Clean Energy Aspects of the American Recovery
and Reinvestment Act
EERE Network News - 2/19/09
Economic Stimulus Act Provides $16.8 Billion for EERE Programs
President Barack Obama signed the American Recovery and Reinvestment Act of
2009 yesterday, and the measure includes $16.8 billion for the DOE Office of
Energy Efficiency and Renewable Energy (EERE). The funding is a nearly
tenfold increase for EERE, which received $1.7 billion in fiscal year 2008.
While the bulk of the new EERE funding is supporting direct grants and
rebates, $2.5 billion will support EERE's applied research, development, and
deployment activities, including $800 million for the Biomass Program, $400
million for the Geothermal Technologies Program, and $50 million for efforts
to increase the energy efficiency of information and communications
technologies. An additional $400 million will support efforts to add
electric technologies to vehicles. And separate from the EERE budget, $400
million will support the establishment of the Advanced Research Projects
Agency—Energy (ARPA-E), an agency to support innovative energy research,
modeled after the Defense Advanced Research Projects Agency (DARPA).
The economic stimulus act also stipulates that $5 billion will go towards
the Weatherization Assistance Program, and the act also increases the
eligible income level under the program, increases the funding assistance
level to $6,500 per home, and allows new weatherization assistance for homes
that were weatherized as recently as 1994. A complementary measure in the
act provides $4 billion to the Department of Housing and Urban Development
(HUD) to rehabilitate and retrofit public housing, including increasing the
energy efficiency of units, plus an additional $510 million to do the same
for homes maintained by Native American housing programs. HUD will receive
an additional $250 million to increase the energy efficiency of
HUD-sponsored, low-income housing. See pages 59, 79, 254-261, and 275-278 of
the act, as well as pages 24, 28, 84, and 86-87 of the accompanying joint
explanatory statement of the conference committee.
The act also directs $2 billion in EERE funds toward grants for the
manufacturing of advanced battery systems and components within the United
States, as well as the development of supporting software. The battery
grants will support advanced lithium-ion batteries and hybrid electric
systems. Another $300 million will support an Alternative Fueled Vehicles
Pilot Grant Program, and an additional $300 million will support rebates for
energy efficient appliances, while also supporting DOE's efforts under the
Energy Star Program. The act also stipulates that $3.2 billion will go
toward Energy Efficiency and Conservation Block Grants, which were
established in the Energy Independence and Security Act of 2007, but were
not previously funded. The grants will go toward states, local governments,
and tribal governments to support the development of energy efficiency and
conservation strategies and programs, including energy audit programs and
projects to install fuel cells and solar, wind, and biomass power projects
at government buildings.
The act also stipulates that $3.1 billion of EERE funds will go toward the
State Energy Program for additional grants that don't need to be matched
with state funds, but the act only allows such grants for states that intend
to adopt strict building energy codes and intend to provide utility
incentives for energy efficiency measures. To help states implement the
measures, a separate portion of the act allocates $500 million to the
Department of Labor to prepare workers for careers in energy efficiency and
renewable energy. See pages 59, 81-85, and 147-148 of the act, as well as
pages 24, 28, and 51 of the accompanying joint explanatory statement of the
conference committee.
Renewable Energy and Smart Grids Spurred by Economic Stimulus Act
The American Recovery and Reinvestment Act of 2009 includes $6 billion to
support loan guarantees for renewable energy and electric transmission
technologies. The funds are expected to guarantee more than $60 billion in
loans. The act requires the DOE Loan Guarantee Program to only make loan
guarantees to projects that will start construction by September 30, 2011,
and that involve renewable energy, electric transmission, or leading-edge
biofuel technologies.
The act also directs DOE to analyze the nation's electrical grid to
determine if significant potential sources of renewable energy are locked
out of the electrical market by a lack of adequate transmission capacity.
DOE must then provide recommendations for achieving adequate transmission
capacity. To help achieve those recommendations, the act includes a
provision allowing the Western Area Power Administration to borrow up to
$3.25 billion from the U.S. Treasury for transmission system upgrades,
particularly for facilitating the delivery of power from renewable energy
facilities. See pages 65-71 and 80-81 of the act and page 28 of the joint
explanatory statement of the conference committee.
In addition, the act provides $4.5 billion for the DOE Office of Electricity
Delivery and Energy Reliability for activities to modernize the nation's
electrical grid, integrate demand-response equipment, and analyze, develop,
and implement smart grid technologies. The funds will also support research
in energy storage technologies, efforts to facilitate recovery from energy
supply disruptions, and efforts to enhance the security and reliability of
the nation's energy infrastructure. A complementary section of the act opens
smart grid demonstration projects to electric systems in all areas of the
country and establishes a smart grid information clearinghouse to share data
from the demonstration projects. See pages 60-62 and 72-76 of the act, as
well as pages 25 and 28 of the accompanying joint explanatory statement of
the conference committee.
