Slimmed Down Energy Bill RE Provisions

This article is the second of a two-part series on the new, leaner energy bill (S.2095). After failing to pass the Senate last fall, the Energy Bill (HR 6) was trimmed down by Pete V. Domenici, Senate Energy & Natural Resources Chairman, for a 2004 bid to pass comprehensive energy legislation. The following content summarizes how the new bill will affect the renewable energy industries.

February 27, 2004 []This article is the second of a two-part series on the new, leaner energy bill (S.2095). After failing to pass the Senate last fall, the Energy Bill (HR 6) was trimmed down by Pete V. Domenici, Senate Energy & Natural Resources Chairman, for a 2004 bid to pass comprehensive energy legislation. The following content summarizes how the new bill will affect the renewable energy industries. To read the first of this two-part series, click here – Solar Energy Provisions – According to SEIA, the Energy Savings Performance Contracts (ESPC: in which the government receives energy efficiency improvements to their facilities in exchange for a percentage of the energy savings realized,) have been accounted for as a $3 billion cost in the bill and therefore cut from this new bill. Major multi-billion-dollar energy service corporations and government savings / energy efficiency advocates will be pushing hard for the reinstatement of this program. Solar ESPC’s are gaining in use and popularity, according to SEIA. Although at first glance the removal of the ESPCs from the Energy Bill may look like a negative action, it is SEIA’s understanding that language to reauthorize this provision has a green light to move forward. In other words, look for ESPCs to be reauthorized in another piece of legislation. The solar relevant provisions previously in the Bill (major increases in renewables R&D, a $300 million program for Federal purchase of photovoltaics, a Federal renewables purchase requirement with double credit for on-site generation, and a 15% residential tax credit capped at $2000) remain unchanged. The $.018 / kWh Production Tax Credit is restored to its original Senate version, which would provide solar power plants with a credit for five years worth of production in a manner that should be more beneficial than the version in the Energy Bill considered last year. – Wind Energy Provisions – The American Wind Energy Association (AWEA) outlined some key legislation in the Energy Bill. With regard to the critical, now-expired wind energy production tax credit (PTC), the new energy bill would: – Maintain a 3-year extension term (through December 31, 2006); and – Eliminate the inflation adjustment provision contained in current law, thus freezing the value of the PTC at the current 1.8 cents per kWh, for all wind projects placed in service after September 30 of this year. Conversely, any wind project placed in service before October 1 would retain access to the PTC inflation adjustment provision. Last year, Senate tax writers also proposed elimination of the PTC inflation adjustment provision and AWEA and its allies were successful in restoring the provision. AWEA is currently pursuing an identical effort to restore both the inflation and alternative minimum tax provisions to the newly-proposed energy bill. Meanwhile, the energy bill’s proposed small turbine tax credit is set at 30% of system cost capped at $2,000 per system. AWEA continues to seek an increase in the cost cap. The new bill would also: – Leave coal provisions unchanged; – Leave electric reliability provisions unchanged; and Cut planned transmission improvements for the federally-financed power marketing administrations, i.e., the Western Area Power Administration (WAPA) and the Southwestern Power Administration (SWPA), by delaying for one year the third-party finance provisions allowing these entities to go to third parties to finance future expansions to the electricity grid. – Biofuels – The new energy bill includes the Volumetric Ethanol Excise Tax Credit, Renewable Fuel Standard (RFS), tax incentives to assist with the establishment of E85 fueling systems, and short-term tax credits to promote the use of all forms of alternative transportation fuels. The RFS is the most important piece of legislation for the biofuels industries. “We’re finally seeing the light at the end of a very long tunnel on RFS,” said National Corn Growers Association (NCGA) President Dee Vaughan, in a recent statement. “This has been a three-year effort and it hasn’t been easy, but we got our message across. It’s gratifying to know our lawmakers believe in a Renewable Fuels Standard. The RFS provides for expansion of the ethanol industry by requiring 5 billion gallons of renewable content in motor fuels by 2012. Aside from providing a vehicle for rural development and economic growth, this is an important move to enhance our nation’s energy security.” In addition the benefits mentioned by the NCGA’s Vaughan, the Renewable Fuels Association (RFA) believes expanded ethanol use can greatly contribute to lessening the countries growing trade deficit. “The U.S. trade deficit recently hit a record $450 billion – in large part to our ever-growing dependence on foreign petroleum products,” said RFA President Bob Dinneen. “Passing this bill and keeping more of our energy dollars here at home will spark economic development and create much-needed jobs.” – HydroPower – The new bill contains important provisions aimed at significantly improving the licensing process for the nation’s 2,000-plus non-federal hydropower projects, according to the National Hydropower Association (NHA). The hydro licensing provisions will give hydropower project operators the flexibility and creativity to meet important resource protection goals while better ensuring that the hydropower resource is preserved for future generations,” said Linda Church Ciocci, executive director of NHA. “There has been a long, productive and healthy debate in Congress on the subject of licensing improvement for years. The time for that debate is over. The time to act is now.” – Geothermal – The new bill is slightly different, but not much, for geothermal, according to Karl Gawell, Executive Director, of the Geothermal Energy Association. The PTC is expanded to include geothermal energy for a five-year credit, and the leasing provisions are included with a deferral of the effective date for some royalty provisions. While the extension is good news for the geothermal industry, it means nothing until it becomes law. While the tax credit has broad bi-partisan support, it’s hung up with the larger energy bill, threatening to put many projects on hold. “While everyone knows that the wind industry is in doldrums with the temporary expiration of the PTC, not just new wind projects are at risk but the fate of geothermal projects being developed in Arizona, California, Nevada, Oregon, Utah, Idaho and New Mexico are tied to what happens to this legislation,” Gawell said. These are all unmistakably big issues to the renewable energy industries, but the political reality is that they are not a Congressional priority. “The real question is whether this bill will pass the Senate, and then what will happen in the House,” Gawell said. “Unfortunately, despite what is happening in the world around us — climate change, oil prices, gas prices and the like, all of which tell us we urgently need a positive, sustainable energy policy– energy legislation is hostage to various “higher” political considerations. Some may disagree with Senator Domenici on substance, but I believe he is genuinely interested in passing an energy bill to address these problems and is being frustrated by the political “game” going on in Washington.”


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