The Energy Bill Incentives

Tax
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* Title XIII - S.1301 The residential tax credit is intact, and would be available Jan. 1 2004 - Dec. 31, 2006 (SWH) and to Dec. 31, 2008 (PV.)
The credit is for 15% of project costs for residential and commercial installations of both photovoltaics, solar water heating, and small wind with a $2000 cap for each. (Viz. if a residential project consists of a $13,333 PV system and a $13,333 wind system, the total credit could be $4000.)
This is the first Federal residential solar credit since the mid-1980s. A 20 percent credit is also included for residential fuel cells. This credit could be a significant spur for the residential market in both technologies when combined with existing incentives available in the states.

* Title XIII - S.1302 The per - kWh production tax credit was extended for wind and "closed loop" biomass and is expanded for open loop biomass (narrrowly), irrigation power, municipal solid waste, geothermal and to solar technologies that produce electricity; this is a helpful precedent, but it is ultimately unclear how useful this will be. The credit is available for solar, geothermal, irrigation and MSW facilities sited before the end of 2006 and wind and closed loop biomass to 2011 and provides 1.8 cents kWh for five years' worth of production. It appears that the credit cannot be used for projects claiming the existing 10 percent investment tax credit for solar and geothermal.

Title XIII - S.1303. Commercial fuel cell tax credit beginning at 0.5 kW and the ITC is $500 per 0.5 kW through placed in service by December 31, 2006.

Title XIII - S.1306 Section 48 expansion for the Combined Heat and Power Tax Credit with an electrical capacity of not more than 15 megawatts. This should have some major side advantages for the biomass, fuel cell and solar thermal industries.

* Title XIII - S.1346-1348 the new PTC and the RTC can now be claimed against the alternative minimum tax.

* The 10% Investment Tax Credit for solar will remain permanent; this was in play very late in the game.

* Title XIII - S.1366 An extremely complicated provision at the end of the bill appears to create a new pilot bonding authority program, requiring the EPA / DOE to administer a program whereby a handful of state and local governments could issue bonds with preferential tax treatment for the redevelopment of brownfields and qualifying areas. The evaluation criteria for this project specifically includes increasing the 2004 - 2005 growth rate in US PV markets by 75% over the 2001 - 2002 growth rate. The provision may establish another useful precedent and could result in a more comprehensive green bonds initiative at a later date.

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RPS
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No Renewable Portfolio Standard, which cuts both ways. Versions afloat late in the game would have developed little or no solar, while impairing our work in the states to establish or maintain RPSs with solar set-asides.

An amendment may be offered in the Conference to reinstate the RPS. This, however would be a long shot at this point.

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Deployment
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* Title II - S. 205 There is language authorizing $60M / year through 2008 for GSA-funded PV deployment and testing program on Federal buildings, with a stated target of 20,000 systems and 150 MW installed. We will have to work very hard with the GSA, as well as the relevant appropriators and the Administration to implement and secure funding for this initiative, but if successful, this could instantly produce a large new market and an excellent precedent going forward.

* Title II - S. 203 Under this bill, the Federal government (the nation's largest electricity consumer) would operate under its own

" mini-RPS," being required to obtain 7.5% of its electricity from renewable sources by 2011. There would be "double credit" given for renewable energy generators located at or on Federal facilities/lands or Indian lands.

* Title IX - Sec. 922 The DOE is required to create a program to cost-share (pending appropriations) up to 40% for state and local governments that choose to deploy on-site renewable energy systems.

* Title V - Sec. 552 - The Architect of the Capitol is directed to produce a study examining a renewables-powered uninterruptible power system for the Capitol and Congressional office buildings.

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Net Metering / Interconnection
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* Title XII, Sec. 1251 - PURPA would be amended to require states to establish net metering rules for all customers within two years. A strong state savings clause completely protects those states such as California and New Jersey which have or are in the process of developing strong standards.

* Title XII, Sec. 1252 - States are strongly encouraged (though they may opt out) to establish universally available Time Of Use metering for all customer classes. By recognizing the inherently higher value of electricity generated in the middle of the day, this could substantially increase the value of DG and renewable energy electricity production where implemented in conjunction with net metering.

