Spending Smart: High-Priority Appropriations for Energy Innovation at DOE

As Congress prepares its legislation to fund the government for fiscal year 2023 (FY23), the Third Way Climate and Energy Program has picked out a handful of funding recommendations to bolster our nation’s development of clean energy technologies. A number of reports lay out funding goals for our government-wide energy innovation activities that are consistent with reaching net-zero emissions by 2050. To stay on track with those goals, Congress must appropriate a multi-billion dollar increase to all energy RD&D in FY23. Increased funding for energy innovation primes emerging technologies for adoption in the marketplace, expanding our clean energy workforce, making the US more competitive in the global economy, and reducing our dependence on foreign energy sources. The Department of Energy (DOE), being one of the government’s largest contributors to these efforts, should receive the lion’s share of this funding boost. That’s why our twelve recommendations target programs within DOE, and why Congress should provide a significant allocation to DOE in the Energy and Water Development Subcommittee.

These recommendations are not exhaustive - we believe there are myriad worthwhile clean energy innovation programs at DOE and beyond that are critical to meeting our climate and energy security goals. We are publishing these twelve to provide a few examples of how increased innovation funding can be put to use to shepherd emerging technologies to widespread adoption and advance national objectives.

With every recommendation, we have listed the relevant expert on our team who helped research and draft it, often in collaboration with our NGO allies. If other advocates want to help any of these funding priorities gain traction in the congressional appropriations process, they can contact the listed author for each request to learn more. The “Jump to Section” links on the left hand side of the page can help readers quickly find and review any requests of particular interest.

Office of Clean Energy Demonstrations

Overview

Third Way recommends $250 million for the Office of Clean Energy Demonstrations. As new opportunities emerge in technology development, DOE must be flexible in supporting our innovation ecosystem. Consistent funding for a large-scale demonstration program will drive private investment in American technologies, put the US ahead of the curve in global clean energy markets, and ensure that DOE can respond to the needs of innovators.

Background on OCED

While only recently established, OCED has high expectations: Congress created it to close the “demonstration gap,” a challenge to innovation that prevents high-risk technologies from achieving widespread adoption. Private investors balk at taking risks on emerging technologies, which is a barrier to commercialization. OCED will provide funding and expertise in project management and finance to prove clean energy innovations work at commercial scale, attract further private capital, and prepare them for success on the market.

Third Way’s Recommendation

We recommend $250 million for the OCED in FY23, with $150 million dedicated to projects that integrate renewable energy sources into our electric grid. Of the remaining funds, we recommend that $25 million go to maintain funding for the Advanced Reactor Demonstration Program’s large-scale projects and $75 million be used for administrative costs for hiring, operations, and establishing strong stakeholder and community outreach functions for the office.

In FY22 OCED was appropriated $20 million for hiring and office operations. Our request is a big increase over this previous funding level, but it’s not unreasonable. Further funding for new and existing demonstration projects and increased administrative funding is exactly what’s needed to keep this office operational in the long term and ensure it can continue to help commercialize innovative clean energy solutions.

Impacts from This Investment

Congress has shown incredible foresight and commitment to clean energy innovation by providing OCED with a large amount of initial funding in the Bipartisan Infrastructure Law (BIL). While this down payment will allow OCED to operate specific demonstration programs for the next five fiscal years, there are notable gaps in funding that must be addressed through the annual appropriations process, beginning with our recommendation for FY23.

Under current law, OCED is responsible for a range of clearly delineated demonstration programs, including long-duration energy storage, low-carbon hydrogen hubs, and carbon capture, utilization, and storage projects. These are important technologies that we should help overcome the demonstration gap, but this funding structure leaves no room for OCED to respond to other emerging technologies. For instance, multiple analyses have identified integration of renewable energy as a major barrier to decarbonizing our economy. The Biden-Harris administration noted this priority in their FY23 budget proposal, requesting $150 million for demonstration projects to help solve this problem. We recommend this funding be provided, and that in future years Congress maintain similar allocations for OCED to allow it the flexibility to determine which emerging technologies most benefit from large scale demonstrations.

The BIL also has moved funding for the Advanced Reactor Demonstration Program (ARDP) into OCED’s jurisdiction. Providing an additional $25 million for these advanced nuclear energy demos, as proposed in the President’s budget request, will help OCED ensure these projects move forward swiftly and reduce future appropriations burdens to fully fund the later stages of the demonstration projects.

The request for administrative funding in Third Way’s recommendation reflects OCED’s need for more operational support. The office has dozens of projects to manage over the next five years. Administrative funding will help the office hire talent and conduct the necessary technical assistance, outreach, and industry and community engagement needed to solicit and select projects.

Finally, under its current funding structure, OCED is set up to go off a “fiscal cliff” in FY27. Without baseline appropriations built in over the next four years, the office will be unable to continue its work for the next three decades, when innovation will be an important part of our decarbonization efforts. For this reason, any appropriation to OCED will be a worthwhile one if only to start building the ramp to continuity now.

Loan Programs Office

Overview

Third Way recommends $470 million for the Loan Programs Office. Responsible for the explosive growth of the solar, wind, and electric vehicle industries in the US, the Loan Programs Office is poised to use increased funding to catalyze new innovative energy technologies, breakthroughs in low-emission vehicles, and Tribal energy development. Increased support from Congress can help LPO turn the next round of emerging US technologies into commercial success stories.

Background on LPO

When a high-risk or emerging clean energy technology has been shown to work and is ready for commercial adoption, finding the right financing to actually site and build a clean energy generation project or clean vehicle manufacturing plant can be challenging. The Department of Energy’s Loan Programs Office (LPO) can help businesses, manufacturers, and other innovators build their technologies, and has already been a critical part of our clean energy economy.

