H.R. 6 builds upon the amendments Congress made last year to the Production Tax Credit. It continues to include geothermal energy in the Section 45 Production Tax Credit (PTC) for the full 1.9 cent/kwhr credit amount, but expands the credit period from five to the full ten years. As a result, geothermal and wind will now receive equal tax treatment — the full ten-year, 1.9 cent production tax amount. Other technologies, such as open loop biomass, receive the full ten-year credit but for half the credit amount, or 0.95 cents/kwhr.
HR 6 extends the “placed in service date” for geothermal and most other technologies by two years. This gives developers 29 months to have their facilities on-line. New power plants placed in service by January 1, 2008 will qualify for the PTC under this bill. However, Congress has extended the placed in service date every two or three years since it first created the Production Tax Credit in 1992 and future extensions are likely.
The Conference Committee also adopted landmark provisions that provide cooperatives and public power entities similar incentives to invest in new geothermal and other renewable power facilities. The Clean Energy bonds proposal, supported by GEA and the Renewable Energy Business Alliance, should open new avenues for renewable power development in the West.
Here is the summary of the Energy Bill’s renewable tax provisions prepared by the Committee Staff. Regarding Section 45, note that solar has no extension in its placed in service date, because they opted to be left out of the PTC in favor of an investment tax credit. Also, the hydropower included in Section 45 is “incremental hydropower” which is defined in the bill’s details. Finally, the “cost” indicated is the estimated, ten-year cost to the Treasury for each provision.
Renewable and Clean Energy Incentives
Extension and modification of renewable electricity production credit
(Section 45). Provision extends placed-in-service date by two years (through December 31, 2007) for qualifying facilities: wind facilities; closed-loop biomass facilities; open-loop biomass facilities; geothermal facilities; small irrigation power facilities; landfill gas facilities; and trash combustion facilities.
Placed-in-service dates for solar facilities and refined coal facilities are not altered. Qualifying facilities receive credits per kWh for electricity produced over a 10 year period. Hydropower and Indian coal are added as new qualifying energy resources. Provision is generally effective on date of enactment. Cost: $2.747 billion
Pass through to cooperatives. Section 45 allows eligible cooperatives to elect to pass any portion of the renewable electricity production credit to their patrons. An eligible cooperative is defined as a cooperative organization that is owned more than 50 percent by agricultural producers or entities owned by agricultural producers. (included in Section 45 score)
Clean renewable energy bonds. Provision creates new category of tax credit Bonds Clean Renewable Energy Bonds (“CREBs”). CREBs are defined as bond issued by qualified issuer if, in addition to other requirements, 95 percent of proceeds are used to finance capital expenditures incurred for facilities qualifying for tax credit under section 45. Qualified issuers include governmental bodies (including Indian tribal governments) and mutual or cooperative electric companies. Provision is effective for bonds issued after December 31, 2005. Cost: $411 million
The Energy Bill’s Title IX, Research and Development, includes provisions directing the Department of Energy to continue a geothermal research program, providing specific goals for that effort. The bill language stipulates: “GEOTHERMAL. The Secretary shall conduct a program of research, development, demonstration, and commercial application for geothermal energy.
The program shall focus on developing improved technologies for reducing the costs of geothermal energy installations, including technologies for– (1) improving detection of geothermal resources;
(2) decreasing drilling costs;
(3) decreasing maintenance costs through improved materials;
(4) increasing the potential for other revenue sources, such as mineral production; and
(5) increasing the understanding of reservoir life cycle and management.”
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