In 2005, Congress passed the first comprehensive Energy Policy Act since 1992.  The bill had its origins in Vice-President Cheney’s energy task force of 2001 and, not surprisingly, the result included billions of dollars in handouts to the nuclear, coal, oil, and gas industries.  Comparatively modest, but still significant, were some new incentives to encourage homeowners and businesses to invest in conservation and renewable energy.  These included tax credits worth up to: $2,000 for solar electric systems, solar hot water systems, and new energy-efficient homes; $500 for efficiency improvements to existing homes; $2,500 for certain hybrid-electric vehicles; and other credits for energy-efficient appliances.  Unfortunately, these clean energy credits were offered for just a limited time—2-3 years in most instances.

After numerous unsuccessful attempts to extend these incentives beyond tax year 2008, Congress has now finally acted.  On October 3rd, 2008, President Bush signed into law the $700 billion economic stimulus bill (H.R. 1424).  Part of the package was the Energy Improvement and Extension Act of 2008, which included several positive provisions.  As is so often the case with U.S. energy policy, the final version of the bill is probably best described as “one step forward, two steps back.”

What started out as a sincere effort to advance legitimate clean energy goals ended up being largely co-opted by fossil fuel interests.  In addition to much-needed assistance for homeowners, businesses, and the nation’s fledgling renewable energy industry, the bill includes millions of dollars in subsidies for coal, oil shale, and tar sands.  Public Citizen’s Tyson Slocum assailed the bill in the Los Angeles Times: “This is a gravy train.  The American people are suffering here, and oil companies are getting a tax break . . . .  This is no way to make laws.  This is not even a way to make sausage.”

Nonetheless, the bill is now law, and the conservation and renewable energy incentives ought not be ignored.  Among them are:

• an extension and expansion of the tax credit for solar electric systems—the $2,000 cap on the credit will no longer apply to systems installed in 2009 or later.  This tax credit will remain in place through 2016, and is projected to create more than 440,000 jobs and more than 28,000 megawatts of solar electric capacity.  The Solar Energy Industries Association called the bill the “most significant federal policy ever enacted for the solar industry.”  And the Solar Electric Power Association stressed how important it is that utilities will now be able to take advantage of these credits, in addition to homeowners and small businesses.
• a new tax credit for small wind systems (worth 30% of the cost of the system up to $4,000, limited to systems generating no more than 100 kW), also expiring in 2016.  Immediately upon passage of H.R. 1424, the American Wind Energy Association issued a statement thanking Congress “for recognizing and supporting small wind systems as an important contributor toward energy security and a cleaner environment.”  AWEA noted that it had been 23 years since the federal government had offered an incentive for small wind turbines.
• a new tax credit worth up to $7,500 for the purchase of plug-in hybrid electric vehicles (PHEVs).  PHEVs are highly efficient vehicles that should be available for purchase as early as 2010.
• a collection of tax incentives for energy-efficient construction, and the manufacture of efficient appliances, although some of these expire in 2009.

In addition to spurring small-scale projects, the bill also reauthorized the key incentive for large-scale commercial wind projects, with a one-year extension of the production tax credit.  A similar credit for geothermal, biomass, and solar energy production was extended through 2010.  Certain hydro-electric, “trash to energy,” and “hydrokinetic” (tidal and wave energy) projects were also included.  And receiving new or continued support were fuel cells, microturbines, combined heat and power systems (cogeneration), geothermal heat pumps ($2,000 tax credit), smart meters, and biofuels.

To help finance projects that would be eligible for these credits, Congress authorized $800 million in new Clean Renewable Energy Bonds and $800 million in Qualified Energy Conservation Bonds (for efficiency projects).  For more information on both the positive and negative elements of this bill, go to the following websites:

U.S. Department of Energy (2 sites):

• www.energy.gov/taxbreaks.htm
• www.energystar.gov/index.cfm?c=products.pr_tax_credits#s4

Solar Energy Industries Association:

• www.seia.org/cs/news_detail?pressrelease.id=217

Solar Electric Power Association:

• www.solarelectricpower.org/docs/SEPA%20Statement%20on%20ITC.pdf

American Wind Energy Association:

• www.awea.org/legislative/

“Rescue package has tax breaks for coal” (Helena Independent Record, October 14, 2008)