Order Code IB10041
CRS Issue Brief for Congress
Received through the CRS Web
Renewable Energy:
Tax Credit, Budget, and
Electricity Production Issues

Updated November 29, 2001
Fred Sissine
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Renewable Energy Concept
Contribution to National Energy Supply
Role in Long-Term Energy Supply
History
Tax Credits
Public Utility Regulatory Policies Act
DOE’s Strategic and Performance Goals
Tax Credits and Incentives
Production Tax Credit
Residential Tax Credit
Other Incentives and Credits
FY2002 DOE Budget
Climate Change
Electricity from Renewable Energy
Renewables Under Electricity Restructuring
Renewable Energy Portfolio Standard (RPS)
Green Power
Distributed Generation
Net Metering
Legislative Activity in the 107th Congress
LEGISLATION
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
CRS Reports
FOR ADDITIONAL READING
Web Sites

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Renewable Energy:
Tax Credit, Budget, and Electricity Restructuring Issues
SUMMARY
Energy security, a major driver of federal
million in earmarks, which may affect DOE’s
renewable energy programs in the past, came
ability to fund its core programs.
back into play as oil and gas prices rose late in
the year 2000. Also, the electricity shortages
An omnibus House energy bill (H.R. 4,
in California have brought a new emphasis to
Securing America’s Future Energy Act of
the role that renewable energy may play in
2001), includes many, if not most, of the
electricity supply.
recommendations from Bush Administration’s
National Energy Policy Development Group
In the 107th Congress, debate over renew-
report. It incorporates many renewable energy
able energy programs appears to be taking a
provisions including authorizations for R&D
focus on tax credits, incentives, and the Bush
appropriations, incentives for alternative fuel
Administration’s National Energy Policy
vehicles, biomass development on federal
report, Reliable, Affordable, and Environmen-
lands, expedited geothermal leasing, and
tally Sound Energy for America’s Future.
investment and production tax credits for

various renewable energy sources.
Also, worldwide emphasis on environ-
mental problems of air and water pollution and
In response to H.R. 4, the Chairman of
global climate change, and the related develop-
the Senate Energy and Natural Resources
ment of clean energy technologies in western
Committee issued a “Chairman’s mark” that
Europe and Japan may remain important
outlines an omnibus energy bill for the Senate.
influences on renewable energy policymaking.
It includes a renewable portfolio standard and
Concern about technology competitiveness
other renewable energy policy proposals.
may also remain a factor in debate.
The Economic Recovery and Assistance
P.L. 107-66 (Energy and Water Appro-
for American Workers Act (H.R. 3090) was
priations Bill) appropriates $396.0 million in
brought to the Senate floor in mid-November.
FY2002 for DOE’s Renewable Energy Pro-
Section 404 of the Senate version would
gram. To recap, the Administration requested
extend the renewable energy production tax
$276.7 million, the House recommended
credit from January 1, 2002 to January 1,
$376.8 million, and the Senate recommended
2003. The House version of the bill would
$435.6 million. The $396.0 million enacted is
extend the credit for 2 years, to January 1,
$20.3 million (5%) more than the FY2001
2004.
appropriation. (See Table 2 at the end of this

brief.) However, the law includes nearly $80


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MOST RECENT DEVELOPMENTS
On November 13, 2001, the Economic Recovery and Assistance for American Workers
Act (H.R. 3090) was brought to the Senate floor. Section 404 would extend the renewable
energy production tax credit from January 1, 2002 to January 1, 2003. The House version
of the bill would extend the credit for 2 years, to January 1, 2004.

On November 12, the President signed the Energy and Water Appropriations Bill (H.R.
2311), which provides $396 million in FY2002 for the DOE Renewable Energy Program.
This is $20.3 million, or 5%, more than the FY2001 appropriation. However, the law
includes nearly $80 million in earmarks, especially for Biomass/Biofuels and for
Electric/Storage programs. The relatively large amount of funding earmarks may affect
DOE’s ability to fund its core programs.

On September 6, 2001, the Senate Energy Committee Chairman issued a “Chairman’s
Mark” for a forthcoming omnibus Senate energy bill that says the bill would include
renewable portfolio standard and other renewable energy provisions. On August 2, 2001,
the omnibus House energy bill (H.R. 4, Securing America’s Future Energy Act of 2001),
passed the House with some renewable energy provisions, including many that were
proposed in the Bush Administration’s National Energy Policy (NEP) report.

(The FY2002 Conference Report is available on the Thomas web site at
[ftp://ftp.loc.gov/pub/thomas/cp107/hr258.txt]. The DOE FY2002 Budget Request is
available on the DOE web site [http://www.cfo.doe.gov/budget/02budget/es/solar.pdf]. The
National Energy Policy report is available on the White House web site
[http://www.whitehouse.gov/energy/].)

BACKGROUND AND ANALYSIS
Renewable Energy Concept
Renewable energy is derived from resources that are generally not depleted by human
use, such as the sun, wind, and water movement. These primary sources of energy can be
converted into heat, electricity and mechanical energy in several ways. There are some
mature technologies for conversion of renewable energy such as hydropower, biomass, and
waste combustion. Other conversion technologies, such as wind turbines and photovoltaics,
are already well-developed, but have not achieved the technological efficiency and market
penetration which many expect they will ultimately reach. Although geothermal energy is
produced from geological rather than solar sources, it is often included as a renewable energy
resource and this brief treats it as one. Commercial nuclear power is not considered to be
a renewable energy resource. (For further definitions of renewable energy, see the National
Renewable Energy Laboratory’s web site information on “Clean Energy 101”
[http://www.nrel.gov/clean_energy/].)
