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DOE's advanced vehicle manufacturing loans come under attack in Senate

Robust federal investment in research and development programs is central to ensuring U.S. global competitiveness, lawmakers on both sides of the aisle said yesterday at a Senate Appropriations Committee hearing on U.S. innovation. But with a severe strain on the budget, senators expressed concern that certain federally supported programs could take a hit.

In his opening statements, Appropriations Committee ranking member Richard Shelby (R-Ala.) urged Congress to rethink "wasteful spending" on several defense, health care and energy research programs in light of rapidly increasing federal debt. According to the Congressional Budget Office, federal debt is expected to reach 78 percent of gross domestic product by 2024, twice the average of the past four decades.

Shelby singled out the Department of Energy's Advanced Technology Vehicles Manufacturing (ATVM) program, which currently has $4.2 billion in credit subsidy appropriations and $16.6 billion in loan authority remaining. A GAO report released earlier this month recommended that Congress consider rescinding all or part of the ATVM program's funding unless DOE can demonstrate new demand and viable applications for the loans.

"In general, I hope this committee will consider the GAO's input and the work it has done on overlap and duplication in government," said Shelby. "Such oversight will ensure that federal research dollars go to the programs that hold the most promise."

DOE has already awarded $8.4 billion in loans through ATVM since the program was created in 2007. The funding was used to support fuel-efficient vehicle manufacturing at Ford Motor Co., Nissan Motor Co. and Tesla Motors Inc., which repaid its $465 million loan guarantee nine years early.

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In an effort to spur new interest in the program, DOE announced earlier this month that it had made reforms to clarify eligibility requirements, improve agency responsiveness and expedite the application process. DOE is now actively encouraging auto component suppliers to seek funding (ClimateWire, April 3).

Moniz defends spectrum of vehicle incentives

While the ATVM program has been central in supporting major advancements in fuel-efficient vehicles, it's only one part of DOE's efforts in this space.

In his testimony at yesterday's hearing, Energy Secretary Ernest Moniz highlighted the department's SuperTruck initiative, which through a partnership with the private sector has demonstrated a 22 percent engine efficiency improvement in the laboratory and developed a full-scale, long-haul truck prototype that achieved a 61 percent improvement in freight efficiency in on-road testing. If SuperTrucks were deployed across the U.S. fleet, it would reduce petroleum use by 260 million barrels per year and achieve a savings of approximately $45 billion, he said.

DOE is also supporting sustainable transportation solutions through the development of advanced batteries, lightweight materials, biofuels and other technologies. Reductions of federal funding for these and other innovative clean energy research and development areas "would have a significant impact at a time of significant global competition and progress," according to Moniz.

In a report published ahead of the hearing this week, the Bipartisan Policy Center shed light on three DOE efforts to advance clean vehicle technology that generally serve as examples of effective federally funded programs.

The Partnership for a New Generation of Vehicles, the FreedomCAR and Fuel Partnership, and U.S. DRIVE operate as a single expanding partnership that has made substantial contributions to reducing oil dependence and greenhouse gas emissions from the transportation sector, according to the report. For instance, their contribution has led to a 50 percent reduction in fuel cell costs between 2006 and 2012 and a 50 percent reduction in lithium-ion battery technology costs between 2008 and 2012.

Reducing oil consumption

"There's large, broad-based support for speeding up the cycles of invention and discovery in the U.S., and the public sector has a strong role to play, as evidenced by the case studies," said Jason Burwen, a senior policy analyst with the BPC energy project.

Margot Anderson, executive director of the Energy Project, underscored that innovative research and development have long had bipartisan support. The promotion of new technologies to reduce U.S. dependence on oil, in particular, has had support from all administrations dating back to the 1960s.

"Since Nixon, the U.S. being overly dependent on petroleum in the transportation sector has been a concern," said Anderson. "This issue will ebb and flow based on the price of petroleum and gasoline ... but I think having a sector that is 93 percent dependent on petroleum can be somewhat troubling when we're subject to the kinds of price and supply swings internationally."

Breakthrough research has already led to improved vehicle efficiency in cars being produced today. A U.S. EPA report released last week found that automakers on average have exceeded greenhouse gas reduction targets for 2012 passenger vehicles (Greenwire, April 25).

Also, according to annual report by the Consumer Federation of America, for the first time ever, more than 50 percent of current-year vehicles can achieve more than 23 mpg. Five years ago, 19 percent of new models achieved that level of fuel economy. Federally enforced performance standards have been a strong driver of this achievement, said Jack Gillis, director of public affairs for CFA.

Early-stage DOE research is expected to play a significant role in bringing more electric and hydrogen cars to market, which will help automakers achieve the federally mandated 54.5 mpg target in 2025.

Budget deficit vs. innovation deficit?

While some lawmakers have sought to cut federal funding for certain agency programs, such as ATVM, Anderson said she doesn't see any major erosion of support for research and development. But faced with a growing budget crisis, Congress will likely be forced to make compromises.

This year's funding will be "tight, very tight," said Appropriations Chairwoman Barbara Mikulski (D-Md.)

But absent sufficient investments, the United States stands to lose its competitive edge not just in the clean energy sector but also in communications, health care, defense and other rapidly evolving sectors, she said.

U.S. investments in research and development are already in decline. Over the last decade, U.S. expenditures on research and development as a share of GDP increased by less than 4 percent, while South Korea and China have increased their investments by nearly 60 percent and 80 percent, respectively.

"I agree reducing the budget deficit is important, but are we being so austere that we are limiting our future growth?" said Mikulski in her opening remarks. "And as one of the greatest countries in the world, are we so preoccupied with making budget cuts that we're heading towards an innovation deficit, as well?"

Twitter: @JMPyper | Email: jpyper@eenews.net

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