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Reason Foundation

Taxpayer's Guide to the Stimulus:
4. Energy and Water Development

Location in Stimulus Bill:
Division A, Title IV and Title VII

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Summary: Nearly $52 billion is set aside for energy productivity and efficiency programs through the Energy Department, and water recycling programs through the Interior Department.

>> Spending

$16.8 billion for Energy Efficiency and Renewable Energy Programs. This money will go to programs that promote renewable energy projects and make federal buildings and American homes more energy efficient: $5 billion will help families "weatherize" their homes with energy efficient fixtures; $3.1 billion will support state energy efficiency research; $2.8 billion will give money to state and local government building renovation projects that install more energy efficient technology; $2 billion will provide subsidies for manufacturing car batteries; and $400 million will fund transportation electrification projects that reduce emissions.

$10.1 billion for New Energy Technology Research Initiatives. This money in Title IV commits $6 billion for loans to guide alternative energy research, $3.4 billion in grants specifically for research on projects that reduce carbon emissions, and $400 million for the Advanced Research Project Agency energy division. Under Title VII, $300 million is given for the Clean Cities Program that gives grants to projects that seek to reduce vehicle emissions.

$6.5 billion for Electricity Providers to Increase their Borrowing Limits. This will allow the Western Area Power Administration and Bonneville Power Administration to each borrow up to $3.25 billion more to fund their hydroelectric power and renewable energy projects.

$6 billion for Environmental Clean Up Programs. Approximately $5.13 billion of this money is for environmental cleanup related to military installations in America, $483 million is for non-defense related clean up, and another $390 million is for the "Uranium Enrichment Decontamination and Decommissioning Fund."

$5 billion for the Weatherization Assistance Program. This Energy Department program helps families “weatherize” their homes by installing more energy efficient heating and cooling systems, electrical systems, and other fixtures. The stimulus bill increases the maximum assistance grant from $2,500 to $6,500 per family.

$4.5 billion for the Energy Department to Modernize the Electric Grid. The stimulus sets aside $4.5 billion for developing “smart grid” electric technology that would gather real-time data on what power is being used in certain areas and better manage distributing power. Proposed new technology will be able to determine and predict power demand trends to improve the quality, reliability, and performance of the nation’s various electricity grids.

$2 billion for Manufacturing Vehicle Batteries. This will give subsidies to US-based vehicle battery manufacturers to produce “advanced” products that will help American car companies move forward in building alternative energy and hybrid vehicles.

$1 billion for Water Management Projects. The Interior Department will receive this money for water management projects that recycle wastewater, maintain canals, and restore polluted areas.

Section 406. Under a specific provision in this section, the Secretary of Energy has until the end of September 2011 to use stimulus money and general budget funds to start building hydropower renewable energy systems, electric power transmission systems, and biofuel projects that can be used on a widespread basis. While this may seem like a long way off, it takes a significant amount of time to do all the necessary preparation and research to start a project with the scope of a hydropower plant—much less several of them. This kind of time table may cause projects to begin without proper due diligence being completed and could lead to significant delays and problems for the project

Section 410. Significantly, this section of Title IV eliminates the standard requirement for states to match any of the funds provided in these programs. Usually, states will have to put up at least half the money for any project they are directing, but given current state budget troubles, the stimulus is rescinding that standard. This will increase the federal financial burden of the projects and reduce the incentives for states to ensure quality work on their projects since they will have no investment to steward.

>> Commentary

Titles IV & VII largely spend money on advancing efficient energy technology in different sectors. Though some may argue that the government has legitimate a role in helping to advance technology, the ultimate question is: can the government do this more effectively that the private sector? In the 20th century, air travel, cars, television, the Internet, and most major medical advances actually came from the private sector innovation.

Consider this question, if you were the government in 1905 and you could choose one of these technological advances to pursue in the 20th century, which would you choose: build roads for the newly developing horseless carriages, covey the sound of a voice or image instantly from point to point anywhere in the world, increase average life expectancy by 30 years, or figure out how to get someone from New York to LA in under 5 hours? All of these things happened in the 20th century. The government chose to develop a series of roads, eventually turning into President Eisenhower's interstate project that took 50 years to complete. Telecommunications, video technology, air travel, and health advances have been driven by the private sector as demand directed.

Sure, government funding has produced a lot as well. Military technology has enhanced civilian lifestyle and government funded research projects are also responsible for technological and medical advances. But even though the government has funded some important technological advances, history shows that it has a poor record picking winners and losers.  When it comes to renewable energy and smart grids, the private sector has the proper market signals to know what technologies to pursue and when, not bureaucrats in Washington with a politically skewed vision.

More from Reason on Energy policy.

>> Government Recovery Websites

Department of Energy: http://www.energy.gov/recovery
Department of the Interior: http://www.doi.gov/recovery/


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Written by: Anthony Randazzo. Please email with any comments or corrections.


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