On April 20, 2016, the U.S. Senate passed the Energy Policy Modernization Act of 2016 (the Act) by a vote of 85-12. If signed into law, the bipartisan bill would impact manufacturing operations across industries by promoting energy efficiency; encouraging renewable energy development; facilitating improvements in infrastructure, including grid storage; removing certain hurdles to the development and export of oil and gas, critical minerals, and other resources; and making other changes intended to keep pace with the nation’s rapidly changing energy industry.

Promoting Energy Efficiency

One focus of the Act is efficiency, be it energy efficiency of manufacturing processes themselves or the resulting buildings, appliances, or vehicles.

The Act contains provisions directly promoting energy efficiency of manufacturing processes. These provisions work to accelerate the deployment of technologies and practices that will increase industrial energy efficiency and improve productivity by means such as increasing partnerships with businesses providing technology or services to improve energy efficiency, water efficiency, power factor, or load management of a manufacturing site or other industrial process in an energy-intensive industry. The Act would also adopt a sustainable manufacturing initiative; expand technical assistance programs to include smart manufacturing technologies and practices; and facilitate access by small and medium manufacturers to resources of the National Laboratories.

With respect to energy efficient buildings, the Act would provide for a model building energy code and certification of green buildings; updates to State building energy efficiency codes; energy retrofitting assistance for schools; revised energy efficiency performance standards for federal buildings; and reduction in a federal building’s energy intensity. In addition, it would fund an energy efficiency retrofit pilot program, energy efficiency training centers and career skills training programs, weatherization assistance programs in low-income housing, and State energy programs.

The Act promotes energy efficient appliances by funding an extension of the appliance product system rebate program and establishing a rebate program for energy efficient transformers. It would authorize third-party certification under the Energy Star program and provide for voluntary verification programs for air conditioning, furnace, boiler, heat pump, and water heater products. It would also delay the adoption or effectiveness of other energy efficiency measures and standards for residential non-weathered gas furnaces and mobile gas furnaces and for commercial refrigeration equipment.

A subtitle of the Act, the Vehicle Innovation Act of 2015, supports research, development, engineering, demonstration, and commercial application and manufacturing of advanced vehicles. Significant funding is allocated to energy efficient vehicles and related technologies, including electrification of vehicle systems, batteries and other energy storage devices, engine efficiency and combustion optimization, waste heat recovery, fuel cell and natural gas vehicle technologies, and medium- and heavy-duty commercial and transit vehicles.

Encouraging Renewable Development

The Act’s energy supply provisions focus on the development of renewable energy resources including hydroelectric, geothermal, marine hydrokinetic, and biomass energy resources. Specifically, the Act seeks to substantially increase the capacity and generation of hydropower resources; authorizes longer extensions of preliminary permits and time for project construction; and amends existing hydroelectric production incentives and efficiency improvements. In addition, it encourages new geothermal energy capacity on public land; identifies high priority areas for new geothermal development; and encourages geothermal exploration test projects by excluding certain projects from National Environmental Policy Act (NEPA) review. Also, the Act would establish a program of research, development, demonstrations, and commercial application for marine hydrokinetic renewable energy production, as well as grant and loan programs for innovation and market development in woody biomass heat and biopower.

Infrastructure and Accountability

With respect to the nation’s electricity and energy storage infrastructure, the Act would establish a program of research, development, and demonstration of electric grid energy storage, including research on materials and power conversion technologies; grid-scale testing and analysis of storage devices; safety and reliability of electric storage devices; and standards for storage device performance, interconnection, and interoperability. It would expedite and improve the permitting process for electric transmission infrastructure and provide guidance on criteria for net metering studies. The Act would enhance grid reliability by requiring transmission organizations to report on their electric generating capacity resources. In addition, it would provide for a more expedited emergency response to any disruptions in the grid, and facilitate a research program to develop exascale computers capable of furthering the application of scientific data and computational workloads for advanced manufacturing.

Other Key Provisions

Additional provisions in the Act would:

  • Facilitate the trade of liquefied natural gas;
  • Designate the Federal Energy Regulatory Commission as the lead agency for purposes of coordinating federal authorizations and NEPA compliance for liquefied natural gas projects;
  • Establish a pilot program for streamlining the review and approval of applications for permits to drill for oil and gas;
  • Facilitate the availability, development, and production of domestic critical mineral resources;
  • Establish a large-scale technology pilot project to improve the conversion, use, and storage of carbon dioxide produced from fossil fuels;
  • Require an assessment of the Department of Energy’s capability to host privately funded fusion and fission reaction prototypes; and
  • Provide for a study of technologies for recycled carbon fiber and production.

Next Steps

Congress must appoint a conference committee to reconcile the Act with a similar bill passed by the House on December 3, 2015. A reconciled bill, after being passed again by the House and Senate, could be delivered to the White House for President Obama’s signature as soon as this summer. Whether the President will sign the bill into law will likely depend on the specific provisions of the reconciled bill. While the Office of Management and Budget’s Statement of Administration Policy took issue with several provisions of the House bill, Energy Secretary Ernest Moniz has noted the Senate bill’s “many positive elements.” Retaining key provisions of the Senate bill is therefore crucial to both the legislation’s success and its potential for impact on companies manufacturing equipment and components utilized by the renewable energy industry.

What This Means to You

The Act has the potential to significantly impact manufacturing operations. While its provisions specifically addressing the energy efficiency of manufacturing operations will directly impact manufacturers in any number of industries, its provisions affecting energy efficient appliances, building materials, and vehicles are also likely to result in an increased demand for energy efficient products. In addition, the Act’s provisions affecting infrastructure and development of renewable energy, oil and gas, critical minerals, and other resources are likely to result in an increased demand for energy supply and resource extraction equipment and components.

Understanding the potential impacts of the proposed legislation could help your business and your clients be positioned to take advantage of the numerous opportunities that are likely to result if the Act is signed into law. In addition, your participation in the legislative process could help educate Congress on the needs of your business and your clients and ultimately impact specific provisions of the Act.