FY22 Budget Outlook: DOE Applied Energy RD&D

The Department of Energy’s applied research, development, and demonstration (RD&D) programs are on the cusp of potentially transformative funding increases.

For fiscal year 2022, the Biden administration has asked Congress to significantly expand the programs’ annual budgets, with proposed topline boosts ranging from 19% for DOE’s Office of Fossil Energy and Carbon Management (FECM) to 65% for the Office of Energy Efficiency and Renewable Energy (EERE). Combined, all increases would amount to more than $2 billion.

The responding proposals from House and Senate appropriators mostly do not meet the requested amounts, though they would still provide major increases across most programs. Both proposals also deny the administration’s request to move forward with design work on a new, multibillion-dollar nuclear energy R&D facility called the Versatile Test Reactor.

This year, the final outcome of the appropriations process is subject to greater-than-usual uncertainty as the House and Senate proposals were developed absent an agreement on overarching federal spending. When that constraint is put in place, it will require the assent of at least some Republicans, who have complained about the Democrats advancing the proposals without a budget framework.

Program-specific proposals are detailed in the House and Senate Appropriations Committees’ reports on their respective spending bills. The House passed its bill in July, but the Senate version could still be amended during floor debate. Summary figures are collected in FYI’s Federal Science Budget Tracker .

Special legislation could bring additional billions

Aside from the annual budget, Congress is also advancing special spending legislation that would add billions of dollars to DOE’s applied energy programs, spread across multiple years.

This month, the Senate passed the bipartisan Infrastructure Investment and Jobs Act , a roughly $1 trillion spending package that would provide about $25 billion for energy technology demonstration projects as well as smaller amounts targeted at certain R&D programs and initiatives.

In addition, congressional Democrats have begun work on an even larger package they hope to pass using Congress’ budget reconciliation process, which would allow them to circumvent Republican opposition. Details remain to be filled in, but Democratic leaders in the Senate have identified facility upgrades at DOE national labs and climate change research as among the priorities the reconciliation package should address.

Democratic leaders are aiming to complete work on both the infrastructure and reconciliation packages this fall, though there are disagreements within the party about the packages that remain to be ironed out .

DOE-wide priorities and cross-cutting initiatives

ARPA–Climate. The House and Senate proposals for the annual budget reject the administration’s request to create an Advanced Research Projects Agency for climate-related R&D that does not fall under the jurisdiction of DOE’s existing ARPA–Energy organization. Both cite the absence of the legislative authorization needed to set up a new agency and they encourage DOE to pursue projects envisioned for ARPA–C through ARPA–E. House Science Committee Chair Eddie Bernice Johnson (D-TX) informed House appropriators in June that her committee has “no current plans” to advance an authorization for ARPA–C in view of the lack of a well-developed justification for climate R&D to be handled through such an agency.

ARPA-Energy. The Senate would increase annual funding for ARPA–E from $427 million to a record-high level of $500 million, meeting the administration’s request, while the House would provide $600 million.

Office of Clean Energy Demonstrations (OCED). The administration requested $400 million for a new office that would support large-scale demonstration projects for targeted classes of technologies in areas across the jurisdictions of different DOE offices. The Senate proposes $100 million for the office and the House $200 million. However, the infrastructure package proposes to consolidate many prospective DOE demonstration projects into the office and includes a total of almost $21.5 billion for them, of which more than $5 billion would be provided in fiscal year 2022.

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Carbon dioxide removal. The Senate proposes that DOE spend at least $120 million across offices on technologies and methods geared toward removing carbon dioxide from the atmosphere, while the House proposes at least $106 million. Both proposals specify that at least $75 million within those allocations should go to direct air capture. In addition, the infrastructure package would provide FECM with $3.5 billion ($700 million in FY22) to establish four “regional direct air capture hubs,” as well as $115 million in one-time funding for prize competitions to develop precommercial and commercial-scale direct air capture technologies. The administration reported it is spending about $98 million on carbon dioxide removal in the current fiscal year.

Industrial decarbonization. The House and Senate both propose DOE spend at least $520 million on industrial decarbonization efforts across FECM, EERE, and the Office of Science. The administration reported spending $523 million across these offices in the current fiscal year. The Senate specifies at least $25 million should be for developing low-carbon feedstocks in the steel, cement, concrete, and other heavy industrial sectors, and at least $25 million should be for clean heat alternatives for industrial processes. In addition, the funds for OCED in the infrastructure package include $500 million ($100 million in FY22) for industrial decarbonization demonstration projects.

Energy storage. The Senate proposes that DOE allocate at least $460 million from across its existing offices for energy storage, while the House proposes at least $484 million. The administration stated it is spending $461 million in the current fiscal year. The OCED funds in the infrastructure package include an additional $505 million ($126 million in FY22) for energy storage demonstration projects.

