oversight

Energy R&D: DOE's Allocation of Funds for Basic and Applied Research and Development

Published by the Government Accountability Office on 1990-05-24.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                               .Appli.eci Research and




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                              llESTlUm;---N&         to be released outside the
                              General AccoudngofpIcC      mrless specifhJly
                              approved b-y the Offke of (kngredonal
                              R&tiOlWJ.



_._-.--
GAO :R(‘ED-9O-148HR
        united
          states
GAO     General Accounting  Office
        Washington, D.C. 20648

        Resources, Commuhity,   and
        Economic Development    Division

        B-239103
        May 24,199O
        The Honorable Marilyn Lloyd
        Chairman, Subcommittee on Energy Research
          and Development
        Committee on Science,Space,and
          Technology
        House of Representatives

        Dear Madam Chairman:
        On August 31,1989, you requested information on the Department of
        Energy’s (DOE) processfor allocating energy research and development
        (R&D) funds. In fiscal year 1990, DOE'S budget for R&Defforts encompass-
        ing programs in fossil, nuclear, solar, fusion, and renewable energy
        sourcesas well as basic energy sciencesand energy conservation was
        over $4 billion. Section 1 contains a short history of DOE's energy R&D
        efforts.
        Specifically, you asked us how DOE prioritizes and coordinates funding
        requests among the various research and development program areas,
        including the role, if any, of the Office of Managementand Budget (OMB)
        and DOE advisory groups. You also asked how priorities have evolved
        over the past 10 years, how the overall DOE funding for RNI has been
        distributed between basic research and applied research and develop-
        ment, and how much DOE has invested in major demonstration projects
        over the past 10 years.
        We briefed your office on the information in this report on February 15,
        1990. In summary, we found the following:

      . OMBbudgetary targets and DOE'S budget processdetermine how R&D
        funds are allocated. Funding priorities are set within the program areas
        according to budget guidance and general policy statements. According
        to DOE officials, DOE has had no good way to establish budget priorities.
        However, DOE is developing a national energy strategy which it plans to
        submit to the President by December1990. During the 1980s OMB budg-
        etary targets played an important role in reducing funding for the
        applied technology areas of fossil, nuclear, conservation and renewable
        energy R&Dwhich was in accordancewith the policy of undertaking
        long-term, high-risk research. DOE primarily coordinates its R&D agenda
        during the budget processthrough analyses of energy areas for broad
        issuesthat cut acrossprogram areas.The major advisory group in DOE
    5333103




  was the Energy ResearchAdvisory Board which, at the Secretary’s
  request, advised and made recommendations on various energy R&D
  issues,(Seesection 2.)
. Over the past 10 years, energy R&D priorities have shifted from the
  energy technology program areas of fossil, nuclear, conservation, and
  renewable R&Dto the basic energy research program areas of general
  scienceand basic energy sciences.* While the energy technology program
  areas decreasedalmost 45 percent from 1980 to 1990, the basic energy
  research program area increased over 140 percent. In addition, from fis-
  cal year 1983 to 1990, congressionalappropriations for the energy tech-
  nology areas influenced priorities becausethey were generally greater
  than DOE requested, although not at a level sufficient to maintain the
  funding levels of the early 1980s.(Seesection 3.)
l Over the past 10 years, funds for basic research have increasedgreatly,
  while funds for applied research have increased slightly and funds for
  development have decreasedsignificantly. DOE’S budget for basic
  research increased over 186 percent during this period, while the
  applied research budget increased about 17 percent and the develop-
  ment budget decreased39 percent. (Seesection 4.)
. From the mid 1970sthrough 1990, over $6 billion has been invested in
  demonstration projects. Of the 41 projects, 16 were terminated, 9 were
  completed, and 17 are ongoing. Of the 16 terminated projects, 10 were
  terminated becausethe previous administration decided not to fund
  demonstration projects. Of the other five, two were terminated due to
  production problems, two were terminated due to a lack of financing on
  the part of the private enterprises proposing to do the projects, and one
  was terminated by the Congress.(Seesection 6.)
    Appendix I contains a detailed list of DOE’s demonstration projects.
    We conducted our review from September 1989 to February 1990 in
    accordancewith generally acceptedgovernment auditing standards. Our
    objectives, scope,and methodology are contained in section 6. In discus-
    sions with DOE, they generally agreed with the results of our work.

    As arranged with your office, unless you publicly announceits contents
    earlier, we plan no further distribution of this report until 30 days from
    the date of this letter. At that time, we will send copies of this briefing
    report to the appropriate House and Senatecommittees, the Secretary of

    ‘The energytechnologyprogramareasgenerally perfom~applied researchand development,
    althoughasmallportionoftheirfundsareusedtocanyoutbasicresearch.



    P8ge 2                                GAO/BCBD-W148BBDOE’sAhc.ation of B&D Funds
B333103




Energy, and the Director, Office of Managementand Budget. Copieswill
also be made available to other interested parties who request them.
Should you have questions or need additional information, please con-
tact me on (202) 275-1441. Major contributors are included in appendix
II.

Sincerely,




Victor S. Rezendes
Director, Energy Issues




P8ge 3                         GAO/RCBD4&143BR DOR’r Allocation of B(u) Funds
Contents


Letter                                                                                             1

Section 1                                                                                          8
Background
Section 2                                                                                         10
DOE’s Prioritization        OMB Role in Allocating R&D Funds
                            Budget ProcessDetermined Priorities
                                                                                                  10
                                                                                                  10
Processfor R&D              Coordination of ResearchAgenda                                        13
Program Areas               Role of Advisory Groups in Allocating R&D F’unds                      13

Section 3                                                                                         16
Evolution of DOE R&D BasicActivities
                           Energy Researchand Supporting Research                                 18
Priorities From 1980 Energy Technologies                                                          20
to 1990
Section 4                                                                                         27
Distribution of Basic,      Basic Research
                            Applied Research
                                                                                                  28
                                                                                                  31
Applied, and                Development                                                           35
Developmental
Research
Section 5
DOE’s Major
Demonstration
Projects
Section 6
Objective, Scope,and
Methodology
Appendixes                  Appendix I: DOE Major Demonstration Projects                          42
                            Appendix II: Major Contributors to This Briefing Report               45



                            Page 4                         GAO/BCED-W148BBDOE%Allocation of RBD F’unda
          Contents




                                                                              -
Tables    Table 1.1: Program Areas for DOE R&D and Funding for                    9
              Fiscal Year 1990
          Table 3.1: Changein Fossil R&D Funding From Fiscal                  22
              Years 1980 to 1990
          Table 3.2: Changein Conservation R&D Funding From                   24 /
              Fiscal Years 1980 to 1990
          Table 3.3: Changein Solar and RenewableEnergy R&D                   26
              Funding From Fiscal Years 1980 to 1990
          Table 5.1: Summary by Program Area of DOE Major                     39
              Demonstration Project Activity
                                                                              -

Figures   Figure 3.1: Percent Changein Funding for Energy R&D                     17
              Programs Between 1980 and 1990 (In Constant 1989
              Dollars)
          Figure 3.2: Change in Percent of Total for Energy R&D                   18
              Programs From 1980 to 1990
          Figure 3.3: RequestedVersus Actual Appropriations for                   19
              Basic’Energy Researchfor Fiscal Years 1981 to 1990
          Figure 3.4: RequestedVersus Actual Appropriations for                   21
              Nuclear Energy R&D for Fiscal Years 1981 to 1990
          Figure 3.5: RequestedVersus Actual Appropriations for                   23
              Fossil Energy R&D for Fiscal Years 1981 to 1990
          Figure 3.6: RequestedVersus Actual Appropriations for                   25
              Conservation R&D for Fiscal Years 1981 to 1990
          Figure 3.7: RequestedVersus Actual Appropriations for                   26
              RenewableEnergy R&D for Fiscal Years 1981 to 1990
          Figure 4.1: Funding for Basic and Applied Researchand                   27
              Development From Fiscal Years 1980 to 1990
          Figure 4.2: Percent of Total Energy R&D Budget for Basic,               28
              Applied, and Development-Fiscal Year 1980
          Figure 4.3: Percent of Total Energy R&D Budget for Basic,               28
              Applied, and Development-Fiscal Year 1990
          Figure 4.4: Basic ResearchBudget for Fiscal Years 1980                  29
              Through 1990
          Figure 4.5: Program Area Share of Basic Research                        29
              Budget-Fiscal Years 1980 Through 1990
          Figure 4.6: Office of Energy ResearchBasic Research                     30
              Budget
          Figure 4.7: Applied ResearchBudget                                      32
          Figure 4.8: Applied ResearchFunding by Program Area                     33




          Page 5                        GAO/WED-gM48BR DOE%Allocation of R&D Funda
C4mtente




