Wednesday, February 18, 2009

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A weekly newsletter from the U.S. Department of Energy's (DOE) Office of Energy Efficiency and Renewable Energy (EERE). The EERE Network News is also available on the Web at: www.eere.energy.gov/news/enn.cfm
February 18, 2009
News and Events
Economic Stimulus Act Provides $16.8 Billion for EERE Programs
Renewable Energy and Smart Grids Spurred by Economic Stimulus Act
Economic Stimulus Act to Result in Greener Federal Buildings and Fleets
High-Speed Rail and Transit Boosted by Economic Stimulus Act
Economic Stimulus Act Extends Renewable Energy Tax Credits
Stimulus Act Expands Clean Energy Tax Credits for Homes and Businesses
Clean Energy Bonds Expanded by the Economic Stimulus Act
News and Events
Economic Stimulus Act Provides $16.8 Billion for EERE Programs


President Barack Obama signed the American Recovery and Reinvestment Act of 2009 on Tuesday. Credit: Pete Souza, White House
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). See the White House announcement and pages 58-60 and 63 of the American Recovery and Reinvestment Act of 2009 (PDF 13.4 MB), as well as pages 24-26 of the accompanying joint explanatory statement of the conference committee (PDF 10.3 MB). Download Adobe Reader.
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. For background on the program, see pages 176-183 of the Energy Independence and Security Act of 2007 (PDF 821 KB).
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. See pages 63 and 76-78 of the American Recovery and Reinvestment Act of 2009 (PDF 13.4 MB), as well as pages 26-27 of the accompanying joint explanatory statement of the conference committee (PDF 10.3 MB). Download Adobe Reader.
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. See pages 88-91 and 195-197 of the American Recovery and Reinvestment Act of 2009 (PDF 13.4 MB), as well as pages 30-31 and 73 of the accompanying joint explanatory statement of the conference committee (PDF 10.3 MB). Download Adobe Reader.
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. See pages 226-229 and 237-247 of the American Recovery and Reinvestment Act of 2009 (PDF 13.4 MB), as well as pages 80 and 82-83 of the accompanying joint explanatory statement of the conference committee (PDF 10.3 MB). Download Adobe Reader.
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. See pages 33-34 of the American Recovery and Reinvestment Tax Act of 2009 (PDF 5.9 MB), as well as PDF pages 105-112 (labeled as pages 103-110) of the accompanying joint explanatory statement of the conference committee (PDF 24.9 MB). Download Adobe Reader.
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. See pages 41-47 of the American Recovery and Reinvestment Tax Act of 2009 (PDF 5.9 MB), as well as PDF pages 125-129 (labeled as pages 123-127) of the accompanying joint explanatory statement of the conference committee (PDF 24.9 MB) Download Adobe Reader.
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. See pages 39-41 and 143-149 of the American Recovery and Reinvestment Tax Act of 2009 (PDF 5.9 MB), as well as PDF pages 100-101, 118-123, and 148 of the accompanying joint explanatory statement of the conference committee (PDF 24.9 MB). Download Adobe Reader.
This newsletter is funded by DOE's Office of Energy Efficiency and Renewable Energy (EERE) and is also available on the EERE Web site. If you have questions or comments about this newsletter, please contact the editor, Kevin Eber.
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