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Smart Grid
The new American Recovery and Reinvestment Act (ARRA '09) contains several important smart grid provisions. Most notably, the Act provides $4.5 billion for modernizing the energy transmission grid and developing a smart grid infrastructure. Two significant smart grid initiatives that will be funded with this money are: (1) the smart grid regional demonstration initiative created by the Energy Independence and Security Act of 2007 (EISA '07) and (2) the federal matching grant program for smart grid investment costs, also created in the EISA '07. The ARRA '09 also amends the smart grid sections of the EISA '07 in several significant ways.
The smart grid regional demonstration initiative created by the EISA '07 has been amended by the ARRA '09 to provide for the following: (1) the financially-supported smart grid demonstration projects may take place in urban, suburban, tribal and rural areas, including areas where electric system assets are controlled by nonprofit entities and areas where electric system assets are controlled by investor-owned utilities; (2) electric utilities and other parties are eligible for financial assistance up to 50% of the cost of the qualifying advanced grid technology investments; (3) the Secretary of Energy is directed to establish and maintain a smart grid information clearinghouse; (4) as a condition of receiving financial assistance under this provision, smart grid participants must provide such information as the Secretary of Energy may require to become available through the smart grid information clearinghouse (with the caveat that business proprietary information and customer information can be kept confidential); and (5) as a condition of receiving funds under this section, demonstration projects must utilize open protocols and standards (including Internet-based protocols and standards) if available and appropriate.
The smart grid federal matching grant program created by EISA '07 has been amended by the ARRA '09 as well: (1) federal matching grants will be available for up to 50% of qualifying smart grid investments (instead of 20%); (2) the statutory preference for funding "innovation and early adaptation" in favor of "proven and commercially viable technologies" has been removed; and (3) the Secretary of Energy is directed to, within 60 days, (a) establish grant application procedures, (b) require as a condition of receiving funding that projects utilize open protocols and standards (including Internet-based protocols and standards) if available and appropriate, (c) establish procedures to ensure there will be public records of grants made, and (d) establish procedures to provide advance payment of moneys up to the full amount of the grant award.
It is important to note that the Department of Energy has not yet released any regulations or guidelines to implement the smart grid program as authorized in EISA '07, so at this point it is difficult to ascertain what criteria the Department is looking for in the grant applications. Secretary of Energy Steven Chu recently said that overall, DOE plans to disperse 70 percent of the stimulus plan's energy investments -- including the smart grid funds -- by the end of next year.
Energy Efficiency and Renewable Energy
The ARRA '09 provides $2.5 billion for renewable energy and energy efficiency research, development, demonstration and deployment activities. Of those funds, $1.2 billion is directed toward biomass and geothermal technologies.
$300 million in grants is provided for up to 30 geographically dispersed projects intended to encourage the use of plug-in electric vehicles and other new vehicle technologies.
$6.3 billion in energy grants is provided through existing programs to state and local governments: $3.2 billion through the Energy Efficiency and Conservation Block Grants program and $3.1 billion through the State Energy Program. These two programs provide funds for a variety of energy projects, including installation of renewable energy technologies at government facilities. Smart Grid projects are also eligible to compete for this money. As a precondition to a state receiving a certain portion of these energy grants, the governor of each state must represent to the DOE in writing that "the governor has obtained necessary assurances that each of the following will occur:
(1) The applicable State regulatory authority will seek to implement, in appropriate proceedings for each electric and gas utility, with respect to which the State regulatory authority has ratemaking authority, a general policy that ensures that utility financial incentives are aligned with helping their customers use energy more efficiently and that provide timely cost recovery and a timely earnings opportunity for utilities associated with cost-effective measurable and verifiable efficiency savings, in a way that sustains or enhances utility customers' incentives to use energy more efficiently.
(2) The State, or the applicable units of local government that have authority to adopt building codes, will implement the following:
(A) A building energy code (or codes) for residential buildings that meets or exceeds the most recently published International Energy Conservation Code, or achieves equivalent or greater energy savings.
(B) A building energy code (or codes) for commercial buildings throughout the State that meets or exceeds the ANSI/ASHRAE/IESNA Standard 90.1-2007, or achieves equivalent or greater energy savings.
(C) A plan for the jurisdiction achieving compliance with the building energy code or codes described in subparagraphs (A) and (B) within 8 years of the date of enactment of this Act in at least 90 percent of new and renovated residential and commercial building space. Such plan shall include active training and enforcement programs and measurement of the rate of compliance each year.
(3) The State will to the extent practicable prioritize the grants toward funding energy efficiency and renewable energy programs...."
Loan Guarantees for Transmission and Renewable Energy
The ARRA '09 includes $6 billion in funding to support $60 billion worth of loan guarantees for the following types of projects, provided that construction commences not later than September 30, 2011:
- Renewable energy systems, including incremental hydropower, that generate electricity;
- Electric power transmission systems, including upgrading and reconductoring projects;
- Leading edge biofuel projects that will use technologies performing at the pilot or demonstration scale that the gov't determines are likely to become commercial technologies and will produce transportation fuels that substantially reduce life-cycle greenhouse gas emissions compared to other transportation fuels.
Fossil Energy
The ARRA '09 includes $3.4 billion for the Fossil Energy Research and Development program, with $1 billion for R&D, $800 million for clean coal demonstration projects, $1.52 billion for grants for industrial carbon capture and energy efficiency improvement projects, $50 million for grants for geologic site characterization activities and $20 million in grants for geologic sequestration training and research.
Tax Credits
The ARRA '09 also includes numerous energy-related tax credit provisions, including:
- A 3-year extension of the production tax credit for wind facilities;
- Provisions allowing taxpayers eligible for the production tax credit to elect to claim an investment tax credit in lieu of the production tax credit;
- Establishment of a new tax credit (in a total amount of $2.3 billion) for qualified advanced energy projects (applicable to solar, wind, geothermal, fuel cells, micro-turbines, energy-storage systems, certain electric grids, carbon capture and sequestration equipment, and renewable fuels blending/refining equipment);
- Expansion of up to an additional $1.6 billion in new clean renewable energy bonds (CREBS), for issuance by public power providers and governmental entities.