Figure 4.9: Program Area Share of Applied Research                    34
    Budget-Fiscal Years 1980 Through 1990
Figure 4.10: Development ResearchFunding by Program                   36
    Area
Figure 4.11: Program Area Share of Development                        37
    ResearchBudget-Fiscal Years 1980 Through 1990




Abbreviations

           Department of Energy
           Energy ResearchAdvisory Board
           National Energy Strategy
           Office of Energy Research
           Office of Management and Budget
           research and development


mw6                           GAo/lKTEBa14sBRDoErAlloauonofBSDFund6
P8ge 7   GAO/RCElM@148BBDOE’sAllocation of R&D Funds
Section 1

Background


             Federal support for civilian energy research and development (R&D) has
             moved through several phasessince the early 197Os,reflecting changes
             in both international energy markets and government policy. During the
             1970sthe federal government focused its support on the nation’s devel-
             oping civilian nuclear reactor industry. However, this limited federal
             energy MD role increased greatly after the Arab oil embargo and subse-
             quent energy crises during the 1970s.The government retained its
             nuclear R&D role and developed and expanded programs in renewable
             energy, fossil energy, and conservation through the end of the decade.
             The government not only increased its support for R&Don alternative
             energy technologies but also broadened its role in energy to support
             demonstration and commercialization of emerging technologies.As a
             result, the energy RW budget increased from $622 million in 1973 to
             about $4.7 billion in fiscal year 1981, a nearly eightfold increase.

             In January 1981, the new administration had a different philosophy of
             the government’s role in energy. It proposed an energy program which
             significantly altered the previous administration’s program. It believed
             that the government’s energy program should be limited to performing
             only long-term, high-risk, and high-payoff R&Dwhich industry could not
             be expected to undertake. It was predicated on the assumption that as a
             technology moves closer to demonstration and commercialization, the
             government’s role should be curtailed with industry providing financial
             support. Thus, the free marketplace was expected to supply the capital
             investments required to support the demonstration and commercial
             introduction of new and alternative energy technologiesinto the econ-
             omy. The administration believed that the marketplace could achieve
             this introduction more efficiently and effectively than the government,
             especially if energy prices were allowed to reflect their true replacement
             costs.
             In support of this belief, budget authority for DOE’S Basic Energy
             Researchprogram and supporting research activities rose from $1.2 bil-
             lion in the fiscal year 1980 budget to $2.4 billion in the fiscal year 1990
             budget-an increase of 93.2 percent. Budget authority for the other
             energy technologies- fossil, renewable, conservation, and nuclear R&D--
             dropped about 46 percent during the sameperiod from $3.1 billion to
             about $1.6 billion. For fiscal year 1990, DOE received total R&Dappropri-
             ations of over $4 billion. Table 1.1 shows the program areas and their
             fiscal year 1990 appropriations.




             Page 8                          GAO/BCED~14SBR DOE’sAllocation of B&D F’unda
Tabto 1.1: Program Areas for DOE R&D
and Funding for Fiscal Year 1990       Program Area                                           Appropriation            Total
                                       Basic Energy Research
                                         General Science                                         $1993,316
                                         Basic Enerav Sciences                                      569,837
                                                                                                                  $1663,153
                                       Supporting Research Activities
                                         Bioloaical and Environmental Research                       308.693
                                         Other Supporting Research Activities                         96,527
                                                                                                                     405,220
                                       Magnetic Fusion                                                               320,259
                                       Nuclear Enerav                                                                341.847
                                       Clean Coal Technology                                                         554,ooo
                                       Fossil Energy R&D
                                         Coal                                                        275.259
                                         Gas                                                          14,429
                                          Petroleum                                                   39,913
                                         Other Fossil                                                 88,670
                                                                                                                     418.271
                                       Conservation and Renewables
                                         Conservation                                                194,069
                                         Solar                                                        89,659
                                         Renewables                                                   47,952
                                                                                                                      331,680
                                       TOtd                                                                       s4,034,430




                                       Page 9                                    GAO~l4iSBR      DOE’sAllocation of R&D Funds
DOE’sPrioritization Processfor R&D
Program Areas

                        OMBbudgetary    targets and DOE’Sbudget processdetermine the allocation
                        of funds appropriated for R&D.Priorities are set within the program
                        areas according to DOEand OMB budget guidance and general policy
                        statements. DOE’sresearch agendais primarily coordinated during the
                        budget process.The Energy ResearchAdvisory Board made recommen-
                        dations to the Secretary of Energy on various aspectsof energy research
                        and development which were adopted to someextent by DOE.


                        OMBplays an important role in the allocation processthrough its setting
OMB Role in             of budgetary targets. According to DOEofficials, DOEprovides out-year’
Allocating R&D F’unds   budget projections to OMB during the annual budget process.According
                        to DOE’sController, these out-year projections are developed using the
                        budget year as a baseline and adjusting for inflation and for whether
                        program requirements are expected to go up or down. OMEI      reviews and
                        adjusts DOE’S projections and provides DOEwith budget planning ceilings,
                        i.e., targets, in annual budget guidance letters, which state the adminis-
                        tration’s goals in broad terms. For example, for fiscal year 1988, the
                        letter stated that
                        “The 1988 Budget continues to emphasize longer term, high risk Non-Nuclear
                        Energy Research and Development that broadly supports private development of
                        new energy production and conservation technologies. Within Fossil Energy, there
                        is a relatively greater emphasis on acid rain-related technologies and enhanced oil
                        recovery.” [Emphasis in original.]

                        The guidance letters also contain out-year estimated targets. For exam-
                        ple, the 1990 budget guidance letter contained out-year numbers for
                        1991 through 1993. The out-year number becomesthe starting point for
                        the next year’s budget. The targets are updated in the late summer
                        before the next fiscal year begins. According to OMBofficials, the new
                        target is based on the previous year’s budget, and the out-year numbers
                        are projected assuming the policies and programs of the current year.

     c Process
Budget                  responsible for setting the priorities within their areas baaedon budget
Determined Priorities   guidance and administration policy. DOEpublished a National Energy
                        Policy Plan in 1981,1983, and 1986, and a report entitled Energy Secur-
                        ity in 1987, which contained general policy statements on energy
                        &arch and development. Throughout the 19SOs,the policy was to

                        ‘Out years are future budgetyears.



                        P8ge 10                              GAO/RCEDSO-148BRDOE'sAUogation     ofBSDFunda
Section 2
DOE’s Prioritization Frocesafor B&D
RorpMl--




undertake long-term, high-risk research and to concentrate federal
energy R&Din areas where the incentives for and availability of private
investment were severely limited or nonexistent. Under these policy
plans, program areas were not compared and priorities were not set
acrossthe range of programs. DOEstated in its posture statement to its
fiscal year 1991 budget overview that “the Department had no road
map for developing top-down policy guidance. There was no Depart-
ment-wide five-year program plan and no good way to establish budget
priorities.”
For fiscal year 1991, DOE stated that it would no longer focus only on
“long-term, high-risk R&D”but would reflect a proper balance of basic
and applied R&Dspecifically directed toward national energy goals. Also,
the research programs should look for areas with the greatest potential
for a scientific or technological breakthrough that could significantly
advance the technology and competitiveness in the market. DOE also
stated that the objective in prioritization should be to look for the best
pay-off in achieving energy, environmental, and safety and health goals.

At the beginning of the budget process,the DOE Under Secretary issuesa
budget guidance memorandum that includes OMBtargets for each pro-
gram area. For fiscal year 1991 the guidance stated, among other things,
how the budget would be focused and how the priorities would be set.
The fiscal year 1991 budget guidance stated that each program would be
developed to show how it contributed to achieving DOEgoals in the near
term, mid term, and long term. The national goals were to promote
health and safety, a clean environment, energy security, U.S./world
competitiveness, and national defense.

Using the Under Secretary’s budget guidance, the assistant secretaries
develop their program area budgets. As part of this budget formulation
process,priorities are set at three levels-at a decrement, at target, and
at program planning. The decrement is the difference between the target
and a percent reduction from the target, and program planning level
consists of proposed initiatives above the target. In the past the decre-
ment level was 10 percent, but for fiscal year 1991 the decrement level
was increased to 16 percent. Each assistant secretary receivesbudget-
ary targets from the Under Secretary that are basedon the targets set
by OMB.The targets are by decision unit which DOEdefines as a program
entity for which various funding requests may be developed.Examples
of decision units would be light water reactors under Nuclear Energy
R&Dand coal liquefaction under Fossil R&D.The assistant secretaries can



 Page 11                              GAO/BCBMO-148BR DOE’sAllocation of B&D Funds
    Se&on 2
    DOE’sPrioritization Procwa PorB&D
    -An-




    rerank the funds for their decision units as they seefit; however, the
    bottom line total must tie directly to the target.