Economic Stimulus Act to Result in Greener Federal Buildings and Fleets
Federal buildings and fleets will become greener under a measure of the
American Recovery and Reinvestment Act of 2009. The act provides $4.5
billion to the U.S. General Services Administration (GSA) to convert federal
buildings into high-performance green buildings, which generally combine
energy efficiency and renewable energy production to minimize the energy use
of the buildings. The act also directs $4 million toward the establishment
of an Office of Federal High-Performance Green Buildings within the GSA. In
addition, the act provides $100 million for the Energy Conservation
Investment Program within the Department of Defense, as well as another $100
million for energy conservation and alternative energy projects at
facilities of the U.S. Navy and U.S. Marine Corps.
For federal vehicle fleets, the act provides $300 million to cover the costs
of acquiring greener motor vehicles, including hybrids, electric vehicles,
and plug-in hybrid vehicles, once they become commercially available. Buying
plug-in hybrids will be an iffy proposition, however, as the funds must be
spent by September 30, 2011.
High-Speed Rail and Transit Boosted by Economic Stimulus Act
High-speed rail corridors and intercity passenger rail service will gain
significant new funding under a measure of the American Recovery and
Reinvestment Act of 2009. The act provides $8 billion for the Federal
Railroad Administration to provide capital assistance to such rail projects,
placing priority on projects that support intercity high-speed rail service.
The act also provides $1.3 billion to the National Railroad Passenger
Corporation, better known as Amtrak, with the majority of funds going toward
the repair, rehabilitation, or upgrade of passenger rail assets or
infrastructure, and for capital projects that expand passenger rail
capacity.
Transit in general gains significantly under the economic stimulus act,
which allocates $6.9 billion to the Federal Transit Administration for
capital assistance grants. The act directs $100 million of those funds to
help public transit agencies reduce their energy consumption and their
greenhouse gas emissions, with priority given to those projects that save
the most energy. An additional $750 million is provided by the act to
support infrastructure investments in "fixed guideway" systems. A fixed
guideway refers to any transit service that uses exclusive or controlled
rights-of-way or rails, entirely or in part, running the gamut from heavy
rail to high-occupancy vehicle lanes. Another $750 million is available for
grants to "New Starts" and "Small Starts" projects, which include fixed
guideway systems, system extensions, and bus corridor improvements. The act
also provides $1.5 billion in supplemental discretionary grants for capital
investments in surface transportation infrastructure, which could include
transit systems.
Economic Stimulus Act Extends Renewable Energy Tax Credits
The tax section of the American Recovery and Reinvestment Act of 2009
provides a three-year extension of the production tax credit (PTC) for most
renewable energy facilities, while offering expansions on and alternatives
for tax credits on renewable energy systems. The extension keeps the wind
energy PTC in effect through 2012, while keeping the PTC alive for municipal
solid waste, qualified hydropower, and biomass and geothermal energy
facilities through 2013. In addition, a two-year extension of the PTC for
marine and hydrokinetic renewable energy systems will keep that tax credit
in effect through 2013. The PTC provides a credit for every kilowatt-hour
produced at new qualified facilities during the first 10 years of operation,
provided the facilities are placed in service before the tax credit's
expiration date. For 2008, biomass facilities fueled with dedicated energy
crops ("closed-loop biomass"), as well as wind, solar, and geothermal energy
facilities earned 2.1 cents per kilowatt-hour, while other qualified
facilities earned 1 cent per kilowatt-hour.
Unfortunately, the current slump in business activity means that fewer
businesses are seeking tax credits, which means that renewable energy
producers are having trouble taking advantage of the PTC. With that in mind,
the act also allows owners of non-solar renewable energy facilities to make
an irrevocable election to earn a 30% investment credit rather than the PTC.
The option remains in effect for the current period of the PTC, that is,
through 2012 for wind energy facilities and through 2013 for other qualified
renewable energy facilities. See pages 34-36 of the American Recovery and
Reinvestment Tax Act of 2009, as well as PDF pages 112-113 of the joint
explanatory statement of the conference committee.
Alternately, the facility owner could choose to receive a grant equal to 30%
of the tax basis (that is, the reportable business investment) for the
facility, so long as the facility is depreciable or amortizable. The grants
are also available for renewable energy facilities that would normally earn
a business energy credit of 10%-30%, including systems using fuel cells,
solar energy, small wind turbines, geothermal energy, microturbines, and
combined heat and power (CHP) technologies. To earn a grant, the facility
must be placed in service in 2009 or 2010, or construction must begin in
either of those years and must be completed prior to the termination of the
PTC. For facilities that would normally earn a business tax credit,
construction must be completed prior to 2017. The grants will be paid
directly from the U.S. Treasury. A separate measure in the act removes
limitations on the business credit based on how the systems are financed and
also removes a business credit limit on small wind energy systems. See pages
36-39 and 153-158 of the American Recovery and Reinvestment Tax Act of 2009,
as well as PDF pages 113-117 of the joint explanatory statement of the
conference committee.
