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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).
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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.
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).
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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.
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).
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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).
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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).
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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.
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)
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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.
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).
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