Fiscal Year 2025 Department Of Energy Funding: House Vs. Senate Markups

Highlights

• Both the U.S. House of Representatives and U.S. Senate have completed their full committee markups of the Energy and Water Development subcommittee appropriations bill before recessing for August.
• House Republicans targeted Biden Administration priorities, and the bill passed along party lines, while the Senate bill enjoyed full bipartisan support, with no members voting in opposition.
• There is a number of notable differences between the two subcommittee draft bills, including the Senate bill establishing the Manufacturing and Energy Supply Chain Office to secure and strengthen critical manufacturing and energy supply chains. The House bill attempts to cut $8 billion from the U.S. Department of Energy Loan Program funding, removing at least $90 billion in financing and an additional $260 billion in reductions to current lending capacity, and seeks to cut Energy Efficiency and Renewable Energy programs by nearly 43 percent over fiscal year 2024 levels.
• Holland & Knight expects a short-term continuing resolution to fund the government at least through the elections in November, but depending on election outcomes, Congress could begin negotiating based on the various drafts that have made their way through the respective committees.

The Subcommittees on Energy and Water Development (EWD) for both chambers of Congress have released proposed bills for funding the U.S. Department of Energy (DOE) in fiscal year (FY) 2025. As seen consistently from the 118th Congress, the Senate largely aligned its bill with the president's budget request, and the House made drastic cuts to the DOE's proposed spending. The Senate focused much of its bill on increased funding and direction for priorities, such as catalyzing the domestic battery supply chain and supporting innovative research, development and demonstration projects. The House focused its bill on budget cuts, such as decreasing funding for the Office of Energy Efficiency and Renewable Energy (EERE) and Loan Programs Office (LPO).

The House passed its EWD bill through full committee on July 9, 2024, with a vote of 30-26. Though the bill stalled on the House floor, House leadership has signaled plans to pick it back up in September following recess. The Senate passed its EWD bill through full committee on Aug. 1, 2024, with no opposition before it broke for recess. To secure FY 2025 funding, both chambers must act before the fiscal year ends in September. Holland & Knight anticipates that Congress will likely pass a continuing resolution (CR) before the end of the fiscal year to extend funding at least through the November elections. Should Congress choose to move an omnibus forward after the elections, both chambers could use the respective passed bills as a baseline for negotiations.

The following sections detail nondefense spending related to key DOE offices and programs, as well as differences between the House and Senate bills. Holland & Knight will continue to monitor both chambers through negotiations or formal conference.

Topline Spending

This year, the president's budget request (PBR), which is published annually and meant to inform congressional spending, requested $18.06 billion for the DOE's nondefense programs. This request is $1.3 billion less than what President Joe Biden requested for nondefense DOE programs in 2024 and $620 million more than what Congress provided the DOE in the Energy and Water Development and Related Agencies Appropriations Act, 2024 (FY 2024 enacted). Though both chambers provided the DOE less funding than was requested in this year's PBR, the Senate decreased the DOE spending by only 2 percent, while the House decreased it by 11 percent.

Even in this current environment where there is downward pressure to limit federal spending, it is notable that this year's Senate markup provided the DOE $17.74 billion for nondefense programs, representing a 1.7 percent increase as compared to FY 2024 enacted funding. This year's House markup provided the DOE $16.07 billion for nondefense programs, representing a 7.86 percent decrease as compared to FY 2024 enacted funding, underscoring the House's preference to decrease nondefense spending.

Overview

Manufacturing and Energy Supply Chains (MESC)

For the first time ever, the Senate established the Office of Manufacturing and Energy Supply Chains (MESC), tasked with securing and strengthening critical manufacturing and energy supply chains. This office focuses on ensuring the effective deployment of manufacturing focused initiatives written into the Bipartisan Infrastructure Law (BIL) and Inflation Reduction (IRA), including the $10 billion for the Qualifying Advanced Energy Project Credit (48C) Program. Establishing the office in appropriations is significant as it formalizes the offices and provides durability to its programs and initiatives. The House kept the MESC budget within the Office of Energy Efficiency and Renewable Energy budget. In the report, the House referenced rare earth magnets' role in defense applications and energy technologies and directed MESC to analyze gaps, vulnerabilities and risks in the domestic supply chain for rare earth magnets, including recycling projects.