For innovations in clean energy generation like renewable energy and nuclear energy, improvements to energy efficiency and emissions reductions, and upgrades to our power grid, innovators can seek out financing opportunities from LPO’s Title 17 program. Makers of low- and zero-emission vehicles and electric vehicles can receive loans from the Advanced Technology Vehicles Manufacturing (ATVM) Program.¹  Thanks to the Bipartisan Infrastructure Law, ATVM can now make direct loans to medium- and heavy-duty vehicles, trains, airplanes, and ferries, as long as they’re reducing emissions. And Native American Tribes with energy development needs can now receive loans from the LPO’s Tribal Energy Loan Guarantees Program (TELGP). Each LPO program serves different innovation needs, but all work together to finance our nationwide decarbonization efforts.

Third Way’s Recommendation

With three distinct loan programs under its charge, LPO is a unique beast; providing or guaranteeing a loan has an estimated cost to the government called the credit subsidy cost. In some cases, LPO must pay the cost, and in others, loan applicants can pay the cost. All of our funding recommendations for LPO center around this credit subsidy cost.

We recommend a combined total of $470 million for the three LPO programs in FY23. That includes $150 million for Title 17 credit subsidy cost to support innovative energy generation, energy efficiency, and transmission projects. For ATVM, we include $300 million in credit subsidy cost so the program can actually take advantage of the new authorities Congress recently gave it. And since TELGP’s ability to provide direct loans is new, we predict newfound interest in the program and a need of $20 million for credit subsidy and outreach.

In the last few fiscal years, Congress has only provided LPO with administrative funding - money to support day-to-day operations. This year, with a suite of legislative and administrative changes that make the program more attractive and more popular, LPO is already doing great work. With increased resources, LPO will be prepared to commercialize even more new clean energy technologies in the future as interest in the program and its record of success grow.

Impacts from This Investment

LPO already has an incredible track record, with its investments supporting 37,000 jobs, avoiding 60 million metric tons of greenhouse gas emissions, and onshoring entire clean energy industries. In the Energy Act of 2020, the BIL, and the FY22 omnibus, Congress gave LPO a number of new tools and authorities that can make the program more efficient, impactful, and easier for borrowers to use.² So it’s no wonder that LPO has seen a huge spike in public interest and applications over the last year and a half. Across its programs, LPO is receiving 2 applications per week and has received applications totaling $80 billion in requested loans, meaning that demand for LPO financing far exceeds its resources.. That’s why this funding request is so critical. As Third Way has written before, credit subsidy funding helps LPO bring more technologies to commercial success.

Our request for Title 17 includes $150 million for credit subsidy. Businesses that apply for Title 17 loan guarantees canpay the credit subsidy cost themselves, but letting LPO cover it allows more businesses to potentially access this financing. According to current estimates, every dollar of credit subsidy for Title 17 unlocks about $33 of loan authority. In other words, this $150 million appropriation frees up another $5 billion worth of loan guarantees for new domestic energy projects. The applications coming to Title 17 cover a range of technologies including all kinds of renewables, energy storage, advanced nuclear energy, and carbon capture, utilization, and energy storage. If successfully deployed, these technologies can improve US energy security, drive further emissions reductions, and move the US towards global leadership in exporting energy innovations.

Though the BIL gave ATVM permission to start financing low-carbon projects in areas like aviation, freight, and maritime transportation for the first time, it still prohibits the use of existing appropriations for those loans. We recommend appropriating new funds to ensure ATVM can properly support its expanded portfolio. At a time when volatile oil markets are driving up fuel prices, making all forms of transportation less reliant on fossil fuels or more fuel-efficient helps meet our climate goals and saves consumers money.

Since its creation in 2016, TELGP has struggled to obligate any loan guarantees. It’s not for lack of outreach or awareness, but rather, a series of financial barriers to Tribes who might otherwise want to take advantage of federal financing. Generally speaking, for Tribal energy development, grants and loans are better than loan guarantees. Now that Congress has provided TELGP with the ability to make direct loans, we expect the program to receive and approve more applications, meaning it will need more funding as interest in the program grows.

Vehicle Technologies Office

Overview

Third Way recommends $602,731,000 for the Vehicle Technologies Office. This funding will help the US develop and scale-up the next generation of electric and other zero-emission vehicle technologies, ensuring U.S. companies and workers lead our transition to EVs and that we can reduce costs for American consumers.

Background on the Vehicle Technologies Office

DOE’s Vehicle Technologies Office (VTO) is essential to developing the technologies needed to unlock the economic, climate, and air quality benefits of electric vehicles (EVs) and other zero-emission vehicles. While the Bipartisan Infrastructure Law (BIL) included important funding to help build out EV charging infrastructure and develop a domestic supply chain for EVs—including funds for critical mineral processing and for manufacturing and recycling of batteries—VTO’s RD&D programs will work in tandem with these to help lower the cost and improve the performance of EV batteries, increase the range of EVs, and reduce charging times, all of which are essential to accelerating our transition to EVs and giving U.S. automakers a leg-up in the global market.

Third Way’s Recommendation

We recommend $602,731,000 for VTO in FY23, roughly $183 million above the current funding level and in line with the President’s Budget Request. This funding would have a significant focus on demonstration, field validation, and marketing transformation activities, including a focus on cost-effective manufacturing at scale. Our request also includes funds to develop the next generation of EV battery technologies to help improve the cost, performance, charging time, and size of batteries and reduce rare minerals content.

Historically, VTO has funded RD&D of a range of vehicle technologies, including those that improve the efficiency of internal combustion engines. While this work is important, we cannot meet our climate goals unless we direct more resources towards zero-emission vehicle technologies. Our FY23 request encourages the office to focus funds on these technologies, such as electric and fuel cell electric propulsion systems, and to deemphasize support for vehicle technologies that don’t have zero or near-zero emissions profiles.

