2021 Clean Energy Outlook

The end-of-the year omnibus (H.R. 133) is a massive $2.3 trillion spending bill containing appropriations for Fiscal Year (FY) 2021, COVID-19 relief funds, the first energy authorization in over a decade and extensions of a number of tax incentives also important to the energy sector. The bipartisan package will foster innovation across a broad range of technologies that are critical to U.S. energy and national security, long-term economic competitiveness and the protection of the environment.

Congressional support for clean energy research and development (R&D) remains strong, as evidenced by increasing budgets for most of the relevant programs at federal agencies, especially the U.S. Department of Energy (DOE) – meaning that billions of dollars will continue to be available through grants, cooperative agreements, loan procurements and other types of federal support. In total, energy programs at DOE will receive nearly $40 billion in funding, an increase of more than $1 billion above the FY 2020 enacted level.

Against the backdrop of the evolving political climate and the implications for energy innovation, drivers include increasing corporate net zero carbon commitments, national security concerns, technology innovation need, market participation, education and competition from foreign governments, all of which should only increase during the incoming Biden Administration.

This Holland & Knight alert provides an overview of DOE funding levels this year and looks ahead to future opportunities that companies can try to help shape over the coming months.

Funding Overview

• DOE received $39.625 billion in funding, an increase of $1.039 billion above the FY 2020 enacted level.
• The Office of Energy Efficiency and Renewable Energy (EERE) received $2.86 billion, a $72 million increase above the FY 2020 enacted level and $2.1 billion above President Donald Trump's budget request. This funding provides for clean, affordable and secure energy, as well as ensures American leadership in the transition to a global clean energy economy.
• The Advanced Research Projects Agency-Energy (ARPA-E) received $427 million, a $2 million increase above FY 2020 levels and a rejection of Trump's proposal to eliminate the program. This funding supports research aimed at rapidly developing energy technologies that are capable of significantly changing the energy sector to address critical economic, environmental and energy U.S. security challenges.
• Despite the Office of Fossil Energy's overall budget remaining level in FY 2021, the carbon capture programs received $126.3 million, nearly $10 million above last year's funding levels.
• The Office of Electricity received $211.7 million, an increase of $21.7 million compared to FY 2020 and $16.7 million above Trump's budget request.

As illustrated by the summary table above, an overwhelming number of DOE programs dedicated to clean energy R&D remained level or received an increase for FY 2021, some of which were more substantial.

The incoming Biden Administration will likely make its appropriations request for FY 2022 in February, which will be the early outline of the incoming administration's intent for the aforementioned programs.

Advanced Manufacturing Office (AMO): $396 Million

The AMO supports R&D projects, R&D consortia and early-stage technical partnerships with national laboratories, companies (for-profit and not-for profit), state and local governments, and universities through competitive, merit reviewed funding opportunities designed to investigate new manufacturing technologies.

The increase in funding for AMO over the years is a clear indication that Congress acknowledges the need for the federal government to play an active role in ensuring that the United States remains a leader in the manufacturing of next-generation materials and equipment. Because AMO's purview overlaps with many of the other programs here – for example, AMO can make awards for the manufacture of lightweight vehicle components, solar modules, wind turbine blades, etc. – companies should pay close attention to AMO's annual multi-topic solicitation.

Building Technologies Office (BTO): $290 Million

Given its mandate, solicitations from BTO can be broad, creating opportunities for a wide array of companies with applications that can be used to increase energy efficiency. BTO is also committed to bringing innovative technologies from the DOE's National Laboratories to the marketplace through funding, strategic partnerships and policy initiatives that align with cities and states. Companies of all types and sizes seeking government collaboration should look not just for direct funding from DOE, but should also look to DOE as a potential partner in forging key strategic relationships at all levels of government and with strategic partners.

Vehicle Technologies Office (VTO): $400 Million

The Vehicle Technologies Office (VTO) at DOE supports R&D of efficient and sustainable transportation technologies that improve fuel economy or otherwise reduce dependence on petroleum. The specific technologies include, but are not limited to, advanced batteries, lightweight materials, high-efficiency engines and alternative fuels.