    According to DOE’S Controller, during the 1980sany changesto the pri-
    orities set by the assistant secretaries were done “at the margin,” i.e.,
    the interval between the target and the lo-percent decrement. The
    budget office would scrutinize each assistant secretary’s budget, chal-
    lenge new initiatives, and recommend a funding level below the target.
    This difference resulted in discretionary funds which the Secretary of
    Energy could move from one program area to another. The assistant sec-
    retaries could appeal decisionsnot to fund projects, but the Secretary
    made the final funding decisions on each program. However, according
    to the Controller, individual program initiatives were not compared
    acrossprogram areas. The idea was to do someresearch in each of the
    program areas. In addition, according to a DOE policy official, the Secre-
    tary did not have any master plan for energy programs.

    The Controller stated that during the fiscal year 1991 budget cycle, the
    Secretary had a prebudget review in which he discussedthe near-, mid-,
    and long-term goals for each program area with the responsible assis-
    tant secretary and the DOE Office of Budget and provided guidance on
    each program area’s ideas. The assistant secretaries then put together
    their budgets. After the budget office reviewed the budgets, the assis-
    tant secretaries could appeal any budget office revisions to the Secre-
    tary. The Secretary made the final decisions after listening to the
    assistant secretaries who had issuesto resolve.
    In July 1989, DOE announcedthe development of a National Energy
    Strategy (NES) that is intended to be a blueprint for energy policy and
    government program decisions.The objectives of the NESare to
. rely on market principles to the greatest extent possible,
. encouragea mixed and balanced set of energy supply resources,
l promote increased energy efficiency where cost effective, and
. minimize potential effects to the environment from energy production
  and use (including acid rain and global warming) wherever this is cost
  effective or justified for other reasons.

    DOE issued an interim  report in April 1990 and is scheduled to issue a
    final submission to the President by December1990. A DOE policy offi-
    cial told us that the NES will be used to make program and budget deci-
    sions and will be out in time to influence fiscal year 1992 budget
    decisions.


    P8ge 12                             GAO/lKXD9@14SBR DDE’s Allocation of B&D Funds
                           Section 2
                           DOE’sPrioritization Proms6 for B&D
                           Progr8m Areaa




                           DOE coordinates the R&D   agendasamong the various researchprogram
Coordination of            areas during the budget processto avoid duplication of funding and
ResearchAgenda             research effort. At that time, the budget office coordinates R&D issues
                           acrossprogram areas (crosscutting) by preparing an analysis of that
                           issue with input from the program offices. This analysis involves (1)
                           identifying other program offices that do research on the sameissue
                           (e.g., high temperature superconductivity, geosciences,global climate
                           change,acid rain, and biofuels), (2) determining how much funding each
                           office obtains for that issue, and (3) determining each office’s research
                           focus. For example, biofuels* is an issue in which two offices carry out
                           research-Energy Researchand Conservation and RenewableEnergy.
                           The analysis for this issue stated that the Office of Energy Research
                           focused its research on providing fundamental biological information on
                           plants and microorganisms for new energy biotechnologies while Con-
                           servation and RenewableEnergy focused its research on the growth of
                           feedstock-wood and plants-and new conversion processes.Thus, this
                           particular analysis concluded that each of the program areas focuseson
                           a different level of research effort.
                           We also found that somecoordination is done by the program areas
                           outside of the budget process.For example, a planning official in the
                           Office of Fossil Energy told us that his office coordinates with Conser-
                           vation on fossil technology. He believed that aside from this there was
                           not much danger of Fossil R&Doverlapping other R&D within DOE. In addi-
                           tion, an Office of Energy Researchofficial told us that at the request of
                           the assistant secretaries,the Office of Energy Researchroutinely con-
                           ducts evaluations of programs to identify gaps and overlapping research
                           areas. These evaluations are internal and are issued to the assistant sec-
                           retaries for their action.

                       1
                           DOE’S major advisory group for energy R&D was the Energy Research
Role of Advisory           Advisory Board (ERAB). The Board’s role in the allocation processwas to
Groups in Allocating       advise the Secretary on issuesrelating to DDE’S R&D. In this role ERAB
R&D Funds                  issued three reports concerning the priorities for DDE’S R&D. The first
                           report made recommendations for budgetary priorities; however, the
                           secondand third reports did not.

                           The first report, Federal Energy R&DPriorities, was dated November
                           1981. The report evaluated four major energy sectors for overall federal

                           “Biofueis are fuels obtained from living matter, especially plants and plant products. Biofuels
                           involves growing more and better vegetation and converting this vegetation to fuel.



                           Page 13                                      GAO/BCED-3Cb148BB
                                                                                        DOE’sAllocation of R&D Fund8
    Se&on 2
    DOE%Rioritiation   Procew for RAkD
    Rorpun-




    energy R&D priorities for: electric supply, liquid fuels and gas supply,
    conservation and utilization, and scienceand technology base.It con-
    cluded that funding for R&D for electric supply and liquid and gas supply
    technologies was higher than needed,that funding for conservation
    should be increased, and that funding for certain areas of the science
    and technology baseshould be increased. In August 1986, DOE’S Argonne
    National Laboratory issued CaseStudies of DOE Responseto ERABRecom-
    mendations: A Retrospective Analysis which stated the following
    conclusions:
. In scienceand technology base,DOE apparently agreed with ERAB’S      gen-
  eral high priority assessments.
l In electric supply, funding had dropped significantly, especially in areas
  mw assigneda low priority.
. In liquid and gas supply, DOE funding patterns had been in general
  agreement with EFM recommendations.
. In conservation and utilization, EXABhad in general indicated a higher
  priority than was evident in DOE appropriations.

    ERAB’S  February 1983 report, The Federal Role in Energy Researchand
    Development, considered only one criterion, appropriateness of the fed-
    eral role, and evaluated each of DOE’S major energy R&Dprograms
    against this criterion. It contained no specific funding recommendations.
    It categorized the federal role as primary, complementary, or minimal.
    The August 1986 casestudies report concluded that in the years since
    the 1983 report, DOE funding shifted to reflect these role definitions, and
    in fiscal year 1987, the items that ERABranked primary received the
    strongest budget recommendations,while funding for those ERABranked
    minimal had been significantly reduced.

    EXAELS  December 1986 report entitled Guidelines for DOE Long-Term
    Civilian ResearchAnd Development summarized the work of four sub-
    panels that dealt with energy supply, energy demand, energy research,
    and DOE F&Dinfrastructure. ERABrecommendedthree high priority
    national goals to (1) reduce U.S. long-term dependenceon foreign oil; (2)
    assure an adequate supply of economical, safe and environmentally
    acceptableelectric power; and (3) to continue the development of a
    strong national basic sciencebase.ERAB also recommendedthat DOE dra-
    matically upgrade its research and development management
    capabilities.
    The August 1986 casestudies report stated that becauseof the recent-
    ness and complexity of the 1986 ERABreport, an analysis of DOE’s


    P8ge 14                              GAO/BC2ZWWlIIIBB DOE’sAllocation of B&D Funds
section2
DOE’s Prioritbtion   ProcessPorB&D
-Areas




responseswas not possible. Our analysis of the 1985 report showed that
DOE’S responseto the recommendations was mixed. For example, one
specific recommendation was that DOE scale up research in geosciences.
A DOE official told us that an Office of GeoscienceResearchhas been
established within the Office of Fossil Energy. In the area of renewable
energy, ERM stated that certain technologies warrant substantial DOE
support. Funding for renewable energy continued to decline through the
late 1980s.
In the 1986 report, ERAB recommendedthat DOE establish a strategic
planning processas the primary means for determining its R&D goals and
for establishing R&D priorities. However, in its fiscal year 1989 Federal
Managers’ Financial Integrity Act report, DOE stated that it had no com-
prehensive strategy for conducting its energy programs. DOE’S proposed
corrective action is to develop the National Energy Strategy by Decem-
ber 1990. In addition, a DOE Office of Energy Researchofficial told us
that the National Energy Strategy, currently being developed by DOE, is
indirectly carrying out someof the recommendations in the 1985 ERAB
report.
In addition to ERAB,two other groups- the National Petroleum Council
and the National Coal Council-do studies at the Secretary’s request. A
representative of these groups told us that neither Council influences
the process for allocating FUkD funds in DOE.




Page 15                              GAO/RCEDBW4SBB DOE’sAllocation of R&D Funds
Evolution of DOE R&D Priorities From 1980
to 1990

               Although DOE's policy plans did not state specific priority areas for
               energy R&D, requested and actual appropriations clearly show that DOE'S
               priority shifted during the last 10 years toward the Basic Energy
               Researchprogram area and away from research in energy technology
               program areas. In addition, from fiscal year 1983 to 1990, congressional
               appropriations for the energy technology program areas influenced pri-
               orities becausethey were generally greater than DOE requests, although
               not at a level sufficient to maintain the funding levels of fiscal years
               1981 and 1982.