Stimulus Act Expands Clean Energy Tax Credits for Homes and Businesses
The American Recovery and Reinvestment Act of 2009 provides greater tax
credits for clean energy projects at homes and businesses and for the
manufacturers of clean energy technologies. For homeowners, the act
increases a 10% tax credit for energy efficiency improvements to a 30% tax
credit, eliminates caps for specific improvements (such as windows and
furnaces), and instead establishes an aggregate cap of $1,500 for all
improvements placed in service in 2009 and 2010 (except biomass systems,
which must be placed in service after the act is enacted). The act also
tightens the energy efficiency requirements to meet current standards. For
residential renewable energy systems, the act removes all caps on the tax
credits, which equal 30% of the cost of qualified solar energy systems,
geothermal heat pumps, small wind turbines, and fuel cell systems. The act
also eliminates a reduction in credits for installations with subsidized
financing.
For businesses and individuals buying electric vehicles, the act simplifies
and expands the available tax credits. For electric low-speed vehicles,
motorcycles, and three-wheeled vehicles, a 10% tax credit is available
through 2011, with a cap of $2,500. For vehicles converted into qualified
plug-in electric vehicles, a 10% tax credit is also available through 2011,
with a cap of $4,000. And starting in 2010, full-scale commercial plug-in
electric vehicles can earn a maximum tax credit of $7,500, depending on
their battery capacity. The credit will phase out over a year for each
manufacturer after they sell 200,000 plug-in vehicles. See pages 50-68 of
the act, as well as PDF pages 138-141 of the joint explanatory statement of
the conference committee.
The act also provides a bonus to homeowners or business owners installing
clean fuel refueling systems at their homes or businesses. For businesses,
the maximum credit for installing such refueling systems increases to
$50,000 for most systems, up from $30,000, and it increases to $200,000 for
hydrogen refueling stations. For homeowners, the credit is doubled from
$1,000 to $2,000. Homeowners might install their own natural gas refueling
system for a natural gas vehicle, or they might install recharging systems
for plug-in electric vehicles. The credit is available through 2010 for most
refueling systems and through 2014 for hydrogen refueling systems. See pages
47-48 of the act, as well as PDF pages 130-131 of the joint explanatory
statement of the conference committee.
The economic stimulus act has also added a new tax credit to encourage
investment in the manufacturing facilities that help make such clean energy
projects possible. A new 30% investment tax credit is available for projects
that establish, re-equip, or expand manufacturing facilities for fuel cells,
microturbines, renewable fuel refineries and blending facilities, energy
saving technologies, smart grid technologies, and solar, wind, and
geothermal technologies. The credit also applies to the manufacture of
plug-in electric vehicles and their electric components, such as battery
packs, electric motors, generators, and power control units. The credit may
also be expanded in the future to include other energy technologies that
reduce greenhouse gas emissions. The Secretary of Treasury must establish a
certification program within the next 180 days and may allocate up to $2.3
billion in tax credits. See pages 101-110 of the act, as well as PDF pages
142-144 of the joint explanatory statement of the conference committee.
Clean Energy Bonds Expanded by the Economic Stimulus Act
Two bonding mechanisms for financing renewable energy and energy efficiency
systems have been expanded under the tax section of the American Recovery
and Reinvestment Act of 2009. The act authorizes the allocation of as much
as $1.6 billion in new Clean Renewable Energy Bonds (CREBs), which are tax
credit bonds for financing renewable energy projects. CREBs were previously
limited to a maximum of $800 million. The act also authorizes the allocation
of $2.4 billion in qualified energy conservation bonds, up from the current
limit of $800 million. These tax credit bonds are allocated to states and
large local governments to finance a variety of clean energy projects.
Unlike normal bonds that pay interest, tax credit bonds pay the bondholders
by providing a credit against their federal income tax. In effect, the new
tax credit bonds will provide interest-free financing for clean energy
projects. But because the federal government essentially pays the interest
via tax credits, the U.S. Internal Revenue Service must allocate such
credits in advance. However, tax credit bonds require the investment of a
bondholder that will benefit from the federal tax credits, and those
investors may be hard to find during the current business downturn. To try
to draw more investment, a separate measure in the tax bill will allow
regulated investment companies to pass through to their shareholders the tax
credits earned by such bonds. Yet another measure adds a prevailing wage
requirement to projects financed with CREBs or energy conservation bonds.
This newsletter is funded by DOE's Office of Energy Efficiency and Renewable
Energy (EERE) and is also available on the EERE Web site:
http://www.eere.energy.gov.
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