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Energy Update, October 3, 2008

In The States

AR – If a closely divided commission’s recommendations are put in place, Arkansas will not build another coal-fired power plant until pollution controls have been improved The Governor’s Commission on Global Warming has made that recommendation and others that will be reviewed by the governor and the state legislature. Since the recommendations are not binding, applications for coal-fired power plants are currently continuing. No new coal plants until technology improves, panel recommendsArkansas News Bureau

MD – An agreement between the Maryland Environmental Service (MES) and Constellation Energy’s Projects and Services Group (PSG) has resulted in a new solar power installation at the MES headquarters building, which will provide about half of the building’s electricity. The power generated by the system will be owned by Constellation and sold to MES at the current rate for coal power, which will be locked-in for 15 years. Constellation to build first solar facility at Maryland state agencyMaryland Newsline and O’Malley announces new solar energy agreementBaltimore Sun

ME – An alternative to heating oil, wood pellets made of waste wood products, have become increasingly popular in Maine in recent years and suppliers are struggling to keep up with demand for the fuel. Many customers bought large amounts in the summer and are only now being delivered. Those trying to buy pellets now are faced with a shortage since some manufacturers are not able to produce as much as they thought they would be able to. Wood pellet supply fails to meet demandBangor Daily News

MI – The state of Michigan has issued $27 million in grants to companies that will pursue projects and collaborations within the state to advance alternative energy technologies including batteries, biogas, and cellulosic ethanol. State begins alternative-energy grantsCrain’s Detroit Business

OH – A task force has said that a site three to five miles off the coast of Cleveland in Lake Erie would be suitable for an offshore wind farm. The planned pilot program of two to ten wind turbines would provide enough power for 900 – 4,500 homes. First studies encouraging on Lake Erie wind turbinesCleveland Plain Dealer

RI – In an attempt to reach the state’s goal of producing 20% of its power through renewable energy, Rhode Island’s governor, Donald Carcieri, has announced a deal with Deepwater Wind to produce 15% of the state’s energy from an offshore wind farm. Carcieri Names Deepwater Wind as Developer for Rhode Island’s Off-Shore Wind FarmRhode Island Government Press Release

SC – Governor Mark Sanford’s Climate, Energy, and Commerce Advisory Committee has issued recommendations to the governor on how to stem the state’s contribution to climate change. Included in the recommendations are a voluntary reduction in carbon emissions, promotion of renewable and nuclear power, and conservation of forests. The governor said that the free market will produce these changes and not government mandates. Governor urges state to act on energyCharleston Post and Courier

Regional News

The Regional Greenhouse Gas Initiative (RGGI) has successfully completed the first-ever mandatory auction of carbon dioxide pollution credits in the United States. Observers of the program, including editorial boards, have praised the progress of the group of states for taking action in the absence of a national cap and trade system. Bidders paid $3.07 per ton of emissions for 12.5 million credits, totaling $38.6 million in revenues for the six states that participated in the auction. The remaining four states are expected to join future auctions that will occur quarterly. Over four times as many credits were requested than won, with 59 bidders requesting more than 51 million credits. News Release [pdf]Regional Greenhouse Gas Initiative Website and Emissions auction runs smoothlyBaltimore Sun and A Carbon MarketWashington Post and Ten states with a planNew York Times

More than a dozen other states and four Canadian provinces are actively engaged in two other organizations – the Midwest Regional Greenhouse Gas Reduction Accord and the Western Climate Initiative – working towards implementation of similar greenhouse gas emissions cap and trade programs.

The Western Climate Initiative (WCI), a proposed cap-and-trade system involving seven U.S. states and four Canadian provinces, has unveiled the newest draft of its plan. It would require greenhouse gas monitoring in 2011 and regulation in 2012, with a goal of reducing emissions 15% below 2005 levels by 2020. While at first only large polluters would be affected, vehicle and natural gas emissions would be included in 2015 covering 90% of carbon pollution, much more than the utility-only RGGI. Polluters could offset up to half of their emissions with offsets that reduce the impact of greenhouse gases such as planting trees. To participate, states and provinces would have to individually pass legislation to comply with the framework of the agreement. States and provinces would decide the amount of credits to be given away or auctioned off to polluters (as long as at least 10% are auctioned). States, provinces have plan to cut emissionsSan Francisco Chronicle and Western states pitch plan to reduce greenhouse emissionsLos Angeles Times and State on team to cut greenhouse gasesSeattle Times

National News

In the first half of 2008, the United States produced about two-thirds of the energy that it used. Of that two-thirds produced in the US, over 10% was from biofuels, geothermal, hydropower, wind, and solar sources. Wind power saw the largest increase, at nearly 50% higher levels than the same period in 2007. Nuclear power represented about 12% of total domestic production. Renewable energy tops 10% of US energy productionRenewable Energy World and the full U.S. Energy Information Administration Monthly Energy Review can be found here.

