Federal Electricity Subsidies: Information on Research Funding, Tax Expenditures, and Other Activities That Support Electricity Production

Electricity is vital to our daily lives, powering homes, businesses, and industries. Presently, electricity is generated largely by coal and other fossil fuels and nuclear power, with hydropower, and, to a lesser extent, renewable energy sources, such as wind. Because of electricity's importance to producers, consumers, and businesses, the federal government has undertaken a wide range of programs to develop the electricity sector, which includes fuel suppliers, electric utilities, and others in the electricity industry. These programs have sought to, among other things, develop the nation's electrical infrastructure, influence the types of fuels used to produce electricity, increase the use of renewable energy, and limit the harmful effects of electricity production. These programs are financed through federal subsidies, broadly defined as payments made or benefits provided by the federal government to encourage certain desired activities or behaviors. For example, the federal government has, for many years, funded research and development (R&D) on fossil fuels, nuclear energy, renewable energy, other energy technologies, and related efforts through the Department of Energy (DOE). In addition, the federal government has provided favorable tax treatment, such as tax credits to companies that make certain types of energy investments. These tax preferences--which are legally known as tax expenditures--result in forgone revenue for the federal government. The revenue losses can be viewed as spending channeled through the tax system. As requested, we are providing information on (1) federal funding DOE receives for electricity-related R&D, including funding by type of fuel; (2) tax expenditures the federal government provides to subsidize electricity production, including expenditures by type of fuel; and (3) other ways the federal government subsidizes electricity. As discussed with congressional offices, we examined federal electricity-related subsidies over a 6-year period, from fiscal year 2002 through fiscal year 2007.