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Contribution to National Energy Supply
According to the Energy Information Administration’s (EIA’s) Annual Energy Outlook
2001, renewable energy resources supplied about 6.6 Q (quadrillion Btu’s or quads) of the
96.1 Q the nation used in 1999, or about 6.9% of national energy demand. More than half
of renewable energy production takes the form of electricity supply. Of this, most is provided
by large hydropower. However, in 1998 and 1999, declining hydroelectric availability led to
a slight drop in national renewable energy use. Industrial use of renewables, supplied
primarily by biofuels, accounts for most of the remaining contribution.
After more than 20 years of federal support, some note that renewable energy has neither
achieved a high level of market penetration nor a growing market share among other energy
sources. A recent review of renewable energy studies by Resources for the Future,
Renewable Energy: Winner, Loser, or Innocent Victim?, concludes that the lower-than-
projected market penetration and flat market share are due primarily to declining fossil fuel
and electricity prices during this period. In contrast, however, it notes that the costs for
renewable energy technologies have declined by amounts equal to or exceeding those of
earlier projections.
EIA’s Annual Energy Outlook 2001 projects that current policies would yield an 1.1%
average annual increase through 2020, resulting in a 26% total increase in renewable energy
production. This would amount to about 6.5% of the projected 127 Q total demand in 2020.
(Detailed breakdowns of renewable energy use appear in EIA’s Renewable Energy Annual
2000
and Renewable Energy 2000: Issues and Trends.)
Role in Long-Term Energy Supply
Our Common Future, the 1987 report of the World Commission on Environment and
Development, found that “energy efficiency can only buy time for the world to develop
‘low-energy paths’ based on renewable sources...” Although many renewable energy systems
are in a relatively early stage of development, they offer the world “a potentially huge primary
energy source, sustainable in perpetuity and available in various forms to every nation on
Earth.” It suggested that a Research, Development, and Demonstration (R,D&D) program
of renewable energy projects is required to attain the same level of primary energy that is now
obtained from a mix of fossil, nuclear, and renewable energy resources.
The Agenda 21 adopted at the 1992 United Nations Conference on Environment and
Development (UNCED) concluded that mitigating urban air pollution and the adverse impact
of energy use on the atmosphere — such as acid rain, global warming, and climate change —
requires an emphasis on “clean and renewable energy sources.”
History
The oil embargo of 1973 sparked a quadrupling of energy prices, major economic shock,
and the establishment of a comprehensive federal energy program to help with the nation’s
immediate and long-term energy needs. During the 1970s, the federal renewable energy
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program grew rapidly to include basic and applied R&D, and joint federal participation with
the private sector in demonstration projects, commercialization, and information
dissemination. In addition, the federal government instituted market incentives, such as
business and residential tax credits, and created a utility market for non-utility produced
electric power through the Public Utility Regulatory Policies Act (P.L. 95-617).
The subsequent failure of the oil cartel and the return of low oil and gas prices in the
early 1980s slowed the federal program. Despite Congress’s consistent support for a broader,
more aggressive renewable energy program than any Administration, federal spending for
these programs fell steadily through 1990. Lacking a sustained, long-range policy from the
Administration, Congress first took a major initiative in 1974. Until 1994, Congress led
policy development and funding through legislative initiatives and close reviews of annual
budget submissions. FY1995 marked a noteworthy shift, with the 103rd Congress for the
first time approving less funding than the Administration had requested. The 104th Congress
approved 23% less than the Clinton Administration request for FY1996 and 8% less for
FY1997. However, funding turned upward again during the 105th Congress and in the 106th
Congress. (A detailed description of DOE programs appears in DOE’s FY2001
Congressional Budget Request
, DOE/CR-0068, v. 3, February 2000.)
From FY1973 through FY1998, the federal government spent about $11.7 billion (in
1999 constant dollars) for renewable energy R&D. Renewable energy R&D funding grew
from less than $1 million per year in the early 1970s to over $1.3 billion in FY1979 and
FY1980, then declined steadily to $136 million in FY1990. Spending rose from FY1991 to
FY1995, declined in FY1996 and FY1997, then rose again in FY1998, reaching $275 million
in 1999 constant dollars.
This spending history can be viewed within the context of DOE spending for the three
other major energy R&D programs: nuclear, fossil, and energy efficiency R&D. From
FY1948 through FY1972, in 1999 constant dollars, the federal government spent about $22.4
billion for nuclear (fission and fusion) energy R&D and about $5.1 billion for fossil energy
R&D. From FY1973 through FY1998, in 1999 constant dollars, the federal government
spent $43.2 billion for nuclear, $21.1 billion for fossil, $11.7 billion for renewables, and $8
billion for energy efficiency. Total energy R&D spending from FY1948-FY1998 reached
$111.5 billion, including $66 billion, or 59% for nuclear, $26 billion, or 23%, for fossil, $12
billion, or 11%, for renewables, and $8 billion, or 7%, for energy efficiency.
Tax Credits. The Energy Tax Act of 1978 (P.L. 95-618) created residential solar
credits and the residential and business credits for wind energy installations; it expired on
December 31, 1985. However, business investment credits were extended repeatedly through
the 1980s. Section 1916 of the Energy Policy Act of 1992 (EPACT, P.L. 102-486) extended
the 10% business tax credits for solar and geothermal equipment indefinitely. Also, EPACT
Section 1914 created an income tax “production” credit of 1.5 cents/kwh for electricity
produced by wind and closed-loop biomass systems. P.L. 106-170 expanded this credit to
include poultry waste and extended it through December 31, 2001.
Public Utility Regulatory Policies Act. The Public Utilities Regulatory Policies
Act (P.L. 96-917) required electric utilities to purchase power produced by qualified
renewable power facilities. Under PURPA, the Federal Energy Regulatory Commission
(FERC) established rules requiring that electric utilities purchase power from windfarms and
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other small power producers at an “avoided cost” price based on energy and capacity costs
that the utility would otherwise incur by generating the power itself or purchasing it
elsewhere. However, to receive avoided cost payments, each renewables facility must file for,
and obtain, qualifying facility (QF) status from FERC. EIA’s Renewable Energy 1998: Issues
and Trends
(p. 4-5) reports that, by the end of 1996, nonutility renewable power capacity
reached 17,200 MW, of which 12,600 MW came from QFs, including 3,420 MW of small
hydropower facilities. These renewable power facilities generated nearly 90 billion kwh, of
which 69 billion kwh was produced by QFs, including about 12 billion kwh of small
hydropower. Thus, in 1996, QFs accounted for about 73% of nonutility renewable power
capacity and about 76% of nonutility renewable power generation. QFs provided about 1.8%
of national electric capacity and about 2.2% of national electricity generation.
