Record boost for clean energy in $1.7 trillion funding bill passed by US House

The $1.7 trillion bipartisan government spending bill passed by the US House of Representatives Dec. 23 has historic funding increases for clean energy and other climate-related programs. The fiscal year 2023 omnibus appropriations package now goes to President Joe Biden's desk for signing next week.

The measure, passed with voted 225-201 vote, was advanced by the Senate on Dec. 22 in a 68-29 vote. To Republicans' chagrin, no amendments were considered by the House.

House Minority Leader Kevin McCarthy, Republican-California, bashed the bill for increasing the deficit with discretionary spending that he argued would exacerbate inflation. He and other Republicans took issue with Democrats pushing through a lame-duck omnibus package just 11 days before the House will flip to Republican control.

But Democrats presented the measure as putting people ahead of politics.

House Speaker Nancy Pelosi, Democrat-California, said on the House floor, "We have a big bill because we had big needs for our country," among them averting a government shutdown.

And clean energy advocates also applauded approval of the spending measure.

"We are ending the year on a high note," the American Council on Renewable Energy's José Zayas said in a Dec. 23 statement.

DOE sees funding lift

The bill appropriates $46.5 billion to the Department of Energy for FY 23, a 4% increase from the previous fiscal year.

The DOE's Office of Energy Efficiency and Renewable Energy is slated to receive a record-high $3.46 billion, a roughly 6% increase from FY 22, for the research and development of clean vehicle technologies, renewable energy grid integration, and clean hydrogen production.

The bill also includes billions of dollars in DOE funding for advanced nuclear power and other clean energy demonstration projects pursuant to a bipartisan infrastructure law enacted in 2021. In addition, the package gives DOE $30 million for oil and gas well cleanup activities and $60 million to develop methane mitigation technologies.

The spending package provides $65 million for the Clean Cities alternative fuels deployment program which will fund alternative fuels, infrastructure and deployment of vehicles powered by biofuels, electricity, hydrogen, natural gas, renewable natural gas, propane and renewable propane.

The bill also provides for some biofuel R&D funding, including $44 million for feedstock technologies research, $23 million to accelerate the design-build-test-learn cycle for biofuels and bioproducts with a focus on sustainable aviation fuels and $10 million for R&D into engines that can integrate low-carbon fuels like ethanol and biodiesel.

No funding increase for transformers

To the dismay of US power industry groups, the bill did not include funding to ramp up the production of electric distribution transformers. The power industry has been seeking $1 billion to help boost transformer production, warning that a tight labor market and supply chain disruptions have dramatically increased order times for the crucial power system component.

Under the bill, the Environmental Protection Agency will receive $10.1 billion for FY 23, an increase of $576 million from 2022 enacted levels. The Interior Department's appropriation is $15.1 billion, a 4% increase from FY 22.

The bill also provides $508.4 million for the Federal Energy Regulatory Commission, climbing $42 million year over year. The request included a boost of $24.9 million for staff, with much of that aimed at standing up FERC's new Office of Public Participation, intended to bolster the commission's public outreach efforts in its natural gas and power sector work.

Revenues for FERC are set to an amount equal to the commission's budget authority, resulting in zero net appropriations for the agency.

The Commodity Futures Trading Commission, which regulates energy derivatives and other commodity derivatives, would receive $365 million, matching the agency's request.

The National Oceanic Atmospheric Administration had requested $256.6 million, an increase of more than $69 million, for climate research to help the nation better prepare for weather disasters. The bill instead provides only an extra $24 million over NOAA's 2022 funding levels, a 12% increase. It also provides $21.4 million for high-performance computing upgrades to support enhanced climate modeling.

One-third of the US' gross domestic product is affected by extreme weather and climate change, a Senate summary of the bill said. As of October, the US had suffered 15 weather events during 2022 causing more than $1 billion in losses, according to NOAA's climate and weather disaster tally.

Strategic Petroleum Reserve

The US Strategic Petroleum Reserve is funded at $207.2 million, an $11.8 million decrease from spending enacted in FY 22 and $7 million below the administration's request to support modernization and management of the emergency crude stockpile in FY 23.

The DOE earlier this year completed the largest-ever drawdown from the reserve, satisfying President Joe Biden's historic commitment to release 180 million barrels to combat energy price hikes spurred by Russia's invasion of Ukraine.

The omnibus cancels 140 million barrels of congressionally mandated SPR sales that were to take place between fiscal years 2024 and 2027. The DOE had sought the cancellations to give it more flexibility as it looks to prioritize replenishing the SPR.

"Notably, the omnibus bill leaves 26 million barrels of required FY 23 sales intact, likely to maintain dry powder in case of a price spike, without the need to declare another supply emergency," Paul Sheldon, chief geopolitical advisor at S&P Global Commodity Insights, said. "However, our outlook for continued downward pressure on prices leads us to believe these will be canceled as well, which all else equal will be more politically palatable than repurchasing a similar amount of crude during a presidential election year in 2024."

S&P Global Commodity Insights reporters Zack Hale, Karin Rives and Siri Hedreen produce content for distribution on Capital IQ Pro.