On Thursday, both the House Energy and Commerce Committee and House Ways and Means Committee separately passed their respective portions of the economic stimulus bill, committing billions of dollars to upgrading the nation’s electric grid and increasing investments in energy efficiency and renewable energy. The House Appropriations Committee separately approved monies to support the stimulus programs on January 21, 2009. Currently the American Recovery and Reinvestment Act of 2009 (the “Stimulus Bill”) carries an estimated cost of $825 billion.
One of the most controversial amendments yesterday in the House Energy Committee debates was the “decoupling” provision offered by Chairman Henry Waxman (D-CA). Under the provision, states are eligible for energy grants if they can show that utilities in the state that lose revenues due to energy efficiency measures will nevertheless be held harmless from such losses and can recover for investments in energy efficiency.
The Stimulus Bill would set aside nearly $11 billion for a Smart Grid Investment Program designed to make the electric grid more efficient, secure and reliable. The Stimulus Bill hopes to encourage new projects by increasing federal matching grants for smart grid technology demonstration projects from 20% to 50%. These demonstration projects will use internet-based protocols and standards to help others learn about the project and how smart grid infrastructure is installed.
One of the biggest programs put forth by the House Energy and Commerce Committee includes renewable energy loan guarantees. These guarantees would make nearly $8 billion available for temporary loans to renewable energy power generation and transmission projects. Amendments to the temporary loans provision clarified that upgrades to technology or capacity that begin construction by September 30, 2011, incremental hydropower projects, and leading edge biofuel projects all qualify. Conversely, language that would have ensured that nuclear power and large hydropower projects would be eligible for the temporary loans did not pass.
The Stimulus Bill language passed by the House Energy Committee also sets aside money in grants and loans to help pay for energy efficiency projects. In addition to billions of dollars set aside to improve the energy efficiency of both federal and state buildings, including larger efficiency projects for hospitals and colleges, the Stimulus Bill calls for a new home weatherization program. This program sets aside $6.2 billion so that it can provide up to $5,000 to helping weatherize an eligible home.
Meanwhile, the House Ways and Means Committee passed its portion of the Stimulus Bill by a 24-13 vote and included $20 billion worth in energy incentives. Two major incentives were passed in hopes of stimulating renewable energy project financing and preventing some of the effects of the recent financial crisis and credit freeze.
The first incentive acts as a substitute to tax incentives, which are vital to renewable energy projects, by directly funding up to 30 percent of wind, solar, and other projects placed in service in 2009 or 2010 through a grant program. A second provision extends a 30 percent investment tax credit, previously limited to solar projects, to wind, geothermal, biomass, and other qualifying technologies. This investment tax credit could be used by projects instead of the current production tax credit, which was also extended by three years under the Stimulus Bill for wind facilities (through December 31, 2012) and other qualifying facilities (through December 31, 2013).
The House Ways and Means Committee also put forth various bonds and tax credits aimed at cutting greenhouse gas emissions and improving efficiency. Power providers, electric cooperatives, and State/local/tribal government that would not qualify for the production tax credit could obtain a portion of the additional $1.6 billion in clean energy renewable bonds proposed in the Stimulus Bill. A separate provision creates an additional $2.4 billion of qualified energy conservation bonds to finance State, municipal and tribal government programs and initiatives designed to reduce greenhouse gas emissions. Finally, almost $4.3 billion in tax credits would go to existing homes that improve their energy efficiency, gas stations that install alternative fuels in 2009 and 2010, and residential wind, geothermal, and solar projects.
Earlier today, the Senate Finance Committee released a tax proposal in preparation for its economic stimulus bill. The proposal, released by Chairman Max Baucus (D-MT), contains $31 billion in incentives that closely mirror the $20 billion package approved by the House Ways and Means Committee, with one exception. The Senate package contains a provision for a five-year carryback period. This $11 billion provision would allow 100 percent of federal income tax liability to be offset by general business credits. The Senate Finance Committee and Senate Appropriations Committee are expected to mark up their portions of the bill next week.