               In examining DOE appropriations, we found that, in actual dollars, fund-
               ing for Basic Energy Researchincreased almost 140 percent from $694.8
               million in fiscal year 1980 to $1.7 billion in fiscal year 1990. The Basic
               Energy Researchprogram area includes research activities in basic
               energy science,high energy physics, nuclear physics, and biological and
               environmental sciences.The research is generally basic in nature, which
               DOE defines as systematic, fundamental study directed toward fuller sci-
               entific knowledge or understanding of subjects bearing on national
               energy needs.

               From fiscal year 1980 to 1990, research and development funding
               decreasedfor the program areas directed toward specific energy tech-
               nologies, which includes Fossil, Nuclear, RenewableEnergy, and Conser-
               vation R.&D.Fossil Energy R&Dfunding decreasedover 60 percent,
               Conservation R&Ddecreased34 percent, and RenewableEnergy F&D
               funding decreasedover 83 percent. Nuclear Energy R&Dfunding also
               decreasedover 68 percent. The research in the energy technology pro-
               gram areas is generally applied and development in nature. DOE defines
               applied research as systematic study directed toward fuller scientific
               knowledge or understanding for direct use in fulfilling specific energy
               requirements. DOE defines development as the development and test of
               systems and pilot plants judged to be technically and economically desir-
               able as a means of achieving principal departmental goals.

               As figure 3.1 shows, the percent change in funding for energy R&D pro-
               grams adjusted for inflation from fiscal year 1980 to fiscal year 1990
               was dramatic.’ In addition, as shown in figure 3.2, Basic Energy
               Research’sshare of total energy R&Dappropriations increased from 16.2
               percent in fiscal year 1980 to 41.2 percent in fiscal year 1990.



               lA~bnents   for inflation are madeto provide a clearercomparisonof appropriationsover time.



               Page 16                                 GAO/RCED&MI(IBp DOE’sAllocation of R&JJFnnda
                                        Section 3
                                        Evolution of DDE B&D F’riorities From 1930
                                        to1990




Figure 3.1: Percent Change in Funding   ,-                   ,-,                           --
for Energy R&D Programs Between 1980
and 1990 (In Constant 1989 Dollars)      100   Pwcwnt

                                         75


                                         “I
                                         25
                                               Ih




                                        Page 17                               GAO/RCED-9!&143BBDOE’sAllocation of R&D Funds
                                             Evolution of DOE B&D Prloritiem From lS80
                                             to1888




Figure 3.2: Chango in Percent of Total for
Enorgy RID Programs From lffl to
1890                                         60Fofcalt




                                                  I      1 FbalYamlORO
                                                          FkQiYlulQW




Basic Energy Research                        actual dollars of almost 149 percent - from $694.8 million in fiscal year
and Supporting                               1980 to $1.7 billion in fiscal year 1990. Adjusting for inflation, this
ResearchActivities                           increase in funding was over 62 percent. Programs included in this cate-
                                             gory are General ScienceResearchand Basic Energy Science.General
                                             scienceactivities consist of three major programs: High Energy Physics,
                                             Nuclear Physics, and the Superconducting Supercollider, all of which
                                             are concernedwith basic research into the fundamental forces of nature.
                                             The Basic Energy Sciencesprogram is responsible for generic, long-range
                                             energy related research in support of both nuclear and nonnuclear
                                             energy technologies. The administration showed its support for these




                                             Page 18                                GAO/BCED-W148BRDOE’sAllocation of B&D Funds
                                         !kction 3
                                         Evolution   of DOE R&D Priorities From 1930
                                         t.01930




                                         areas in budget requests. Figure 3.3 shows the difference in the adminis-
                                         tration’s request and the actual appropriations for these areas from fis-
                                         cal year 1981 to fiscal year 1990.2

Figure 3.3: Requested Venus Actual
Appropriation; for 6aric Energy          1800    Wf#ondM
Research for Fiscal Years 1991 to 1990




                                         Supporting ResearchActivities also fared well with an increase in actual
                                         dollars of over 100 percent, from $191.3 million in fiscal year 1980 to
                                         over $406 million in fiscal year 1990. Ac@sted for inflation, the increase
                                         was about 36 percent. Supporting ResearchActivities include such areas
                                         as biological and environmental research, university research support,
                                         and multiprogram energy laboratories facility support. Biological and
                                         environmental research, which seeksto develop the knowledge neces-
                                         sary to identify, understand, and anticipate the long-term health and
                                         environmental consequencesof energy use and development, receives
                                         the largest proportion of the funds.


                                         ‘For requested versus actual appropriations, the years 1981 to 1990 are used becau.w (If I hc*unavail-
                                         ability of earlier data.



                                         Page 19                                     GAO/lUXMO-143BR DOE’sAllocation             of R&D Funds
                      section3
                      Bvolutlon of DOE B&D Prloritiea From 1930
                      to1990




                      Funding in actual year dollars for magnetic fusion, which seeksto estab-
                      lish the scientific and technological base required for the production of
                      magnetic fusion energy, was $360.3 million in fiscal year 1980 and
                      $320.3 million in fiscal year 1990-a decreaseof 8.6 percent. However,
                      adjusted for inflation, funding decreasedalmost 42 percent. Between
                      1980 and 1990, funding rose to a high of $468.4 million in fiscal year
                      1984. The difference in requested and actual appropriations ranged
                      from 12.6 percent less than requested in fiscal year 1986 to 3.2 percent
                      more than requested in fiscal year 1983.

                      Specific energy technologies include nuclear, fossil, conservation, and
Energy Technologies   renewables R&II.Following administration policy of funding only long-
                      term, high-risk research, total funding in these areas, in actual dollars,
                      declined about 46 percent from $3.1 billion in fiscal year 1980 to $1.6
                      billion in fiscal year 1990. Adjusted for inflation, the decline was almost
                      66 percent.


Nuclear Energy R&D    Funding for Nuclear Energy R&D,in actual dollars, declined 68 percent
                      from $1.1 billion in fiscal year 1980 to $341.8 million in fiscal year 1990.
                      Adjusted for inflation, the decline was almost 80 percent. During this
                      period funding for developing the Clinch River breeder reactor was ter-
                      minated. Nuclear Energy FUDincludes research in, among other things,
                      light water reactors, advanced reactors, and nuclear facilities. The Light
                      Water Reactor program supports industry-led efforts to revitalize and
                      advance the light water reactor technology. The Advanced Reactor
                      Researchand Development program supports development of highly
                      innovative reactor systems with the potential for breakthroughs in eco-
                      nomics, safety, licensability, and waste managementoptions. Nuclear
                      energy facilities are to provide safe, reliable, and economical testing
                      capabilities for the development and verification of nuclear power sys-
                      tems for space and defensepower systems and civilian applications.
                      After fiial year 1983, requested funds ranged within less than 1 per-
                      cent to about 16 percent of actual appropriations. Figure 3.4 shows this
                      difference in dollars, The difference in actual versus requested appro-
                      priations for fiscal years 1981 and 1982 was attributable to funding for
                      the breeder reactor program.




                      Page20                                GAO/BCEM@l43BR DOE’sAllocation of B&D Funds
                                        Section 3
                                        Evolution of DOE R&D Priorities From 1980
                                        tO1930




Figure 3.4: Requested Versus Actual
Appropriations for Nuclear Energy R&D   9oo
for Fiscal Years MS1 to 1990

                                        800




Fossil Energy R&D                       Fundmg for Fossil R&Ddeclined 61 percent in actual dollars from $847.4
                                        million in fiscal year 1980 to $418.3 million in fiscal year 1990, not
                                        including Clean Coal Technology.3Adjusted for inflation, funding
                                        declined almost 69 percent. Coal research programs supported R&D on
                                        technologies to expand coal utilization in an environmentally sound
                                        manner. Petroleum research concentrateson enhancedrecovery of light
                                        and heavy oils. The Gas program assiststhe private sector in developing
                                        cost-effective diagnostic and extraction technologies which are required
                                        to produce gas efficiently and economically from unconventional gas
                                        resources.Funding in each area of Fossil R&D declined as shown in table
                                        3.1.


                                        %lean Coal Technology was funded at $1.2 billion from fmaJ year 1986 to 1990. These funds are
                                        separate from Fossil Energy’s Coal program funds. The Clean Coal Technology program provides
                                        financial assistance to industry to demonstrate the commercial applications of emerging technologies
                                        that would enhance the use of coal but in both a more efficient and environmentally acceptable
                                        manner.