Impacts from this Investment

The transportation sector is the largest source of US CO2 emissions and a major contributor to air pollution and resulting public health issues.  Several deep decarbonization studies including Third Way’s Decarb America Research Initiative show that to meet global climate goals and improve air quality, the U.S. will need to rapidly increase adoption of zero-emission light- and heavy-duty vehicles, while simultaneously increasing the fuel economy of remaining internal combustion engine vehicles. The Biden-Harris Administration has announced a national goal to have 50% of new vehicle sales be EVs by 2030, a goal shared by many of our automakers. Federal investment in RD&D of newer, better battery technologies—in conjunction with other policies to help drive demand for these vehicles—will be critical to meeting and exceeding this goal.

These investments in clean mobility are also essential if we want to position the U.S. as a leader in the global EV market. In this light, VTO’s work is critical to protecting and growing the over 900,000 jobs in auto and auto parts manufacturing that could be at risk if we cede this leadership to other countries. When coupled with BIL investments in battery manufacturing and recycling, VTO’s RD&D efforts will help us ensure U.S. automakers and auto workers lead and benefit from the global transition to EVs.

We also need to make sure the U.S. owns the supply chain for the next generation of EV batteries. Our request provides funding to develop these new and improved EV battery technologies, including $60 million for solid-state battery R&D. These new technologies have the potential to reduce costs, boost performance and charging time, and reduce the need for cobalt and other rare metals. This will also help us reduce our dependence on minerals and components from foreign countries including Russia and China.

While the transition to electric cars is underway, more work is needed to advance zero-emission alternatives to today’s heavier vehicles. Our request boosts funding for the SuperTruck Program, which works with the private sector to develop and demonstrate technologies that reduce freight trucking emissions, from $40 million to $60 million. It also refocuses the program on complete decarbonization of heavy-duty long- and regional-haul trucks.

Finally, if we are to successfully transition to EVs, we need to make sure everyone can access EV charging infrastructure. VTO’s Clean Cities Program provides funds for cities to deploy EVs and charging infrastructure, among other activities to help improve transportation efficiency. The program complements the National Electric Vehicle Infrastructure (NEVI) formula program created by the BIL, which provides funds to build out EV charging along highway corridors, by providing additional funds to install EV chargers in public locations throughout our communities. Our request boosts funding for this program in line with the President’s Budget Request and would prioritize funds for underserved communities—including rural corridors, low-income neighborhoods, and communities of color—that are less likely to see private investment in EV charging. Our request would also help accelerate the buildout of this infrastructure by directing the office to address the “soft costs” of EV charger installation, including permitting and interconnection challenges.

Hydrogen and Fuel Cell Technologies Office

Overview

Third Way recommends $220 million for the Hydrogen and Fuel Cell Technologies Office. This funding will help the US realize the full potential of hydrogen as a clean source of fuel for some of the hardest-to-decarbonize segments of our economy, including heavy-duty transportation and industry.

Background

The Hydrogen and Fuel Cell Technologies Office (HFTO) resides within DOE’s Office of Energy Efficiency and Renewable Energy. HFTO provides RD&D funding to advance hydrogen and fuel cells as viable and cost-effective clean energy solutions for heavy-duty transportation and industrial applications where electrification is technologically or economically infeasible. Anchoring HFTO’s work is the new Hydrogen Shot initiative, which seeks to reduce the cost of clean hydrogen by 80%—to $1 per kilogram—in the next decade. While the Bipartisan Infrastructure Law (BIL) provides important funds for deployment of hydrogen technologies, including new programs for Regional Hydrogen Hubs and for Clean Hydrogen Manufacturing, Recycling and Electrolysis, more funding is needed for RD&D to enable hydrogen use at scale in those harder-to-abate sectors.

Third Way’s Recommendation

We recommend $220 million for HFTO in FY23, $62.5 million above the current level and $34 million above the President’s Budget Request. This funding would target advancements for hydrogen use to decarbonize the hardest-to-electrify sectors of the economy and enable HFTO to leverage the combined expertise of other DOE offices to unlock hydrogen’s full potential for long-term energy storage, decarbonization of steel-making, and other applications.

Our request builds on the FY22 appropriation, which provided support for a wide range of hydrogen applications but failed to provide an adequate funding level. For example, last year Congress provided $60 million within HFTO’s budget for technologies to advance hydrogen use for heavy-duty transportation and industrial applications. Our FY23 request would raise this to $100 million, given the hurdles that still must be overcome to lower cost and accelerate scale-up.

Impacts from This Investment

Third Way’s Decarb America Research Initiative has found that hydrogen will play an important role in decarbonizing hard-to-electrify sectors of the economy including steelmaking, bulk chemical production, and heavy-duty transportation such as maritime shipping, aviation, and rail. However, robust RD&D is still needed to fully enable those end-uses of hydrogen to achieve commercial viability. Our request provides significant funding—nearly half of the total for HFTO—to support the advancement of hydrogen technology in these hard-to-electrify applications with a significant focus on getting these innovations out of the lab and into demonstration.

Given the broad role hydrogen will play across various sectors of the economy, it’s important for HFTO to collaborate with the other sectoral offices within DOE in implementing its RD&D programs—and our request enables it to do so. Our request includes funding for HFTO to work with the Advanced Manufacturing Office on efforts to advance technologies that decarbonize steel production using hydrogen; with the new Office of Clean Energy Demonstrations to develop the industrial demonstration program and hydrogen hubs program created by the BIL; with the Office of Electricity to advance the potential for hydrogen as a long-duration electricity storage resource as part of DOE’s Energy Storage Grand Challenge and Long-Duration Storage Shot initiatives; and with the Office of Fossil Energy and Carbon Management to evaluate the potential landscape of hydrogen pipelines that can serve future hydrogen demand centers.

