FY24 Budget Outlook: DOE Applied Energy R&D

The Infrastructure Investment and Jobs Act of 2021 and last year’s Inflation Reduction Act have thoroughly transformed the Department of Energy’s portfolio of programs supporting clean energy. DOE is now intensely focused on channeling billions of dollars into projects that aim to move technologies toward commercialization and deployment on a nationwide scale. It has already chosen some projects for funding, pending successful award negotiations, and selections are poised to accelerate in fiscal year 2024, with budgets insulated from Congress’ annual appropriations process.

The Biden administration has sought to complement the influx of funding from the laws with increases in the annual appropriations for DOE’s various energy R&D programs. Those efforts were partly successful in the previous budget cycle, but the administration’s latest budget request is running up against caps on federal spending that President Joe Biden and House Speaker Kevin McCarthy (R-CA) agreed to in May. Senate appropriators’ spending proposals adhere to those caps, while House appropriators generally want even tighter budgets.

The administration’s request is detailed in DOE’s budget justification, and Congress’ proposals are detailed in reports by House and Senate appropriators. Summary figures are collected in FYI’s Federal Science Budget Tracker.

Nuclear energy

The administration has proposed to roll back the Office of Nuclear Energy’s budget from $1.77 billion to $1.56 billion. The Senate proposal would make a marginally larger cut, but the House proposal would provide a small increase to $1.78 billion. The office received some of its annual funding through a special budgetary supplement last year, which all proposals this year would incorporate back into its base budget.

Small modular reactors. The administration’s and Senate’s proposed cuts for the office are mostly linked to a planned reduction from $165 million to $20 million for SMR R&D and deployment activities. However, the House proposal would both maintain that budget at $150 million and reassign $1.20 billion from the Civil Nuclear Credit Program over the next three fiscal years to “ongoing demonstration activities.” The credit program was created by the infrastructure law with a total budget of $6 billion to subsidize existing nuclear plants that might otherwise be shut down, but much of the funding remains unobligated. While the House proposal does not designate specific activities to fund, DOE announced during the Trump administration it would provide “up to” $1.40 billion to a demonstration power plant at Idaho National Lab comprising 12 SMR modules built by the company NuScale.

Advanced reactor demonstrations. In fiscal year 2024, the infrastructure law will allocate the third of four installments of the $2.48 billion it is providing for the Advanced Reactor Demonstration Program. That money is supporting two commercial demonstrations of non-traditional nuclear plant designs: one that the company TerraPower is building in Wyoming and one the company X-energy is building to provide process heat and power at an industrial site the chemical company Dow operates along Texas’ Gulf Coast. The House proposal also includes an extra $60 million for the projects within the office’s ordinary fiscal year 2024 budget, while the Senate proposal includes an extra $4 million.

Advanced reactor development. The Senate proposal meets the administration’s request for a steady $120 million budget for five smaller-scale advanced reactor projects, and the House proposal would add a further $10 million. The administration proposes to reduce funding for Idaho National Lab’s National Reactor Innovation Center from $70 million to $66 million, mainly reflecting a ramp-down in work on an advanced reactor test bed called DOME, offset by the ramp-up of construction on a second testbed called LOTUS. The Senate proposal includes an extra $2 million for the center and the House proposal includes an extra $31 million.

Nuclear fuel availability. Many advanced reactor designs will employ high-assay low-enriched uranium (HALEU) fuel, which is fuel that can be composed of up to 20% of the highly fissile U-235 isotope. However, domestic commercial HALEU supplies are not yet established and the only large-scale alternative is Russian supplies, which have become untenable following that country’s invasion of Ukraine. These circumstances have already led TerraPower to delay the scheduled opening of its Wyoming plant. The Inflation Reduction Act is providing $700 million to boost DOE efforts to accelerate HALEU availability, and, within the department’s annual budget, the Senate proposal adds $5 million to the administration’s request for steady funding of $120 million for those efforts. The House proposal would not only meet the request but also divert $2.40 billion from the Civil Nuclear Credit Program over three years to bolster the availability of both HALEU and the ordinary low-enriched uranium used in existing U.S. commercial nuclear power plants.

Carbon management and decarbonization

There is not a deep divergence in views over the Office of Fossil Energy and Carbon Management budget. The administration is proposing an increase from $890 million to $905 million and the Senate and House proposals would respectively provide $892 million and $858 million. However, that budget is currently eclipsed by the funding the infrastructure law is providing for carbon management projects ranging from design activities to commercial demonstrations of unprecedented scale.

Atmospheric carbon dioxide removal. Last month, DOE selected two projects for “hubs” that will capture carbon dioxide directly from the atmosphere and permanently sequester it. Together they will receive up to $1.2 billion from the infrastructure law, pending successful award negotiations. One located in Louisiana will be built by nonprofit contractor Battelle and the other will be built by a subsidiary of petroleum company Occidental at a site in Texas. A further $2.3 billion for such projects remains to be obligated.

Carbon capture from point sources. The infrastructure law is providing about $3.5 billion for commercial-scale demonstrations and large-scale pilot projects to capture carbon from point sources such as power plants. DOE has already awarded $189 million for nine front-end engineering and design studies, and it is currently evaluating proposals responding to solicitations offering $1.7 billion for demonstration projects and $820 million for large-scale pilots.

