U.S. House of Representatives initial stimulus proposal describes the U.S. energy shortcomings as opportunities to put people to work in ways that will transform the U.S. economy.

President Obama continues to emphasize the development of renewable energy, energy efficiency, including personal responsibility for reducing energy usage and greenhouse gas emissions control during his campaign and in recent pronouncements.  Taking up this challenge, the U.S. House of Representatives, Ways and Means Committee Chairman Charlie Rangel (D-NY) and House Appropriations Committee Chairman David Obey (D-WI) released the House initial stimulus proposal on January 15, 2009 – a Stimulus Appropriations Bill -- the American Recovery and Reinvestment Bill of 2009 -- and corresponding Report as revised today by the Democratic leadership and the Energy and Commerce Committee.  The Ways and Means Committee and other committees are expected to markup stimulus tax legislation and the overall proposal this week and next. 

While many provisions do not seem controversial, the discussion of the scope and scale of the package is very fluid and fast paced at this time.  Although expected soon, no specific comment has yet come from the U.S. Senate leadership.  Committee mark-ups and bill reconciliations between the House and Senate efforts must occur.  The goal appears to be to provide President Obama a stimulus package by mid-to-late February. The Report describes the package as the first crucial step in a concerted effort to create and save three to four million jobs, jumpstart the U.S. economy and begin the process of transforming the U.S. economy for the 21st century with $275 billion in economic recovery tax cuts and $550 billion in targeted priority investments with unprecedented accountability and oversight measures.  Below are highlights of certain provisions of the proposal as it stands today that specifically impact renewable energy, greenhouse gas emissions control and energy efficiency, including smart grid and transmission programs. 

In terms of “green”, the package is intended to double renewable energy production and increase energy efficiency, including groups of investments, as set out below.  The focus is on “Clean, Efficient, American Energy.”  The Report summarizes that America’s current energy shortcomings present a significant opportunity to put people to work in ways that will transform the U.S. economy.