Office of Electricity

Overview

Third Way recommends $327 million for the Office of Electricity. As the US advances down the path to net-zero emissions, our nation’s grid, transmission lines, and energy storage abilities need to be modernized and improved. Increasing federal funding for the Office of Electricity will help ensure the US is meeting the nation’s decarbonization needs in an efficient and practical way, protecting our energy infrastructure from cyber attacks, providing more dependable electricity transmission to households, and setting strategies to strengthen America’s electricity system against natural and human-induced disasters.

Background

The Office of Electricity (OE) helps ensure an efficient clean energy transition, and therefore requires robust support to create a secure, dependable, and resilient electricity system. OE focuses on three major topics. Within its Advanced Grid Research and Development efforts, OE concentrates on transmission, distribution, and the different tools necessary for the US to modernize its grid. It does this through R&D of smart grids, microgrids, and energy storage. OE’s Electricity Delivery Division (EDD) supports the implementation of electricity policy. Lastly, the Electricity Delivery Cybersecurity Research and Development Division aims to reinforce strong security measures to protect our nation’s electricity infrastructure from cyberattacks and improve grid resiliency.

Third Way’s Recommendation

We recommend a minimum funding topline for the Office of Electricity of $327 million. Of this total, we suggest at least $81 million to further support OE's energy storage R&D and $40 million towards the initiation of a R&D program to reduce costs associated with next-generation power electronics that improve transmission and distribution services. We also encourage DOE to continue its collaboration with National Laboratories and expand research and development activities under the Grid Modernization Initiative and Grid Modernization Laboratory Consortium.

Third Way’s recommendation is a $50 million increase compared to the $277 million OE received in FY22, and would ensure the entire office and its individual programs are supported.

Impacts from This Investment

GMI and GMLC: The Grid Modernization Initiative and Grid Modernization Lab Consortium encourage collaboration with DOE and the National Labs through this crosscutting partnership. In order for the US to become more energy independent and achieve net-zero emissions in the long term, the national grid must be up to the task. GMI and GMLC ensure the grid is reliable and resilient to the challenges foreseen in the future and would benefit from additional support for this significant work.

Energy Storage: Energy storage will play a vital role in integrating new clean energy sources while strengthening grid reliability. OE is a leading office in implementing grid-scale energy storage research and development. One OE program in particular, the Grid Storage Launchpad (GSL) at the Pacific Northwest National Laboratory, specializes in modernizing battery materials, testing new energy storage methods, and improving research and development. However, GSL's funding under OE was strictly for its construction. With the facility near completion, there will be a gap in energy storage at OE if it does not authorize broad energy storage for all its programs. So, it's essential for OE to continue steady financing for energy storage research efforts—including aiding early-stage storage technology development and commercialization. Our appropriations recommendation would make sure these needs are met.

Power Electronics: The Transformer Resilience and Advanced Components (TRAC) Program focuses on hardware, systems integration, and power electronics. These technical pieces are vital to achieving the Biden-Harris Administration's clean energy goals by helping improve transmission efficiency and grid modernization. With the funding laid out in Third Way’s appropriations recommendation, OE could assist these efforts by creating a research and development program tasked with reducing costs associated with advanced transmission hardware components. These components support applications such as high voltage direct current converter stations that convert electricity from alternating current (AC) to direct current (DC), and medium voltage direct current converter applications for distribution of substations and microgrids.

Geothermal Technologies Office

Overview

Third Way recommends $300 million for the Geothermal Technologies Office. Geothermal energy produces firm, renewable energy critical to decarbonizing the US economy and meeting the Biden-Harris clean energy goals to have a carbon-free power sector by 2035 and a net-zero economy by 2050. However, conventional geothermal resource potential (hot springs, geysers, etc.) primarily resides in the Western US. To expand the geographic scope of geothermal energy and optimize its potential as a 24/7 renewable resource, it is essential to significantly ramp up innovative R&D efforts and fully-fund Enhanced Geothermal Systems (EGS) demonstration projects.

Background

The Geothermal Technologies Office (GTO) is part of the Department of Energy’s Office of Energy Efficiency & Renewable Energy (EERE). GTO aims to help mitigate risks and costs associated with new exploration and operational roadblocks for geothermal technologies through innovative techniques and R&D. One of GTO’s primary focuses is Enhanced Geothermal Systems (EGS), which create artificial reservoirs in areas with less traditional geothermal potential by fracturing the Earth’s surface to draw out steam for energy production. DOE’s GeoVision report indicates that geothermal capacity has the potential to reach over 60 GW by 2050, translating to 8.5% of total electricity generation in the US if EGS and other technological advances prevail. There’s also great job growth potential, particularly in association with the scale of EGS, as fossil and other energy-related jobs have transferable skills required for the geothermal industry.

Third Way’s Recommendation

We recommend $300 million for the Geothermal Technologies Office, with at least $200 million to fully fund EGS demonstration projects. The remaining $100 million is needed for overall R&D, such as for the Frontier Observatory for Research in Geothermal Energy (FORGE), Hydrothermal subprogram, Low Temperature and Co-Produced Resources subprogram, and the Data, Modeling, and Analysis subprogram.

Third Way sees great potential in GTO and its ability to leverage a firm renewable energy resource, but only if it receives the necessary funding. For this reason, Third Way’s recommendation is $300 million, which is a $190.5 million increase compared to the $109.5 million GTO received in FY22.

Impacts from This Investment

Following an authorization in the Energy Act of 2020, the Bipartisan Infrastructure Law (BIL) appropriated $84 million for four EGS demonstration projects. This represented a significant increase over previous funding appropriated for this type of demonstration project and is an important step in the right direction. However, GTO will also need a boost in its annual appropriations going forward since national laboratory and industry estimates make clear that completing commercial-scale demonstrations requires a lot more than $84 million. Depending on the MW size of potential commercial-scale projects, the required funding for one demonstration could be up to $80 million or more. But it’s an investment that pays off.

