Thursday, March 05, 2009

Overview of Renewable Energy and Energy Efficiency Provisions of the American Recovery and Reinvestment Act of 2009 (ARRA)

ACORE has an short summary of the renewable energy and energy efficiency provisions of the American Recovery and Reinvestment Act of 2009 - otherwise known as the "stimulus bill."

The ARRA was signed into law on February 17, 2009. The major programs for renewables in the ARRA include tax incentives, direct spending, and bond and loan guarantee programs.

The tax incentive programs include, among other things:
  • Three-Year Extension of PTC: The ARRA finally provides a multi-year extension of the Production Tax Credit (PTC) for electricity derived from wind facilities placed in service by December 31, 2012, as well as for geothermal, biomass, hydropower, landfill gas, waste-to-energy and marine facilities placed in service by December 31, 2013;
  • Investment Tax Credit (ITC): The law provides an option for developers of wind, geothermal, biomass and other technologies that are eligible for the PTC to use a 30 % investment tax credit instead of the PTC. The ITC was previously only available to solar projects. The law also repeals limitations on ITC eligibility for projects that received other forms of subsidized energy financing;
  • Grant Program in Lieu of Tax Credits: The law also allows project developers to apply for a grant from the Treasury Department in lieu of the ITC. The grant will be equal to 30% of the cost of eligible projects that start construction in 2009 or 2010. It will be issued within sixty days of the facility being placed in service or, if later, within sixty days of receiving a grant application;
  • Advanced Energy Manufacturing Credits: The bill provides $2 billion worth of energy related manufacturing investment credits at a 30% rate. These credits apply to projects creating or retooling manufacturing facilities to make components used to generate renewable energy, storage systems for use in electric or hybrid-electric cars, power grid components supporting addition of renewable sources, and equipment for carbon capture and storage (CCS).
The ARRA also provides more than $16.8 billion in direct spending on renewable energy and energy efficiency programs. These programs include, among other things:
  • State Energy Programs: The ARRA directs $3.1 billion, in the form of grants which do not require matching state funds, to state-administered energy programs.
  • R&D, Demonstration Projects: ARRA provides $2.5 billion for applied research, development, demonstration and deployment activities at DOE’s Office of Energy Efficiency and Renewable Energy (EERE). Of this total, $800 million is slated for biomass energy projects and $400 million for geothermal projects.
  • DOE Energy Efficiency and Conservation Block Grants: ARRA provides $3.2 billion for an Energy Efficiency and Conservation Block Grants (EECBGs) program. Of that total, $400 million is to be awarded on a competitive basis to grant applicants.
  • DOE Weatherization Program: ARRA provides $5.0 billion for the DOE Weatherization Program. The Weatherization Assistance Program enables low-income families to permanently reduce their energy bills by making their homes more energy efficient. DOE program guidelines specify that a variety of energy efficiency measures are eligible for support under the program. Such measures include insulation, space-heating equipment, energy-efficient windows, water heaters, and efficient air conditioners. The guidelines further specify that the income level of eligible households must be less than 150% of the poverty level.
  • Advanced Battery Manufacturing Grants: The law establishes a new program of $2.0 billion for facility funding grants to manufacturers of advanced battery and battery system components. Covered activities include the production of lithium ion batteries, hybrid electrical systems, system components, and software.
  • Smart Grid Development: In addition to the $16.8 billion for renewable and energy efficiency programs, the bill also includes $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 implement smart grid technologies. The bill also increases federal matching grants for the Smart Grid Investment Program from 20% to 50%.
In addition to these direct spending provisions, the ARRA also includes both a bond and loan garantee program:
  • Clean Energy Renewable Bonds (CREBs): The bill provides $1.6 billion of new clean energy renewable bonds to finance wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, marine renewable, and trash combustion facilities. One third of the authorized funding will be available for qualifying projects of state/local/tribal governments, one-third for public power providers and one-third for electric cooperatives. The CREB program was initially developed under the Energy Policy Act of 2005. We previously posted information on how the federal CREB program works with examples of some of the projects that have received CREBs in the past;
  • Renewable Energy Loan Guarantee Program: The bill provides $6 billion for a temporary loan guarantee program for renewable energy power generation and transmission projects that begin construction by September 30, 2011.
The text of the bill is available here (warning: large PDF). Additional information on these programs is also available on the recovery.gov website and on the Department of Energy's Recovery website. The Congressional Research Service has also published an analysis of the ARRA provisions.

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