The U.S. Senate and U.S. House have now both passed the Emergency Economic Stabilization Act of 2008 (HR 1424), which President Bush is expected to sign. Many of the energy tax provisions in legislation considered separately by both the House and Senate are included in this bill.

Renewable Energy Incentives:
  • A 1-year extension of the placed-in-service date for the production tax credit for wind and refined coal (through December 31, 2009), and a 2-year extension for other sources (through December 31, 2010). The bill also expands the types of qualifying facilities to include biomass and marine renewables (e.g. waves and tides).
  • An 8-year extension of the 30% investment tax Credit for solar energy and qualified fuel cell property, and the 10% tax credit for microturbines through 2016. The $500 per half kilowatt of capacity cap for qualified fuel cells is tripled to $1,500 per half kilowatt of capacity and small commercial wind is added as a new category of qualified investment. Combined heat and power systems and geothermal pumps also get a new 10% credit. These credits can be used to offset the alternative minimum tax (AMT).
  • An 8-year extension of the residential solar property tax credit through 2016 and the removal of the credit cap (currently $2,000) for solar electric investments. Residential small wind investment is also added, and is capped at $4,000. The credit can offset the AMT.
  • An $800 million authorization for new clean renewable energy bonds (“CREBs”) to finance facilities that generate electricity from wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, qualified hydropower, landfill gas, marine renewable and trash combustion facilities. This bond authority is evenly divided between State/local/tribal governments, public power providers, and electric cooperatives.
Carbon Mitigation and Coal:
  • $1.5 billion in new tax credits for the creation of advanced coal electricity projects ($1.25 billion) and certain coal gasification projects ($250 million). Credits will be awarded to applicants based on the percentage of CO2 emissions that can be sequestered. To qualify, projects must capture and sequester at least 65% of CO2 emissions. Recipients failing to meet this threshold upon award will forfeit their credits.
  • A $10 credit per ton for the first 75 million metric tons of CO2 captured and transported from an industrial source for use in enhanced oil recovery and a $20 per ton credit for CO2 captured and transported for permanent storage in a geologic formation. Qualifying facilities must capture at least 500,000 metric tons of CO2 and the credits apply only to CO2 stored or used in the U.S.
Transportation and Domestic Fuels:
  • A new tax credit for plug-in electric drive passenger vehicles and light trucks, ranging from $2,500-$7,500. Taxpayers can claim the full amount of the allowable credit up to the end of the first calendar quarter following the quarter in which total U.S. sales exceed 250,000.
  • A 50% tax allowance for the cost of facilities that produce cellulosic ethanol or other cellulosic biofuels if placed in service before January 1, 2013.
  • An extension of the $1/gallon production tax credit for biodiesel and the 10¢/gallon credit for small biodiesel producers, as well as the $1/gallon production tax credit for diesel fuel created from biomass, through 2009. Diesel fuel created by co-processing biomass with other feedstocks (e.g., petroleum) will be eligible for the 50¢/gallon tax credit for alternative fuels.
  • An extension of the alternative fuels excise tax credit through December 31, 2009 for all fuels except hydrogen, which retains its current-law expiration date of September 30, 2014.
  • Expansion of the 30% credit for alternative refueling property, such as natural gas or E85 pumps, through 2010. Electric vehicle recharging property also qualifies for the credit.
  • Assistance provided by employers to offset the cost of commuting by bicycle (e.g., storage) treated as a fringe benefit.
Energy Conservation and Efficiency:
  • A new category of tax credit bonds capped at $800 million nationally to finance state, municipal, and tribal government initiatives to reduce greenhouse gas emissions.
  • Extension of the tax credit for energy-efficient existing homes through 2009 and a new $300 consumer tax credit for biomass fuel stoves.
  • A 5-year extension of the tax deduction for energy efficient building improvements made to heating, cooling, ventilation, hot-water, and interior lighting systems in commercial buildings.
  • An extension of the tax credit provided to contractors who build energy-efficient homes through 2009. The credit ranges from $1,000 for homes with heating and cooling systems 30% more efficient than comparable homes up to $2,000 for homes that are 50% more energy efficient.
  • Extension of the tax credit for manufacturers who produce energy-efficient appliances through 2010. The standards and applicable amounts are also increased.
  • Accelerated depreciation of smart electric meters and smart electric grid equipment.
  • An extension of authority to issue green building and sustainable design project bonds through the end of 2012.
  • Accelerated depreciation of equipment used to collect, distribute or recycle a variety of commodities.
The full legislative text of the tax provisions in the Emergency Economic Stabilization Act of 2008 can be found here [pdf]: http://www.senate.gov/~finance/sitepages/leg/LEG%202008/093008%20Leg%20Text%20of%20the%20Emergency%20Economic%20Stabilization%20Act%20of%202008.pdf

A summary of the energy-related provisions in the Emergency Economic Stabilization Act of 2008 can be found here [pdf]: http://www.senate.gov/~finance/sitepages/leg/LEG%202008/093008%20Staff%20Summary%20of%20the%20Emergency%20Economic%20Stabilization%20Act%20of%202008.pdf

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