The Information Technology & Innovation Foundation’s (ITIF) Innovation Agenda acknowledges the high up-front costs associated with these demonstration projects but estimates revenue to be higher than other renewables by up to $40/MWh more. Therefore, the long-term opportunities are worth the capital-intensive upfront investments. Further, geothermal is a rare opportunity for renewable energy to serve as a “firm” cost-effective power source on the grid. Past studies³ estimated up to 62% of electricity cost reductions when firm low-carbon technologies were allowed in an energy system.

Third Way's appropriations recommendation includes $200 million to fully fund competitively awarded enhanced geothermal systems demonstration projects. DOE could use this funding to provide the initial four demonstration projects with follow-on funding essential to their finalization. Even after these four demonstration projects are completed, it’s essential that GTO leaves room for future demonstration and commercialization projects by maintaining steady funding for EGS innovation.

Most of GTO’s annual funding normally goes toward essential R&D activities that will need to continue and expand in order to keep the pipeline full of new and innovative geothermal technologies. This is why Third Way’s request includes $100 million in addition to the $200 million for demonstrations. This R&D funding could support additional studies within the Data, Modeling, and Analysis subprogram to address current research gaps on grid integration, constraints on land use and water resources, risk reduction, drilling, and efficiency in enhanced extraction techniques. Additionally, the Frontier Observatory for Research in Geothermal Energy (FORGE) program would also benefit from robust support for its ongoing activities.

GTO has been persistently underfunded, receiving less money than other renewable offices in most years. Third Way’s recommendation for FY23 appropriations would help make up for that funding backlog and put GTO on a sustainable, accelerated path to commercializing geothermal technologies that communities across the country can take advantage of.

Advanced Manufacturing Office

Overview

Third Way recommends $650 million for the Advanced Manufacturing Office. Increasing the budget for the Advanced Manufacturing Office (AMO) will provide the resources necessary to further develop and deploy industrial efficiency and decarbonization technologies, helping domestic manufacturers remain competitive while meeting our climate goals.

Background

Industrial emissions account for roughly a quarter of all US GHG emissions but are notoriously difficult to abate because many industrial processes are energy intensive, require extremely high temperatures, and are vulnerable to trade and therefore sensitive to rising costs. The Advanced Manufacturing Office (AMO) - housed within the Office of Energy Efficiency and Renewable Energy (EERE) at the Department of Energy - supports research and engages with industry on efforts essential to reducing emissions from the industrial sector through advancements in efficiency, electrification, low-carbon fuel use, carbon capture, and more. AMO’s mission and resources are vital for fostering industrial innovations and ensuring US manufacturers of goods like steel and concrete remain competitive amid global decarbonization efforts.

Third Way’s Recommendation

We recommend $650 million for AMO in FY23 to fund its four subprograms: Industrial Efficiency and Decarbonization, Clean Energy Manufacturing, Material Supply Chains, and Technical Assistance and Workforce Development. We also recommend that not less than $150,000,000 of this funding be used to establish the Industrial Emissions Reduction Technology Development Program authorized in Section 6003 of P.L. 116-206 for clean industrial research, development, and demonstrations that are both sector-specific and technology-inclusive.

Impacts from This Investment

Increasing funding for advanced manufacturing RD&D will accelerate the technological innovations needed to reduce major sources of emissions in the industrial sector and strengthen the competitiveness of American manufacturers, particularly in trade-exposed sectors like steel, cement, and chemicals. Funding for industrial emission mitigation research, development, and demonstration projects that was recently authorized in the Energy Act of 2020 and funded by the BIL provide AMO with direction and resources to develop sector-specific strategies for deep decarbonization.

Third Way’s FY23 request expands on this effort by bolstering AMO’s ability to prioritize industrial efficiency and decarbonization, with an emphasis on clean industrial technologies that are both sector-specific and technology-inclusive. $650 million will support all activities at AMO, which the Biden Administration has proposed to organize in four subprograms: Industrial Efficiency and Decarbonization, Clean Energy Manufacturing, Material Supply Chains, and Technical Assistance and Workforce Development. Of the funds dedicated to the Industrial Efficiency and Decarbonization subprogram, we suggest at least $150 million be used to fund the Industrial Emissions Reduction Technology Development Program, as part of the larger Industrial Efficiency and Decarbonization subprogram.

The work conducted under each of these subprograms is crucial to decarbonizing industry and helping domestic manufacturers compete in a global marketplace that is increasingly demanding lower-carbon materials. Large buyers of common construction materials like steel and concrete - in both the private and public sectors - have adopted clean procurement standards that favor materials produced using fewer emissions, relative to industry averages. For instance, the EU is in the process of implementing a trade policy that will levy import fees on “dirty” materials, or those with high embodied carbon. The US government is also in the process of establishing procurement guidelines that would favor lower-embodied carbon materials as well for use in public infrastructure projects. In order to remain competitive in both domestic and global markets, US industry must continue to address industrial process emissions, and enhanced AMO funding would support those efforts.

Office of Nuclear Energy - Advanced Reactor Demonstration Program

Overview

Third Way recommends $250 million for the Advanced Reactor Demonstration Program. The Advanced Reactor Demonstration Program (ARDP) helps develop innovative reactor technologies that are poised for demonstration and commercialization in the near to mid-term. Thanks to ARDP and funding through the Bipartisan Infrastructure Law (BIL), two projects are on their way towards demonstration and first operation in the 2027-2028 timeframe. Continued robust funding for ARDP will be necessary to ensure that other innovative reactor designs can also progress to concrete timelines for deployment and commercialization.

