Americans daily lives, as well as the economic productivity of the United States, depend on the availability of energy, the majority of which comes from fossil fuels, such as oil and coal. However, public concern over the nations reliance on imported oil, volatile energy costs, and fossil fuels emissions of greenhouse gases linked to global climate change have increased the focus on developing renewable energy resources to meet future energy needs. The Department of Energys (DOE) Energy Information Administration projects that use of renewable energy to generate electricity and produce liquid fuels for transportation will continue to grow over the coming decades. One renewable energy sourcewind energyhas been the fastest-growing source of U.S. electric power generation in recent years, increasing about 33 percent per year since 2001, according to the Energy Information Administration. In 2011, wind energy constituted 32 percent of all new additions to U.S. electricity-generating capacity and contributed 3 percent of the nations total electricity generation, the largest share of any renewable source other than hydroelectric power.
Congress and some federal agencies have emphasized the importance of renewable energy as a means to address national concerns, including energy security, and have committed substantial federal resources to initiatives in this area. For example, the federal government subsidizes investment in certain types of renewable energy-related projects by providing tax credits or other types of favorable tax treatment (known as tax expenditures), to businesses and individuals for the production or consumption of renewable energy. The federal government is also uniquely positioned to affect the development of renewable energy resources through its land management and regulatory activities and as the single largest U.S. consumer of energy.
Federal support for renewable energy increased significantly in recent years as a result of the provisions of the American Recovery and Reinvestment Act of 2009, as well as other factors, such as the priority placed on renewable energy by agencies leadership or by the administration. There is no comprehensive database that tracks federal renewable energy spending across agencies for all types of activities. While available third-party estimates vary in the types of activities they include and the time periods they cover, these estimates indicate that the level of federal financial support for renewable energy has averaged several billion dollars per year over the past decade. For example, third-party estimates indicate that federal renewable energy spending over the 7-year period from 2002 through 2008 averaged about $4 billion per year and increased to almost $15 billion in fiscal year 2010, in part because of additional spending through the American Recovery and Reinvestment Act of 2009. For wind energy specifically, the Energy Information Administration estimated that federal agencies provided nearly $5 billion in subsidies in fiscal year 2010 to support efforts to research, develop, and deploy wind energy technologiesmore than 75 percent of federal subsidies for all renewable sources of electricity.
GAO reported in February 2012 that 23 agencies and their 130 subagencies implemented 679 renewable energy initiatives in fiscal year 2010. Four agenciesthe Departments of Agriculture (USDA), Defense, Energy, and the Interiorimplemented almost 60 percent of the initiatives GAO identified, and the other 40 percent of initiatives were implemented by a wide array of agencies (see the figure below for more information on the agencies implementing renewable energy initiatives in fiscal year 2010). Federal support for renewable energy was fragmented across numerous initiatives implemented by a wide array of agencies in fiscal year 2010. While the extent to which this fragmentation is necessary remains unclear, the magnitude of federal renewable energy efforts may increase the likelihood that some of this fragmentation is, in fact, unnecessary.
Number of Federal Renewable Energy-Related Initiatives by Agency, in Fiscal Year 2010
Note: Data for the Department of Defense include data for five componentsthe Air Force, Army, Marine Corps, Navy, and other components that report to the Office of the Secretary of Defense.
These initiatives supported a range of renewable energy sourcesmost commonly bioenergy, solar, and windand while many initiatives supported multiple sources and types of recipients, many others targeted support to one source or recipient type. Agencies renewable energy efforts increased in recent years as a result of the provisions of the American Recovery and Reinvestment Act of 2009 and other factors. For example, GAO found that 157 initiativesnearly 25 percent of the renewable energy initiatives identifiedwere established, received additional funding, or were impacted in some other way by the American Recovery and Reinvestment Act of 2009. While the level of agencies future renewable energy efforts is less certain with the expiration of these provisions, as well as the expiration of other authorities, in addition to depletion of available appropriations and continued budget constraints, agencies appear poised to continue to provide substantial support for renewable energy through those initiatives that are not scheduled to expire or whose funding has been renewed or is not tied to a specific appropriation. Although GAO examined characteristics, such as energy source and recipient type, for the nearly 700 renewable energy initiatives identified in its February 2012 report, GAO could not comprehensively assess the potential for overlap or duplication among the initiatives because existing agency information was not sufficiently complete to allow for such an assessment.