DOE’s Strategic and Performance Goals
The Government Performance and Results Act (GPRA, P.L. 103-62) requires each
federal agency to produce and update a strategic plan linked to annual performance plans.
In September 2000, DOE issued a new Strategic Plan. Renewable energy objectives and
strategies appear under general goal #1 “Energy Resources.” On March 30, 2000, DOE
released its Accountability Report, which assesses the results of DOE’s performance goals
for FY1999. In the DOE Annual Performance Plan for FY2001, strategic objective ER2
aims to “Promote reliable, affordable electricity supplies that are generated with acceptable
environmental impacts.” Goals for 2010 include: triple non-hydro renewable generating
capacity, increase distributed power to 20% of new annual capacity additions, and complete
one million solar roofs. Two related performance goals for FY2001 are: increase non-hydro
generating capacity to 9.3 million kilowatts, and install 20,000 solar roofs, bringing the total
to 90,000 solar roofs installed. Six other FY2001 performance goals involve thin film
photovoltaics, small dish concentrating power systems, a Kalina Cycle geothermal
demonstration plant, testing of biomass gasification cofiring with coal, wind hybrid control
technology, and demonstration of electric torch hydrogen production without carbon dioxide.
Also, in April 2000, the Office of Energy Efficiency and Renewable Energy (EERE) released
a strategic plan, Clean Energy for the 21st Century. Further, in early 2000, the National
Academy of Public Administration issued A Review of Management in the Office of Energy
Efficiency and Renewable Energy
and the National Research Council issued Renewable
Power Pathways: A Review of the U.S. Department of Energy’s Renewable Energy
Programs
.
Tax Credits and Incentives
In the first session of the 107th Congress, a number of renewable energy tax credit bills
have been introduced.
Production Tax Credit. This 1.5 cent/kwh production tax credit (PTC) was created
by Section 1914 of the Energy Policy Act of 1992 (EPAct). It is currently available for wind,
closed-loop biomass, and poultry waste. The 106th Congress extended the credit through
December 31, 2001. Some bills in the 107th Congress would enhance this credit. some bills
(S. 94/H.R. 876, S. 530) would extend the credit for five years, another bill (H.R. 269) calls
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for a permanent extension of the credit, and still others (H.R. 983, H.R. 1657, S. 188, S. 756,
S. 845) would broaden it to include a more extensive variety of biomass sources.
Residential Tax Credit. Two bills (S. 207, S. 293/H.R. 778) amend the Internal
Revenue Code of 1986 to create a refundable tax credit for up to 50% of increased residential
energy costs, applicable to a variety of residential equipment, including solar water heaters
and photovoltaics. Another bill (S. 465) establishes a 15% residential tax credit for
homeowners who purchase photovoltaics and solar thermal equipment. S. 596 creates a
credit for equipment and building design features in residential and commercial buildings.
Also, in A Blueprint for New Beginnings, the Bush Administration calls for tax credits for
rooftop solar equipment.
Other Incentives and Credits. A 1.5 cent/kwh renewable energy production
incentive (REPI) was created by EPAct Section 1212. It is available to state and local
government agencies and non-profit electrical cooperatives. One bill (S. 249) would expand
the range of eligible renewable energy resources. It would add “incremental” hydropower
from new capacity or improved efficiency, and it would broaden biomass resources to include
forest wastes, agricultural sources, and certain forms of wood waste. Further, it would add
0.25 cent/kwh, or 17%, to the credit for a qualified facility located on Native American land
and for a “co-production” facility that also produces useful heat, mechanical power, or
minerals. Also, the National Energy Security Act of 2001 (S. 388/S. 389) proposes an
infrastructure credit for alternatively-fueled vehicles operated by state and other fleets covered
by EPAct. Credits for fuels are also set out in H.R. 377 and S. 760. H.R. 760 contains a
credit for hydropower facilities. Further, in A Blueprint for New Beginnings, the Bush
Administration calls for tax credits for renewable fuels to help open markets.
FY2002 DOE Budget
The Senate bill (S. 1171) has $59.3 million more than the FY2001 appropriation.
Relative to the FY2001 level, the Senate bill has $5.8 million less for Photovoltaics, $2.6
million less for Renewable American Indian Resources, and $2.0 million less for International
Renewables. However, it also includes $19.0 million more for Electric/Storage, $12.2 million
more for Biomass Power, $8.0 million more for Hydrogen, and $8.0 million more for NREL.
The funding for NREL includes $5.0 million to address electric power needs in the
Southwest.
Relative to the FY2001 appropriation, the House recommendation includes some
significant cuts. Under technology programs, there are cuts of $5.9 million for Concentrating
Solar Power and $2.0 million for Small Hydro. A $9.1 million cut for support and
implementation programs includes reductions of $6.6 million to eliminate the Renewable
Energy Program for American Indians, $2.0 million for International Renewables, and $1
million for Program Support.
In May 2001, the Bush Administration issued its revised FY2002 budget request for
Renewable Energy programs at the Department of Energy (DOE). Despite a “growing need
for clean and affordable energy,” it proposes to cut Renewable Energy funding from $375.7
million in FY2001 to $276.7 million (excluding funding for programs under the Office of
Science) — a decrease of $99.0 million (26%) below the FY2001 level.
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For the technology programs, the Administration’s request would provide $36.8 million
less for photovoltaics, $19.5 million less for wind, $13.1 million less for geothermal, and
$11.8 million less for concentrating solar power. Also, for the support and implementation
programs, it would eliminate the Renewable Energy Program for American Indians and cut
$2.5 million from the International Renewable Energy Program.