Background on the Advanced Reactor Demonstration Program

The primary objective of ARDP is to rapidly accelerate the development and demonstration of advanced reactors through cost-share arrangements with US industry in order to expand our suite of clean energy solutions and ultimately revitalize our nuclear energy infrastructure and supply chain capabilities. Through ARDP, awards have been issued to US advanced reactor companies at various stages of research, development, deployment, and commercialization.  The program was officially authorized in the Energy Act of 2020, and the Bipartisan Infrastructure Law (BIL)  provided significant funding for the two main demonstrations led by TerraPower and X-energy, which are scheduled for completion within a seven-year period. Additional funding has also been awarded to companies to advance their reactor concepts closer towards demonstration and commercialization through the Risk Reduction for Future Demonstrations pathway and the Advanced Reactor Concepts 2020 (ARC 20) pathway.

Third Way’s Recommendation

Although the Bipartisan Infrastructure Law (BIL) contained strong forward funding for the two Pathway 1 demonstrations, continued robust investment in ARDP is required to advance other innovative reactor designs, some of which are also quickly progressing towards first demonstration and deployment. We recommend $250 million for ARDP in FY23 to ensure continued support for the National Reactor Innovation Center, Risk Reduction for Future Demonstrations, Regulatory Development, and Advanced Reactor Safeguards line items.

In FY22, Congress appropriated $250 million for ARDP, which was divided across all line items within the program, including the two Pathway 1 Demonstration awardees, National Reactor Innovation Center, Risk Reduction for Future Demonstrations, Regulatory Development, and Advanced Reactor Safeguards. In FY23, funding for the two main ARDP demonstrations is expected to migrate to the Office of Clean Energy Demonstrations, therefore the $250 million in this request is intended for the remaining line items.

Impacts from This Investment

Nuclear energy provides the majority of our carbon-free power, and has established itself as an indispensable contributor to a comprehensive clean energy portfolio. The continued development of new nuclear power technologies is crucial to both long-term US energy security and climate goals, by ensuring that the country has firm, emissions-free energy sources that can complement and work flexibly with renewables. Beyond the US, advanced nuclear presents numerous options for international markets seeking to transition from fossil fuels by providing safe, scalable, and efficient energy solutions for a variety of use scenarios.

The primary objective of ARDP is to support the development of advanced reactor technologies that are likely to be ready for demonstration and commercialization in the near to intermediate-term. Third Way’s appropriations request would continue funding for ARDP at the level necessary to keep the program on track with project schedules and either support companies in their endeavors to build and construct advanced reactor demonstrations or advance their respective reactor designs towards commercialization.

Successful execution of these ARDP projects is dependent upon appropriations from Congress. The outcomes of these projects will have huge implications for the future prospects of the US advanced nuclear industry and the robustness of the domestic nuclear supply chain.

Moreover, the success of ARDP will positively impact the health of the nuclear innovation ecosystem that serves as the foundation for American technological leadership and global competitiveness in this sector. Ensuring that ARDP stays on course will be immensely important to urgent national priorities, including activating key tools to mitigate emissions and combat climate change in a timely fashion, as well as maintaining our technological and competitive edge against intensifying competition for international markets—while there are several countries in the mix, Russia and China, in particular, have invested heavily in advanced reactor development and are positioned to commercialize these technologies and sell them abroad. Considering recent world events, the operationalization of clean energy alternatives, such as advanced nuclear, that can reduce dependence on fossil fuel imports from hostile states for both ourselves and our allies has also become a crucial imperative.

Office of Nuclear Energy - Advanced Nuclear Fuel Availability Program

Overview

Third Way recommends $300 million for the HALEU Availability Program. The US is preparing to develop, demonstrate, and commercialize next-generation nuclear technologies. In order to bring these scalable carbon-free reactors to market, the US must take bold steps to develop the domestic infrastructure necessary to produce reliable fuel supplies for future advanced nuclear fleets. Strong funding for the HALEU Availability Program will not only support domestic advanced reactor deployment, but also bolster the competitiveness of advanced nuclear exports while helping countries boost energy security and cut emissions.

Background

The Energy Act of 2020 authorized the Advanced Nuclear Fuel Availability Program, also known as the HALEU Availability Program, to support the availability of high-assay low-enriched uranium (HALEU) for civilian domestic research, development, demonstration, and commercial use. The Energy Act directs the Department of Energy (DOE) to develop and evaluate strategies that would enable it to acquire or provide sufficient quantities of HALEU to meet the estimated demand of advanced nuclear power plants and other end users.

Third Way’s Recommendation

We recommend no less than $300 million for the Advanced Nuclear Fuel Availability Program in FY23 to fund and expedite the implementation of the program to support the availability of HALEU for civilian domestic research, development, demonstration, and commercial use. In FY22, this program was appropriated $45,000,000, an insufficient figure considering projected demand for HALEU fuel from future advanced reactor operators and rapidly approaching near-term needs by the Pathway 1 Advanced Reactor Demonstration Program (ARDP) demonstrations. This need is particularly urgent in light of the extraordinary geopolitical developments precipitated by the Russian invasion of Ukraine.

Far more robust funding is required to afford DOE different program options and enable it to articulate a strategy that includes specific milestones and timelines for completion. Furthermore, additional funding will be necessary for the Department to rapidly move forward with program implementation, announce funding opportunities under an open and competitive process, and facilitate the development of multiple vendors to prevent the emergence of a single point of failure.

Impacts from This Investment

Advanced nuclear holds tremendous potential as an important contributor to our clean energy future—its scalability, enhanced passive safety characteristics, flexibility in applications, and other advantages have generated high interest in this technology, both at home and abroad. High-assay low-enriched uranium (HALEU) is required to operate most types of advanced reactors under development in the United States, but a domestic market supply of this material is currently unavailable. Russia is the only viable commercial supplier of HALEU in the world—a situation that had elicited concern long before recent Russian aggression and was a significant factor in prompting the creation of the HALEU Availability Program.

