In the previous edition of the TLQ, we discussed the $18 billion of clean tech tax incentives that were inserted into the Emergency Economic Stabilization Act of 2008 — an act that largely focused on bailing out the beleaguered US financial system. President Obama has since enacted the American Recovery and Reinvestment Act of 2009 in an effort to move the US from "peril to progress." This $787-billion stimulus bill allocates $92 billion to clean tech initiatives and endeavours to serve as a broad stimulus to the entire American economy. Because of its enlarged focus and increased monetary value, the 2009 Recovery Act will likely provide a much greater stimulus to the clean tech sector than did the 2008 bailout.
The 2009 Recovery Act focuses largely on renewable energy production. Overall, the goal is to double American renewable energy generating capacity over the next three years — roughly equivalent to the energy used by six million homes.
Renewable energy production will be encouraged largely through three different tax credits. Existing production tax credits will be made available for the following 10 years, with mandatory "in service" dates extended by two years for marine and hydrokinetic energy facilities and by three years for wind, biomass, geothermal, hydropower, landfill gas and waste-to-energy facilities. Alternatively, taxpayers may elect to claim an investment tax credit equivalent to 30 per cent of the cost of such facility during the first year of service. And as a third option, eligible taxpayers may opt to receive a grant equal to 30 per cent of the reportable business investment, rather than take advantage of either of the above tax credits. Given that not all clean tech companies are impacted identically by the current economic slump, these tax credits provide taxpayers with increased financial flexibility.
The 2009 Recovery Act also contains a dizzying array of additional tax credits that will benefit clean tech companies. Of note are a 30 per cent tax credit for energy efficiency improvements by homeowners, and a tax credit of up to $7,500 for purchasers of plug-in hybrid vehicles when they become available. Substantial tax credits will also apply to purchases of electric low-speed vehicles, and for taxpayers that convert existing vehicles to plug-in hybrids.
Clean tech-related infrastructure spending also received significant funding, specifically in terms of upgrades to energy and water systems. Loan guarantees and grants totalling $7.2 billion were allocated for water treatment upgrades, and $11 billion in loans and grants are available for the installation of 3,000 miles of electricity transmission lines and 40 million smart meters in an effort to create an efficient "smart grid."
Energy efficiency was another key focus of the 2009 Recovery Act. Fossil energy research and development was allocated $3.4 billion, largely devoted to developing clean coal power and carbon capture and storage initiatives. Up to $2 billion in grants will be made available to US-based manufacturers of advanced battery systems and vehicle batteries. Renewable energy research and development was allocated $2.5 billion. An additional $3.2 billion was allocated for the Energy Efficiency and Conservation Grant Program, and $3.1 billion for State Energy Programs.
Building efficiency initiatives will assist both the clean tech and construction sectors. The federal program dedicated to the weatherization of low- and middle-income homes received $5 billion. The federal building fund also received $4.5 billion to convert existing government buildings into high-performance green structures. The Department of Defence received $4.2 billion to restore and modernize their aging facilities.
Renewable energy projects will also be able to decrease financing costs through access to up to $60 billion in loan guarantees. The Department of Energy will allocate these funds to renewable energy projects and transmission projects that commence construction before the end of September, 2011. Interestingly, renewable energy projects are defined to include not only facilities that produce renewably sourced energy, but also the manufacturers of components used by those energy producers.
Apart from measures already mentioned above, the 2009 Recovery Act dedicated considerable funds for scientific and technological research. NASA will receive $1 billion, with $400 million earmarked for scientists to work on climate change research. The Department of Energy’s Office of Science, which researches biofuels, high-energy physics, nuclear physics, fusion energy sciences and climate change, received $1.6 billion. The National Science Foundation received $3 billion. And almost another $1 billion is being distributed to other energy and technology agencies.
Analysts are suggesting that the 2009 Recovery Act will cut carbon dioxide emissions by over 60 million metric tons annually — which is the equivalent of taking 13 million cars off the road. Impressive statistics, indeed. But given the current economic downturn, the 2009 Recovery Act may be much more memorable for its substantial stimulus to the clean tech sector.