Under photovoltaics, the $9.0 million decrease for fundamental R&D would reduce
efforts to improve solar energy conversion efficiency. Also, the $5.9 million cut for advanced
materials and devices would scale-down efforts to improve thin film and crystalline silicon
efficiency and terminate the advanced manufacturing R&D program, which aims to reduce
production costs. Further, the $21.2 million drop for technology development would
eliminate other efforts to reduce manufacturing costs and reduce R&D for reliability,
standards, certification, testing and verification.
Under wind programs, applied R&D would fall $6.6 million, cutting back research on
structures, materials, and components for advanced wind technologies. Also, the $5.0 million
cut for turbine R&D would greatly slow down work on the next generation turbines, low
speed turbines, and small wind turbines. Further, the $7.5 million cut for cooperative research
and testing would eliminate the wind Powering America initiative aimed at opportunities and
barriers to development and reduce efforts to study the integration of wind power into utility
grid systems.
However, House report language says the request has “no clear rationale to explain the
selective budget cuts” and no “apparent coordination” with the National Energy Policy
report. At the same time, the report cites a 2000 study by the National Academy of Public
Administration that found an absence of clear goals, priorities, work program, and milestones.
Further, the report stresses that DOE technology programs are designed for long-term energy
solutions, not immediate relief to the energy crisis, which is better addressed by incentives
other than appropriations. Thus, the House recommends $376.8 million which is $100.2
million (36%) above the request and $1.1 million (0%) above the FY2001 appropriation.
Relative to the FY2001 appropriation, the House recommendation includes some
significant cuts. Under technology programs, there are cuts of $5.9 million for Concentrating
Solar Power and $2.0 million for Small Hydro. A $9.1 million cut for support and
implementation programs includes reductions of $6.6 million to eliminate the Renewable
Energy Program for American Indians, $2.0 million for International Renewables, and $1
million for Program Support.
The above funding reductions are offset by proposed increases of $6.0 million for
Photovoltaics and $8.0 million for Electric/Storage, which includes $4.0 million for the
Transmission Reliability Program and $2.9 million for the Superconductivity Program.
In March 2001, the Bush Administration issued A Blueprint for New Beginnings: A
Responsible Budget for America’s Priorities which outlines the approach of the
Administration’s budget policy. In Chapter 10, the Blueprint states that solar and renewable
energy cannot replace fossil fuels in the near-term, but will be an important part of the
Nation’s long-term energy supply. As part of creating a comprehensive energy policy, the
Blueprint proposes to increase the “performance” of renewable energy R&D by “winnowing
out” less promising projects; to use tax credits for rooftop solar equipment and renewable
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fuels to help market penetration; and to use income from bonus bids for oil and gas leases in
the Arctic National Wildlife Refuge to support development of solar and renewable energy
(Blueprint, p. 69; Budget Appendix, p. 405).
The FY2002 request for DOE’s Renewable Energy Program seeks “to meet the growing
need for clean and affordable energy,” according to the Appendix to the U.S. Government’s
FY2002 Budget (p. 404-405). In accordance with the above policy, DOE proposes to cut
solar and renewables funding under DOE’s Office of Energy Efficiency and Renewable
Energy (EERE) from $373.2 million in FY2001 to $237.5 million (excluding funding for
programs under the Office of Science) — an decrease of $135.7 million (36%) below the
FY2001 level. However, the budget request states that a forthcoming budget amendment will
add a total of $39.2 million for Biomass/Biofuels, Hydrogen, Small Hydropower,
Electric/Storage, and Renewable Support (DOE Budget Highlights, p. 14). Vice President
Cheney is chairing a task force on energy policy that is expected to release a report that could
have further implications for the Renewable Energy budget.
The Administration’s $237.5 million request would eliminate the International
Renewable Energy Program and the Renewable Energy Program for American Indians.
Further, it would include $36.1 million less for Photovoltaics, $19.1 million less for Wind,
$17.8 million less for Superconductivity, $13.0 million less for Geothermal, $13.0 million less
Hydrogen, and $11.8 million less for Concentrating Solar Power.
For Photovoltaics, the $36.1 million decrease would cut Fundamental R&D by $9
million, or 49%. This would mean large reductions in efforts to improve solar energy
conversion efficiency Also, Advanced Materials and Devices would fall by $5.9 million, or
23%. This would mean a scale-down in efforts to improve efficiency for thin film and
crystalline silicon technologies. It would also terminate the Advanced Manufacturing R&D
Program, which aims to reduce production costs. Further, Technology Development would
drop by $21.2 million, or 69%. This would eliminate other efforts to reduce manufacturing
costs while scaling down R&D for reliability, standards, certification, testing and verification.
For Wind, the proposed cut would reduce Applied R&D by $6.6 million, or 44%. This
would scale down research on structures, materials, and components for advanced wind
technologies. Also, it would reduce Turbine R&D by $5.0 million, or 40%. This would
greatly slow down work on the next generation turbine, low speed turbine, and small wind
turbine. Further, it would reduce Cooperative Research and Testing by $7.5 million, or 62%.
This would eliminate the Wind Powering America initiative aimed at opportunities and
barriers to development and reduce efforts to study the integration of wind power into utility
grid systems.
For Superconductivity, the proposed cut would lead to cancellation of the next stage of
industry partnership for developing highly efficient transmission cables and scale back the
Second Generation Wire Initiative and related strategic research.
P.L. 106-377 (H.R. 4635; H.Rept. 106-988) was signed into law on October 27, 2000.
It includes the FY2001 Energy and Water Appropriations bill that provides $373.2 million for
the DOE Renewable Energy Program under the Office of Energy Efficiency and Renewable
Energy and $47.1 million for DOE renewable energy research programs under the Office of
Science.