In the wake of the invasion of Ukraine, it has become clear that Russia can no longer be relied upon for the fuel needed by even a handful of America’s first reactors, as was previously assumed. Third Way’s recommendation for FY23 appropriations includes funding to accelerate solutions that can secure the first fuel loads for the Pathway 1 ARDP demonstrations, which would require HALEU deliveries at least a few years in advance of their planned start dates in the 2027-2028 timeframe. Unconventional supply pathways, such as downblending of federal stocks of highly enriched uranium (HEU), are now being evaluated as options to meet this initial need. Additional resources would be essential to executing such plans, delivering HALEU quickly, and enabling the timely completion of the first ARDP projects.

Beyond producing the first core loads for the vanguard ARDP demonstrations, the bulk of this funding would be directed towards the principal task of building out domestic HALEU enrichment and other fuel cycle infrastructure. Development of a sustainable commercial HALEU market in the United States will be vital to supporting additional advanced reactor deployments and the establishment of a vibrant US advanced nuclear sector. In addition to reducing emissions, strengthening US energy independence, creating jobs, and spurring economic growth, a domestic HALEU production capacity would further US export competitiveness; the energy security interests of international operators of US advanced reactors; and important US geopolitical, national security, and nonproliferation objectives.

Through a robust FY23 appropriation, Congress can provide DOE with the certainty it requires to finalize a clear and ambitious implementation plan and rapidly progress to program execution. The funding level in our request reflects cost estimates consistent with the Department moving forward on an accelerated timeline to ensure HALEU fuel supply to support both domestic advanced reactor commercialization and the broader imperative of weaning ourselves and our allies off of reliance on Russian energy imports.

Office of Nuclear Energy - Advanced Small Modular Reactor Research & Development

Overview

Third Way recommends $211 million for the Advanced SMR R&D program. Advanced SMR technology has progressed considerably over the past several years, resulting in a platform that is poised to provide zero-emissions energy for both domestic and international markets. The commercialization and broad deployment of the NuScale SMR technology has numerous benefits for the energy independence, grid resilience, and security of our communities at home and those of our allies overseas. Funding for this program would support the continued development of an internationally demanded, industry-leading technology and push the envelope for the US nuclear sector overall.

Background

The Advanced Small Modular Reactor (SMR) R&D program was initiated in FY19 and supports research, development, and deployment activities to accelerate the availability of US-based SMR technologies for both domestic and international markets. These innovative reactors can vary in capacity from tens of megawatts up to hundreds of megawatts, and can be used for power generation, process heat, desalination, or other industrial uses. Through this program, the Department of Energy has executed a cost-share partnership with NuScale Power and Utah Associated Municipal Power Systems (UAMPS), known as the Carbon Free Power Project (CFPP), to demonstrate a first-of-a-kind reactor technology and support development of NuScale’s advanced SMR concept for mid- to long-term deployment.

The success of this program will provide broad benefits to other domestic reactor developers by resolving many technical and licensing issues that may arise from the deployment of SMR technologies, while broadly promoting the US advanced nuclear industry and other innovative technologies that support a future supply of reliable, carbon-free baseload power.

Third Way’s Recommendation

We recommend $211 million for the Advanced SMR R&D program in FY23 to continue funding for the UAMPS/NuScale Power project. Our funding request is an increase of $61 million over FY 22 funding levels, reflecting the progress of the CFPP as it continues though its construction phase and meets key milestones. This funding level would enable both NuScale and UAMPS to complete licensing processes with the NRC, including applications for design approvals and the execution of the corresponding reviews. The FY23 recommendation also provides for a management reserve for the CFPP that would prevent unnecessary costs from mobilization and demobilization should Congress not complete its FY24 appropriations bills by September 30th, 2023.

Impacts from This Investment

Small modular reactors (SMRs) offer a number of key benefits, such as providing carbon-free, firm power while requiring a smaller footprint than conventional nuclear plants. SMRs have significantly enhanced safety profiles—some have passive cooling characteristics that can remove heat without the need for outside power or human intervention. Additionally, SMRs have the capability to integrate with and complement other clean energy generation assets such as renewables, as well as support non-power applications such as industrial heat and hydrogen production.

Such characteristics make SMRs an appropriate choice for numerous markets. For example, they are excellent options to replace retiring coal generation, especially as they are capable of leveraging existing workforce and infrastructure assets. The versatility and flexibility of SMRs also make them attractive to countries seeking to build responsive and resilient clean energy portfolios, and thus, SMR technologies have significant export potential.

The recommended FY23 funds will support crucial SMR RD&D, mainly through the continued development of the CFPP. Funding will allow UAMPS to progress with actions to meet logistical, material, and licensing milestones, as well as making administrative updates aimed at enhancing overall project execution. The data gathered from the CFPP and the regulatory development of the NuScale Power SMR technology will be incredibly valuable for future licensing of new SMR designs and other advanced reactor projects. Robust support for this demonstration will contribute to the overall visibility of the advanced nuclear industry and increase the competitiveness of US nuclear technology in both domestic and foreign markets.

Carbon Capture, Utilization, and Storage

Overview

Third Way recommends $607.5 million for Carbon Capture, Utilization, and Storage and Power Systems.Reducing emissions from existing fossil fuel power generation and hard-to-decarbonize industries is a key part of meeting nationwide emissions targets. This request will further develop the technologies needed to contain, transform, and permanently store carbon emissions, and provide opportunities for economic and job growth, particularly in industrial and energy-producing communities across the country.

Background on Carbon Capture, Utilization, and Storage Activities

DOE’s office of Fossil Energy and Carbon Management (FECM) is the central hub of Carbon Capture, Utilization, and Storage (CCUS) RD&D efforts for the federal government. Technology development for CCUS involves discovering and testing new materials, processes, methods, and geologies. Carbon capture is important for our industries to reduce emissions and pollution, and has its own line in DOE’s budget. Another budget line is dedicated to carbon utilization RD&D, which helps unlock new methods of keeping captured carbon out of the atmosphere and, in many cases, creating valuable products. The carbon storage program identifies, validates, tests, and helps prepare geologic storage sites to receive captured carbon and safely sequester it. 

