WITH RESCUE SET, UTILITIES TO MOVE ON NEW ENERGY

Pop Quiz: What’s the best thing about the financial rescue legislation passed by both Houses of Congress and signed into law by the President last week?

Answer: Depends on who is asked.

Ask the folks at the American Wind Energy Association (AWEA). Greg Wetstone, Senior Director of Governmental and Public Affairs, AWEA: “We salute Members of Congress in both parties who fought under difficult conditions to keep the renewable energy production tax credit and small turbine investment tax credit on the agenda until the very end, and then pushed them across the finish line. These tax credits are essential to the continued growth of wind energy, to the economic and energy security of the United States, and to a successful beginning in the fight against global warming…”

Passage of the Emergency Economic Stabilization Act of 2008 (H.R. 1424) included extension of the New Energy industry federal tax credits, specifically (1) extending the solar energy industry’s investment tax credit (ITC) for 8 years, (2) granting the same tax benefit to small wind installations, and (3) extending the wind energy industry’as production tax credit (PTC) for another year.

The folks at the Solar Electric Power Association (SEPA) focused on a very particular aspect of the new legislation that allows electric utilities to take advantage of the credit. It opens the door for big capital to come into the large-scale solar installation market.

Julia Hamm, executive director, SEPA: “U.S. electric utilities’ engagement with grid-connected solar electricity has increased significantly in 2008, with major photovoltaic and concentrating solar thermal project announcements totaling more than 5,000 megawatts…[Without the ITC], the only viable financial option was to have these plants be owned and operated by independent power producers…The change to the tax credit facilitates utility ownership as another option, which will result in additional projects and innovations.”

Example: Pacific Gas and Electric Company (PG&E) announced the 2 biggest photovoltaic (PV) projects ever planned (one 550-megawatts, the other 250 megawatts) this past summer -- pending extension of the ITC.

As this example shows, the expectation of what will happen as a result of the tax credit exstensions is hardly hypothetical. Large-scale solar installation activity was already poised to explode into action because of the many state Renewable Electricity Standards (RESs) driving New Energy development by requiring the utilities to produce specific portions of their power from New Energy sources by a date certain. The tax benefit is sure to be a shot of financial adrenalin.

Example: Duke Energy has been making plans for new solar capacity ever since it became clear North Carolina would pass an RES. Now Duke can take ownership of everything it has been developing.

Jim Rogers, chairman/president/CEO, SEPA member Duke Energy: “This is a very positive development for the utility industry as it will go a long way to putting solar power within reach of many more Americans…It is exactly what we need as we explore investing $100 million to install, operate, maintain and dispatch solar panels on our customers' rooftops in North Carolina as a viable option to build a bridge to a low-carbon future.”

Example: Bolstered by Massachusett’s Green Communities Act allowing utilities to buy and develop as much as 50 megawatts of solar capacity by 2010, New England utility National Grid had already announced it would become the first company in the Commonwealth to begin building. Even without the federal tax credits and even at an estimated cost of $38 million, National Grid expected the project to be a financial winner (at a cost of only 8 cents/month/customer), thanks to the value of new generating power and the state subsidies to be earned.

With the extension of the tax credits, projects like these will inevitably expand rapidly.

Political policy-makers are finally realizing what the potential of New Energy is. The PG&E, Duke and National Grid undertakings are only the beginning in a huge new fight that will be led by the U.S. New Energy and energy efficiency industries on behalf of national security and energy independence, and against global climate change.

The fight will generate millions of good, productive domestic jobs and billions dollars in concrete, New Energy-infrastructure-backed new revenues. Those who can buy in now will reap huge dividends later.

Passsage of the legislation extending the New Energy tax credits comes not a moment too soon. The U.S. economic engine is slowing but New Energy can get it going like a solar-powered electric racing car.

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National Grid Announces Plan for New Solar Energy Program in Massachusetts; Company First to Respond Under Green Communities Act
October 2, 2008 (Business Wire via MarketWatch)
and
SEPA Statement on Historic 8-Year Solar Tax Credit Extension; Removal of Utility Prohibition to Have Major Impact on Solar Market Development
Josephine Mooney, October 3, 2008 (Solar Electric Power Association)
and
Wind Energy Industry Applauds U.S. House of Representatives’ Passage of Renewable Energy Credits
October 3, 2008 (American Wind Energy Association)

WHO
National Grid; Massachusetts Department of Public Utilities; American Wind Energy Association (AWEA) (Greg Wetstone, Senior Director of Governmental and Public Affairs); Solar Electric Power Association (SEPA) (Julia Hamm, executive director); Pacific Gas and Electric Company (PG&E); National Grid

WHAT
The Emergency Economic Stabilization Act of 2008 (H.R. 1424) included extension of the New Energy industry federal tax credits. Massachusett’s Green Communities Act allows utilities to buy and develop solar capacity. It is a variation on a growing trend for states pass Renewable Electricity Standards (RESs) mandating New Energy development. In response, utilities are accelerating their move to large-scale solar installation, large-scale distributed PV capacity and wind installations.

