Energy bill doesn’t revolutionize alternatives

Operators of wind farms like this one in Lamar, Colo., got tax credit help from the energy bill passed this week by Congress. An industry spokesman said that'll help the industry for two years but that longer term not much has changed.David Zalubowski / AP file
/ Source: The Associated Press

America’s fledgling renewable energy industry won’t be significantly transformed by the energy bill Congress passed Friday. To the disappointment of environmentalists and those with a financial stake in alternatives to fossil fuels, most of the $14.5 billion in tax breaks will help producers and users of oil, natural gas and coal.

Still, boosters of wind, solar and biofuels said their tiny segment of the market will also benefit from the legislation, as will consumers looking to conserve fuel at home or on the road.

“This bill is a major disappointment from an energy-policy perspective,” said Dan Reicher, a former assistant secretary in the Energy Department during the Clinton administration and president of New Energy Capital Corp., a venture capital firm that specializes in renewables. But while Reicher would have preferred legislation that mandates reductions in oil consumption and limits the output of carbon dioxide from power plants, he said the compromise bill “does provide some useful incentives for investors in clean energy.”

Those who voted in favor of the bill and representatives of the fossil fuel industry would agree with Reicher’s latter point, though they complain that the new energy policy does not go far enough to promote more domestic onshore and offshore drilling for oil and natural gas. Rep. Richard W. Pombo (R-Calif.) called the bill “a good first step” in addressing the country’s rising dependence on foreign oil, the same description used by the American Petroleum Institute, a Washington-based trade group.

Wind industry feels ‘pretty good’
In sheer dollar terms, the biggest clean energy perk in the bill was a two-year extension of a tax credit critical to companies that produce power from renewable sources — an allocation worth $2.7 billion. The bulk of those funds will promote the construction of new wind farms, a boon to utilities and wind turbine manufacturers, while the remainder will assist biomass, geothermal and hydroelectric companies.

“Given the relative size and political weight of our industry, I feel pretty good,” said Randall Swisher, executive director of the American Wind Energy Association, which estimates that some $5 billion in new wind projects will go forward over the next two years. Without the tax credits these projects would not go forward and hundreds of jobs would have been lost, Swisher said.

Nevertheless, “with this bill, I don’t see any fundamental changes in the direction of U.S. energy policy,” Swisher said.

The bill does create a new category of tax credits known as clean renewable energy bonds, or CREBs, that have an estimated value of $400 million. These tax-exempt bonds can be issued by local governments or electricity cooperatives to help pay for wind, solar, biomass and other specified projects.

An additional $194 million will go toward the two-year extension of excise- and income-tax credits for manufacturers of biodiesel, a soybean derivative that is blended with regular diesel.

“Any time we can use one of our products as a fuel... that’s a win for agriculture,” said Darryl Brinkmann of Carlyle, Ill., a full-time corn and soybean farmer and the chairman of the National Biodiesel Board.

Brinkmann and other farmers also stand to gain from a provision that mandates the annual use of 7.5 billion gallons of ethanol, a corn derivative, by 2012.

No sticks in bill
Yet advocates of renewables said the bill is equally notable — and disappointing — for what it does not include. There are no minimum requirements for clean power production in the United States and no disincentives to help curb fossil-fuel consumption, such as automobile fuel-economy standards or mandatory caps on greenhouse gas emissions.

“A strong energy policy needs both carrots and sticks,” Reicher said. “But this is a bill that’s mostly about carrots.”

The Kyoto Protocol, an international treaty on climate change that went into effect in February, caps the amount of carbon dioxide that power plants and fuel-intensive manufacturers in more than two dozen countries are allowed to emit. The United States is not bound by the treaty.

While the bulk of the financial rewards in the energy bill are aimed at corporations, there are a handful of provisions that will make it more economical for homeowners and motorists to reduce their energy consumption and invest in cleaner fuels.

Homeowner credit for solar
Solar enthusiasts may have gotten the most significant shot in the arm of anyone in the renewable sector, not in absolute dollar terms but with regard to the fact that homeowners who install photovoltaic systems will now be eligible for federal financial assistance for the first time in 20 years.

The bill includes a federal tax credit worth 30 percent of the cost of residential solar panels after taking into account any assistance from the state. The credit is capped at $2,000.

Rhone Resch, president of the Washington-based Solar Energy Industry Association, said the tax credit would give “individuals support in making a purchase that will improve the United States’ energy independence.”

Hybrid cars
Similarly, close to $875 million in tax credits will be made available to those who buy hybrid gas-electric vehicles before 2010. A person buying a Toyota Prius, for instance, will receive a tax credit of at least $2,500, according to Toyota Motor Corp. spokeswoman Martha Voss.

The hybrid vehicle tax credit has its limits, however. Each manufacturer can apply the tax credit to just 60,000 vehicles and Toyota sells roughly 150,000 hybrids per year.

“If we had our way, there would have been a cap of 200,000,” Voss said. “But for hybrids just to be in the bill, we’re thrilled.”

About $555 million is available in the form of tax credits to homeowners who buy energy-efficient fans, furnaces and hot water boilers.

There are also tax credits available for manufacturers of dishwashers, refrigerators and other appliances, as well as commercial builders, if they meet certain energy-efficiency standards.

David Goldstein, director of the Natural Resources Defense Council’s energy program, said the bill is well-intentioned with regard to spurring energy conservation among homeowners and businesses, but he fears the results will be minimal because the tax credits are only good for two years. “It’s just very frustrating,” he said.