Senate Energy Bill Strong on Renewable Energy

Renewable energy advocates, industry representatives and environmentalists appear largely pleased with the clean energy policy enacted by the Senate version. It's a tentative victory, however, as the bill will need to be reconciled with House version, a less favorable package teeming with contentious policy issues that will need to be resolved before a final bill can be sent to the president's desk.

While the following article will break down the Senate energy bill with respect to what each renewable energy technology received, it should be noted that one particularly strong policy item contains them all. The Senate voted for the first-ever federal Renewable Portfolio Standard (RPS), a bill that will require that 10 percent of the electricity generated by investor-owned electric utilities be generated by renewable energy by the year 2020.

This policy approach, already adopted by 19 states, has been very successful at fostering renewable energy development and investment throughout the U.S. A national standard could help normalize what's been an effective but complicated patchwork of state regulation and clean energy policy.

The Union of Concerned Scientists, one of its major supporters, considers the RPS the highlight of the Senate energy bill. The group cited a recent analysis by the Energy Information Administration showing that the item would reduce total electricity sector carbon dioxide emissions by 249 million metric tons (7.5 percent) by 2025 and reduce residential electricity prices by $2.7 billion.

Looking at specific technologies, solar secured a particularly noteworthy policy: the first tax credit since 1982. The Senate bill will give homeowners that purchase solar electric or water heating systems a credit worth up to $2,000, and boost incentives for businesses to install solar as well. The credit would be available to homeowners through the end of 2009, and to businesses through the end of 2011.

"A usable investment tax credit would bring solar costs over the tipping point in many areas of the country," said Rhone Resch, President of the Solar Energy Industries Association (SEIA). "More consumers would take a step towards energy independence by choosing solar power - and that means cleaner air, more jobs, and greater energy security for all."

Ocean Energy was arguably the unexpected, come-from-behind winner in the Senate's energy bill. A month ago, many lawmakers may not have even been aware of ocean energy technologies but a strong last minute lobbying and grassroots effort helped to secure helpful legislation for the nascent but promising technology.

Editor's Note: In full disclosure it should be noted that much of the grassroots success for ocean energy was achieved by the "Renewable Energy Action Network", a new advocacy project by RenewableEnergyAccess.com.

Amendments to the Senate's Energy Bill cover a number of items for ocean energy including renewable energy production incentives, Mandatory Purchase Requirements, and Production Tax Credits for energy produced from tidal, current and wave technologies. Additionally, the bill includes language, similar to the House version, that encourages the Secretary of Energy to provide funding for the assessment of ocean energy technologies. And the previously mentioned RPS requirement for electric utilities also now lists Ocean Energy as a qualified renewable energy technology.

"As we all know, even modest support can help to produce energy from cleaner, more reliable sources," said Sean O'Neill, President of the newly formed Ocean Renewable Energy Coalition (OREC). "Traditional energy players should, if anything, get behind the smallest of investments, with such bright and promising potential. Over time, through judicious and insightful investments, many large gains that have redefined the energy playing field have started as non-traditional initiatives."

In another water-intensive, but considerably more traditional renewable energy technology, the hydroelectric power industry secured favorable changes to the hydropower licensing process.

"By repairing the long-broken hydropower licensing process and providing incentives for new hydropower development at existing dams, the Senate energy bill creates a bright new future for the nation's leading renewable resource," said Linda Church Ciocci, Executive Director of the National Hydropower Association.

For wind power, the Senate energy bill includes a three-year extension of the Production Tax Credit (PTC) offering the industry a longer respite from the on-again, off-again nature of the tax credit. The credit remains unchanged -- it is maintained at its current value of 1.8 cents per kWh.

Not included in the bill this time is a new credit for small wind energy systems for individual homes, farms, or businesses. Last year the Senate energy bill included a 30 percent investment tax credit for such purchases, capped at $2,000 per system. While wind power advocates would have preferred federal support on such a policy, the Senate overwhelmingly voted down an amendment from Senator Lamar Alexander (R-TN) that would have had a devastating effect on new wind power developments, particularly those in offshore waters.

That same three-year PTC extension for wind power was also expanded to include geothermal energy. This again, will provide a fixed 10 year phase of tax credits on a per kWh basis.

According to Alyssa Kagel, Outreach & Research Officer for the Geothermal Energy Association, the Senate bill also provides incentives for public power systems and rural cooperatives through its "clean renewable energy bonds" provision. These provisions would result in revitalization of geothermal power in across the Western states by spurring new power projects from New Mexico to Alaska.

Provisions that update and revise the Geothermal Steam Act will encourage more "direct use" of geothermal by homes, communities, ranchers and businesses and for power producers will reduce high administrative cost of federal royalties by directing the Department of the Interior to move to a gross proceeds royalty system.

Biomass and biofuels landed a host of policy items -- particularly those favorable to the agricultural sectors.

The most notable items for biofuels is the Renewable Fuels Standard calling for a minimum of eight billion gallons of ethanol to be used by 2012. Currently, the U.S. uses less than 4 billion gallons. In addition to an 8 billion gallon RFS, the tax provisions contain an important update of the small ethanol producer program, extension of biodiesel tax credit through 2010, and establishment of a tax credit for the cost of installing clean fuel refueling equipment, such as an E85 fuel pump.

For biomass, the Senate bill amends the current R&D initiative (subject to appropriations) from $14 million to $200 million from FY06-FY2010 (total of $1 billion). Another amendment creates a reverse auction program for cellulosic biofuel with a goal to produce first 1 billion gallons of cellulosic biofuel by 2012. For a full list of biomass and biofuels amendments included in the Senate energy bill see the link following this story.

In summary, like many comprehensive bills enacted by Congress, there seems to be something for everyone (including many fossil and nuclear energy items, which will not be addressed here). The real challenge for renewable energy technologies is for these policy items to survive the far more secretive process of consolidation between the House and Senate energy versions of the energy bill.