                                        Page 21                                     GAO/RCEM@143BR DOE’sAllocation of R&D Funds
                                          Section3
                                          Bvolution of DOE B&D Priorities From 1980
                                          to1990




Table 3.1: Change in Foaell R&D Funding
From Fiscal Yews 1990 to 1990             Actual year dollars in millions
                                                                                                                                          Percent
                                          Program                                                          1980             1990          change
                                          Coal                                                           $754.9            $275.3            -63.5
                                          Gas                                                              30.7              14.4            -53.1
                                          Petroleum                                                        61.7              39.9            -35.3
                                          Other Fossil                                                            a          88.7
                                          aAppropriatiins   for “Other Fossil” in fiscal year l%O were included under the coal, petroleum, and gas
                                          programs.


                                          As shown in figure 3.6, from fiscal years 1983 through 1990, DOE
                                          requests were less than actual appropriations for Fossil R&D.These
                                          requested budgets reflected DOE’s policy that it would withdraw federal
                                          support from near-term development and demonstration programs
                                          which could and should be carried forward by private industry. DOE
                                          stated that government research funding could then be directed toward
                                          solving fundamental problems and toward generic research in such
                                          areas as advanced coal cleaning, coal conversion, and enhancedoil
                                          recovery.




                                          P8ge 22                                        GAO/BCBDdW14SBBDOE’s Allocation of 6                Funds
                                           Section 3
                                           Evolution of DOE R&D Priorities From 1980
                                           to1990




Figure 3.5: Requested Versus Actual
Appropriations for Fossil Energy RID for
Fiscal Years 1991 to 1990                  Yii4bm of Ddlan
                                           1600
                                           1600
                                           1400
                                           1300
                                           1200




Conservation R&D                           Conservation R&D’S budget in actual dollars decreasedover 34 percent
                                           from fiscal year 1980 to fiscal year 1990. Adjusted for inflation, Conser-
                                           vation’s R&Dbudget decreasedover 58 percent. Conservation R&D
                                           includes buildings and community systems, industry, transportation,
                                           and multi-sector. The Buildings and Community Systemsprogram sup-
                                           ports generic research in building systems, with the goal of encouraging
                                           optimal energy use in new and retrofitted structures. The Industry pro-
                                           gram supports research and development of technologies in such areas
                                           as waste energy reduction and improved processefficiency which have
                                           the potential to increase energy use efficiency in private industry. The
                                           Transportation program focuseson research to improve the energy effi-
                                           ciency of vehicle systems. The Multi-Sector program supports basic
                                           research and exploratory development of new conceptsthat offer
                                           increased efficiencies in energy conversion and utilization. Table 3.2
                                           shows the decreasefor each area funded under Conservation R&D.




                                           P8ge 23                              GAO/RCEMN&l48BR DOE’sAllocation of R&D Funds
                                         Section 3
                                         Bvolution of DOE B&D Priorities From lI#)o
                                         t.01920




Table 3.2: Change in Conservation RID
Fundfng From Fiscal Years 1990 to 1990   Actual year dollars in millions
                                                                                                                    Percent
                                         Program                                             1990        1990       change
                                         Transportation                                    $113.4       $65.0         -42.7
                                         industrial                                          60.2        50.9         -15.4
                                         Buildings and Community Systems                    104.4        38.8         -62.8
                                         Multi-Sector                                        16.8        36.0          114.3


                                         As shown in figure 3.6, Conservation R&Drequested budgets were less
                                         than actual budgets for fiscal years 1983 through 1990. For fiscal year
                                         1983, the requested budget for Transportation, Industrial, and Buildings
                                         and Community Systems was zero, which was in keeping with the previ-
                                         ous administration’s policy to withdraw support from technology pro-
                                         grams where sufficient market incentives existed, i.e., consumer
                                         products, advanced automotive engine development, demonstration of
                                         electric and hybrid vehicles, and industrial processefficiency. Although
                                         funds were appropriated for these areas, the funding was at reduced
                                         levels from fiscal years 1981 to 1982.




                                         Page 24                                GAO/BCEb8M48BB DOE’sA&x&ion     of B&D Funds
                                          Section 3
                                          Evolution of DOE B&D Priorities From 1939
                                          to 1999




Figure 3.6: Requested Versus Actual
Appropriations for Conservation RID for
Fiscal Ybars 1961 to 1990                 350

                                          200




Solar and Renewable                       The budget for Solar and RenewableEnergy R&Ddecreasedin actual dol-
Energy R&D                                lars over 83 percent from 1980 to 1990. The Solar Energy program sup-
                                          ports generic and long-range research in photovoltaics, biofuels, wind,
                                          solar thermal and solar building technologies. RenewableEnergy UD
                                          includes geothermal, electric energy systems, and electric storage sys-
                                          tems. Geothermal Energy research programs support research in energy
                                          from geothermal resources.Electric energy systems directs research
                                          toward solving mid- to long-term problems in electric energy transmis-
                                          sion and distribution and integrating renewable energy resourcesinto
                                          the utility network. Energy storage systems supports generic research
                                          into electrochemistry and applied battery research into a variety of spe-
                                          cific battery types. Table 3.3 shows the decreasein funding from 1980
                                          to 1990 for Solar and RenewableEnergy R&D.




                                          Page 25                              GAO/BCED&H48BR DOE’sAllocation of B&D Funds
                                      JZvolntion of DOE It&D Rioritie~ Ram 1980
                                      t019SO




Table 3.3: Change in Solar and
Renewable Energy R&D Funding From     Actual year dollars in millions
Fiscal Yoan 1990 to 1990                                                                                        Percent
                                      Program                                           1990        1990        chanae
                                      Solar Enemy                                      $559.2       $89.7         -843
                                      Renewables                                        273.5        48.0         -82.5


                                      As shown in figure 3.7, from fiscal year 1983 to 1990, except for fiscal
                                      year 1986, requested funds were consistently less than actual appropri-
                                      ations, which was in keeping with the previous administration’s policy
                                      that the overall objective of the Solar and Renewableprograms was to
                                      contribute scientific and engineering knowledge to the renewable energy
                                      technology baseso that industry could develop systems for transform-
                                      ing renewable resourcesinto energy forms suitable for widespread
                                      application.

Figure 3.1: Requested Vereur Actual
Approprhtions for Renewebb Energy
RID for Fiwrl Years1991 to 1990       la0    wMmlsdDo(fm




                                      P8ge 26                               GAO/Rc’0MM48BR DOE%Auoution     of R&D Funds
Distribution of Basic,Applied, and
DevelopmentalResearch

                                    From fiscal year I980 through 1990, DOE’S civilian energy R&D funds for
                                    basic research have generally increased while funds for applied
                                    research have increased slightly and funds for development have gener-
                                    ally decreasedsignificantly. l Figure 4.1 shows these changes.In addi-
                                    tion, as shown in figures 4.2 and 4.3, basic research’sshare of the R&D
                                    pie has grown from 13 percent in fiscal year 1980 to 39 percent in fiscal
                                    year 1990. At the sametime, from fiscal year 1980 to 1990, the Office of
                                    DefensePrograms applied research budget increased 88.9 percent from
                                    $178.2 million to $336.7 million and its development budget increased
                                    124.4 percent from $713.6 million to $1.6 billion.

Figure 4.1: Funding for Basic and
Applied Reuarch and Development
From Fiscal Years 1990 to 1990      3000   Dotbn In YIIW




                                    ‘All funds are in actual dollars.



                                    Page 27                             GAO/XED-R%148BR DOE’sAllocation of RBD Fun&
                                          Se&on   4
                                          Dlstrlbutlon of MC, Applied, aud
                                          Developmental Besearch




Figure 4.2: Percent of Total Energy R&D
BudBet for Basic, Applied, and
Development-Fiscal     Year 1900




Figure 4.3: Percent of Total Energy R&D
Budget for Be&c, Applfed, and
Development-Fisoal     Veer 1990                                                    Development




                                          DOE’S total  civilian basic research budget from fiscal year 1980 through
Basic Research                            1990 was $10.4 billion. As shown in figure 4.4, from 1980 to 1990, DOE’S
                                          total basic research budget increased i86.S percent, from $622.4 million
                                          to $1.5 billion, due in large part to a 173~percentincrease in the Office of
                                          Energy Research’s(OER)budget. Figure 4.6 shows a breakout of the total
                                          basic research budget by program area.