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Climate Change
Since 1988, the federal government has accelerated programs that study the science of
global climate change and created programs aimed at mitigating fossil fuel-generated carbon
dioxide (CO ) and other human-generated emissions. (For more details, see the CRS
2
e l e c t r o n i c b r i e f i n g b o o k o n G l o b a l C l i m a t e C h a n g e a t
[http://www.congress.gov/brbk/html/ebgcc1.html].)
The federal government funds programs for renewable energy as a mitigation measure
at DOE, EPA, the Agency for International Development (AID), and the World Bank. The
latter two agencies have received funding for renewable energy-related climate actions
through Foreign Operations appropriations bills.
Because CO contributes the largest share of greenhouse gas emission impact, it has been
2
the focus of studies of the potential for reducing emissions through renewable energy and
other means. Except for biofuels and biopower, wherever renewable energy equipment
displaces fossil fuel use, it will also reduce carbon dioxide (CO ) emissions, as well as
2
pollutants that contribute to water pollution, acid rain, and urban smog. In general, the
combustion of biomass for fuel and power production releases CO at an intensity that may
2
rival or exceed that for natural gas. However, the growth of biomass material offsets this
release. Hence, net emissions occur only when combustion is based on deforestation. In a
“closed loop” system, biomass combustion is based on rotating energy crops, there is no net
release, and its displacement of any fossil fuel, including natural gas, reduces CO emissions.
2
Electricity from Renewable Energy
The Public Utility Regulatory Policies Act (PURPA) has been key to the growth of
electric power production from renewable energy facilities. Since 1994, state actions to
restructure the electric utility industry have dampened PURPA’s effect. As part of
restructuring, some have proposed PURPA repeal. In the 107th Congress, H.R. 381/S. 552
would repeal PURPA.
Renewables Under Electric Industry Restructuring. To ensure a continued
role for renewable energy under restructuring, some states and utilities have enacted measures
such as a renewable energy portfolio standard (RPS), public benefits fund (PBF), and/or
“green” pricing and marketing of renewable power. Also, some restructuring legislation in
the 106th Congress included such provisions for renewables. (For a discussion of broader
electricity restructuring issues, see CRS Electronic Briefing Book on Electricity Restructuring
at [http://www.congress.gov/brbk/html/ebele1.html].)
Renewable Energy Portfolio Standard (RPS). About 10 states have created an
RPS; several with – and a few without – restructuring in place. State experience indicates
an RPS can be ineffective unless attention is given to key design elements that include policy
goals, an energy target, eligible resources, a focus on retail sellers, tradable credits, an
enforcement mechanism, and coordination with other policies. Some see a federal RPS as a
way to replace the PURPA’s administrative price determination for power from renewables
with a more market-oriented mechanism. The 106th Congresses considered a federal RPS
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proposal for a 7.5% renewable energy requirement. In the 107th Congress, S. 1333/H.R.
3037 proposes a 20% RPS, and the Chairman’s Mark for an omnibus Senate energy bill
proposes a 5% RPS. (For more on RPS, see CRS Memorandum on Renewable Energy
Portfolio Standard.)

Green Power. The spread of competition in the electric industry has been
accompanied by growth in the market for green power services. The term “green power”
generally refers to electricity supplied in whole or in part from renewable energy sources.
Green pricing is an optional utility service that allows electricity customers who are willing
to pay a premium for the environmental benefits of renewable energy to purchase green
power instead of conventional power. More than 80 utilities have implemented green pricing
programs that can reach more than one-third of the nation’s consumers. Green power
marketing, the selling of green power in either the retail or wholesale competitive
marketplace, is underway in the newly competitive electricity markets of California,
Connecticut, Illinois, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island,
and Texas. The growth of green power has led to market information needs for disclosure
and certification, which are discussed in CRS Report RS20270 on Renewable Energy and
Electricity Restructuring
. (For more on green power see the web site
[http://www.eren.doe.gov/greenpower/home.shtml])
Distributed Generation. Distributed generation involves the use of small, modular
electricity generators sited close to the customer load that can enable utilities to defer or
eliminate costly investments in transmission and distribution (T&D) system upgrades, and
provide customers with better quality, more reliable energy supplies and a cleaner
environment. Technologies for distributed electricity generation include wind, solar,
bioenergy, fuel cells, gas microturbines, hydrogen, combined heat and power, and hybrid
power systems. For example, DOE’s R&D program is developing systems under five
megawatts in size that would primarily use agricultural or industrial biomass wastes to supply
on-site energy or to sell to the grid. As another example, photovoltaic (PV) systems ranging
from one kilowatt to one megawatt are commercially available. PV has the advantages of
being modular, easy to site near the use, has low operating and maintenance costs, and its
power output curve follows the peak electrical demand. In December 2000, DOE issued a
S t r a t e g i c P l a n f o r D i s t r i b u t e d E n e r g y R e s o u r c e s ( a v a i l a b l e a t :
http://www.eren.doe.gov/distributedpower/).
In March, to help increase electricity supplies in the Western states, FERC waived
(EL01-47/000, [http://www.ferc.fed.us/electric/bulkpower/el01-47-000.pdf]) its prior notice
requirements for businesses with on-site power generators that sell wholesale power to the
grid. This action tends to encourage more generation from distributed renewable energy
power sources. Also, H.R. 1045 would create incentives for distributed generation.
Net Metering. Net metering allows customers with generating facilities to turn their
electric meters backwards when they are feeding power into the grid, so that they receive
retail prices for the excess electricity they generate. This encourages customer investment in
distributed generation, which includes renewable energy equipment. In April 2001, California
enacted a law (ABX129) that raised the size limit for net-metered systems from 10 kw to 1
Mw. Further, the California Public Utility Commission approved $138 million annually over
four years for programs that reduce peak demand, including a provision for up to 50% of
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system cost to customers that install PV, wind, or fuel cells that use renewable fuels ranging
in size from 30 kw to 1 MW. Also, H.R. 954 and S. 597 would provide for net metering.