In a March 2013 report on federal support for wind energythe largest recipient of federal support for renewable sources of electricityGAO found that nine agencies implemented 82 wind-related initiatives in fiscal year 2011. Of these 82 initiatives, GAO found that 20 percent supported wind energy alone or primarily, while 62 percent supported other renewable energy sources or other activities either primarily or equally with wind energy. The initiatives supported a range of wind issues, such as energy generation from land-based or offshore wind, or transmission of wind energy, as well as a variety of technology advancement activities from basic and applied research to deployment. Under these initiatives, agencies incurred obligations of about $2.9 billion and provided estimated tax subsidies totaling at least $1.1 billion for activities specifically related to wind in fiscal year 2011.
GAO found that the 82 wind-related initiatives were fragmented across multiple agencies. Additionally, most of the 82 initiatives had overlapping characteristics, and several of them have provided duplicative financial support to deploy wind energy projects. Specifically, regarding fragmentation, nine agencies implemented initiatives that involved the same broad area of national needpromoting or enabling wind energy development. Most initiatives, 68 of the 82 (83 percent), overlapped to some degree with at least 1 other initiative because, for example, they supported the same wind issues and technology advancement activities, and shared other key characteristics. Overlap did not necessarily lead to duplication of efforts because initiatives sometimes differed in meaningful waysfor instance, by targeting support to different types of recipients.
In evaluating wind initiatives that provided financial support to deploy wind energy projects in fiscal year 2011, GAO identified seven initiatives that have provided duplicative supportfinancial support from multiple initiatives to the same recipient for a single project. These seven initiatives included tax expenditures, as well as grant, loan, and loan guarantee programs implemented by Treasury, DOE, or USDA. In many cases, wind project developers combined the support of more than one Treasury initiative and, in some cases, received additional support from smaller DOE or USDA grant or loan guarantee programs. For example, projects supported by Treasurys Section 1603 program also received support from DOE- or USDA-administered loan guarantees, as well as tax expenditure support. Wind projects may also receive financial support from state tax credits and grant and loan programs, as well as indirect support from state policies, most notably renewable portfolio standards. In addition, duplication of financial support among these initiatives may not be limited to wind projects because the initiatives also provided support to projects involving a range of other renewable energy sources.
Although these initiatives have, in some cases, provided duplicative support, their support may address different needs of wind project developers or the communities their projects serve. For instance, according to DOE officials, in many cases, a DOE loan guarantee program provided financing for innovative projects that were seen as too risky to obtain affordable private financing. Without this support, developers might not have been able to advance these projects to the point, such as being placed in service or beginning to generate electricity, where they would be eligible to receive tax credits. In addition, there can be limits on the extent to which individual projects can receive support from multiple initiatives. For instance, provisions of the tax code prevent project developers from combining Treasurys Section 1603 program grants with Treasurys energy investment or energy production tax credits to support a specific wind project. In addition, for some grant, loan, and loan guarantee programs, USDA and DOE reduce the value of support provided or deny support altogether for applicants who receive funding from other initiatives. Despite these limits, the initiatives GAO identified that have provided duplicative support were combined in many cases to provide cumulative financial support worth about half of project costs for wind projects, according to financial professionals active in the wind energy industry.
GAO also identified three other DOE or USDA initiatives that did not actually fund any wind projects in fiscal year 2011 but that could be combined with one or more other initiatives to provide duplicative support in the future based on the types of projects eligible for their support. For these initiatives, as well as those DOE or USDA initiatives that GAO found, in some cases, did provide duplicative support to wind projects in fiscal year 2011, GAO also found that DOE and USDA have discretionto the extent allowed by their statutory authorityover the projects they support. This discretion allowed the agencies to allocate this support based on projects ability to meet initiative goals, along with other criteria, such as financial and technical feasibility. For instance, DOE established initial screening criteria for projects under one of its loan guarantee programs, including that projects employ an innovative technology that is not commercially available and that projects be financially viable. To further evaluate projects that meet these initial screening criteria, DOE examines projects potential contributions related to two program goals: expected reduction or avoidance of greenhouse gas emissions in relation to project costs, and support for clean energy jobs and manufacturing. Similarly, USDA allocates the support of its initiatives according to projects ability to contribute to program goals, such as providing benefits for rural and other eligible communities, and other factors, such as technological feasibility and expected performance.