                                          Page 28                            GAO/BCBD-W14SBBDOE’sAllocation of B&D Funds
                                             Section 4
                                             Distribution of Basic, Applied, and
                                             Developmental Research




                .-,_- ,. ,,
Figure 4.4: Bask Research Budget for flual    Yban ISa0 Through 1990
15m    Dollsn in Millions
1400
1300
1200
1100
1000
 ooo
 SW
 700
 so0
 so0
 400
 200
 #w)
 100
   0
               L            L
       1900        lsm          lm2
       FbdYSUS



figure 4.5: Program Area Share of Bark
Rewarch Budget-Fiscal     Years 19W
Through 1990




                                              \                 95.7% -             -      Energy Research




                                             Page 29                               GAO/ICED-W149BR DOE’sAllacation   of f&D   Funds
Office of Energy Research From fiscal year 1980 through 1990, OERreceived an averageof 96.7
                                    percent of DOE’s basic research money. These funds have been concen-
                                    trated in High Energy Physics, Nuclear Physics, and Basic Energy Sci-
                                    encesprograms. OERreceived a total budget of $9.9 billion during this
                                    period, of which $3.9 billion was for High Energy Physics, $3.5 billion
                                    was for Basic Energy Sciences,and $1.6 billion was for Nuclear Physics.
                                    As shown in figure 4.6, the Office of Energy Research’sbasic research
                                    budget has increased 173 percent from $619.8 million in fiscal year 1980
                                    to $1.4 billion in fiscal year 1990. This increase was due to a steady rise
                                    in funding for High Energy Physics, Nuclear Physics, and Basic Energy
                                    Sciences.

Flgum 4.& Oflko of Enorgy Raaowch
mnicRo8ufchBudget
                                    lsw    DdlnhYlonr
                                    1400
                                    lsQ0
                                    1200
                                    1100
                                    loo0
                                     900
                                     ow
                                     7m
                                     coo
                                     500
                                     400
                                     a00
                                     200
                                     100
                                       0




Office of Fossil Energy             The Office of FossiI Energy received an average of 3.2 percent of DOE’S
                                    basic research budget from fiscal year 1980 through 1990. Its budget
                                    increased from $.6 miIIion in fiscal year 1980 to $62.8 million in fiscal
                                    year 1990, an ahnost 106-fold increase, due to increasesin the Coal pro-
                                    gram. Of Fossil’s total basic research budget from fiscal year 1980 to
                                    1989 of $300.9 million, $266.2 million was concentrated in the Coal
                                    prOgI-aIll.
                                    *Data for fiscal year 1990was not brokenout for the Coalpmgram.



                                    P4e 80                                  GAO/BCEDU%l4SBRDOE’sAllocation of R&D F’unds
                            Section 4
                            Distxllmtion of B&c, Applied, and
                            Developmental Beaearch




Offices of Nuclear Energy   From fiscal year 1980 through 1990, the Offices of Nuclear Energy and
and Conservation and        Conservation and Renewablesreceived an average total of 1.1 percent of
                            DOE'S basic research budget. Nuclear Energy’s budget dropped from $2.0
Renewables                  million in fiscal year 1980 to $0 in fiscal year 1986 and has remained at
                            $0 through 1990. Renewablesincreased from $0 in fiscal year 1980 to
                            $21.5 million in fiscal year 1986 and generally remained steady until it
                            dropped to $14.8 million in fiscal year 1990. Conservation R&D received
                            no basic research money from fiscal year 1980 through 1990.


Applied Research            through 1990 was $9.2 billion. As shown by figures 4.7 and 4.8, DOE'S
                            total civilian applied research budget fluctuated. It increased 109.8 per-
                            cent from fiscal year 1980 to 1983 mainly becauseof increasesin OER'S
                            Magnetic Fusion program and Fossil Energy’s Coal program. In addition,
                            Nuclear Energy’s Naval Reactorsapplied research program was funded
                            only in fiscal years 1983 and 1986 which resulted in a decreasein
                            applied research in general of 23.9 percent in fiscal year 1984 and an
                            increase of 47.3 percent in fiscal year 1986. Applied research funding
                            decreased50.3 percent from fiscal year 1986 to 1990 primarily because
                            of decreasesin OER’S   Magnetic Fusion program and in Renewable
                            Energy’s Solar Energy program. Figure 4.9 shows a break out of the
                            applied research budget by program area.




                            Page 91                             GAO/BCED-W14BBRDOE’sAllocation of B&D Funds
                                      Section4
                                      Distdlmtlon of Basic, Applied, and
                                      Developmental Recleuch




Ffguro 4.1: Appllad Roamarch budgat
1400 DobminYUlbtm
1300                                   r
1200
1100
1000

 w
  w

 I#)
                            r
 600
 500
 400
 am
200
 loo
   0




                                      Pye 82                               GAO/BCBMO-148BB DOE’sAllocation of B&D Punds
                                          Section 4
                                          Distribution of Basic, Applied, and
                                          Developmental Besearch




Figure 4.8: Applied Research Fundlng by                                         - -..                       ,,,,.
Program Area
                                          200 DaUusInNMlom



                                          IS0




                                          100




                                           50




                                            0




                                                -       FomilEnaqy
                                                mm-1    NudauEtwgy
                                                M       canswaual
                                                nnnn    Rsnsw8blm




                                          Page 33                                       GAO/WBD-B&148BRDOE’sAllocation of B&D Funds
Flgun 4.9: Program ha   shue d   --.--          ,-     ~. -,.   ,~--              - ,.--   ---
m--@-v-
1mThmugh      1#8
                                                                                           69%
                                                                                           Nudoar Energy
                                                                                           5.7%
                                                                                           conoervatiotl




                                                                                            Food Energy
                                 Note: Applii        budget totals 99% due to rounding.


Office of Energy Research The Office of Energy Researchreceived an averageof 66.2 percent of
                                 DOE’S applied research money from fiscal year 1980 through 1990. OER'S
                                 applied research budget increased 63.8 percent from fiscal year 1980 to
                                 1984 from $351.4 million to $640.6 million and decreased33.3 percent
                                 from fiscal year 1986 to 1900 from $621.1 million to $347.7 million.
                                 F’rom fiscal year 1980 through 1990, $1.6 billion of OER’Sapplied
                                 research budget of $4.9 billion was concentrated in biological and envi-
                                 ronmental research and $3.3 billion was in magnetic fusion.


Office of Conservation and F’rom fiscal year 1980 through 1990, the Office of Conservation and
                           Renewablesreceived an average of 19.4 percent of DOE'S applied
Renewables                 research funds. Renewablesmade up 13.7 percent of the applied
                                 research budget, with the Solar program accounting for an average of
                                 ahno& 76 percent of the Renewable&budget from fiial year 1980 to
                                 1000. bnservation RBDmade up an average of 6.7 percent of the
                                 applied research budget from fiscal year 1980 to 1990. In fiscal years



                                 P-84                                               GAO/EEDS@l48BR DOE’sAllocation   of R&D F’unds
                           Section 4
                           Distribution of B&c, Applied, and
                           Developmental Research




                           1981 and 1985, the office’s total applied research budget peaked prima-
                           rily due to an increase in Solar Energy program funding. From fiscal
                           year 1986 to 1990, the office’s total budget decreased31.1 percent pri-
                           marily becauseof decreasesin the Solar Energy program.


Office of Fossil Energy    The Office of Fossil Energy received an average of 17.4 percent of DOE'S
                           applied research money from fiscal year 1980 through 1990. Fossil’s
                           budget increased 146.5 percent from $76.2 million in fiscal year 1980 to
                           $187.1 million in fiscal year 1986. Fossil’s budget then decreased36.6
                           percent to $120.4 million in 1987. From fiscal year 1988 to 1990, Fossil’s
                           budget increased 33.9 percent from $129.2 million to $173 million. From
                           fiscal year 1980 to 1989,82 percent of Fossil’s research budget was con-
                           centrated in the Coal program.3


Office of Nuclear Energy   From fiscal year 1980 through 1990, the Office of Nuclear Energy
                           received an average of 6.9 percent of DOE'S applied research budget. This
                           average reflects the fact that from 1987 to 1990 the Office of Nuclear
                           Energy received no applied research money. Nuclear Energy received a
                           total of $885.2 million in applied funds of which $732.2 million was for
                           naval reactors.

                           DOE'S  total civilian development budget from fiscal years 1980 through
Development                1990 was $17.1 billion. DOE'S total development budget decreased72.9
                           percent from $2.8 billion in fiscal year 1980 to $760.9 million for fiscal
                           year 1986. As illustrated in figure 4.10, these decreasesare attributable
                           largely to decreasesin the Conservation and Renewables,Fossil, and
                           Nuclear Energy program areas. From fiscal year 1986 to 1990, the
                           development budget increased 126.1 percent from $760.9 million to $1.7
                           billion. The increasesoccurred in Fossil’s Clean Coal Technology pro-
                           gram and Nuclear Energy’s Naval Reactorsprogram.




                           %ata for fiial   year 1990 was not broken out for the Coal program.



                           P8ge35                                      GAO/EED-9&146Blt DOE's Allocation of R&D Funda
                                    Dbt.rhtlon  of MC, Applied, and
                                    Developmental Besear&




Flgure 4.10: Development Research
Funding by Program Area
                                    1400      Dolkn   In Yillhm
                                    1300
                                    1200
                                           l mmmm'l mmmm**%
                                                                     %A




                                     wo
                                     500
                                     400
                                     SW
                                     200
                                     100
                                       0

                                       lolo                   1912        l@M           lW#             lS80             1HO
                                       Flaal Yam




                                    Development research generally had the highest total research budget
                                    from fiscal year 1980 to 1990. Figure 4.11 shows a breakout of the total
                                    development budget by program area.




