Together, the American Jobs Plan and the Annual Budget Go Big on Clean Energy Innovation

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The Biden-Harris Administration recognizes the importance of clean energy innovation in both tackling the climate crisis and bolstering the economy. Shortly following the release of the American Jobs Plan (AJP), which includes many clean energy research and development policies, the administration issued its annual discretionary budget proposal which will be used by Congress to help draft and pass appropriations legislation later this summer to set the federal budget for fiscal year (FY) 2022. This budget proposal also includes significant support for clean energy innovation.

This memo explains how the Biden-Harris budget and AJP are intended to work together to lay the groundwork for the United States to develop and deploy the next generation of clean energy needed to fight climate change. A number of the clean energy innovation and other climate proposals from the AJP are already included in the bipartisan infrastructure package being negotiated. We hope to see the remaining innovation and climate proposals from the AJP included in the forthcoming reconciliation package, and see the final budget for FY22 include the complementary initiatives proposed in the President’s budget. 

The President’s Budget Proposes Big Increase In Climate Funding

The President’s budget is strong on energy and climate, proposing a total of $36 billion for climate activities, including $10 billion across the government for clean energy innovation ($8.1 billion of which is for the Department of Energy). This is an increase of $22 billion over last year’s total climate funding, and makes good on the president’s commitment to invest in climate solutions.

These investments come in the form of new programs for different government agencies and significant increases in funding for existing programs—a heartening change from the budget proposals of the last four years. Two examples of exciting new proposed spending for clean energy innovation are 1) $400 million for a new Office of Clean Energy Demonstrations (OCED) and 2) big, multi-billion increases for the Department of Energy (DOE)’s applied offices. These are investments that we hope to see in both Chambers’ appropriations bills.

This summer and fall, Congress will work to pass the annual budget into law. By mid-July, the House will have finished editing and amending its twelve appropriations bills, which will go to the House floor to be voted on and sent to the Senate. In the fall (but hopefully earlier!) the Senate will do the same. When all twelve bills have been approved by each chamber, the two chambers will come together and work out any differences to produce a new compromise appropriations bill. This new bill has to pass both chambers again before heading to the President’s desk. The current fiscal year, FY 2021, ends September 30. If this process isn’t complete by then, we will either see a continuing resolution (which maintains current fiscal year funding levels for a specified amount of time) or the government will shut down. The House has already released their FY 2022 Energy and Water appropriations bill, and we are encouraged to see a multi-billion dollar increase in Department of Energy funding. We hope that in negotiations with the Senate, the funding levels will come closer to those proposed by the Biden-Harris administration.

How the AJP Can Build on Increased Climate Funding in the Federal Budget

Any large annual funding increases achieved through the budget process would not eliminate the need for the AJP, but rather would set the AJP investments up for success by bolstering the programs and activities that will be responsible for carrying out AJP proposals. These proposals (such as a Clean Electricity Standard, increased funding for pilot and demonstration programs, oil well and mine reclamation and remediation, and incentivizing the expansion of the clean energy workforce) benefit directly from robust annual climate and energy spending and help lay the groundwork for meeting our goal of net-zero emissions by 2050, as we’ll explain in detail below. 

The significance of the funding in the AJP is that it is money that would be difficult to spend in an annual appropriations process due to procedural and political factors, like the allocations set by Congressional committees that cap spending in each appropriations bill and the 60-vote threshold needed in the Senate to clear anything not in a reconciliation bill. In a sense, we need the budget to create a regulatory, operational, and bureaucratic framework, and we need the AJP to immediately ramp up funding for these activities. If the budget is intended to keep the lights on, the AJP is how we innovate better bulbs and renovate the fixtures.

Specifically, the AJP calls for an additional $145 billion in funding for the research, development, demonstration, and deployment of clean energy technologies and climate response. This includes $50 billion for the National Science Foundation to apply science and engineering to technological problems, $40 billion for new laboratory infrastructure, and a new climate-focused national lab at a Historically Black College or University, and $55 billion in clean energy technology research. It also has $100 billion to modernize our power grid and $50 billion for climate resilience, for a total of more than $300 billion in climate-related funding.