Legislative Activity in the 107th Congress
More than 80 renewable energy bills have been introduced during the 107th Congress.
These bills cover a wide range of renewable energy technologies including alcohol fuels and
biofuels, biopower, geothermal, hydrogen, hydropower, solar, and wind. Also, they cover
a range of policies that include tax credits, regulation, funding, goals, and environment. So
far, tax credits and incentives for alcohol fuels and biofuels are the policy topics that have
generated the greatest number of bills.
The Senate Energy Committee Chairman has issued a “Chairman’s Mark” for a
forthcoming omnibus Senate energy bill that says the bill would have a renewable energy
portfolio standard and several other renewable energy provisions. Many of these provisions
may be derived from the Democratic energy bills, S. 597 and S. 596, and some may also be
drawn from the Republican energy bills, S. 388 and S. 389.
An omnibus House energy bill (H.R. 4, Securing America’s Future Energy Act of 2001),
includes many, if not most, of the recommendations from Bush Administration’s National
Energy Policy (NEP) report. It incorporates many of the renewable energy provisions that
are included in H.R. 2436, H.R. 2460, H.R. 2511, and H.R. 2587. Another House bill (H.R.
2324) has some renewable energy provisions which differ markedly from those in H.R. 4.
Some key renewable energy bills are listed in the Legislation section below. A detailed,
comprehensive list of renewable energy bills appears in CRS Report RL31044, Renewable
Energy Legislation in the 107th Congress.

LEGISLATION
P.L. 107-66, H.R. 2311)
Energy and Water Appropriations Bill, FY20002. Makes appropriations for DOE’s
Renewable Energy Program. Reported (H.Rept. 107-112) June 26, 2001. Passed House
without amendments for renewable energy on June 28. Senate Appropriations Committee
reported a Senate bill (S. 1171, S.Rept. 107-39) July 13, 2001. Passed Senate without
amendments to renewables, July 19. Conference Committee reported (H. Rept. 107-258)
October 30. Signed into law November 12,2001.
H.R. 4 (Tauzin)
Securing America’s Future Energy (SAFE) Act of 2001. Incorporates certain renewable
energy provisions from H.R. 2436, H.R. 2460, H.R. 2511, and H.R. 2587. Introduced July
27, 2001; referred to Committee on Energy and Commerce, and to the Committees on
Science, Ways and Means, Resources, Education and the Workforce, Transportation and
Infrastructure, the Budget, and Financial Services. Passed House, amended, August 2.
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H.R. 2324 (Woolsey)
Renewable Energy and Energy Efficiency Act of 2001. Creates a broad range of
provisions for renewable energy and energy efficiency. Section 3 sets a 20% goal for non-
hydro renewables share of national energy production by 2020. Section 102 sets individual
cost reduction goals for wind, photovoltaics, and other renewable energy technologies; and
it also authorizes appropriations for FY2002 through FY2006. Section 103 sets goals of
tripling bioenergy use by 2010, integrating biomass gasifers with gas turbines and fuel cells,
and accelerating the commercial production of cellulosic ethanol; and it also authorizes
appropriations for FY2002 through FY2006. Section 104 directs Department of Energy
(DOE) to undertake resource assessments that would support commercial development of
renewables. Section 201 directs Department of Energy (DOE) to study innovative financing
techniques for renewables. Section 202 directs the Office of Science and Technology Policy
to study and report on regulations that may pose barriers to commercial use of renewables.
Section 203 directs DOE to provide commercialization assistance for renewables and
authorizes appropriations from FY2002 through FY2020. Section 204 creates an educational
outreach program and authorizes appropriations from FY2002 through FY2020. Introduced
June 26, 2001; referred to Committee on Science.
H.R. 2436 (Hansen)
Energy Security Act. Introduced July 10, 2001; referred to Committees on Resources
and Energy and Commerce. Section102 creates an inventory of certain biomass resources
on federal lands. Title expedites federal action on leases and modifies royalty provisions for
geothermal energy. Resources Committee reported (H.Rept. 107-160, Part I) July 25, 2001.
Energy and Commerce Committee discharged on July 25. Incorporated into H.R. 4.
H.R. 2460 (Boehlert)
Comprehensive Energy Research and Technology Act of 2001. Title I authorizes
appropriations for alternative fuel (including methanol and hydrogen) vehicles and distributed
energy resources. Title II authorizes appropriations for renewable energy R&D programs.
Introduced July 11; referred to Committee on Science. Reported (H.Rept. 107-177) July 18.
Incorporated into H.R. 4.
H.R. 2511 (McCrery)
Amends IRS tax code to create tax incentives. Section 101 creates a residential solar
energy tax credit, Section 102 extends the renewable energy production tax credit, and
Section 104 creates a credit for alternative fuel vehicles. Also, Section 306 extends a tax
credit for certain biomass sources. Introduced July 17, 2001; referred to Committee on Ways
and Means. Reported (H.Rept. 107-157) July 24. Incorporated into H.R. 4.
H.R. 2587 (Tauzin)
Creates a variety of energy conservation and other energy policy measures. Title IV has
provisions for hydropower, namely alternatives to fishways and data on time and costs for
hydroelectric licensing. Introduced July 23, 2001; referred to Committee on Energy and
Commerce and many other committees. Reported (H.Rept. 107-162, Part I) July 25.
Incorporated into H.R. 4.
H.R. 2646 (Combest)
Farm Security Act of 2001. Section 605 provides loan guarantees for renewable energy
equipment and Section 606 broadens the range of renewable energy equipment available for
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loans. Introduced July 26; referred to Committee on Agriculture. Reported (H.Rept. 107-
191, Parts I, II, and III) August 2. Passed House October 5.