Third Way’s Recommendation

We recommend $607.5 million for the CCUS and Power Systems account. This section of the Office of Fossil Energy and Carbon Managment’s budget contains the budget lines for carbon capture, carbon utilization, carbon storage, and other related activities like carbon removal (discussed in the next section). Third Way’s request would be a significant but worthwhile increase in investment over the $469 million provided in FY22.

Our request encourages DOE to increase the focus of carbon capture research on industrial applications, as those technologies are far less advanced than applications for power generation. We recommend $5 million for pilots of carbon capture on industrial facilities to further develop these technologies.

Carbon utilization presents major commercialization opportunities in the production of novel materials and products. Given the wide range of applications and the need for several demonstrations, DOE’s carbon utilization efforts could make effective use of up to $100 million in FY23, compared to the $29 million it received in FY22.

Secure and permanent storage is key to keeping captured carbon out of the atmosphere. We recommend up to $100 million for feasibility studies on carbon storage sites that determine their efficacy, with a focus on maintaining environmental integrity to minimize harm to our natural spaces.

Impacts from This Investment

As mentioned, RD&D efforts on industrial carbon capture lag far behind those for power generation. We have fewer options for dealing with process emissions from industrial facilities including cement, steel and chemical production. With increased and dedicated funding for industrial applications, DOE can boost the adoption of carbon capture in heavy industry, help tackle some of the nation’s trickiest sources of emissions, and make US manufacturers more competitive in a low-carbon global economy.

Funding for  DOE’s Carbon Utilization program can advance a wide variety of technologies that turn waste into a revenue stream. For instance, captured carbon dioxide can be made into new durable materials where it remains indefinitely, or can be converted into a carbon-neutral fuels and chemicals. This is an excellent opportunity to not only reduce emissions, but also to spur new lucrative industries and jobs, make the financial case for deploying carbon capture technologies, and shore up domestic supply chains for materials and fuels.

Carbon storage is a key part of keeping captured emissions and ambient carbon dioxide from returning to the atmosphere and contributing to climate change. CarbonSAFE is DOE’s flagship effort to conduct geological assessments that are of practical use for project developers trying to decide where to locate projects. The program has multiple phases - with early phases (1 & 2) focused on assessing feasibility of sites and later phases (3, 4 and beyond) moving toward permitting and operation. The later phases have been well funded in the BIL, but the early phases are just as important for determining the appropriate geologies and locations for storage. Funding for the CarbonSAFE program in annual appropriations should focus on these early stage projects to give us a better sense of where it is appropriate to store carbon long term, preventing further climate warming pollution.

Lastly, this request leaves room in the CCUS and Power Systems budget to also increase FECM’s contribution to crosscutting RD&D efforts related to carbon dioxide removal.

Carbon Dioxide Removal (Crosscut)

Overview

Third Way recommends $337 million for carbon dioxide removal (CDR) research, development, and demonstration across DOE. Carbon Dioxide Removal entails technologies and processes that filter and capture ambient carbon dioxide from the atmosphere, and are becoming an increasingly clear necessity for meeting mid-century climate goals. This funding will help to validate and reduce the cost of various forms of CDR and enable more American communities, workers, and industries to take part in CDR opportunities.

Background on Carbon Dioxide Removal

The Department of Energy conducts RD&D on CDR across a range of its offices, in what is known as a “crosscutting initiative.” CDR activities are necessarily interdisciplinary, routing funding from the Office of Science, the Office of Fossil Energy and Carbon Management, and the Office of Energy Efficiency and Renewable Energy, and they focus on natural, biological, geological, and technological processes for scrubbing ambient carbon dioxide from the atmosphere.

Third Way’s Recommendation

We recommend $337 million for Carbon Dioxide Removal activities across DOE programs. These activities should be jointly coordinated between the Office of Science, the Office of Fossil Energy and Carbon Management, and the Office of Energy Efficiency and Renewable Energy. This funding can support the CDR RD&D program authorized by the Energy Act of 2020 to help advance many applications of CDR to commercial scale. It will also support the administration’s Carbon Negative Shot initiative, which aims to drastically reduce the cost of CDR to under $100 per metric ton of CO₂.

In FY22, CDR activities received $104 million across DOE programs. Our request represents a significant increase in funding due to the urgency and importance of commercializing CDR technologies and processes, and based on technical recommendations from a number of scientific reports. We must accelerate the pace of technology development in this critical area, thus more funding is needed to advance CDR technologies to commercial adoption.

Impacts from This Investment

In 2019, the Energy Futures Initiative released a study entitled  “Clearing the Air: A Federal RD&D Initiative and Management Plan for CDR technologies.'' This report details a comprehensive RD&D agenda that outlines year-by-year funding levels required over the next 10 years to bring CDR technologies to the gigaton-scale. As FY20 was the first appropriations year with significant funding for CDR technology, the FY23 cycle would therefore constitute the fourth year of appropriations. The recommended funding of $337 million comes from this report, after omitting funding for carbon transportation, storage, and utilization - which are funded outside of the CDR Crosscutting Initiative.

This funding can increase federal support for a variety of nascent CDR solutions, both engineered and natural, which are crucial to a technology-inclusive approach to removing excess CO₂ in our atmosphere. Models and reports produced by the Intergovernmental Panel on Climate Change (IPCC) and International Energy Agency (IEA), among others, indicate the need for a near-term focus on CDR development and deployment to achieve carbon neutrality by 2050.

Furthermore, America’s success in CDR, combined with our research enterprises in carbon utilization and storage, offers the opportunity to export US technologies around the world that remove carbon from the atmosphere and turn it into materials and fuels or store it. This would bolster local economies, and make the US a leader in technologies and practices that are likely to see high demand growth as governments around the world accelerate their climate efforts.