The market for the electrification of the vehicular transportation is no longer viewed as a niche market or far-off tipping point. Moreover, utilities now view electric vehicle (EV) deployment as central to their future business model. The legacy auto manufacturers are churning out more and more electric models in order to not lose market share to EV newcomers. Both policymakers and industry experts expect batteries to be the next frontier in the clean energy revolution, hopefully following the same downward cost trajectory that has been seen in wind and solar energy over the past decade.

Energy Storage: $80 Million

In addition to funding DOE's continuing energy storage R&D efforts, the House and Senate Appropriations Committees emphasized the importance of the DOE's cross-cutting approach to this technology sector. Efforts already underway through the Energy Storage Grand Challenge initiative will continue, and new interagency collaborations with the national labs and NASA will likely emerge. In addition, congressional direction was given for DOE to focus some R&D on long duration energy storage technologies in all of its forms, given its potentially pivotal role in enabling other innovative building, transportation and electric power technologies.

Advanced Research Projects Agency – Energy (ARPA-E): $427 Million

ARPA-E is unique in many ways, including its focus on transformational change, its open-ended solicitations, its willingness and ability to issue grants worth millions of dollars to the most promising technologies, and its broad (and growing) bipartisan support. ARPA-E advances high-potential, high-impact energy technologies that are too early for private-sector investment. ARPA-E awardees are unique because they are developing entirely new ways to generate, store and use energy.

Loan Programs Office

The Energy Act of 2020 features improvements to the Title 17 Loan Program. Specifically, the Act allows for future appropriations to be used to cover application fees, credit subsidies and other costs to applicants. It also adjusts the fee schedule so the upfront costs of program participation are less burdensome for project developers. The reforms also broaden eligibility categories under Title 17 and formalize some of the ongoing internal functions of the program.

The FY 2021 appropriations did remove $1.9 billion in credit subsidies from the Advanced Technology Vehicles Manufacturing loan program (ATVM). This decreases the overall amount of lending available out of the program, which had $17.7 billion remaining to help finance new automotive and auto component manufacturing in the U.S. The ATVM program will be one to watch under the Biden Administration, particularly with former Michigan Gov. Jennifer Granholm being nominated as Secretary of Energy.

Congressional Outlook

Congress has laid a strong foundation for the incoming Biden Administration's energy and climate agenda. As discussed in a previous Holland & Knight alert, the Energy Act of 2020 passed in the 2020 year-end legislative package is a down payment on a transition toward a future for DOE on innovation, technology commercialization, emissions reductions, renewables and domestic manufacturing. (See "Energy Policy Act Signals Inclusive, Innovation-Focused Future for DOE," Jan. 5, 2020.)

Looking ahead to the 117th Congress, in light of the slim edge that Democrats won in the Senate following the Georgia runoffs, there are renewed hopes for limited legislation to combat climate change, such as measures to fulfill President-Elect Joe Biden's pledge to promote the use of clean energy by spending on renewable power programs.

Climate and energy legislation with bipartisan backing still has the best shot at passage with thin Democratic majorities in the House and Senate, although Senate control will give the Democratic clean energy economic agenda a far stronger chance of passage, whether through tax incentives and spending measures in a budget bill or broader infrastructure legislation. Nevertheless, Democratic leaders will need the support of every member of their caucus.

Final Holland & Knight Insights

In sum, 2021 is shaping up to be a transformational year for the forward momentum on clean energy technology.

With historically high funding levels, Congress has laid a strong foundation for the incoming Biden Administration's clean energy agenda through the passage of the bipartisan Fiscal Year 2021 appropriations omnibus. Critical research, development and deployment activities will continue to be funded throughout the remainder of the year, with new rounds of funding opportunity announcements expected from the Energy Department.

How the White House intends to use federal agencies such as DOE, the Department of Transportation and the General Services Administration moving forward will become clearer when the new president releases his energy-related Executive Orders in the early days of his administration and his first congressional budget request in February or March 2021.

For more information about federal FY 2021 clean energy appropriations or other topics addressed in this Holland & Knight alert, please contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.