State and Community Energy Programs (SCEP)

The Senate increased FY 2025 funding for SCEP, the office responsible for deploying $16 billion in grants, formula funding and rebates to states and local entities. The Senate increased and matched FY 2024 funding, respectively, for the Weatherization Assistance Program and the State Energy Program – two of SCEP's foundational programs that have delivered energy and cost savings to Americans for more than four decades.

Though both chambers funded SCEP within the Office for Energy Efficiency and Renewable Energy, the House decreased overall SCEP funding by $111.41 million and cut $75 million from the budget for the Weatherization Assistance Program. Unlike the Senate, the House did not provide funding for Energy Future Grants, an IRA grant program that provides technical assistance to states and local governments to increase resiliency and improve access to affordable clean energy.

Office of Energy Efficiency and Renewable Energy (EERE)

The Senate funded EERE – the office tasked with accelerating research, development and demonstration opportunities across renewable energy, sustainable transportation, building efficiency and manufacturing – at the FY 2024 enacted levels. The 11 suboffices (e.g., Vehicle Technologies Office, Solar Energy Technology Office, State and Community Energy programs) within the EERE largely matched the president's respective budget requests. In addition to recommendations for renewable energy research and development (R&D), the Senate report includes additional direction to support domestic battery manufacturing, battery recycling R&D and hydrogen R&D. In comparison, the House cut $1.5 billion from EERE's FY 24 budget and cut suboffice budgets by an average of 27 percent.

The DOE was reorganized in early 2022 to reflect the increased funding that came from the BIL and IRA, leading to the creation of many new offices to effectively implement those laws. Due to the new offices, the proposals from the president, House and Senate reflect different configurations of the accounts. The PBR proposed distinct budgets for MESC, SCEP and EERE. The Senate bill does include SCEP within EERE but establishes a new office for MESC as previously noted, and the House bill includes both MESC and SCEP within the topline EERE proposed budget.

Office of Clean Energy Demonstrations (OCED)

The Senate increased funding for OCED, tasked with deploying $25 billion in funding from BIL and IRA to deliver clean energy demonstration projects at scale with the private sector. Notably, the Senate dedicated $80 million to program direction to support the implementation of large capital projects funded through BIL and IRA. The Senate also recommended oversight and funding for the Advanced Reactor Demonstration Program (ARDP) to be relocated to the OCED from the Office of Nuclear Energy (NE). The House decreased funding for the office as compared to FY 2024 funding and the PBR.

Title 17 Innovative Technology Loan Guarantee Program (Title 17)

Note: This includes the 1703 Innovative Clean Energy, Supply Chains and State Energy Financing Loan Program and 1706 Energy Infrastructure Reinvestment (EIR) Program

The Senate matched the PBR for administrative funds for Title 17, further enabling the Loan Programs Office to finance projects that support clean energy deployment and energy infrastructure reinvestment. Though the House matched the PBR for administrative funds, it reallocated funds that had been previously authorized and appropriated in BIL and IRA, including $6.5 billion in funding and $260 billion in lending capacity. This cut was a part of the House's total $8 billion cut to the LPO, which also included a $1.5 billion cut to the Carbon Dioxide Transportation Infrastructure Finance and Innovation financing program (CIFIA). The House bill proposed reallocating the $8 billion to support advanced reactor nuclear projects.

Advanced Technology Vehicle Manufacturing Loan Program (ATVM)

Though the Senate provided ATVM only administrative funding of $20 million, less than the PBR, it addressed the underlying issue, which is that administrative funds were capped at $25 million in IRA. The Senate proposed increasing the administrative funding from $25 million to $100 million. Raising the cap on administrative costs will allow the LPO to continue deploying the $25 billion in loan authority that the program gained through IRA. The House report directed the ATVM to provide due consideration to applications for projects that manufacture medium- and heavy-duty vehicles powered by propane gas and other alternative fuels and provided the program with 65 percent less administrative funding than requested.

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