  • Renewable Energy Loan Guarantees:  Renewable energy power generation would receive $8 billion and transmission projects would receive $3 billion for loans.  The Energy and Commerce Committee added that to qualify the project must start construction before September 2011.  The U.S. Department of Energy (DOE) previously authorized $10 billion for renewable energy loan guarantees, although the funds have not been released in three years.   The availability of these existing funds and whether this fits within the stimulus plan may come into the upcoming debate.
  • Tax Credits:  The tax portion of the proposal would include a long-term extension, the length of which has not yet been announced or determined with any certainty, of the production tax credit (PTC) used by wind, geothermal, biomass and waste-to-energy projects.  Currently, the Energy and Commerce Committee draft would extend the qualifying in-service dates for wind to December 31, 2012, and to December 31, 2013, for geothermal, biomass, waste energy and marine energy.  In addition, the bill would temporarily allow –– those utilizing the PTC the option to take an up-front investment tax credit (ITC) instead of the 10-year PTC, compressing 10 years of tax credits into the early stages of a project.  It is not clear whether this option would run for the full term of the extended PTC.
  • Tax Credits and “Refundability”:  There is not yet a refundability provision for the existing ITC and PTC, as argued for by the renewable power industry.  Refundability means that the renewable generation project could get back in cash the balance, if any, of the remaining credit after use towards its tax liability.  The loan guarantees, however, could be viewed by some as a substitute for refundability of the tax credits.  This could be helpful given that many developers and investors do not or no longer have enough tax liability to warrant use of the credits and, as has become clear with the banking and credit crisis, there are not a lot of tax equity providers currently looking for investments. 
  • Questions/Certainty regarding Loan Guarantees and Credit:  Several viable renewable projects currently need additional financing to complete or otherwise maintain their projects.  The proposed guarantees and credits do not yet address some basic structural questions, including how the two programs work together (can a project or investor take at the same time the credit, up-front or otherwise, and the grant), whether projects with in service dates before any final legislation would receive the grants or credits, how “long” is long-term for the tax credit extension and how “temporary” is temporary for the up-front application.  All-in-all, financing needs certainty, so there is more work to do on the bill.
  • Smart Grid:  Depending on how one combines the various proposed initiatives, upwards of $5 billion (maybe significantly more) would be for research and development for a reliable, efficient electric grid, including pilot projects and federal matching funds for the Smart Grid Investment Program (established in the Energy, Independence and Security Act of 2007) (EISA).
  • U.S. General Services Administration (GSA) Federal Buildings:  Projects to be funded with the $6.7 billion for renovations and repairs to federal buildings including at least $6 billion focused on increasing energy efficiency and conservation are to be selected based on GSA’s ready-to-go priority list. 
  • Local Government Energy Efficiency Block Grants:  In an effort to increase energy efficiency and reduce carbon emissions $6.9 billion would be used to help state and local governments make necessary energy investments.
  • Energy Efficiency Housing Retrofits:  Funds totaling $2.5 billion for a new program to upgrade U.S. Department of Housing and Urban Development sponsored low-income housing to increase energy efficiency, including new insulation, windows and furnaces would be competitively awarded.
  • Energy Efficiency and Renewable Energy Research:  Awarded on a competitive basis to universities, companies and national laboratories, $2 billion would be used for energy efficiency and renewable energy research, development, demonstration and deployment activities to foster energy independence, reduce carbon emissions and cut utility bills. 
  • Advanced Battery Loans and Grants:  To support U.S. manufacturers of advanced vehicle batteries and battery systems $2 billion would be funded for the Advanced Battery Loan Guarantee and Grants Program, which has yet to be funded under the EISA.  As stated in the Report, the United States should lead the world in transforming the way automobiles are powered.
  • Energy Efficiency Grants and Loans for Institutions:  In an effort to help school districts, institutes of higher education, local governments and municipal utilities implement projects that will make them more energy efficient $1.5 billion would be used for energy sustainability and efficiency grants and loans.
  • Home Weatherization:  To reduce energy costs $6.2 billion would be used to help low-income families weatherizing their homes.
  • Smart Appliances:  Rebates totaling $300 million would be provided to consumers for buying energy efficient Energy Star products to replace old appliances, which will lower energy bills.
  • GSA Federal Fleet:  To save fuel costs and reduce carbon emissions $600 million would be used to replace older vehicles owned by the federal government with alternative fuel automobiles. 
  • Electric Transportation:  A new grant program to encourage electric vehicle technologies would be created with $200 million in funding.
  • Cleaning Fossil Energy:  Funding, totaling $2.4 billion, for carbon capture and sequestration technology demonstration projects would provide valuable information necessary to reduce the amount of carbon dioxide emitted into the atmosphere from industrial facilities and fossil fuel power plants.
  • U.S. Department of Defense Research:  In order to research the use of renewable energy to power weapons systems and military bases $350 million in funding would be provided. 
  • Alternative Buses and Trucks:  To reduce fuel costs and carbon emission $400 million would be used to help state and local governments purchase efficient alternative fuel vehicles.
  • Industrial Energy Efficiency:  Energy efficient manufacturing demonstration projects would be supported with $500 million in funding.
  • Diesel Emissions Reduction:  To reduce diesel emissions, benefiting public health and reducing global warming, $300 million in grants and loans would go to state and local governments for projects that include technologies to retrofit emission exhaust systems on school buses, replace engines and vehicles, and establish anti-idling programs.  Seventy percent of the funds would go to competitive grants and 30 percent funds grants to states with approved programs.  Last year, the Environmental Protection Agency was only able to fund 27 percent of the applications received.  
  • U.S. Department of Energy (DOE):  Basic research into the physical sciences including high-energy physics, nuclear physics and fusion energy sciences and improvements to DOE laboratories and scientific facilities would receive $1.9 billion in funding.  The Advanced Research Project Agency – Energy to support high-risk, high-payoff research into energy sources and energy efficiency would received $400 million of this funding. 
  • National Oceanic and Atmospheric Administration Satellites and Sensors:  For climate sensors and climate modeling $600 million would be used for satellite development and acquisitions.    
  • Industrial Technology Services:  To accelerate research in potentially revolutionary technologies with high job growth potential $70 million would be used for the Technology Innovation Program.  To help small and mid-size manufacturers compete globally by providing them with access to technology $30 million would be used for the Manufacturing Extension Partnerships.
  • Transit:  Public transportation would be promoted because it saves Americans time and money, saving as much as 4.2 billion gallons of gasoline and reducing carbon emissions by 37 million metric tons each year.  
  • Training and Employment Services:  Job training including formula grants for adult, dislocated worker and youth services (including $1.2 billion to create up to one million summer jobs for youth) would receive $4 billion in funding.  The needs of workers also would be met through dislocated worker national emergency grants, new competitive grants for worker training in high growth and emerging industry sectors with priority consideration to “green” jobs and health care, and increased funds for the YouthBuild program.  Green jobs training would include preparing workers for activities supported by other economic recovery funds, such as retrofitting of buildings, green construction and the production of renewable electric power.