About the Author: Scott Sklar is president of the Stella Group, a strategic clean energy marketing and policy firm based in Washington, D.C. and prior he concurrently ran the Solar Energy industries Association and the National BioEnergy Industries Association for 15 years. Sklar served for nine years as an aide to Senator Jacob Javits of New York and he lives in a solar home with both solar water heating, photovoltaics and advanced energy efficiency in Arlington, Virginia. He can be reached at Solarsklar@aol.com
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