Hydrogen. The administration, House, and Senate all propose increasing the topline for the Hydrogen and Fuel Cells Technologies program within EERE by about a third, from $150 million to near $200 million. However, the infrastructure package would vastly expand DOE’s work in the area, providing $1 billion ($200 million in FY22) for a clean hydrogen electrolysis demonstration program and $500 million ($100 million in FY22) for clean hydrogen manufacturing and recycling RD&D. In addition, from the OCED funds, the package would allocate $8 billion ($1.6 billion in FY22) to establish four “regional clean hydrogen hubs.”

Critical minerals. Across FECM, EERE, and the Office of Science, the House proposes that DOE spend at least $152 million on efforts tied to the recycling and efficient use of critical minerals and for finding substitutes, while the Senate proposes at least $146 million. The administration reported spending $144 million across these offices for the current fiscal year. The infrastructure bill would provide FECM with an additional $600 million ($230 million in FY22). It would also provide $127 million ($23 million in FY22) for R&D on the extraction and recovery of rare earth elements and other critical materials from coal and coal byproducts as well as for research on any related environmental or public health impacts. Finally, it would provide $75 million ($40 million in FY22) to establish a “critical materials supply chain research facility.” The House report on the annual spending legislation expresses general support for such a facility, though it directs DOE to provide additional information about its cost and mission before obligating any funds for it.

Justice40. House and Senate appropriators express support for DOE efforts to address equity and justice issues within the U.S. energy system, as well as for the Biden administration’s Justice40 Initiative, which seeks to ensure disadvantaged communities receive 40% of the overall benefits from clean energy and climate-related spending. The House specifies that DOE should allocate $20 million to its Office of Economic Impact and Diversity, which oversees work on the initiative, nearly doubling its current budget and matching the administration’s request. The House also directs DOE to initiate a National Academies study that analyzes “technical and non-technical barriers” to ensuring the equitable distribution of benefits from clean energy and assesses the department’s role in mitigating those barriers.

Civilian Climate Corps. The House report directs DOE to coordinate with the Interior and Agriculture Departments in establishing a Civilian Climate Corps, which would recruit and train individuals in climate change mitigation and resilience techniques. Funds for setting up such a corps could be provided through the reconciliation package.

Renewable energy

The House and Senate respectively propose a 29% and 35% increase for EERE’s renewable energy programs, which currently have a combined budget of $646 million, while the administration requested a 47% increase. Within the Senate’s proposal for renewable energy, it moves $40 million for grid integration activities outside of the budgets for individual renewable energy technology programs, meaning its proposals for those programs’ toplines are not strictly comparable with those of the House or the administration. The infrastructure package includes $156 million for various renewable energy RD&D programs, with no allocations for specific fiscal years.

Wind energy. Not accounting for how the grid integration funds are treated, the Senate matches the administration’s request to increase the wind energy budget from $110 million to $205 million, while the House proposes $170 million. The House specifies at least $60 million should be for offshore wind energy, which is near its current level, whereas the administration proposed an increase to $100 million and the Senate does not specify a level. The Senate does specify that at least $30 million should be for prioritizing “early-stage research on materials and manufacturing methods and advanced components … and on activities that will accelerate fundamental offshore-specific research and development such as those that target technology and deployment challenges unique to U.S. waters.”

Water power. The Senate would also match the administration’s request to increase the water power budget from $150 million to $197 million, while the House would provide $175 million. Within those increases, both proposals exceed the request for a nearly flat $112 million marine energy budget, respectively specifying $142 million and up to $137 million. Both also propose that DOE allocate at least $24 million to its Powering the Blue Economy Initiative , with House appropriators expressing support for the initiative’s integration of “marine energy harvesting, energy storage, and continuous, wide-area environmental monitoring.” Both proposals would provide continued funding for operations at the Atlantic Marine Energy Center, which the administration proposed to operate using only prior-year appropriations.

Neither the House nor Senate proposal comes close to meeting the administration’s request to more than double hydropower funding to $85 million, which would go in part to expand analysis of climate change impacts on hydropower systems. The House specifies that DOE should allocate up to $35 million to expand the HydroWIRES program, highlighting appropriators’ support for pumped-storage RD&D that aims to improve hydropower grid integration.

Solar energy. Whereas the administration seeks to increase the solar energy budget from $280 million to $387 million, the House and Senate seek smaller increases, to $350 million and $300 million, respectively. The House specifies not less than $30 million each for work on cadmium telluride photovoltaics and perovskites, up from the $20 million specified for the current fiscal year. The House and Senate both direct DOE to maintain at least level funding of $60 million for concentrating solar power technologies, with the House specifying that up to $50 million of that should be for technologies for long-duration energy storage and process heat for industrial applications. The Senate also includes some funding for selected solar technology projects through earmarks .

