On February 17, President Obama signed into law the American Recovery and Reinvestment Act of 2009, an economic stimulus package with a total cost to the U.S. government (as estimated by the Congressional Budget Office) of $787 billion. The package is a mix of federal government spending, federal tax cuts and support for state and local governments. The Obama administration predicts it will save or create more than 3.5 million jobs. As previewed in our briefing earlier this month,1 the package includes several provisions aimed at greater U.S. energy independence and the advancement of alternative energy technologies.  

The earlier version of the bill, HR 1, as it was passed in the House of Representatives on January 28, 2009, allocated approximately $75 billion to energy-related purposes. However, shortly after the bill moved to the Senate, a compromise on several key provisions emerged from discussions among moderate Democratic senators and a handful of Republican senators, resulting in a pared-down version of the plan. The two versions were reconciled in a joint House-Senate conference committee before both chambers voted on the compromise text.  

The finalized stimulus plan was approved by the House on the afternoon of February 13, 2009, again without any Republican support, and by the Senate later that evening. The bill was signed into law by President Obama on February 17. The substance of the energy provisions in the bill, summarized below, does not differ significantly from the original House version of the bill. The Senate compromise did, however, reduce the amounts allocated to several types of expenditure and tax relief. Overall spending for purposes related to alternative energy and energy efficiency now stands at $45 billion.  

Broadly, the major elements of the stimulus package relevant to the Obama administration energy plan were:

  • a major extension, generally for three years, of production tax credits for renewable energy production (beyond extensions previously enacted in October 2008) and a new 30 percent tax credit for investment in certain renewable energy facilities;
  • authorization for an additional $1.6 billion of new clean renewable energy bonds to finance certain renewable energy facilities and $2.4 billion of qualified energy conservation bonds to finance programs designed to reduce greenhouse gas emissions;
  • tax credits for families that purchase plug-in hybrid vehicles with at least 5 kilowatt hours of battery capacity and an increase in the amounts of alternative fuel pump credits;
  • an extension and modification of tax credits for energy-efficiency improvements to existing homes, increasing the credit to offset 30 percent (rather than 10 percent) of the cost of such improvements in 2009 and 2010, but capped at $1,500 per home;
  • funding for improved energy efficiency in federal buildings and state and local public buildings, and funding of federal and state energy technology research programs;
  • funding for domestic manufacturing facilities to develop more advanced vehicle batteries and construction of electrical systems at transportation facilities;
  • funding to replace vehicles in federal fleets with alternative fuel or hybrid vehicles;
  • loan guaranties or other support to private entities researching biofuels or carbon sequestration technologies;
  • grants of $11 billion for electrical grid projects, including $4.5 billion for “smart grid” electric transmission projects; and
  • $750 million for competitive job training grants for high-growth and emerging industry sectors, including $500 million for jobs relating to energy efficiency and renewal.  

One notable feature of the compromise bill is the speed with which it will be implemented. The package favors projects that will be ready to begin in 2009 and the Congressional Budget Office estimates that 74 percent of the money will be spent by September 30, 2010, compared with 64 percent under the original House bill.