Weekly Clean Energy Roundup: October 8, 2008

  • Economic Stabilization Bill Includes Clean Energy Tax Incentives
  • Continuing Resolution Includes $25 Billion in Automakers Loans
  • DOE Invests $43.1 Million in 21 Enhanced Geothermal Projects
  • DOE Awards $83.3 Million to Develop a Sustainable Biofuels Industry
  • Michigan Requires 10% Renewable Electricity by 2015
  • GM and Porsche Win the American Le Mans Green Challenge
  • Economic Stabilization Bill Includes Clean Energy Tax Incentives

    President Bush signed the $700 billion Emergency Economic Stabilization Act of 2008 (H.R. 1424) into law last week, which also extended and enhanced critical tax credits and financing relating to renewable energy and energy efficiency.

    The Energy Improvement and Extension Act of 2008, which was attached to H.R. 1424, provides a one-year extension of the production tax credit (PTC) for wind energy, keeping the credit in effect through 2009. The bill also provides a two-year PTC extension, through 2010, for electricity produced from geothermal, biomass, and solar energy facilities, as well as trash-to-energy facilities, small hydropower facilities using irrigation water, capacity additions to existing hydropower plants, and hydropower facilities added to existing dams.

    In addition, the bill creates a new PTC for electricity produced by marine and hydrokinetic renewable energy systems (also called advanced water power systems) with a rated capacity of at least 150 kilowatts and placed in service by 2011. To help on the financing end, the bill authorizes $800 million in new Clean Renewable Energy Bonds for all of the above technologies. See the White House press release.

    While the PTC extensions and enhancements are good news for all major renewable energy sources, arguably the biggest winner in the tax bill is solar energy, which gained an 8-year extension (through 2016) of the 30% tax credit for residential and commercial solar installations, as well as the elimination of the $2,000 tax credit cap for residential solar electric installations.

    The Solar Energy Industries Association (SEIA) expects the creation of more than 440,000 jobs and the generation of at least $325 billion in private investment due to those changes, which should yield more than 28 gigawatts of solar power. The Solar Electric Power Association (SEPA) also sees huge potential growth in a measure that allows electric utilities to take advantage of these tax credits.

    In addition, small wind power gained a 30% tax credit, up to $4,000 for wind turbines with capacities of 100 kilowatts or less, which is also good through 2016. The tax credits for fuel cells and microturbines are also extended by 8 years, and the fuel cell tax credit limit is tripled, to $1,500 for each 0.5 kilowatts of capacity. The act also creates a new 10% tax credit for certain combined heat and power systems and for geothermal heat pumps (up to $2,000). In addition, the bill also provides accelerated depreciation for utilities installing smart meters and smart grid systems. See the press releases from SEIA and SEPA (PDF 33 KB).

    In terms of energy efficiency and alternative fuels, the act extends and revives a number of energy efficiency tax incentives for buildings, creates new tax credits for efficient vehicles, and extends and modifies tax credits for biofuels.

    Specifically, it extends energy efficiency tax deductions for commercial buildings through 2013 and revives similar deductions for home improvements installed in 2009, adding a new $300 tax credit for energy-efficient biomass fuel stoves. It also extends tax credits for builders of new energy-efficient homes through 2009 and increases tax credits for manufacturers of energy-efficient appliances, while extending that credit through 2010.

    The act creates a new tax credit of up to $7,500 for plug-in hybrid vehicles, which are expected to go on sale in 2010, while providing tax exemptions for idle reduction technologies and advanced insulation installed in trucks. The act also extends a 30% tax credit for alternative fuel refueling facilities through 2010 and expands the credit to include electric charging stations.

    For biofuel producers, the act extends a 50% first-year depreciation for cellulosic biomass ethanol plants to include any plant producing biofuels from cellulosic (non-food) biomass sources. The act also extends through 2009 a PTC of $1 per gallon for biodiesel and other biomass-based diesel fuels and a credit of 10 cents per gallon for small biodiesel producers, but it cuts the PTC for renewable diesel blended with petroleum to 50 cents per gallon, while closing a loophole that allowed foreign producers to earn a U.S. tax credit. See the press releases from the ACEEE and the National Biodiesel Board.

    To help individuals take advantage of all the tax credits, Division C of H.R. 1424 increases the income limits for the Alternative Minimum Tax, while the energy tax provision allows unused tax credits to be carried over to the next tax year. And to help finance energy efficiency improvements, the bill authorizes $800 million in Qualified Energy Conservation Bonds, which will be issued by state and local governments. The bonds can be applied to a wide range of energy efficiency projects, research and demonstration projects, and even renewable energy projects. The bill also extends the authority to issue bonds for qualified green building and sustainable design projects through 2012. See the Division B and C of H.R. 1424, and for comparison, see Subparts A, D, and E of Part IV of Subchapter A of Chapter 1 of the existing Internal Revenue Code (posted by the Cornell University Law School), as well as Section 168 of Part VI of Subchapter B.