Geothermal energy. While the administration seeks to increase funding for geothermal technologies from $106 million to $164 million, the House and Senate seek smaller increases, to $137 million and $130 million respectively. The House specifies that at least $20 million should be for super-hot-rock geothermal technology and at least $20 million should be for low-temperature and co-produced resources.

Nuclear Energy

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Whereas the administration proposes to increase the Office of Nuclear Energy’s topline budget by 23% to $1.85 billion, the House and Senate respectively propose increases to $1.68 billion and $1.59 billion.

Versatile Test Reactor. The House and Senate both zero out funding for the proposed VTR user facility, offering no reason or any indication of whether the project could continue using funds already appropriated. If built, the facility would provide a domestic capability for testing fuels, materials, and components in conditions that would exist within planned power-generating nuclear reactors with designs that employ high-energy neutrons. Preliminary cost estimates placed VTR’s total price tag between $2.6 billion and $5.8 billion. In its budget request for the project, the administration stated it planned to push it back to follow construction of the company TerraPower’s Natrium reactor, a power-generating demonstration project with a design similar to VTR that is supported through DOE’s Advanced Reactor Demonstration Program.

Advanced Reactor Demonstration Program. The Senate proposes to meet the administration’s request to increase funding for ARDP from $250 million to $370 million. The House proposes $395 million, with the additional funding allocated to efforts to reduce technical risk on potential future demonstration projects. In addition to full demonstration projects being pursued with the companies X-energy and TerraPower, the program is currently supporting five risk-reduction efforts and three concept-development projects . The OCED funds in the infrastructure bill include almost $2.5 billion ($677 million in FY22) for the program.

Nuclear fuel. The House meets the administration’s request for $33 million to initiatve a program dedicated to establishing a domestic supply of high-assay low-enriched uranium fuel, while the Senate proposes $25 million. The fuel is required by many advanced reactor designs. The House and Senate both propose small increases in the $106 million budget for accident-tolerant fuels while denying the administration’s request to more than double the current $20 million budget for fuel cycle laboratory R&D.

Fossil Energy and Carbon Management

The House and Senate both adopt the administration’s appendage of “carbon management” to the Office of Fossil Energy’s name and respectively propose increasing its current $750 million budget to $820 million and $850 million. The administration proposed a 19% increase to $890 million.

CCUS. The House and Senate propose increasing the current combined budget of $188 million for carbon capture, utilization, and storage to $285 million and $332 million, respectively. Those amounts are exclusive of efforts involving removal of carbon dioxide directly from the atmosphere and are roughly in accord with the administration’s request for a 62% increase to $305 million.

However, the infrastructure package would vastly scale up CCUS efforts in line with recommendations in the Energy Act of 2020 . Within the OCED funds, $937 million ($387 million in FY22) would be for large-scale carbon capture pilot projects and more than $2.5 billion ($937 million in FY22) would be for carbon capture demonstration projects. In addition, FECM would receive $2.5 billion ($500 million in FY22) for carbon storage validation and testing, $100 million ($20 million in FY22) for a “front-end engineering and design program” for carbon capture technologies, and $310 million ($41 million in FY22) for carbon utilization activities. In addition, the package would provide $2.1 billion over two years to create a “carbon dioxide transportation infrastructure finance and innovation program,” but only $3 million is allocated for fiscal year 2022.

Fossil fuels. The House and Senate propose to increase funding for the Natural Gas Technologies program from $57 million to $97 million and $82 million, respectively. That is short of the $130 million the administration requested to focus the program on emissions reduction and carbon-neutral hydrogen production. Both proposals follow the administration in zeroing out funds for the Transformational Coal Pilots and the Unconventional Fossil Energy Technologies from Petroleum-Oil Technologies programs. However, neither proposal explicitly endorses the administration’s effort to cease all “direct fossil fuel subsidies.”

Grid-scale energy storage and grid integrity

Energy storage. Within the Office of Electricity, the House proposes increasing the budget for energy storage research from $57 million to $69 million, while the Senate proposes $92 million. The administration requested $72 million. In addition, the Senate would meet the administration’s request for $47 million to finish funding the Grid Storage Launchpad facility at Pacific Northwest National Lab, while the House would provide $32 million.

Cyber R&D. The House and Senate both accept the administration’s proposal to transfer the Cyber R&D program from the Office of Cybersecurity, Energy Security, and Emergency Response to the Office of Electricity, but both proposals would only provide $14 million of the $25 million requested for it. The administration explained in its request that the program is increasingly focused on data-based and physical methods for designing grid architecture that mitigates the threats posed by cyber attacks.