Holding Government to Corporate Standards

by Scott Sklar

Large corporations have been in the headlines lately for structuring their balance sheets in ways that make their companies appear to be performing better than they actually are. Government regulators have moved in to insure that U.S. investors have a transparent window into their potential corporate investments, and to stop these CEOs from playing games with their investors’ money.

Unfortunately, the U.S. Department of Energy (DOE), a multibillion-dollar entity, plays the same game. And in this case, we – the U.S. taxpayers – are the investors. Both political parties share the blame for this charade, as do we who allow it to continue. Just as the Securities and Exchange Commission (SEC) is putting the kabash on corporate misrepresentations, it’s time we end the DOE gaming once and for all.

To hear our U.S. government representatives talk at the World Summit on Sustainable Development in Johannesburg, South Africa, last September, it would appear that U.S. budgets for clean energy are growing. But definitions of “clean” energy have become muddied. The practice of mislabeling “renewable energy” and “clean energy” has been condoned by both the Bush and Clinton Administrations.

A typical example is a Clean Energy Export Initiative announced early in the Bush Administration, for which they had panels on “clean” coal, nuclear and – oh yes, at the end – renewable energy.

Within the environmental community, “clean” energy usually refers to renewable energy (solar, wind, biomass, etc.) and energy efficiency, often including combined heat and power and advanced natural gas technologies (fuel cells, heat engines, microturbines). However, others in the political arena cast a wider net and include nuclear energy, “clean” coal and advanced engine technologies (diesel, reciprocatiing engines). Never is this so clear as it is in tax policies and appropriations.

The clean energy community has allowed this ambiguity to continue. Congressional tax committee press releases report that the government plans to spend nearly $8 billion for “clean” coal, nuclear and “clean” fossil subsidies, with only $4 billion going to new efficiency and renewables assistance.

No one should be surprised that no studies have been done to determine whether government subsidies paid to mature energy companies with mature technologies in mature markets will have an adverse market impact compared to subsidies paid to newer renewable energy companies with emerging technologies in evolving markets. In other words, if our country provides a few billion dollars of subsidies for the more mature technologies, doesn’t that skew the marketplace against the higher-cost emerging technologies – even if they are subsidized equally, which they are not?

The trends in supporting cleaner traditional energy sources in Federal Research, Development and Demonstration (RD&D) programs rather than renewable energy technologies are even more stark. And the trend toward incorporating non-renewable RD&D in the federal renewable RD&D program has grown considerably.

Superconductivity, a great efficiency RD&D program, is not a renewable energy program, and is now included as a significant percentage (over 10%) of the federal renewable RD&D program. Distributed energy systems RD&D is predominantly geared towards reciprocating engines and older fuel cells, not renewable-based distributed generation, and this program is also growing to between 5-15% of the renewable program.

Hydrogen RD&D, which could have a significant renewable energy basis, is almost entirely focused on infrastructure delivery (primarily with natural gas), with some RD&D involving fuel cells. At a recent DOE Hydrogen RD&D program review, the nuclear and coal industries were well represented, and are working to integrate themselves in the program in a major way. Only about 10% of the hydrogen program – which is 7% of the renewables program – has any relationship to renewable energy.

This “Inside the Beltway” game has serious consequences, because the Administration and Congress (in many cases unwittingly) believe that actual federal renewable RD&D is significantly increasing. Between 1986-2002, the renewable energy RD&D program grew by 50% and during the same period, the non-renewable section of the renewable RD&D budget grew faster, increasing by about 15 times.

Using budget intervals beginning in fiscal year 1984, the DOE renewable energy program was $207.6 million with only $7 million allocated to non-renewable activities, or about 4%. By fiscal year 1990, the non-renewable portion hit 5% but the renewables budget was much smaller. Byfiscal year 1993, $45 million of the $257 million renewable energy budget was earmarked for non-renewables, or almost 20%.

By fiscal year 2001, the $314 million renewable RD&D budget had $80 million directed conservatively to non-renewables, or over 25%. The fiscal year 2003 budget may even be higher, as electric energy systems, distributed generation, non-renewable hydrogen, international and a series of Congressionally-directed line items drive non-renewable RD&D with the renewable program to above 30%.

The Administration even paid for the printing of its National Energy Strategy, a document that promoted and covered far more than renewable energy, out of the Renewable RD&D budget – a small sum, but symbolic of the problem.

These non-renewable programs may have very worthy benefits, but they should be moved into the areas where they belong – fossil, efficiency and cross-cutting programs. And the end-of-year funds that remain unspent, which are higher than ever, need to be openly announced and quickly redirected toward the renewable energy RD&D for which they were intended. These funds can be mysteriously redirected without public input or knowledge, and it is time that clean energy advocates ask for a detailed review and an appropriate allocation.

The national organizations that track the budgets should stop playing the “inside game” of capitulation because they are afraid of rocking the boat. Just as large corporations must be compelled to report their finances and activities honestly, so should DOE. Congress hasn’t helped, and we all must be emphatic that renewable energy RD&D money must be spent on renewables, and other worthy programs must go where they belong.

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