H.R. 3090 (Thomas)
Economic Security and Recovery Act of 2001. Section 303 of the House version would
extend the renewable energy production tax credit for 2 years, from January 1, 2002 to
January 1, 2004. It also extends a credit for electric vehicles and a deduction for clean fuel
vehicle property. Committee on Ways and Means reported (H.Rept. 107-251) bill on October
17, 2001. Passed House October 24. Senate Finance Committee reported (Committee Print
107-49) an amendment in the nature of a substitute with an amendment to the title (Economic
Recovery and Assistance for American Workers Act) on November 9. Section 404 of the
Senate version would extend renewable energy production tax credit, for one year, from
January 2002 to January 2003. Brought to the floor November 13.
S. 389 (Murkowski)
National Energy Security Act of 2001 and Energy Security Tax Policy Act of 2001.
Identical to S. 388 except that it adds the tax provisions of the Energy Security Tax Policy
Act of 2001 as Title IX. In Subtitle G on Alternative Fuels, Section 981 creates a tax credit
of up to 85% for the incremental cost of alternative-fueled vehicles that use alcohol fuels or
biofuels. Section 983 creates a 25-cent retail sales tax credit for alternative fuels. For
refueling property that supports clean-fueled vehicles, Section 984 extends a credit from tax
year 2004 through 2007, and Section 985 sets a cap for the value of this credit. In Subtitle
H on Renewable Energy, Section 991 expands the production tax credit to include landfill
gas, geothermal, incremental hydropower, municipal solid waste, and additional forms of
biomass; and it extends the credit through tax year 2011. Section 992 creates a 15%
investment tax credit for residential solar and wind energy equipment. Section 993 makes the
use of bagasse (a form of biomass) for energy production at solid waste facilities eligible for
tax-exempt financing
S. 596 (Bingaman)
Energy Security and Tax Incentive Policy Act of 2001. Modifies tax incentives for using
renewable energy equipment and building design features in the commercial and residential
sectors. Introduced March 22, 2001; referred to Committee on Finance.
S. 597 (Bingaman)
Comprehensive and Balanced Energy Policy Act of 2001. Permits net metering and sets
a renewables portfolio standard starting at 3% in 2002 and rising to 7.5% by 2010.
Introduced March 22, 2001: referred to Committee on Energy and Natural Resources.
Hearing on renewables provisions scheduled for July 19.
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
U.S. Congress. House. Committee on Small Business. Subcommittee on Rural Enterprises,
Agriculture, and Technology. Renewable Fuels. Hearing held July 24, 2001.
[http://www.house.gov/smbiz/hearings/107th/2001/010724a/index.html]
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U.S. Congress. Senate. Committee on Energy and Natural Resources. S. 1006, Renewable
Fuels for Energy Security Act of 2001. Field hearing held July 6, 2001.
[http://www.senate.gov/~energy/]
U.S. Congress. House. Committee on Energy and Commerce. Subcommittee on Energy
and Air Quality. The National Energy Policy Report of the National Energy Policy
D e v e l o p m e n t G r o u p . H e a r i n g h e l d J u n e 1 3 , 2 0 0 1 .
[http://energycommerce.house.gov/107/hearings/06132001Hearing271/hearing.htm]
U.S. Congress. House. Committee on Science. The Nation’s Energy Future: Role of
Renewable Energy and Energy Efficiency. Hearing held February 28, 2001.
U.S. Congress. House. Committee on Energy and Commerce. Subcommittee on Energy
and Air Quality. National Energy Policy. Hearing held February 28, 2001.
CRS Reports
CRS Memorandum. Renewable Energy Portfolio Standard, by Fred Sissine.
CRS Report RL31044 . Renewable energy legislation in the 107th Congress, by Fred Sissine.
CRS Report RL31033. Energy efficiency and renewable energy fuel equivalents to potential
oil production from the Arctic National Wildlife Refuge (ANWR), by Fred Sissine.
CRS Report RS20270 . Renewable energy and electricity restructuring, by Fred Sissine.
CRS Electronic Briefing Book. Electric utility restructuring and reliability, by Amy Abel.
[http://www.congress.gov/brbk/html/ebele1.html]
CRS Issue Brief IB10054. Energy tax policy, by Salvatore Lazzari.
CRS Report RL30953. Energy tax incentives: a comparison of the National Energy Security
Act of 2001 (S. 389) and the Democratic Alternative (S. 596), by Salvatore Lazzari.
CRS Report RL30369. Fuel ethanol: background and public policy issues, by Brent
Yacobucci.
FOR ADDITIONAL READING
Tables showing DOE Renewable Energy R&D Funding (current and constant) trends back
to FY1974 are available from the author of this issue brief.

Edison Electric Institute. Various articles on renewable energy and distributed power.
Electric Perspectives Online.
Electric Power Research Institute. Various articles on renewable energy technologies. EPRI
Journal Online.[http://www.epri.com/journal/default.asp].
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—— Renewable power industry status overview. EPRI December 1998. 1 vol. (EPRI TR-
111893).
—— Renewable energy technology characterizations. Dec. 1997. 266 p.
—— Utility customers go for the green. EPRI Journal, v. 22, March/April 1997: 6-15.
Holt, Edward A. Disclosure and certification: truth and labeling for electric power.
Renewable Energy Policy Project. January 1997. 12 p.
Loiter, Jeffrey M. and Norberg-Bohm, Vicki. Technology policy and renewable energy:
public roles in the development of new energy technologies. Energy Policy, v. 27,
1999. p. 85-97.
Organization for Economic Cooperation and Development. International Energy Agency
(IEA). Renewable energy policy in IEA countries. OECD/IEA, Paris, 1998. 253 p.
—— Benign energy? The environmental implications of renewables. 1998. 122 p.
U.S. Department of Energy. Interlaboratory Working Group. Scenarios for a Clean Energy
Future. (ORNL/CON-476) November 2000. 350 p.
[http://www.ornl.gov/ORNL/Energy_Eff/CEF.htm]
------ Office of Energy Efficiency and Renewable Energy. Making connections: case studies
of interconnection barriers and their impacts on distributed power projects. June 2000.