                                    P8ge iM                                 GAO/WED-gthl4tJBR   DOE’s Allocation of B&D Funds
                                     Section 4
                                     Distribution of Basic, Applied, and
                                     Developmental Research




Figure 4.11: Program Area Sham of
Development Research Budget-Fiscal
Yearn 1980 Through 1990

                                                                                  Fossil Energy




                                                                                  Nuclear Energy




                                                                                  .6%
                                                                                  Energy Research
                                                                                  7.1%
                                                                                  Conservation



Office of Nuclear Energy             From fiscal year 1980 through 1990, the Office of Nuclear Energy
                                     received an averageof 66.6 percent of DOE'S development budget.
                                     Nuclear Energy’s budget decreased22.5 percent from $1.2 billion in
                                     1980 to $952.6 million in 1990. This can be attributed to a 58.1-percent
                                     decreasein the Nuclear Energy R&D program and a 100~percentdecrease
                                     in the Remedial Action and WasteTechnology program.


Office of Conservation and           The Office of Conservation and Renewablesreceived an average of 15.8
                                     percent of DOE’S development funds from fiscal year 1980 through 1990.
Renewables                           RenewablesR&Daccounted for an average of 8.6 percent of the develop
                                     ment budget, and Conservation R&D accounted for an average of 7.1 per-
                                     cent of the development budget. From fiscal year 1980 to 1989, the
                                     Office of Conservation and Renewables’budget dropped 88.5 percent
                                     from $860.1 million to $99.1 million. This was attributable to a 7 1.2-
                                     percent reduction in Conservation R&Dfrom $262.1 million to $75.6 mil-
                                     lion, a 92.7~percentreduction in the Geothermal program, and a 98.8-


                                     Page 37                               GAO/RCBD-W14SBRDOE’sAllocation of R&D F’unda
                                section 4
                                D&trlbntlon of Basic, Applied, and
                                Developmental   lbmearch




                                percent reduction in the Solar Energy program. In fiscal year 1990 the
                                Office of Conservation and Renewablesbudget increased39.2 percent
                                from 1989 due to a 43.9~percentincrease in the Conservation R&D
                                program.


Office of Fossil Energy         The Office of Fossil Energy received an average of 17.1 percent of DOE’S
                                development funds from fiscal year 1980 through 1990. From fiscal
                                year 1980 to 1986, Fossil Energy’s total development budget decreased
                                89.2 percent from $652.1 million to $70.2 million. This was primarily
                                due to a decreasein the Coal program from $679.1 million to $60.1 mil-
                                lion. However, from fiscal year 1986 to 1990, Fossil’s budget increased
                                288 percent from $161.8 million to $628.4 million, primarily due to the
                                Clean Coal Technology program which was first funded in 1986.


Office of Energy Research The Office of Energy Researchreceived an average of .6 percent of the
                                 development budget. From fiscal year 1980 to 1990, the budget
                                 decreased97.9 percent from $61.1 million to $1.3 million due to the
                                 elimination of development funding for the Magnetic Fusion program
                                 from 1982 to 1990.




                                 P8ge 38                             GAO/BcED8014SBR DOE%Allocation of R&D Funds
Section 5

DOE’sMajor Demonstration Projects


                                        From the mid-1970s through 1990, DOE invested a total of $6.0 billion in
                                        major demonstration projects.’ Demonstration projects are defined as
                                        the evaluation and verification of large scale energy systems in opera-
                                        tional circumstances for their commercial application. Table 5.1 summa-
                                        rizes the number, cost, and status of DOE’S major demonstration projects
                                        by program area. Seeappendix I for a detailed list of the major demon-
                                        stration projects.
Table 5.1: Summary by Program Area of
DOE Major Demonstration Project         Dollars   in millions
ACtiVity                                                               Projects               Projects               Projects
                                                                     terminated              completed               ongoing
                                        Program                     No.    Amount           No.   Amount           No.   Amount                  Total
                                        Conservation                   3a      $115.1         2b      $151.4                                 $266.5
                                        Nuclear                        1C     1 .&lo.0                                1       $949.3        2549.3
                                        Fossil                         9d       495.4         7e      2,213.0                               2,708.4
                                        Clean Coal                     2'          4.2                               16        486.7          490.99
                                        Total                        15     $2,214.7          9     $2364.4          17    $1,436.0       $6,015.1
                                        aA Conservation official defined a terminated project as a project that was aborted, usually wlthout fully
                                        achieving its goals and objectives. The Wind Energy Demonstration - Field Evaluation Program was
                                        terminated because of the prior administration’s policies. The Heber and Baca Geothermal Demonstra-
                                        tion Projects were terminated because of production problems.
                                        bA Conservation program official defined a completed project as a project that was continued to Its
                                        planned completion date.

                                        CThe Clinch River Breeder Reactor was terminated by the Congress in fiscal year 1984
                                        dA Fossil Energy official defined a terminated demonstration project as a project that IS stopped
                                        because of a change in level of appropriations available, mission need, program objectlves or project
                                        goals or unsatisfactory performance towards established goals. Two Coal Llquefactlon and seven Sur-
                                        face Coal Gasification Projects were terminated prior to construction because of the pnor admlnlstra-
                                        tion’s policies.
                                        eA Fossil Energy official defined a completed demonstration project as the design, construction. testing.
                                        operation and evaluation of nearer to full scale modules under conditions more approxlmatlng commer-
                                        cial permitting and operations.

                                        ‘The Underground Coal Gasification Project and the Advanced Coal Gasification Combined Cycle Power
                                        Generation Plant were terminated because industry sponsors were unable to obtain flnanclng The Indi-
                                        cated funding was obligated, but no additional funds will be spent.

                                        QThis total does not include the eight clean coal projects under negotiation, totaling $252 1 mtlllon.




                                        ‘This total does not include eight clean coal projects which are under negotiation as (1t’ t‘t+ I 1, 1990.



                                        Page 39                                          GAO/RCBD-9@14SBR DOE’s Allocation of R&D Funds
Section 6                                                                                .
Objective,Scope,and Methodology


              The objective of this assignment was to determine how DOE allocates
              applied R&D funds. We were asked specifically:
              (1) How does DOE prioritize funding requests among the various research
              and development areas?What are the underlying criteria and philoso-
              phy for such decisions?(Seesection 2.)

              (2) To what extent does DOE coordinate its R&CD agenda among participat-
              ing internal DOE organizations? (Seesection 2.)
              (3) What role, if any, do the Office of Management and Budget and the
              various advisory groups play in allocating funds among DOE research
              programs? (Seesection 2.)

              (4) How have DOE priorities evolved over the past 10 years? (See
              section 3.)
              (6) How has the overall DOE funding for R&Dbeen distributed between
              fundamental or basic research and applied or project oriented research,
              development and demonstration? In energy IUD has there been a change
              in emphasis from applied R&D to basic research over the past decade?
              (Seesection 4.)
              (6) How much has DOE invested in major demonstration projects over the
              past 10 years? How many of these projects have been terminated before
              completion, and what was the basis or criteria for the termination? (See
              section 5.)

              To answer these questions, we spoke with cognizant agency officials in
              DOE's budget office and assistant secretary-level offices to determine
              their processesfor planning and allocating energy R&Dfunds for the
              period 1980 to 1990. In addition, we obtained pertinent DOE orders and
              memoranda concerning the allocation process.We also examined DOE
              policy plans for the years in which they were available-1981,1983,
              1985, and 1987-to determine what guidance DOE issued on its priorities
              for energy R&n.DOE also provided appropriation history data for its R&D
              programs which we used to determine trends in research areas over the
              period fiscal year 1980 to 1990. Becauseof time constraints, we did not
              verify this data. To provide a clearer comparison of appropriations over
              time, we adjusted the dollar amounts to account for the effects of infla-
              tion. We also spoke with OMBofficials concerning their role in the alloca-
              tion processand obtained OMB guidance on the energy F&Dbudget
              process.We spoke with the executive director of the Energy Research
section 6
Objective,   Scope,and Methodology




Advisory Board and a representative of the National Petroleum Council
and the National Coal Council to determine what role they play in the
R&D allocation process.We also examined 1981, 1983, and 1985 EFIAB
reports for their recommendations on the allocation of R&D funds. For
the 1985 report we analyzed several recommendations for DOE actions.
We did not analyze every recommendation due to time constraints and
the voluminous nature of the ERAE!report.

DOE provided  data on the distribution of funds for basic, applied, and
development research for the period 1980 to 1990 by program office.
The data for 1980 to 1989 was dated January 1989 and the 1990 data
was dated January 1990. Due to time constraints, we did not indepen-
dently verify the data.