    Continuing Resolution Includes $25 Billion in Automakers Loans

    President Bush last week signed a continuing resolution bill that keeps the federal government operating through March 6, 2009, but also includes funds for automaker loans that will encourage the development of plug-in hybrids and other advanced technology vehicles.

    H.R. 2638-the "Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009"-includes as part of its continuing resolution an appropriation of $7.51 billion for DOE to support up to $25 billion in direct loans to automakers and auto part suppliers. The amount includes $10 million for DOE to administer the loans, which were authorized by the Energy Independence and Security Act of 2007, H.R. 6.

    That energy act designated loans to support the manufacture of advanced light-duty vehicles (cars and light trucks) that meet strict emissions limits and exceeded the average fuel economy of current model year vehicles by at least 25%. It specified that the loans would go to automakers and component suppliers to cover up to 30% of the cost of engineering the integration of advanced technologies into vehicles; designing the tooling, equipment, and manufacturing processes to produce the technologies and the vehicles; and creating the manufacturing facilities for the components and vehicles. The new act requires DOE to promulgate an interim final rule for the loan program within 60 days. See the White House press release, Section 129 of Division A of H.R. 2638, and Section 136 of H.R. 6.

    In addition to the automotive loans, Section 130 of the continuing resolution provides a $250 million budget boost to the DOE Office of Energy Efficiency and Renewable Energy (EERE), providing additional funds for the Weatherization Assistance Program, which offers energy efficiency services for the homes of low-income families. Other than that, funding for EERE will remain at fiscal year 2008 levels while the continuing resolution is in effect. However, as part of special funds for fire management at the U.S. Forest Service, Chapter 6 of the new act provides $175 million for hazardous fuels reduction, an effort that generates low-value wood waste that it useful for biomass energy production. The act specifies that $125 million of that amount should go toward fuels reduction and hazard mitigation activities on state and private lands. See Section 130 of Division A of H.R. 2638, as well as Chapter 6 of the act.

    DOE Invests $43.1 Million in 21 Enhanced Geothermal Projects

    DOE announced on Monday that it will invest up to $43.1 million over the next four years in 21 research, development, and demonstration projects involving enhanced geothermal systems (EGS). EGS technologies employ rock fracturing techniques in high-temperature geological formations deep underground, and they can be used to either create a geothermal reservoir of hot water or steam where none existed before or to extend and enhance an existing geothermal reservoir.

    The technology typically involves the injection of water at high pressures to fracture the rock. The awards will given to companies and universities under two topic areas-systems demonstrations and technology research and development (R&D)-and include a record 13 first-time recipients. Combined with private cost-share investments, up to $78 million will be invested in these projects.

    DOE will invest $3.7 million in four systems demonstration projects, all of which will attempt to increase power production from existing geothermal reservoirs, including The Geysers reservoir in northern California, about 72 miles north of San Francisco; the Brady geothermal field in Nevada, about 50 miles east of Reno; the Raft River geothermal project in southern Idaho, about 200 miles southeast of Boise, and a fourth undisclosed location. The success of these projects could result in more than 400 megawatts of new generating capacity within the next five years.

    DOE will also invest up to $8.7 million in 17 R&D projects, which will address aspects of geothermal reservoir creation, management, and utilization at temperatures up to 572°F and depths as great as 6.2 miles. The technologies include computer models and tools for characterizing the enhanced geothermal reservoirs-such as seismic monitors, chemical techniques, and devices that would be lowered to the bottom of a borehole-as well as electronic systems and submersible pumps designed to operate in the high-temperature geothermal well environments. In addition, one project will investigate the use of "proppants," which are small particles mixed with the fracturing fluid to help hold fractures open. See the DOE press release and DOE’s Geothermal Technologies Program.

    DOE Awards $83.3 Million to Develop a Sustainable Biofuels Industry

    DOE and the U.S. Department of Agriculture (USDA) released on Tuesday the National Biofuels Action Plan (NBAP), an interagency plan that details the collaborative efforts of federal agencies to accelerate the development of a sustainable fuels industry. The NBAP outlines interagency actions, federally supported research and development efforts, and future goals and required steps in seven areas: sustainability; feedstock production; feedstock logistics; conversion science and technology; distribution infrastructure; blending; and environment, health, and safety. The NBAP was developed by the Biomass Research and Development Board, which is co-chaired by both USDA and DOE officials in order to coordinate the activities of federal agencies involved in biomass research and development. See the DOE press release and fact sheet on the NBAP, the NBAP report (PDF 4.9 MB), and the USDA Energy Matrix Web site.

    For its part, DOE will focus on three major goals: research to enable increased use of biofuels; deployment of cellulosic biorefineries; and research and development (R&D) of biofuels. DOE’s research to enable the increased the use of biofuels will be focused mostly on assessing the potential impacts of E15 and E20-blends of gasoline with 15% and 20% ethanol, respectively-on conventional vehicles and other gasoline engines.