[http://www.eren.doe.gov/distributedpower/barriersreport/]
—— Energy Information Administration. Federal financial interventions and subsidies in
energy markets 1999: primary energy. (SR/OIAF/99-03). September 1999.
—— Lawrence Berkeley Laboratory and National Renewable Energy Laboratory. Green
power marketing in retail competition: an early assessment. May 1999.
—— National Renewable Energy Laboratory. The Clean Air Act and renewable energy:
opportunities, barriers, and options. (NREL/CP-620-29654). February 2001.
U.S. Executive Office of the President. Federal energy research and development for the
challenges of the twenty-first century. November 5, 1997. 200 p.
U.S. Executive Office of the President. Powerful partnerships: the federal role in
international cooperation on energy innovation. June 1999. 260 p.
U.S. General Accounting Office. Renewable energy: DOE’s funding and markets for wind
energy and solar cell technologies. (GAO/RCED-99-130) May 1999. 38 p.
[http://frwebgate.access.gpo.gov/cgi-bin/multidb.cgi]
—— Solar and renewable resources technologies program. (GAO/RCED-97-188). July
1997. 69 p.
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U.S. Office of Technology Assessment. Renewing our energy future. OTA-ETI-614.
September 1995. 269 p.
U.S. Department of State. Office of Global Change. Climate action report: 1997 submission
of the United States of America.
July 1997. 256 p.
Wiser, Ryan et al. Renewable energy policy and electricity restructuring: a California case
study. Energy Policy, v. 26, 1998. p. 465-475.
Web Sites
American Solar Energy Society. [http://www.ases.org/index.html]
American Wind Energy Association (AWEA). [http://www.awea.org/]
California Energy Commission. [http://www.energy.ca.gov/renewables/index.html]
Center for Renewable Energy and Sustainable Technology (CREST).
[http://solstice.crest.org/index.shtml]
International Solar Energy Society (ISES). [http://www.electricnet.com/orgs/intsolar.htm]
National Association of Regulatory Utility Commissioners. [http://www.naruc.org/]
National Association of State Energy Offices. [http://www.naseo.org/]
Organization for Economic Cooperation and Development (OECD). International Energy.
Agency. Renewable Energy Newsletter. [http://www.caddet-re.org]
The Bonn Climate Change Conference (COP-5). November 1999.
[http://www.unfccc.int/resource/cop5.html]
The Hague Climate Change Conference (COP-6). November 2000.
[http://cop6.unfccc.int/modules/none.asp?pageid=16]
U.S. Department of Energy. Energy Efficiency and Renewable Energy Network.
[http://www.eren.doe.gov/]
U.S. Department of Energy. Green Power Network Clearinghouse.
[http://www.eren.doe.gov/greenpower/home.shtml]
U.S. Department of Energy. National Renewable Energy Laboratory (NREL).
[http://www.nrel.gov/]
U.S. Department of Energy. Alternative Fuels Data Center. [http://www.afdc.nrel.gov/]
U.S. Environmental Protection Agency. Solar Site. [http://www.epa.gov/solar/]
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Table 3. DOE Renewable Energy Budget for FY2000-FY2002
($ millions)
OFFICE OF ENERGY
EFFICIENCY AND RENEWABLE
FY2001 FY2002 FY2002 FY2002 FY2002
Conf.-
Pct.
ENERGY
Apprn.
Request
House
Senate
Conf
FY2001
Diff.
Biofuels - Total
86.3
82.0
89.0
103.0
93.0
6.0
7%
Biofuels/Utility Power
39.7
37.8
41.0
53.0
----
----
----
Biofuels/Transportation
46.5
44.2
48.0
50.0
----
----
----
Geothermal
26.9
13.9
27.0
32.0
29.0
2.0
7%
Hydrogen
26.9
26.9
27.0
35.0
31.0
4.0
15%
Small Hydro
5.0
5.0
3.0
9.3
5.3
0.3
6%
Solar Energy
92.7
42.9
94.7
92.3
95.0
1.5
2%
Concentrating Solar Power
13.7
1.9
7.9
15.3
----
----
----
Photovoltaics
75.1
39.0
81.8
70.0
----
----
----
Solar Buildings
3.9
2.0
5.0
7.0
----
----
----
Wind
39.6
20.5
40.0
45.0
41.0
1.0
3%
TECHNOLOGIES SUBTOTAL
277.3
191.2
280.6
316.6
294.3
14.8
5%
Electric/Storage
51.7
51.7
60.0
71.0
63.0
11.0
21%
Renewable Support &
Implementation
21.5
9.6
12.5
15.0
14.5
-7.1
-33%
Dept. Energy Management
2.0
1.0
2.5
1.0
1.5
-0.5
-24%
International Renewables
4.9
2.5
3.0
3.0
3.0
-2.0
-40%
Production Incentive
4.0
4.0
4.0
4.0
4.0
0.0
0%
Renew. Amer. Indian Res.
6.6
0.0
0.0
4.0
3.0
-3.6
-54%
Program Support
4.0
2.1
3.0
3.0
3.0
-1.0
-25%
NREL (incl. construction)
4.0
5.0
5.0
12.0
5.0
1.0
25%
Program Direction
18.7
19.2
18.7
21.0
19.2
0.5
3%
RENEWABLES, Subtotal
373.2
276.7
376.8
435.6
396.0
20.3
5%
OFFICE OF SCIENCE
OS/Photovoltaics Rsch.
2.8
----
----
----
----
----
----
OS/Biomass-Biofuels
26.7
----
----
----
----
----
----
OS/Wind
0.3
----
----
----
----
----
----
OS/Solar Photoconversion
14.3
----
----
----
----
----
----
OS/Hydrogen
3.0
----
----
----
----
----
----
OS/Subtotal
47.1
----
----
----
----
----
----
RENEWABLES with OS
420.3
----
----
----
----
----
----
Source: S.Rept. 107-39; H.Rept. 107-112; DOE FY2002 Cong. Budget Request, v. 3; April 2001.
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