* Title XII, Sec. 1224 - Electrical reliability measures in the bill amend the Federal Power Act to provide FERC with the authority to use distributed generation - explicitly including photovoltaics - as a measure to achieve greater transmission reliability. Aside from the vote of confidence, this subtly provides FERC with greater authority to perhaps eventually issue a truly universal national interconnection ruling.

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Research and Development
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* Title IX, Sec. 918 - Overall renewables research spending is authorized to increase annually each year for the next 5 years.

* Title IX, Sec. 920 - Explicitly authorizes a 5-year, $210M total program to produce hydrogen from Concentrating Solar Power devices.

* Title IX, Sec. 912 - Authorizes the to-be-created Electricity and Reliability office within DOE to create a distributed hybrid research unit focused on integrating renewables and non-intermittent conventional power sources.

* Title XII, Sec. 1225 and elsewhere - Increased research and development into devices and methods for protecting the power grid includes DG and renewable energy devices.
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Siting
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* Language in the bill would ease siting of solar, wind, and other energy sources on Federal lands.

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Mortgage
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* Title I, Sec. 143 - FHA and Fannie Mae mortgage coverage for any given situation could be increased by 30% (from the previous 20%) to accommodate residential solar, wind, and other DG installations.

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Other Incentives
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* Title XII, Sec. 1226 - DOE and the Department of Homeland Security would be authorized to give production incentive payments to facilities using renewables as part of an uninterruptible power supply (UPS) system - the incentive would be $.018 / kWh for devices used in power-critical commercial applications, and $.025 / kWh for devices used in security / response facilities. The Secretary would be authorized to spend up to $10M / year from 2004 - 2010 on this program.

* Anti-Idling. 250lb weight exemption in it and also has funding for deployment of anti idling technology for EPA

Please note that the conventional energy incentives including clean coal and new nuclear, as well as traditional oil and gas, received six times more subsidies ($18 billion) than the combined total for energy efficiency, renewable energy and clean distributed generation.

Scott Sklar
President
The Stella Group, Ltd.
1616 H Street, N.W., 10th floor
Washington, D.C. 20006
Phone: 202-347-2214 Fax: 347-2215
E-mail: solarsklar@aol.com

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ADDENDA -- From trade associations --

GEOTHERMAL

ALLOWS geothermal developers to opt to pay only 50 percent of the royalties currently due under an existing federal geothermal lease for new and expanded production for four years.

ALLOWS geothermal developers to convert geothermal leases into mining claims where production byproducts are locatable minerals under the Mining Law of 1872, and to obtain vested property rights in federal lands at no cost.

ALLOWS industry to be reimbursed for the costs of environmental compliance, setting new precedent under NEPA.

HYDROPOWER

SUBSIDIZES hydropower industry by providing incentive payments for 10 years of 1.8 cents per kWh (not to exceed $750,000 per facility per year) for hydroelectric production resulting from the addition of generating devices at existing dams.

SUBSIDIZES hydropower producers through payments of up to $750,000 per facility for efficiency improvements.

PERMITS industry to write cost-saving alternative conditions and fishway prescriptions which must be included in hydroelectric licenses if threshold standards are met.

ENERGY INDUSTRY

LIMITS PAYMENT BY ENERGY INDUSTRY for easements and rights-of-way for energy facilities and renewable energy development on the outer Continental Shelf to a one-time or annual payment only. Prohibits payments based on throughput or energy output.

REMOVES discretion of Secretary to set the value for the use of rights-of-way on public lands and Forest Service lands.

AUTHORIZES $50 million to subsidize companies to remove trees, including large fire-resistant trees important for forest health, and burn them for energy.

ELECTRICITY

AUTHORIZES $140 million for research, development, demonstration, and commercial application program focused on power delivery using components incorporating high temperature superconductivity.

AUTHORIZES $70 million for direct payments to owners or operators of advanced power system technologies and qualifying security and assured power
facilities.

REQUIRES regulatory approval for transmission pricing schemes that allow utilities to charge others for construction of transmission that the utility will own, and can use without paying.