    To support that effort, DOE released on Tuesday a preliminary report that found no significant impact on emissions or performance when using the ethanol blends. DOE’s National Renewable Energy Laboratory (NREL) and Oak Ridge National Laboratory (ORNL) studied the affects of E15 and E20 on 13 vehicles and 28 small non-road engines, including lawn equipment and generators. See the DOE fact sheet on the report and the full report (PDF 1.5 MB).

    To meet its deployment and R&D goals, DOE will invest an additional $76.3 million in POET, LLC, which is producing a commercial-scale cellulosic biorefinery, plus another $7 million in five advanced biofuels projects, subject to annual appropriations. POET received $3.7 million under the first phase of a cooperative agreement with DOE that covered that covers initial design, permitting, and preparation of National Environmental Policy Act (NEPA) documentation.

    This second phase of funding will support final design, construction, and commissioning of the project to develop an economically viable cellulose-to-ethanol biorefinery. Meanwhile, the five advanced biofuels projects will develop cost-effective, environmentally friendly ways to convert non-food feedstocks into stabilized pyrolysis oils. Pyrolysis involves the rapid heating of biomass in the absence of oxygen. See the DOE press release.

    Michigan Requires 10% Renewable Electricity by 2015

    Michigan Governor Jennifer Granholm approved an energy package on Monday that includes a requirement for 10% of the state’s electricity to come from renewable energy sources by 2015. Senate Bill 213 requires utilities to obtain renewable energy credits (RECs) equal to 2% of their electricity supply in 2012, increasing each year until the number of RECs equal 10% of their electricity supply in 2015 and thereafter. Aside from currently existing contracts for wind power and a few other exceptions, the RECs must be generated by renewable energy systems located within the state or within the service territory of the state’s major utilities. The bill provides triple credits for power generated by solar power systems and partial extra credits for renewable power generated from equipment manufactured in Michigan or from systems constructed by a Michigan workforce, as well as for renewable power generated at peak times or generated at off-peak times but stored and provided to the grid at peak times.

    The RECs will be certified, tracked, and traded under a system to be established by the Michigan Public Utilities Commission (PUC). The bill also allows the use of industrial cogeneration to meet up to 10% of the renewable energy requirement, and other advanced energy systems, load management programs, or energy efficiency programs could be used to meet that portion of the requirement, but only with PUC approval.

    In addition to the REC requirements, utilities with 1-2 million retail customers must have 200 megawatts (MW) of new renewable energy capacity in their energy portfolios by the end of 2013 and 500 MW of new renewable capacity by the end of 2015. Utilities with more than 2 million retail customers must add 300 MW of renewable capacity by the end of 2013 and must add another 300 MW by the end of 2015, for a total of 600 MW of new renewable power capacity. To encourage wind power development, the bill establishes a framework to designate wind energy resource zones, to determine transmission needs for those resource zones, and to expedite the state’s approval of needed transmission lines. The bill also requires the PUC to establish a statewide net metering program, allowing customers with renewable energy systems to earn credit for power fed back into the electrical grid.

    SB 213 also mandates electric utility plans for energy efficiency and load management, as well as energy efficiency plans for natural gas utilities, with requirements for electric utilities to reduce their electricity sales by 5.5% by 2015, and for natural gas utilities to reduce natural gas usage by nearly 4% by 2015. The PUC could even decouple revenue from sales for natural gas utilities with aggressive energy efficiency programs. Large customers can also opt out of the energy efficiency programs if they institute their own self-directed energy efficiency program. The bill also establishes an energy efficiency program for the Michigan State government, with a goal of reducing grid based energy purchases by 25% by 2015. As a complement to SB 213, SB 1048 provides a 10% tax credit for energy efficiency improvements to homes. See the governor’s press release and the texts for SB 213 and SB 1048.

    GM and Porsche Win the American Le Mans Green Challenge

    General Motors Corporation (GM) and Porsche AG were named on Saturday, October 4, as the inaugural winners of the Green Challenge at the Petit Le Mans, the signature endurance race of the American Le Mans Series. GM’s Corvette Racing team took top honors among the Grand Touring entries, which are modified production cars, while Porsche’s Penske Racing team placed first among the prototype cars. While Audi Sport North America won the actual 1,000-mile race at Road Atlanta, the Corvette and Porsche teams won the race-within-the-race by achieving the best scores for overall performance, amount of petroleum displaced, and amount of greenhouse gas emissions.

    According to GM, the Corvette team’s low score was achieved in part by burning cellulosic E85R, a blend of 15% gasoline and 85% ethanol derived from waste wood. The American Le Mans Series partnered with DOE, the U.S. Environmental Protection Agency, and SAE International (an automotive engineering society) to develop the Green Challenge. See the announcement from the American Le Mans Series, the GM press release, the Green Challenge rating system (PDF 44 KB), and the Road Atlanta Web site.

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    Kevin Eber is the Editor of EREE Network News, a weekly publication of the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE).

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