Two House panels last Thursday voted out their portions of the economic stimulus spending package promoting increased production of alternative fuels and encouraging more energy efficiency and conservation. The votes, mostly along party lines, set the stage for what could be a partisan fight on the House floor this week.
By 24-13, the House Ways and Means Committee approved the $275 billion tax portion (HR 598) of the proposed $825 billion economic stimulus bill, rejecting attempts by Republicans on the panel to alter the measure. An estimated $20 billion is devoted to tax breaks and incentives for energy. In parallel action, the powerful House Energy and Commerce Committee by 34-17 voted out $54 billion in energy initiatives as part of the economic recovery package.
The House tax-writing committee's tax bill will be combined with spending proposals cleared last Wednesday by the House Appropriations Committee, CQ Today reported. The appropriations panel's bill "would clearly benefit energy efficiency and weatherization ($24.6 billion) and smart grid ($4.5 billion) investments," said energy analysts K. Whitney Stanco and Christine Tezak of Stanford Group Co. in Washington, DC.
The Ways and Means Committee tax plan "would include a three-year extension of the production tax credit and a substitute for renewable energy tax credit 'refundability,' which should make renewable energy project deployment easier, despite the current financial crisis. A legislative expansion of the existing advanced energy technology loan guarantee program was also approved, but we are less convinced of this proposal's ability to generate benefits in the short term," they said.
The House Democratic leadership expects a floor vote on the stimulus package Wednesday, with the Senate likely to mark up its version of the stimulus package around the same time. The Senate Finance Committee Friday unveiled a $275 million tax-reduction plan, which is said to reflect many of the same provisions in the House tax bill. President Obama said the economic recovery bill is on track to be pushed through Congress by mid-February.
The energy tax portion of the stimulus bill would extend for three years, until the end of 2012, the date that wind facilities must be placed in service to qualify for the federal renewable energy production tax credit. It also would extend for three years, until the end of 2013, the deadline by which other qualifying facilities must be in service to be eligible for the production tax credit. The other qualifying facilities include closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste-to-energy and marine renewable facilities.
This proposal alone will cost an estimated $13.14 billion over 10 years, or more than half the amount of total tax breaks and incentives that will be offered to energy in the economic recovery bill.
Renewable project developers also could get an upfront subsidy equal to 30% of the project's capital costs in lieu of the existing renewable energy tax credits, which are payable over a 10-year period. This proposal is projected to cost $218 million over 10 years, according to the House tax-writing panel.
"Eligible projects would be placed in service in 2009 and 2010 and would only have to wait 60 days after submitting an application to be reimbursed by the DOE [Department of Energy]. ...The renewable energy industry argues [that this] is necessary to finance projects in the current economic downturn," said Stanco and Tezak.
Moreover, businesses and individuals could qualify for the full amount of the investment tax credit even if their property is financed with industrial development bonds or through any other subsidized energy financing. And small wind energy property, solar water heating property, small wind energy property and geothermal heat pumps would be eligible for an uncapped 30% tax credit. It would remove the individual dollar caps. This part of the tax bill would have an estimated cost of $872 million over 10 years.
The House tax measure also authorizes an additional $1.6 billion of renewable energy bonds to finance facilities that generate electricity from alternate fuel sources. One-third of the amount would be available for qualifying projects of state, local and tribal governments; another third for qualifying projects of public power providers; and the remaining third for projects of electric cooperatives. This is projected to cost $578 million over the next decade.
In addition, House Ways and Means authorized an additional $2.4 billion of qualified energy conservation bonds to finance state, municipal and tribal government programs designed to reduce heat-trapping greenhouse gas emissions. This would cost $803 million over 10 years, according to the committee.
The tax credit for homeowners who make qualified energy efficiency improvements this year or in 2010 would increase to 30% of the amount paid by the taxpayer during the taxable year. The tax credit would be capped at $1,500 for all qualifying energy efficiency improvements. The proposal is estimated to cost $4.27 billion over the next decade.
The measure also provides for an enhanced 20% research and development credit in taxable years beginning in 2009 and 2010 for research expenditures incurred in the fields of fuel cells, battery technology, renewable energy, energy conservation technology, efficient transmission and distribution of electricity, and carbon capture and sequestration. The cost for this is pegged at $18 million over 10 years.
Separately, the House Energy and Commerce Committee's energy portion of the stimulus package would increase the percentage of matching grants for smart grid demonstration projects to 50%; offer $8 billion in loan guarantees for commercial renewable energy systems and electric power transmission facilities that begin construction by Sept. 30, 2011, as well as upgrades; would increase the threshold for household eligibility for weatherization assistance to 200% of the federal poverty income levels, and hike per-home maximum assistance to $5,000 from $2,500; and require the DOE to include an analysis of the transmission issues facing renewable energy in a study of electric transmission congestion that is due by August.
As a condition to a state receiving federal funds for energy programs, the House bill would require assurances from a governor that the state will adopt certain utility regulatory policies to encourage utility-sponsored gains in energy efficiency, as well as updated energy-efficient building codes.
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