2012 Federal Budget: House Budget Aims to Gut Energy Innovation Investments

The following is cross-posted with the Breakthrough Institute and was authored by Research Analyst Sara Mansur. For additional coverage of the 2012 budget debate from ITIF, please see our recent posts on ARPA-E’s budget fate and the draft House Appropriations bill.

The 2012 Energy and Water Appropriations bill, passed on Friday by the House of Representatives, would cut federal energy innovation funding by 12 percent of the levels put in place by the FY11 Continuing Resolution, 37 percent below the White House’s FY12 Administration’s budget request. The bill would cut the Department of Energy (DOE)’s budget by $2.5 billion over FY2010 funding levels.

Overall, the House’s plan would cut about $644 million from the combined budgets of the five major DOE offices engaged in energy innovation activities (see Figure 1 and Table 1 below). However, these new cuts are relative to FY11 budget levels, already diminished by spending reductions included in a Continuing Resolution passed by Congress in April to fund the government through the end of the year. All told, the 2012 Appropriations bill would see funding levels for the five core DOE energy innovation agencies tumble $1.4 billion below FY10 levels and a precipitous $3 billion below President Obama’s budget request for FY12.

Figure 1, below, and accompanying Table 1, present the House budget in comparison to the funding levels for these offices in FY10, FY11, and previous Administration budget requests.

The legislation would cut the budgets of each of the DOE’s major energy innovation offices, stripping the most funding from the Office of Energy Efficiency and Renewable Energy (EERE), even after an amendment to the legislation passed late last week to restore $10 million to the EERE’s solar research program. EERE’s overall budget would fall to $1.3 billion dollars, 29 percent below FY11 Continuing Resolution funding levels, and a full 59 percent below the Administration’s FY12 budget request.

Thanks to a last minute amendment passed by a single vote the budget for the Advanced Research Projects Agency-Energy (ARPA-E), the DOE’s flagship energy innovation program, was essentially restored to FY211 levels, receiving $180 million in the House appropriations bill. However, those funding levels still fall 67 percent below the White House’s 2012 budget request and even come in well below the Heritage Foundation’s recent recommendation of $300 million for the key energy innovation agency. ARPA-E’s $180 million budget allocation also leaves the agency critically underfunded compared to the $1.5 billion in eventual funding recommended by the American Enterprise Institute, Brookings Institution, and Breakthrough Institute in their report Post-Partisan Power or the $1 billion per year called for by the National Academies and originally envisioned in the bipartisan 2007 authorizing language that created the agency.

Below, we estimate the impact on direct energy innovation investments that would result from these cuts (see Figure 2/Table 2). We find that the overall budget cuts would strip at least $310 million in direct energy innovation investments by these DOE agencies relative to FY11 levels, or a cumulative reduction of $635 million below FY10 levels. In contrast, President Obama’s budget requests had aimed to increase these budgets by $116 million in FY11 and by a cumulative $754 million in FY12, relative to FY10 levels. The House budget will slash the combined energy innovation investments of these five DOE offices by 12 percent relative to FY11 levels, 21 percent below FY10 levels, and 37 percent below the Administration’s FY12 budget request.

The 2012 Energy and Water Appropriations Bill now heads to the Senate for further debate. Stay tuned for ongoing analysis of the budget battles waging in Washington and their impacts on the United States' energy innovation system...