DOE and USDA consider applicant need for their initiatives support; however, the extent to which the agencies use assessments of applicants need to determine the amount of support to provide under their initiatives is unclear because the agencies do not document such assessments. Specifically, according to agency officials and program guidance, DOE and USDA consider applicant need for the financial support of some initiatives. For example, the solicitation for applications under one of DOEs loan guarantee programs states that DOE will take an unfavorable view of projects that could be fully financed on a long-term basis by commercial banks or others without a federal loan guarantee. Similarly, USDA considers applicants need for support from some of its initiatives, according to agency officials. While agency officials reported that they consider applicant need in some cases, the officials did not provide any documentation that indicated how information they collected or examined about applicant need influenced their decisions on whether to provide support, or how much support to provide, under their initiatives for specific projects. As a result, the extent to which applicant need influenced agency decisions is unclear.Moreover, whether initiatives incremental support was always needed for wind projects to be built is also unclear. In particular, GAOs review of a briefing memorandum from White House staff, DOE documents, and other documentation related to two wind projects suggests that agencies wind initiatives have, in some cases, supported projects that may have been built without their incremental support. In other cases, however, the incremental support provided by the initiatives may be necessary for wind projects to be built, according to agency officials and financial professionals active in the wind energy industry. Further, federal support in excess of what is needed to induce projects to be built could, instead, be used to induce other projects to be built or could simply be withheld, thereby reducing federal expenditures.
GAO defined a renewable energy-related initiative as a program, tax expenditure, or group of activities serving a similar purpose or function that was related to renewable energy through a specific emphasis or focus, even if renewable energy was part of a broader effort.
The federal obligations and tax subsidies for fiscal year 2011 presented here cannot be compared with the Energy Information Administrations estimate of $5 billion in total federal subsidies for wind in fiscal year 2010 because of differences in the period covered and methods used in calculating these numbers.
All of these initiatives were specifically established by Congress, as opposed to agency-created initiatives. Four of the seven initiatives, including two tax expenditures, a grant program, and a loan guarantee program recently expired or are scheduled to expire for wind projects at the end of 2013. However, policymakers may decide to create similar initiatives as a means for supporting wind energy or other renewable energy sources in the future.
Of the seven initiatives, those implemented by Treasurytax expenditures and a grant programaccounted for over 95 percent of the federal financial support for wind in fiscal year 2011, based on available estimates.
Approximately 94 percent of the $2.9 billion in fiscal year 2011 wind-related obligations GAO identifiedover $2.7 billionwas obligated under Treasurys Section 1603 grant program, which was established by the American Recovery and Reinvestment Act of 2009 and provided cash payments of up to 30 percent of the total eligible costs of wind and certain other renewable energy facilities in lieu of tax credits for energy investment or production.
Renewable portfolio standards do not provide direct financial support to particular wind projects; however, by requiring or encouraging that a percentage of the electricity consumed in a state be generated from renewable sources, they are designed to create market demand for electricity from sources such as wind.
The majority of the wind-related initiatives GAO identified supported a range of renewable energy sources in addition to wind, as well as other activities such as energy efficiency projects or rural development projects.
Treasury provides support to projects based on the eligibility criteria in the tax code. In contrast to DOE and USDA, Treasury generally does not have discretion in allocating support to projects and therefore does not assess applicant need for the support of its initiatives.
The term incremental support refers to the support an agency provides to an individual project under one of its wind energy initiatives that is in addition to support provided to that project by that agency or other agencies under different wind energy initiatives.
GAO recommended in its March 2013 report that, to support federal agencies efforts to effectively allocate resources among wind projects, the Secretaries of Energy and Agriculture should take the following action:
GAO could not estimate the potential financial benefits of preventing unnecessarily duplicative support for wind energy projects because the potential for unnecessary duplication is project-specific. Conducting the types of assessments GAO recommended could help identify the potential financial benefits of reducing unnecessarily duplicative support for projects or, at a minimum, provide greater assurance that unnecessarily duplicative support is not provided.