To better explain how the AJP and the budget work together, here are a couple examples of how they have complementary initiatives and spending to spur progress on the advanced energy technologies we need to address climate change:

Clean Energy Demonstrations

The AJP calls for $15 billion in clean energy demonstrations for “utility-scale energy storage, carbon capture and storage, hydrogen, advanced nuclear, rare earth element separations, floating offshore wind, biofuel/bioproducts, quantum computing, and electric vehicles.” These are demonstrations of technologies that have been proved in the laboratory, thanks to robust federal research funding, and now need to prove their commercial viability at scale. That’s hard to do both from a financial and technical perspective, and often requires help from the federal government.

These are pivotal investments to meet our climate goals: According to the International Energy Agency’s Net Zero by 2050 report, 50% of carbon emissions reductions between 2030 and 2050 will come from technology that is currently in the prototype or demonstration phase of development. 

The President’s budget sets these demonstration investments up for success by proposing the creation of the Office of Clean Energy Demonstrations (OCED). If funded, this office would be responsible for facilitating at least one large-scale energy demonstration each year and assisting other DOE applied energy offices in their demonstration activities. With proper direction, OCED can serve as a hub or control point for demonstrations across the Department of Energy, including both those funded in the annual appropriations process and those in the AJP.

These large and necessary investments in demonstrations in the AJP will help get these technologies into the market—something that can't be done within an annual budget and appropriations process alone. Meanwhile, the annual budget establishes the offices and programs needed to implement these projects, and funds a healthy and well-staffed DOE needed to consistently recruit researchers, administer demonstrations, support new businesses, and eventually commercialize technology. That’s why the AJP goes hand in hand with the historic annual increases that Congress should appropriate this year. 

Supportive Infrastructure Needed to Deploy Clean Energy

In addition to getting technology from the lab to the market, DOE has a responsibility to make sure the infrastructure and workforce to support new technology is readily available. That’s why the budget proposes an investment of $2 billion to modernize our grid and prepare it for the task of decarbonization, which would create thousands of new jobs. Grid modernization and maintenance, much like energy RD&D, are ongoing processes. For the grid to adequately meet our energy needs, we need well-paid workers who can keep it running smoothly and cleanly.

The AJP proposes complementary investments and incentives to build out the grid, like pledging tax credits to support the construction of high-voltage power lines. These policies, which can’t be done through the annual appropriations process, will encourage utilities and businesses to hire more workers to build the modern, carbon-free grid of the future. This expanded grid will be prepared to host the dozens to hundreds of advanced clean energy demonstrations that need to come online over the next few decades, and be more resilient and able to handle the terawatts of new clean and renewable electricity we need to deploy to decarbonize the grid. The bipartisan infrastructure package invests nearly $25 billion in transmission, smart grid, and grid resilience projects, though the tax incentives outlined in AJP will need to be included in reconciliation.

We Still Need a Reconciliation Package that Goes Big on Climate

Innovation isn’t a one-time project. We will always strive to bring down the costs of existing technologies and develop entirely new solutions to meet the climate challenge. However, if Congress passes the significant increase in clean energy innovation and deployment funding proposed in the President’s budget and AJP, then this would be an impressive downpayment on our climate goals.

We hope to see both Congressional Appropriations Committees fund the President’s clean energy budget items, including funding the substantial increases in DOE’s applied energy offices, and the energy storage demonstrations in the Office of Clean Energy Demonstrations. Congress’s bipartisan infrastructure agreement already puts billions of dollars into clean energy demonstrations and infrastructure deployment. To further capitalize on this agreement and the annual appropriations process, Congress should prioritize the remaining energy and climate funding in the AJP through an additional, robust budget reconciliation package. This will set our country up for leadership in the response to climate change and create well-paid domestic jobs in growing clean energy industries.

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