We conducted our review from September 1989 to February 1990 in
accordancewith generally acceptedgovernment auditing standards.

We discussedthe draft report with cognizant DOE officials. They gener-
ally agreed with its contents.




Page 41                              GAO/RCEDBl%148BBDOE’sAllocation of B&D Funds
Appendix I                                                                                                                                        .

DOE Major Demonstration Projects


Dollars in millions
                                       -w-date’          Statuab                                  B8sis for termination
                                                                                                                                          DOE
                                                                                                                                          cost
prognm ~WPI-
conauvrtion
Heber Geothermal Demonstration                           Terminated. Negotiations in              Insufficient reservoir production.
  Project                                                pro ress to sell-plant which will
                                               9/80      lea lY to government recuperation of
                                               7/87      part of its investment.                                                          $64.5
BaPyoG=.thermal       Demonstration                      Terminated by DOE, UNOCAL, and           Only one half of the necessary
     -1---
                                                         Public Service of New Mexico. DOE        steam was available from the
                                               9 8       awaitin final payments from              drilled wells.
                                               1bi 2     powerp Bant equipment sales.                                                     $47.0
Barstow Solar Thermal                          9/77      Completed.                               c
   Demonstration Project                       9188                                                                                     $140.0
Field Evaluation Program Wind                  197:      Terminated. Reports published.            Prior administration’s   policy.
   Energy Demonstration Project                                                                                                            $3.6
Sl\;iey       Diesel Cogeneration              9/79      Completed. Four major units sold          c
                                               6f04      and operating.                                                                   $11.4
NUC1.W
Clinn;tvar    Breeder Reactor               1973         Terminated.                               Congress eliminated funding.
                                         FY 1984                                                                                       $1,600.0
Atomic Vapor Laser Isotope                               Ongoing.                                  c
  Separation Program                           1972                                                                                     $949.3
Foaoil
Solvent Refined Coal Demo Plant I     3rdF$u$;;          Terminated prior to construction.         Prior administration’s   policy.

                                               El&l                                                                                      $190.7
Solvent Refined Coal Demo Plant II    3rdFygrt;          Terminated prior to construction.         Prior administration’s   policy.
                                               ._._
                                             7/8t                                                                                         $70.8
High BTU “A”                                lo/75        Terminated prior to construction.         Prior administration’s   policy.
                                              7/81                                                                                        $53.7
High BTU “B”                                lo/15        Terminated prior to construction.         Prior administration’s   policy.
                                             7181                                                                                         $77.8
Low/Med BTU Fuel Gas Industrial           FY 1976        Terminated prior to construction.         Prior administration’s   policy.
                                               v83                                                                                        $11.7
Low/Med Industrial BTU “A”                FY 1976        Terminated prior to construction.         Prior administration’s   policy.
                                             7101                                                                                         $65.6
Low-BTU Fuel Gas Utility                     !3$:        Terminated prior to construction.         Prior administration’s   policy.
                                                                                                                                           $7.8
Low-BTU Fuel Gas-Small Industry           ;;   1;;;      Terminated prior to construction.         Prior administration’s   policy.
                                                                                                                                          $17.3
Low-BTU Fuel Gas -Utility B               ;; ;99;        Terminated prior to construction.         Prior administration’s   policy.          Not
                                                                                                                                       available
Ft. Lewis Pilot Plant                                    Completed. No Ion er needed to
                                          FY 1975        support Solvent Re9n‘ned Coal
                                             7/81        demonstration project.                                                           $20.0




                                               P8ge 42                                       GAO/BCBD-W14SBRDOE’sAllocation of B&D Funds
                                         -1
                                         DOE Major Demonstration        Project8




Progmm area/project                   -g..!        Stetusb                               Basis for termination
                                                                                                                               DOE
                                                                                                                               cost
H-Coal Pilot Plant                                 Completed. Successfully               c
                                         12/77     demonstrated plant operability
                                          9/82     using ILL. #6 and Wyodak Coal.                                            $277.9
EXXON Donor Solvent Pilot Plant                    Completed. Successfully               c
                                          l/76     demonstrated plant operability with
                                         12105     3 coals.                                                                  $163.3
Methanol Conversion Pilot Plant           3/80     Completed. Operation successfully     c
                                          3/86     completed, plant dismantled.                                               $11.2
BI-Gas Pilot Plant                     FY 1972     Completed. General Services           c
                                         12/82     Administration sold facility.                                             $113.6
HY-Gas Pilot Plant                                 Completed. Turned over to Institute   c
                                          7/77     of Gas Technology, then
                                         12180     mothballed.                                                                $72.1
Gr;;Jjzins   Coal Gasification                     Completed. Sponsors defaulted on      c
                                                    overnment loan guarantee.
                                       FY 1982     8 overnment operated plant until
                                         10188     sold 10/31/80.                                                          $1555.0
Clean coal woamm
Round 1
Pressurized Fluidized Bed                          Ongoing.                              c
   Cornbuster                             2107                                                                                $60.2
Circizting Atmospheric Fluidized                   Ongoing.                              c
                                          8188                                                                                $19.9
Circ;id$ing Atmospheric   Fluidized                Under negotiation.                    c
                                                                                                                              $65.0
Underground Coal Gasification                      Terminated.                           Energy lntl could not obtain
                                                                                         financing?                             $3.3
Integrated Gasification Combined                   Terminated.                           M.W. Kellogg could not obtain
   Cycle                                                                                 financing.e                             $.9
Liru;z     Injection Multistage                    Ongoing.                              c
                                          6107                                                                                  $7.6
Advanced Cyclone Combuster                2107     Ongoing.                              c                                       S.5
Gas Reburning and Sorbent                          Ongoing.                              c
  Injection                               7187                                                                                 $14.9
Prototype Commercial Coal/Oil Co-                  Ongoing.                              c
  Processing Plant                       12/87                                                                                 $45.0
Advanced Slagging Combustor              1 l/88    Ongoing.                              c                                     $23.5
Advanced Coal Cleaning Process                     Under negotiation.                    c                                     $28.0
Advanced Coal Cleaning Process                     Under negotiation.                    c                                      $7.7
Round 2
Integrated Gasification Combined                   Under negotiation.                    c
   Cycle Repowering                                                                                                           $129.4
Philip S rn Pressurized Fluidized-                 Ongoing.                              c
   Bed l?ombustor                         4190                                                                                $184.8
                                         12189     Ongoing.                              c                                     $15.7
WSA-SNOX Flue Cleaning Demo.
Sox-Nox-Rex-Box Flue Gas                           Ongoing.                              c
  Cleaning Demo.                         12189                                                                                   $4.9
                                                                                                                         (continued)




                                         P8ge 43                                   GAO/RCED@l4SBE      DOE% Allocation of R&D Funda
                                      **I
                                      DOE Mqjoc Demomtmtion          ProJecta




                                  Start/end                                                                                            DOE
Progmm area/project                    date     Statusb                                     Barir for termination                      cost
LN&;i;fer   for Cyclone Fired                   Under negotiation.                          c
                                                                                                                                        $6.8
CT 121 Flue Gas Disulfurization        4190     Ongoing.                                    c                                          $17.5
Advanced On-site Flue Gas                       Ongoing.                                    c
  Disulfurization                     12189                                                                                            $63.4
Limestone Scrubber Cement Kiln                  Ongoing.                                    c
  Gas Cleaning                        12189                                                                                             $4.8
Coke Oven Gas Cleaning                1l/09     Ongoing.                                    c                                          $13.5
Otisca Fuel Demo Project                        Under negotiation.                          c                                           $3.5
Advanced Wall-Fired Combustion        12189     Ongoing.                                    c                                           $5.2
Selective Catalytic Reduction                   Under negotiation.                          c                                           $7.5
Advanced Tang.-Fired Combustion                 Under negotiation.                          c                                           $4.2
Coa&FIe~rning in Cyclone-Fired                  Ongoing.                                    c
                                       4l99                                                                                             $5.1
                                      Vates are as provided by DOE.
                                      bSee table 5.1 for definitions of terminated and compfeted projects.
                                      CNotapplicable.
                                      dThe indicated funding has been obligated and no additional funding will be spent




                                      P&ge 44                                       GAO/IKZD-W148BB          DOE’s Allocation   of R&D Funds
Appendix II

Major Contributors to This Briefing Report


Resources,              Robert E. Allen, Jr., Assistant Director
Community, and          Edward E. Young, Assignment Manager
                        Ilene Pollack, Evaluator-in-Charge
Economic
Development Ditision,   Elise Bornstein, Evaluator

Washington, D.C.




(301333)                Page 45                         GAO/lUXD4@148BR   BOE’rr Allocation of B&D Funda
                                                                                            ,
     7



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