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July 04, 2009

House and Senate Climate Bills and Stimulus Bill Energy Impact




The last few months and the next few months are seeing a flurry of energy bills and energy impacting legislation.

Stimulus Bill's Energy Impact
The stimulus bill (America Recovery and Reinvestment Act 2009) ARRA allocated a total of $9.45 billion to weatherize and/or increase the energy efficiency of low-income housing and assist local governments in implementing energy efficiency programs.

ARRA allocates $3.1 billion for States to implement or enhance energy efficiency programs.

ARRA contains several changes to the plug-in hybrid electric vehicle (PHEV) tax credit originally included in the Energy Improvement and Extension Act of 2008 that have been included in the updated reference case. For example, ARRA allows a $2,500 tax credit for the purchase of qualified PHEVs with a battery capacity of at least 4 kilowatthours. Starting at a battery capacity of 5 kilowatthours, PHEVs earn an additional $417 per kilowatthour battery credit up to a maximum of $5,000. The maximum total PHEV credit that can be earned is capped at $7,500 per vehicle.

Prior to the passage of ARRA, the production tax credit (PTC) for certain renewable technologies was to expire on January 1, 2010. ARRA extended this date to January 1, 2013, for wind and January 1, 2014, for all other eligible renewable resources. In addition, ARRA allows companies to choose an investment tax credit (ITC) of 30 percent in lieu of the PTC and allows for a grant in lieu of this credit to be funded by the U.S. Treasury.

ARRA provides $6 billion to pay the cost of guarantees for loans authorized by the Energy Policy Act of 2005.

Wind generation with the ARRA is expected to be more than twice tha
projected in the no-stimulus case, 201 billion kilowatthours compared to 86 billion
kilowatthours and estimated generation of 53 billion kilowatthours in 2008.

ARRA reduces commercial sector energy expenditures by an average of $5.7 billion
(2.7 percent) annually (real 2007 dollars) between 2010 and 2030.

Excluding transportation-related expenditures, total residential and commercial
energy bills are $13 billion (2.6 percent) and $21 billion (3.8 percent) lower
respectively in 2020 and

In the AEO2009 reference case, with assumptions developed prior to the current economic downturn, domestic cellulosic ethanol production was projected to reach 150 million gallons in 2012. However, a review of projects proceeding towards construction, suggests that, without assistance, only about 74 million gallons of domestic cellulosic ethanol production capacity will be built by 2012, because financing for these developers has become extremely difficult to obtain and some projects have been canceled. With the loan guarantees arising from the stimulus package, it is assumed that the 2012 production rises back to about 110 to 170 million gallons, with additional capacity additions occurring under the same financing structure as in AEO2009.

ARRA provides $3.4 billion for additional research and development on fossil energy
technologies.

ARRA provides $4.5 billion for smart grid demonstration projects. The funds
provided will not fund a widespread implementation of smart grid technologies. In July 2004 the Electric Power Research Institute (EPRI) estimated that full deployment would cost $165 billion. However, successful deployment of several demonstration projects could stimulate more rapid investment than would otherwise occur. Smart grid technologies generally include a wide array of measurement, communications, and control equipment employed throughout the transmission and distribution system that will enable real-time monitoring of the production, flow, and use of power from generator to consumer.

In the updated reference case, it is assumed that the Federal expenditures on
smart grid technologies will stimulate further efforts to lower losses, reducing them by an additional 10 to 15 billion kilowatthours, roughly one-third the maximum EPRI estimate. In a 2008 report, EPRI estimated that smart grid technologies could reduce line losses in 2030 by between 3.5 and 28.0 billion kilowatthours

House and Senate Climate Bills
Kansas City Star reports the nonprofit American Council for an Energy-Efficient Economy examined the bill's efficiency provisions and concluded that they would save 1.4 million barrels of oil per day in 2030. That's roughly 10 percent of the projected use of 14.3 million barrels a day in that year, according to the government's Energy Information Administration.

The Environmental Protection Agency put the oil savings at 700,000 barrels a day by 2030. The EPA looked mainly at the bill's terms that would put a declining cap on the amount of emissions of heat-trapping gases allowed each year and create a pollution-permit trading system.

EPA's analysis showed only a modest decrease because the bill would have little impact on the price of gasoline - and thus little impact on people's driving behavior and choice of cars. EPA estimated that gasoline prices would go up about 25 cents a gallon in 2030 as a result of the bill.

The House-passed climate legislation focuses primarily on electricity generation. Its backers said they sought the quickest and cheapest ways to bring down U.S. emissions to 83 percent below 2005 levels by 2050.

The senate bill will yield energy efficiency savings of about 2 quadrillion Btu’s of energy (“quads”) in 2020 and nearly 4 quads in 2030, according to a preliminary analysis released today by the American Council for an Energy-Efficient Economy (ACEEE). ACEEE estimates that this bill will save about half of the energy in 2020 and one-third of the energy in 2030.

ACEEE estimates that 70% of the 2020 energy savings in the Senate bill will come from buildings, including a major building retrofit program, improvements to building codes, and a variety of other buildings provisions. Of the remaining savings, 18% are from new minimum efficiency standards on appliances and 12% from industrial programs






Impact of 25% renewable energy requirement

The RES program analyzed in this report has the following characteristics:

The program begins in 2012 with the required renewable share starting at 6 percent and growing in scheduled increments to 25 percent in 2025. The program sunsets in 2040.

Power sellers with retail sales of at least 1 billion kilowatthours (1,000,000 megawatthours) are covered. Entities with retail sales below this level are exempt.

Generation from existing hydroelectric and municipal solid waste (MSW) facilities are not included in the base electricity sales but also do not earn compliance credits.

Most of the projected increase in wind generation is due to existing State renewable portfolio standard programs and the passage of ARRA. This occurs in both the reference case and the RES cases. Total wind generation in the two RES cases is projected to increase from 32 billion kilowatthours in 2007 to between 208 billion kilowatthours and 249 billion kilowatthours in 2030. Total biomass generation increases from 39 billion kilowatthours in 2007 to between 438 billion kilowatthours and 577 billion kilowatthours in 2030 in the two RES cases. The renewable provisions of ARRA do not have as large an impact on biomass as on wind, because the production subsidies provided for the co-firing of biomass are smaller and because new dedicated biomass plants generally take longer to develop than would be required to meet the deadline to qualify for production subsidies under ARRA.


The higher renewable generation stimulated by the Federal RES leads to lower coal and natural gas generation. In the two RES cases, coal generation ranges between 182 billion kilowatthours (8 percent) and 257 billion kilowatthours (11 percent) below the reference case level. Similarly, natural gas generation in the two RES cases in 2030 is between 55 billion kilowatthours (6 percent) and 150 billion kilowatthours (15 percent) below the level projected in the reference case.


Given the amount of eligible renewable generation projected in the reference case, the RES is not expected to affect national average electricity prices until after 2020. As the required RES share increases to its maximum value in 2025, the value of RES credits increases, and impacts on national average electricity prices become evident. The peak effect on national average electricity prices, 2.7 percent in the RESFEC case and 2.9 percent in the RESNEC case, occurs as the required renewable share ramps up more rapidly than the demand for electricity is growing. In the later years of the projections, the impact on national average electricity prices is smaller, as the impact of the RES requirement on the cost of coal and natural gas, fuels whose use is reduced by added renewables, is increasingly reflected in electricity prices. By 2030, electricity prices are projected to be little changed from the reference case in both RES cases, with 2030 prices less than 1 percent higher than in the reference case.





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