On March 15, members of the House Energy and Commerce Committee sent letters to the Treasury and Energy departments requesting information on the number of energy jobs created by a tax grant program authorized by Section 1603 of the American Recovery and Reinvestment Act. The letters received no response, leading House Speaker John Boehner to say on March 29 that “More than $10 billion – that’s with a ‘b’ – $10 billion has been spent on this, and [Energy] Secretary Chu said it created ‘tens of thousands of jobs,’ except there’s no evidence to support that.” (The Hill)
An NREL report released at the beginning of April suggests that the Act’s support of renewable energy projects, and the Section 1603 tax grant program specifically, did create employment. While federal funding amounted to around $9 billion, the NREL report states that the Section 1603 program resulted in $26 to $44 billion in total economic output over the past three years, supporting 23,000 energy projects and leading to between 52,000 and 75,000 jobs. Many of these jobs were in manufacturing and the supply chains associated with renewable energy projects. The projects added 13.5 GW of renewable energy capacity, according to the report.
The Section 1603 tax grant program offered energy project developers an upfront, one-time cash payment in lieu of taking the Investment Tax Credit (ITC) or the Production Tax Credit (PTC)— an attractive option in a recession, when third-party investment in energy projects is limited. According to the NREL report, the program brought billions in private capital to the table.
When are subsidies for energy projects and technologies warranted? What factors should be used to evaluate the effectiveness of subsidies? Should the Section 1603 program be extended?
Section 1603 in and of itself deserves criticism and review. But that does not mean that subsidizing energy programs, or “new ways to produce energy”, should be thrown out all together. What now has become a game changer, hydraulic fracturing, horizontal drilling, and the production of natural gas once trapped inside impermeable shale — this did not develop overnight, but rather from four decades of “subsidies” and R&D, paid for by tax payers.
This kind of foresight is absolutely necessary when we look four decades in the future. The US has vast potential to develop shale gas, but there is more to energy policy than just shale. Other elements are overlooked – updating the national grid, energy infrastructure in general, energy storage, and energy security. Putting all of your eggs in one basket is a problem, whether that basket is shale gas or avoiding the problems associated with fossil fuel exploration and development.
Subsidies may in fact be one of the most important elements of the US’s energy well-being, yet this vetting process needs realism and less political favoritism. The amount of subsidies that have gone into the fossil fuel industry must be recognized, and so too must attempts at jump-starting new energy projects be scrutinized. We have to take a global perspective, as the energy market is global and will remain so for some time.
The US needs to understand why Germany’s solar subsidies had to become cut. And understand what China aims to do with becoming a leader in clean energy, while still dealing with it’s own vast energy demands. There is much to be considered, but, the whole process in and of itself needs careful examination.
If the US can learn from its own mistakes and those of others, and put more focus on finding a process that works than on who to blame — while understanding that subsidies and investment will be essential if the US wants to be a global energy leader — they can contribute a great deal. Otherwise, they will continue to fall behind those who pursue innovation, and are willing to take the risks necessary to become the leader in new areas of energy.
I would like to see more robust and earnest energy dialogue — not from the perspective of one industry or interest group, but from a broad scope of options, their capacities, their consequences, and how to make the best decisions for the future. People talk of an “all of the above” strategy, and yet, there is no conceptual framework for understanding what “all of the above” amounts to, or needs to amount to, in order to supply the US’s real energy needs. Until that understanding happens, it seems unlikely to expect the US to openly and realistically consider its place in the global energy situation.
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Sorry, the research funding for the development of shale gas technologies was by and large not from the federal government. DOE provided some initial funding for shale basin characterization shortly after the agency was formed. After that the bulk of the funding (by far) came from the Gas Research Institute which received its funding for research from a surcharge placed on gas volumes at the pipe — it was industry money. The program was very loosely administered by FERC (GRI had to submit an annual plan for example) but other than that there was very little federal funding for this technology development. Unfortunately, an early victim of deregulation is always R&D. When the gas industry was deregulated, this surcharge, while very small, became a competitive issue and it was eventually phased out. The surcharge provided as much as $212 million for gas R&D across all gas sectors. DOE came to rely on this funding as the funding for gas R&D and actually used it as private matching funds for extremely small DOE gas research programs. When the surcharge was phased out there was never any backfilling at DOE — the result is there is virtually no federal R&D funding for natural gas.
Hm that’s very interesting. Where can I learn more about that process? Particularly the process of the surcharge, and also how the industry sustained research that has lead to the current shale gas situation. Do you recommend a place that can give a detailed history of natural gas and/or other US domestic industries along these lines?
Jesse, google on mit energy initiative, on the left hand side of the home page, you will find quick links. link to major studies and reports, find the mit future of natural gas study, go to the R& D chapter. it has a history of this funding and i believe there is more in an appendix on the history. i did not do the R& d chapter so i am uncertain about the appendix. it includes compelling information about the GRI program and its successor, RPSEA.
let me know if you have questions.
I was already looking that up when I saw your response – I hadn’t seen all that MIT energy had done before. Thanks for sharing, and I’ll definitely forward more questions your way when they come up. Seems like a great resource for those interested in learning more about energy policy, and related.
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