The information contained in this analysis is based on findings from products listed in the related GAO products section. To identify federal renewable energy initiatives that were funded, planned, implemented, or authorized in fiscal year 2010, GAO reviewed budget documents and other information sources for the 24 agencies subject to the Chief Financial Officers Act of 1990. GAO then collected more detailed information on these initiatives using a structured data request and follow-up interviews with agency officials. GAO did not review the level of financial support provided by agencies renewable energy-related initiatives because financial support for renewable energy is often not tracked separately from other activities. To examine federal wind energy initiatives, GAO focused on nine agencies initiatives. GAO selected these nine agencies initiatives because they promoted the research and development, commercialization, or deployment of wind energy technologies. GAO updated the data collected for its February 2012 report to reflect the extent to which initiatives implemented by these nine agencies were still active or new in fiscal year 2011. After determining that the nine agencies implemented 82 wind initiatives in fiscal year 2011, GAO used a questionnaire to collect additional data on these 82 initiatives, and analyzed the data to categorize initiatives recipients and goals, and to determine the extent of potential fragmentation, overlap, and duplication. To further examine the initiatives that have or could have provided duplicative support, GAO interviewed agency officials, and financial professionals from several of the major financial institutions and legal firms active in wind energy project financing in recent years. For these initiatives, GAO also collected information from other sources, such as a briefing memorandum from White House staff, and DOE or other project documentation to assess the financial support provided for projects.
Tables 3 and 4 in appendix IV list the wind energy initiatives GAO identified that might have similar or overlapping objectives, provide similar services, or be fragmented across government missions. Overlap and fragmentation might not necessarily lead to actual duplication, and some degree of overlap and duplication may be justified.
GAO identified renewable energy initiatives at 18 of these agencies but reported data for 23 agencies in its February 2012 report and e-supplement because GAO reported data separately for each of the military services within the Department of Defense and also for the Federal Energy Regulatory Commissionan independent agency listed under DOE in the federal budget.
Among other differences with the scope of the agencies and initiatives examined for GAOs February 2012 and March 2013 reports, GAO excluded certain agencies, such as the Departments of Defense, Homeland Security, and State, whose initiatives generally focused on development of wind energy and other technologies for use in a military, border security, or international aid setting, rather than for use in the domestic commercial energy market.
In commenting on the March 2013 report on which this analysis is based, DOE agreed with GAOs recommendation, while USDA generally concurred with the information in the report related to its initiatives. DOE stated that it will now formally document its evaluation of applicants assertions regarding their inability to finance their projects without a federal loan guarantee, and will clarify how it considers the financial need of applicants when determining what amount of support to provide. DOE and USDA also provided technical and clarifying comments, which GAO incorporated as appropriate.
GAO also provided a draft of this report section to DOE and USDA for review and comment. USDA provided comments via an e-mail attachment in which it neither agreed nor disagreed with the information in the report section. However, USDA noted that, for certain initiatives, loan guarantee applicants are required to state their need for the guarantee on the loan application form. USDA further noted that, for one initiative, financial need is no longer taken into consideration when making awards because the requirement to do so was not included in the provisions of the Food, Conservation, and Energy Act of 2008 and, therefore, USDA removed the requirement from program regulations. GAO believes that, while USDA may not be legally required to formally assess applicants need for project support for this initiative, making that assessment could help allocate scarce resources. To the extent possible within its statutory authority, GAO recommends that USDA formally assess and document whether the incremental financial support of its initiatives is needed in order for applicants projects to be built, and take this information into account in determining whether, or how much, support to provide. Furthermore, in response to this comment, GAO revised this report section to include language from the March 2013 report, where GAO recommended that in the event USDA or DOE lack discretion to consider this information in determining what financial support to provide, they may want to report this limitation to Congress. DOE provided technical comments, which GAO incorporated as appropriate.
For additional information about this area, contact Frank Rusco at (202) 512-3841 or firstname.lastname@example.org.