Weekly Clean Energy Roundup:August 11, 2005

News and Events

• Energy Act Provides Tax Incentives for Energy Efficiency
• Net Metering, Tax Credits for Solar Energy Included in Energy Act
• Power Production from Renewable Energy Aided by Energy Act
• Biofuel Requirement and Tax Incentives Included in Energy Act
• Energy Act to Increase Energy Efficiency in Federal Buildings
• Energy Act Shifts Daylight Saving Time, Sets Appliance Standards

Energy Act Provides Tax Incentives for Energy Efficiency

President Bush signed the Energy Policy Act of 2005 into law on Monday, setting in motion a process that will yield new tax incentives for consumers and businesses that pursue energy efficiency. “Energy conservation is more than a private virtue; it’s a public virtue,” said President Bush. “And with this bill I sign today, America is taking the side of consumers who make the choice to conserve.” See the White House press release, President Bush’s comments, and the White House’s related “Energy for America’s Future” Web page.

The energy act creates a total tax credit of up to $500 for energy efficiency improvements to your home, including credits of up to $200 for installing new exterior windows; up to $300 for installing a highly efficient central air conditioner, heat pump, or water heater; up to $150 for installing a highly efficient furnace or boiler; and credits for 10 percent of the cost of insulation, energy-efficient doors, and cool reflective roofs. The credits will be available in 2006 and 2007. DOE also anticipates possible consumer savings as a result of new tax credits for contractors who build energy-efficient homes and for manufacturers who make energy-efficient appliances. New energy-efficient commercial buildings will also earn a tax deduction.

Buying hybrid electric vehicles and vehicles with cleaner burning diesel engines, known as advanced lean-burn engines, can earn you a tax credit of up to $3,400. The credit is largest for the vehicles that save the most fuel, but the credit will phase out shortly after an automaker sells 60,000 eligible cars. Tax credits of up to $4,000 are also available for alternative fuel cars. Businesses can earn the same tax credits, as well as credits of up to $12,000 for buying large hybrid vehicles, such as buses, and up to $32,000 for the purchase of large alternative fuel vehicles. And although fuel cell vehicles are not on the market yet, the act also establishes tax credits for these vehicles. See “Energy Bill Signed” on the DOE Web site and the Alliance to Save Energy press release.

For more information, see pages 1332 to 1433 of the full 1,724-page energy act (also referred to as the “conference report”), which is available as a “Featured Item” on the Web site of the Senate Committee on Energy and Natural Resources as a 2.6-MB PDF file. The Web site also features an 8-page summary by fuel and a 17-page summary by title. See the Senate Committee Web site.

Net Metering, Tax Credits for Solar Energy Included in Energy Act

When President Bush signed the Energy Policy Act of 2005 into law on Monday, he set the stage for the first federal tax credits for solar energy systems on homes in 20 years. According to the Solar Energy Industries Association (SEIA), homeowners and businesses will receive a credit of up to 30 percent of the cost of installing a solar power system or a solar hot water system. The solar energy tax credit is capped at $2,000 for each type of system, and applies to the cost after accounting for any state and utility incentives. It applies to systems that are placed in service in 2006 or 2007. Homeowners will also earn a tax credit for installing fuel cells, and businesses will earn a tax credit for installing either fuel cells or microturbines. See the SEIA summary of the solar tax credits and see pages 1373 to 1390 of the energy act (PDF 2.6 MB).

To further encourage homeowners and businesses to generate their own power, the energy act amends the Public Utilities Regulatory Policies Act (PURPA) to require every public utility to offer interconnection to the power grid and net metering upon request. Net metering allows consumers to offset their electricity use with any self-generated electricity fed into the power grid over the course of a billing period. See pages 1146 to 1151 and pages 1173 to 1176 of the energy act (PDF 2.6 MB).

Power Production from Renewable Energy Aided by Energy Act

The Energy Policy Act of 2005 includes a number of provisions to increase the use of renewable energy as a source of electricity. The energy act extends the production tax credit through 2007 for electricity produced from wind power, geothermal power, biomass, landfill gas, small irrigation power, and trash combustion facilities. The credit would have expired at the end of this year. The act also extends the credit to include the hydropower generated from new facilities added to existing dams or conduits, and the additional hydropower generated because of efficiency improvements at existing hydropower stations. The American Wind Energy Association (AWEA) and the National Hydropower Association (NHA) hailed the credit extension. See the AWEA press release, the NHA fact sheet (PDF 31 KB), and pages 1222 to 1227 of the energy act (PDF 2.6 MB).

By 2013, the act requires the federal government to buy at least 7.5 percent of its electricity from renewable energy sources, including wind, solar, biomass, landfill gas, ocean, geothermal, municipal solid waste, and new hydroelectric generation achieved through efficiency improvements or capacity additions at existing hydroelectric plants. The act doubles the credit for power generated on-site or on federal or tribal lands.