Utilties have been building wind energy aggressively since 2007. Now that boom can continue. (click to enlarge)

WHEN
- National Grid is the first utility in Massachusetts to present its informational filing with the Massachusetts Department of Public Utilities, a plan to develop and own new solar generation.
- Next: Engineering, licensing, permitting, host community planning.
- National Grid hopes to break ground on 4 new installations by Spring 2009.
- National Grid has 20+ years of experience in solar. Its 1st large-scale Massachusetts PV installation (30 homes in (Gardner, Mass.) was in the late 1980s.

WHERE
- National Grid delivers electricity in Massachusetts, New Hampshire, New York and Rhode Island, and manages the Long Island electricity network with the Long Island Power Authority (LIPA).
- PG&E serves Northern and Central California.
- National Grid’s 4 projects are proposed for (1) Revere (Wharf Street, 1.5 megawatts); (2) Dorchester (Victory Road, 1 megawatt); (3) Everett (Rover Street, 1.5 megawatts); and (4) Haverhill (Hilldale Road, 1 megawatt)

WHY
- The 8-year extension for the solar industry ITC in HR1424 is widely regarded as a major incentive for utilities to diversify into solar energy.
- H.R. 1424, Emergency Economic Stabilization Act of 2008 (EESA). 451 pages. Covers 5 major areas:
I. Stabilizing the Economy – EESA provides up to $700 billion to the
Secretary of the Treasury to buy mortgages and other assets, relieve financial institutions and make it possible for citizens and businesses to get credit. It also allows companies to insure assets.
II. Homeownership Preservation – EESA requires modification of bad loans (many due to predatory lending) to help owners keep their homes and improves the HOPE for
Homeowners program.
III. Taxpayer Protection – EESA sets up requirements that assure taxpayers they will benefit from any growth companies get from the act and requires the President to submit legislation to cover taxpayer losses from the program.
IV. No Windfalls for Executives – EESA prevents executives who made bad decisions from dumping bad assets and walking away with millions in bonuses. To gain EESA advantages, companies lose certain tax benefits and must limit executive pay and golden parachutes.
V. Strong Oversight – EESA allocates $250 billion immediately, then requires Presidential certification before the next $100 billion and the last $350 billion are allocated. It also requires ongoing reports from the Treasury Department and creates an Oversight Board and special inspector general to protect against waste, fraud and abuse.
- The provisions regarding New Energy tax credits are based on those in H.R. 6049, which included:
(1) a 1-year extension of the wind energy industry’s production tax credit (PTC),
(2) a 2-year extension of a production tax credit for biomass, geothermal, hydrokinetic and some forms of solar,
(3) an 8-year extension of the solar energy investment tax credit (ITC),
(4) tax credits for pilot “clean” coal (carbon capture and sequestration, CCS) projects, coal-to-liquids projects, battery manufacturing, high-speed rail construction and green building,
(5) authorization for the National Academy of Sciences to assess IRS incentives’ impacts on greenhouse gas (GhG) emission abatement,
(6) tax credits for cellulosic ethanol and biodiesel production and a tax credit for the purchase of a plug-in hybrid electric vehicle,
(7) approves $3 billion in bonds and tax credits for efficiency and GhG abatement projects and construction,
(8) includes a package of extensions on tax breaks for teachers, hurricane victims and others.
- The bill also contains a compromise provision for the controversial Alternative Minimun Tax (AMT).
- The legislation is reported to save taxpayers $60 billion.

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- National Grid's proposal:
(a) develop, build, own solar installations across Massachusetts, the 1st 4 in the Greater Boston area,
(b) work with customers throughout the state to pick customer-owned buildings or properties (ex: state and federal government-owned buildings and public schools) for National Grid-installed/owned/maintained solar energy generation (w/solar education and science curricula in schools w/solar systems),
(c) customer education/guidance for solar and energy efficiency programs,
- National Grid has connected ~4.7 megawatts of distributed solar generation on the New England electricity system and administered ~1,700 solar PV systems in Long Island, NY.

QUOTES
- Tom King, president, National Grid (U.S.): "We are pleased to take a leadership role in promoting renewables, an important part of the Green Communities Act. We believe that developing solar generation can offer very real benefits to our customers…These installations are just a start for us…Through implementation of this plan, we will help diversify the Commonwealth's renewable energy portfolio and further develop utility-scale solar generation that will be critical in advancing the development of the solar industry in the state."
- Julia Hamm, executive director, SEPA: “The extension of the tax credit also significantly increases the likelihood that recently announced solar projects will come to fruition…”
- Greg Wetstone, Senior Director of Governmental and Public Affairs, AWEA: “…We look forward to working next year with a new Congress and Administration to fashion a serious long-term clean energy policy that increases domestic energy, increases our reliance on clean renewable energy, and creates jobs for Americans.”