Bioenergy, Geothermal, Hydropower, Project Development, Solar, Wind Power

House Energy Bill: A Portfolio of Benefits for Clean Energy

While the national media focused mostly on the Renewable Energy Standard (RES) approved by the U.S. House of Representatives this past weekend, there are many more pieces to the entire energy package that have important implications for clean energy.

The House passed both H.R. 2776, the energy tax package, and H.R. 3221, the overall energy bill.  

In H.R. 2776, the House approved a modified 4-year extension of the wind Production Tax Credit (PTC) for large turbines and an 8-year extension and improvement of the solar and fuel cell Investment Tax Credits (ITC). The House version of the PTC for large wind turbines had significant changes from its prior form, by placing a 35% cap on the PTC, which, according to AWEA, “would penalize the most efficient projects.”

The solar tax credit extension provides an eight-year extension of the existing 30 percent ITC for businesses under Section 48 of the tax code, provides the ability for corporate and personal filers to claim the ITC against the Alternative Minimum Tax (AMT), and removes the prohibition barring utilities from using the section 48 ITC.

The House did not extend the solar residential tax credit or include a tax credit for small wind. While the Bill provides no extension of the existing 30 percent ITC for homeowners under Section 25 of the tax code, it does eliminate the existing $2,000 maximum dollar limitation. It is possible that the House will extend the residential solar tax credit for at least two years in the “Expiring Tax Credit” package later this session and place a $4,000 cap on solar systems.

In addition, the House energy tax bill provides up to $2.4 billion in bonding authority for the issuance of Clean Renewable Energy Bonds, known as CREBS. This program created in the 2005 Energy Bill (EPACT), has been very popular with municipalities, whose projects don’t qualify for standard tax credits.

The loan guarantee program however came under fire, since nuclear power was included as a “clean technology.” Section 9202 in the House energy bill did not give the nuclear industry $50 billion in loan guarantees that got play in the national media; however, it prevents Congressional appropriators from being able to exclude any eligible project from the guarantees. It does not prevent appropriators from being able to set a cap on the amount of guarantees that the Department of Energy (DOE) can give out.

Small wind, which has had no federal-level assistance since 1985 and had been pushing for a straight 30% credit, made headway in the Senate energy tax bill—getting a 30% ITC capped at $4,000 per system. The House’s small-wind incentive differs from the $1,500 per 1⁄2 kilowatt (kW) ITC proposed in H.R. 1772 by Reps. Earl Blumenauer (D-OR) and Tom Cole (R-OK). The House bill includes loans or grants that could be applied to the purchase and installation costs of small wind systems for residential applications, but not commercial.  

The amount of the incentive depends on what percentage of a home’s electricity needs the small wind system is expected to generate, but is not to exceed $12,000. To qualify for the loans or grants, small wind systems and other technologies must also meet or exceed efficiency standards as set forth by the DOE’s “Energy Star” program, though currently the Energy Star program has no established standards for any of these technologies.

The House-passed H.R. 3221, incorporated energy legislation from several non-tax committees. As outlined in an earlier RenewableEnergyAccess.com article, the House adopted an amendment by Congressman Tom Udall (D-NM) to create a national RES. The RES would require utilities to provide 15 percent of their power from renewable sources by 2020, allowing 4 percent of the requirement to be satisfied with electricity efficiency measures. The RES does not pre-empt state RPS requirements or statutes. Distributed energy and thermal applications such as ground-coupled heat pumps and solar water heating technologies are also allowed. For distributed generation (including distributed biomass, fuel cell, small wind, and solar, etc.), a 3x credit multiplier would be issued for each kWh generated.

Other solar and renewable energy provisions in H.R. 3221, the New Direction for Energy Independence, National Security, and Consumer Protection Act, as provided by the Solar Energy Industries Association (SEIA), are:
       • Title III – Small Business Committee Sec. 3005: Provides grants, subject to appropriation, and authorizes technical assistance to small businesses to assist them in evaluating the suitability of using renewable energy resources.