The act updates the Geothermal Steam Act to require competitive lease sales at least every two years in states with geothermal resources. Land tracts offered for competitive leases but not bid upon can then be offered for non-competitive leases. Fees will be charged based on power production, and only nominal fees will be charged for geothermal resources not used to generate power. The act also reforms the hydropower licensing process. To help assess the availability of renewable energy, the energy act also requires an annual assessment of all renewable energy resources, including solar, wind, biomass, ocean, geothermal, and hydroelectric energy sources. See pages 161 to 251 of the energy act (PDF 2.6 MB).

Biofuel Requirement and Tax Incentives Included in Energy Act

The Energy Policy Act of 2005 sets a new national minimum requirement for the use of biofuels, particularly ethanol. The new “Renewable Fuels Standard” requires that gasoline sold in the United States contain a total of 4 billion gallons of biofuels in 2006, increasing to 7.5 billion gallons in 2012. The standard provides greater flexibility for refiners by allowing renewable fuel credits and by eliminating the reformulated gasoline oxygenate standard. The bill allows a credit of 2.5 gallons for every gallon of ethanol produced from wastes or cellulosic (woody) biomass sources. A recent report by DOE’s Energy Information Administration analyzed a similar requirement and found it had a negligible impact on fuel prices. See the report.

And should you install a refueling station for alternative fuels at your home or business, you can earn a 30 percent tax credit (this sounds unlikely for the home, but Honda is now offering home natural gas fueling stations in California). The credit applies to fueling stations for ethanol, natural gas, compressed natural gas, liquefied petroleum gas, hydrogen, and biodiesel blends containing at least 20 percent biodiesel. The act also extended tax incentives for fuel distributors that blend biodiesel into their diesel fuel. See the press releases from the Renewable Fuels Association and the National Biodiesel Board (PDF 22 KB).

The act also requires federal alternative fuel fleets with flexible fuel vehicles (vehicles that can be fueled with gasoline or alternative fuels) to actually use alternative fuels, provided they are reasonably available and not unreasonably expensive. Currently, many federal fleets are buying the flexible fuel vehicles but fueling them only with gasoline or diesel fuel. See pages 682 to 1724 of the energy act (PDF 2.6 MB).

Energy Act to Increase Energy Efficiency in Federal Buildings

The Energy Policy Act of 2005 will require reduced energy use in federal buildings, federal purchasing of energy efficient products, and more sustainable designs for new federal buildings. And for the first time, the act requires congressional office buildings to meet the same efficiency standards as the rest of the federal government.

The energy act requires federal agencies to cut the energy consumption in their buildings to 20 percent below their energy use in 2003, in terms of energy use per square foot, by 2015. The act allows some exceptions for energy-intensive processes and matters of national security. The act also allows federal agencies to retain the funds not spent because of energy savings, but requires the agencies to invest the funds back into energy efficiency or renewable energy projects. To help agencies pay for energy improvements, the act extends the Energy Savings Performance Contracts program, which allows private companies to pay for the improvements and to be paid back with a portion of the energy savings. The act also requires federal agencies to buy either Energy Star products or products designated as energy efficient by the Federal Energy Management Program.

New federal buildings will be designed to use 30 percent less energy than a building that meets the minimum standards of the International Energy Conservation Code (for homes) or the relevant 2004 standard from the American Society of Heating, Refrigeration, and Air-Conditioning Engineers. New federal buildings will also have to incorporate water conservation technologies and meet sustainable design principles. See pages 22 to 40 of the energy act (PDF 2.6 MB).

Energy Act Shifts Daylight Saving Time, Sets Appliance Standards

Here’s one way to save energy: turn your lights on one hour later for a few weeks in the spring and fall. You might be picturing millions of frugal U.S. residents sitting in the dark, but Congress found an easier way to make that happen: extend Daylight Saving Time. Yes, thanks to the Energy Policy Act of 2005, in 2007 Daylight Saving Time will start on the second Sunday in March instead of the first Sunday in April, and will end on the first Sunday in November instead of the last Sunday of October. Congress expects the change to save energy; DOE will have to study the impact of the change and report back to Congress, which reserves the right to change things back.

Another way to help consumers save energy is to set minimum energy efficiency standards for appliances and other products. The new energy act sets energy efficiency standards for a number of products, including dehumidifiers, distribution transformers, ceiling fans, traffic signals, illuminated exit signs, torchieres, and other products, and requires DOE to set new standards for battery chargers, vending machines, and external power supplies. The act also requires new standards for a variety of equipment for commercial use, including clothes washers, icemakers, refrigerators, freezers, and packaged air conditioning and heating equipment. California and five other states have already set st
andards for many of these products; a federal standard will avoid the confusion of having different product standards across the country on a state-by-state basis.

The Daylight Saving Time measure is located on pages 52 and 53 of the energy act, and the product standards run from page 79 to page 147. See the full text of the act (PDF 2.6 MB).

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