Carbon storage, utilization, and transport. The infrastructure law is providing $2.5 billion for validation and testing projects in carbon storage. In May, DOE selected nine projects totaling $242 million that are focused on storage site characterization, planning, and permitting, as well as three projects totaling $9 million for pipeline network design studies. The law is also providing $310 million for carbon utilization projects and $2.1 billion through DOE’s Loan Programs Office for financing carbon dioxide transportation infrastructure.

Industrial decarbonization. Together, the infrastructure law and the Inflation Reduction Act are providing $6.3 billion for demonstration projects to reduce carbon emissions in energy-intensive, difficult-to-decarbonize industries. A solicitation of proposals for almost all of that funding closed last month and DOE plans to select its intended awardees in early 2024. The administration has also requested $170 million in the annual budget for the DOE Office of Clean Energy Demonstrations to fund up to five additional industrial decarbonization demonstrations. The Senate proposal would provide $64 million, with direction to focus on industrial decarbonization and hydrogen-powered transportation, while the House proposal would provide nothing.

Within the Office of Energy Efficiency and Renewable Energy, the administration seeks to increase the annual budget of the Industrial Efficiency and Decarbonization program from $267 million to $394 million, but the House and Senate proposals would only provide $235 million and $275 million, respectively.

Hydrogen. Hydrogen has long been developed as a clean fuel, as in hydrogen fuel cells, and burning hydrogen is regarded as a potential replacement for carbon-emitting heating processes in difficult-to-decarbonize industries. However, hydrogen is itself generally produced using carbon-intensive processes. DOE is currently evaluating proposals for regional “clean hydrogen hubs,” with the aim of selecting between six and 10 that will together receive $7 billion of the $8 billion the infrastructure law is providing for that purpose. The department received 79 preliminary applications in a first round of review and encouraged 33 to submit full applications. The organization Resources for the Future is tracking 27 publicly known proposals. In addition to the hub funding, the infrastructure law is providing $1 billion for clean hydrogen electrolysis projects.

Hydrogen technology R&D is also supported across a number of DOE programs. The administration is proposing to trim overall annual funding for those efforts from $417 million to $382 million, which would include a cut in the Hydrogen and Fuel Cell Technologies program budget from $170 million to $163 million.

Energy storage

DOE has just selected a set of long-duration energy storage projects that will draw $325 million from the $505 million the infrastructure law is providing for pilot projects and commercial demonstrations in energy storage. In addition, the law is providing $6 billion to support battery manufacturing, recycling, and material processing projects. DOE already awarded $2.8 billion of that money, though it later walked back a $200 million grant to the company Microvast after Republicans charged that Microvast’s extensive business in China makes it vulnerable to exploitation by the Chinese government. DOE also supports energy storage R&D across a large number of programs and the administration proposes to keep overall annual funding for those efforts roughly steady at around $600 million.

Renewable energy

The administration sought significant budget increases across-the-board for programs covering renewable energy, clean vehicle, and energy-efficient building and manufacturing technologies. However, neither the House nor the Senate proposal would support budgets on the scales envisioned.

Wind energy. The administration advanced a particularly ambitious proposal for DOE’s wind energy program, seeking to nearly triple its budget to $385 million. The bulk of the additional funding would go to activities related to expanding offshore wind energy, though there would also be major increases for land-based wind energy and systems integration. While the Senate proposal would partially meet that request with $231 million, the House proposal would cut the budget from $132 million to $113 million. Outside the program’s ordinary budget, DOE just selected projects that are drawing $27 million from the $40 million the infrastructure law is providing for wind energy R&D.

Geothermal energy. The administration also aimed for a large increase for DOE’s geothermal energy program, from $118 million to $216 million. Most of the additional money would go to improving enhanced geothermal systems, which involve heating a fluid by pumping it through high-temperature rock deep beneath the Earth’s surface. However, the Senate and House proposals both call for a flat budget. DOE is also currently evaluating applications in the first of an expected four rounds of awards for enhanced geothermal system demonstration projects that will altogether account for $74 million of the $84 million the infrastructure law is providing for geothermal energy.

Water power. The administration is seeking a more modest increase for DOE’s water power program, from $179 million to $230 million. The Senate proposal includes $200 million while the House proposal would cut funding to $155 million. DOE is also evaluating proposals for $45 million in awards for tidal and river current energy technology projects that will draw from the $70 million the infrastructure law is providing for marine energy R&D and demonstrations. The law is also providing $40 million for national marine energy centers and $36 million for hydropower R&D and demonstrations.

Solar energy. The administration wants to increase the solar energy program budget from $318 million to $379 million, but the Senate proposal calls for flat funding, while the House proposal would cut the budget to $288 million. The infrastructure law is providing $80 million for solar energy projects, covering technology R&D, recycling R&D, manufacturing improvements, and workforce development.

Advanced Research Projects Agency–Energy

The administration proposed to increase the ARPA–E budget from $470 million to $650 million, but the House proposal is for flat funding and the Senate proposal would make a cut to $450 million. ARPA–E accords a high degree of independence to its program managers to fund high-risk, early-stage projects across energy technology areas. The administration has aimed to expand application of the “ARPA” model to projects focused on climate change resilience, first through a new agency and now by expanding APRA–E, but the idea has yet to gain backing from Congress.