REQUIRES regulatory approval for utilities to increase transmission rates to customers.

MISCELLANEOUS

PROVIDES up to $500 million to the Denali Commission (over 10 years) for the purposes of funding the power cost equalization program established under the Alaska Statutes.

Geothermal Industry Backs Current Energy Bill

Washington D.C. - November 18, 2003 [SolarAccess.com] The Geothermal Energy Association (GEA) has spoken out in praise of the House and Senate compromise Energy Bill proposal, which has been in conference committee sessions for months. GEA said the proposal contains two significant provisions designed to stimulate investment and create new jobs in the US geothermal industry.

" Geothermal energy is an enormous, underused heat and power resource that is clean (emits little or no greenhouse gases), reliable (average system availability of 95 percent), and homegrown (making us less dependent on foreign oil)," according to the US Department of Energy's web site. There is roughly 3,000 MW of geothermal power on-line in the Western United States.
The proposed Energy Bill would expand the Section 45 Production Tax Credit (PTC) to include new geothermal power facilities. This tax provision, first adopted in 1992, has fueled the rapid expansion of wind power in the US. Under the Chairman's proposal, new geothermal facilities placed in service by January 1, 2007 would receive a 1.8 cent per kWh tax credit during their first five years of operation.

" Expanding the PTC to include geothermal energy will give investors the incentive needed to overcome the higher risk and large, upfront costs of new geothermal power plants," GEA said. "As a result, hundreds of new megawatts of geothermal power will come on-line in the next few years. The second provision GEA highlighted would streamline and update the laws governing leasing and permitting on public lands. The proposal closely tracks legislation introduced by Representative Jim Gibbons (R-NV), H.R. 2772, the John Rishel Geothermal Steam Act Amendments of 2003.

" These provisions will streamline administration of the law, reduce administrative costs for both companies and the government, improve how it works for state and local governments, and result in a clearer, fairer law," GEA said. GEA presented testimony about this legislation before the House Resource Committee's Energy Subcommittee in March. GEA and other witnesses told the Subcommittee that the John Rishel Act "would help address many of the obstacles to a revival in the use of our nation's largely untapped geothermal resources."

" Together, the geothermal PTC and leasing law reforms will significantly advance national security," said Karl Gawell, GEA's Executive Director. "If we don't take steps now to develop our renewable energy resources, we could become as dangerously dependent upon OPEC countries for natural gas as we are for oil. Expanded use of geothermal energy will help offset demand for new natural gas from constrained North American supplies."

According to the US Geologic Survey, there are significant undeveloped geothermal resources in Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming.

" The USGS identified over 20,000 MW of clean geothermal power potential in those states twenty years ago, but investors have not had the incentive necessary to overcome the expense and risk involved in developing those systems," Gawell said. In addition to the identified systems, the USGS estimated in 1978 that there could by an additional 72,000 to 127,000 MW in undiscovered systems in the Western States. " Tapping geothermal energy's vast potential is also essential to achieving healthier air and cleaner water in the West, and reducing the threat of global warming for the entire nation," said Gawell. The Domenici/Tauzin proposal takes big steps in those directions.

Biofuels Industry Urges Energy Bill Passage Washington D.C. - November 18, 2003 [SolarAccess.com] The Renewable Fuels Association (RFA), representing the U.S. ethanol, and biodiesel industries, called upon the House of Representatives and Senate to enact the Renewable Fuels Standard (RFS) and renewable energy tax provisions contained in the conference report to H.R. 6, the Energy Policy Act of 2003.

" The ethanol industry calls upon Congress to pass the energy bill, which makes an historic and unprecedented federal commitment to renewable fuels like ethanol and biodiesel," said Bob Dinneen, RFA President.

" In order to achieve a safe and secure energy future, America must increase the contribution of domestic, renewable fuels. For far too long, America has relied on energy flowing from unstable and hostile parts of the world to fuel our economic growth.

Enacting the RFS and renewable energy tax provisions in this energy bill will put ethanol in the forefront of our energy future - bolstering our energy security, invigorating rural economies, and safeguarding precious environmental resources."