| An Overview of
the Energy Bill, Part II
It took more than four years of debate, but in July the U.S. Congress
sent to President George W. Bush a comprehensive energy bill. That
bill--the Energy Policy Act of 2005--was signed by Bush on August 8. The
energy bill adds $14.5 in new tax incentives for individuals and
businesses. In the midst of the incentives for hybrid vehicles and
energy-efficient appliances and support for hydrogen and nuclear power
programs, the energy bill includes about $2.1 billion in tax incentives
for efficiency and conservation measures. For members of the green industry, the energy bill provides a number of incentives and benefits. Last week, we took a look at provisions covering solar energy, net metering, residential home tax measures and building. The following are additional segments of the energy act impacting the renewable energy industries: Alternative Fuel Vehicles Buying a hybrid electric vehicle or a vehicle with cleaner burning diesel engines (advanced lean-burn engines) can earn the buyer a vehicle tax credit worth $250 to $3,400 for hybrid or diesel vehicles. The credit is larger for those vehicles that save the most fuel. The hybrid credits are available, beginning in 2006, for up to 60,000 vehicles from each auto manufacturer, with the tax break phasing out over the year after the cap is met. 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. In addition, although fuel cell vehicles are not on the market yet, the act also establishes tax credits for those vehicles. Production Tax Credit 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) hailed the extension of the wind energy Production Tax Credit (PTC). The PTC, which was scheduled to expire on December 31, 2005, provides a 1.9 cent-per-kilowatt-hour (kWh) tax credit for electricity generated with wind turbines over the first 10 years of a project’s operations, and is a critical factor in financing new wind farms. Up to 2,500 megawatts of wind energy capacity are scheduled to come on line in the U.S. this year, bringing new power to the equivalent of 700,000 homes and injecting over $3 billion of investment into the power generation sector. With the timely extension of the PTC, the American Wind Energy Association anticipates that strong growth momentum will continue in 2006 and 2007. Power Production from Renewable Energy 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 also 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. National Minimum Standard for Biofuel Use The energy act 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 more 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. Alternative Fuel Refueling Stations A 30 percent tax credit is available for installing a refueling station at a business or home. 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 extends tax incentives for fuel distributors that blend biodiesel into their diesel fuel. In addition, 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. Minimum Energy Efficiency Standards for Appliances The energy act sets energy-efficiency standards for 16 products--exit signs, traffic lights, building transformers, torchiere lighting fixtures, compact fluorescent lamps, commercial unit heaters, residential dehumidifiers, commercial refrigerators and freezers, large commercial air conditioners, commercial ice makers, commercial clothes washers, pedestrian signals, mercury vapor lamp ballasts, fluorescent lamp ballasts, pre-rinse spray valves (used in restaurants), and residential ceiling fan light kits. It also requires the Department of Energy to set new standards for battery chargers, vending machines and external power supplies. Expanded Daylight Saving Time Daylight saving time has been extended by one month (one week in the spring, three weeks in the fall). 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. The Department of Energy will study the impact of the change and report back to Congress, which reserves the right to change things back.
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