       • Title IV – Science and Technology Committee Sec. 4301- 4308: The Solar Energy Research and Advancement Act of 2007, provides funds, subject to appropriation, to support the research, development, and commercial application of solar energy technologies. Special emphasis is placed on concentrating solar power thermal storage research, solar lighting and cooling and advanced photovoltaic technology development.

       • Title VII – Natural Resources Committee Sec. 7302: Directs the Bureau of Reclamation to inventory lands under its jurisdiction for suitability for renewable energy development projects.

                    – Sec. 7304: Establishes a Strategic Solar Reserve Program that seeks to identify lands under the Bureau of Land Management’s jurisdiction that can accommodate up to 25 gigawatts (GW) of solar energy development. It also provides favorable terms and conditions for permitting, leasing and site identification.

                    – Title IX – Energy and Commerce Committee Sec. 9072 – 9075:  Authorizes the Department of Energy, subject to appropriation, to assist state, county, local government, schools, universities, airports and other qualifying entities, to provide technical assistance to increase the deployment of renewable energy systems.

                    – Sec. 9086: Authorizes 25-year federal power purchase agreements for renewable energy (current maximum duration is 10 years).

                    – Sec. 9321- 9328: Authorizes heightened cooperation between the U.S. and Israel on innovative energy technologies, including solar.
Adopted Amendments include:
       • Renewable Electricity Standard (RES) — Requires electric suppliers, other than governmental entities and rural electric cooperatives, to generate 15 percent of their electricity from renewable resources by the year 2020. It would allow 4 percent of the requirement to be satisfied with electricity efficiency measures. For distributed generation (electric energy generated by a renewable energy resource at an on-site eligible facility, used to offset part or all of the customer’s requirements for electric energy), including distributed renewables, the Secretary of Energy shall issue three renewable energy credits to such customer for each kWh generated.

       • Solar Energy Industries Research and Promotion Board — Creates a Solar Energy Industries Research and Promotion Board to increase consumer awareness nationwide of solar energy options and appropriate certifications. The solar program would be funded entirely by a small portion of industry revenues. No appropriations are authorized.
As expected, this House Energy package was void of vehicle efficiency standards. House Energy and Commerce Committee Chairman John Dingell (D-MI) addressed the issue by assuring that CAFE standards will reappear in the climate change and global warming legislation the committee is planning to introduce in September. The energy legislation included provisions to promote plug-in hybrid electric vehicles (PHEVs) and advanced technology in transportation, such as outlined by the Environmental and Energy Study Institute (EESI):
    • Establishes a loan guarantee program for the construction of advanced battery manufacturing facilities.

    • Amends the language in the Energy Policy Act of 2005 that provides manufacturing conversion grants for hybrid-electric vehicles to include plug-in hybrids and components.

    • Establishes a program to provide grants on a cost-shared basis to state governments, local governments, metropolitan transportation authorities, air pollution control districts, private or nonprofit entities or combinations thereof, to carry out projects to encourage the use of plug-in electric drive vehicles or other emerging electric vehicle technologies.

    • Provides incentives for federal and state fleets for medium- and heavy-duty hybrids.

    • Amends the Energy Policy Act of 1992 to include a number of forms of electric drive vehicles, including plug-in hybrids, for the allocation of credits.
Passage of the energy bill and tax package rests in the hands of the informal group of about 25 Democrats from oil and gas-producing states, Republican leadership in the House and about 5 Democratic Senators and a part of the Republican leadership in the Senate who are reportedly opposed to the $17 billion of tax increases on the oil and gas industry that are used to offset the cost of H.R. 2776’s tax incentives that are primarily for renewable energy and energy efficiency. Additionally, the oncoming national Presidential election has heated up the debate and made relations very tense between the parties.

Because energy is such a critical national issue, many people expect there to be compromise on the taxing of oil included in the House Bill and its treatment of natural gas and oil leases offshore. These issues will be reviewed because of the threat of a Presidential veto. The energy package could fold if positions harden and personal animosities worsen. Clean energy analysts in Washington are ready for a nerve-wracking fall as Congress attempts to pass the Energy Bill and adjourn for its December recess.