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

Updated May 17, 2002
Fred Sissine
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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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
Renewables Provisions in Omnibus Energy Bills
Renewable Energy Portfolio Standard (RPS)
Renewable Energy Fuel Standard
Other Renewables Provisions
Tax Credits and Incentives
Production Tax Credit
Residential Tax Credit
Other Incentives and Credits
FY2003 DOE Budget
Electricity from Renewable Energy
Renewables Under Electric Industry Restructuring
Renewable Energy Portfolio Standard (RPS)
Green Power
Distributed Generation
Net Metering
Climate Change
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 for Program Direction.
renewable energy programs in the past, came
back into play as oil and gas prices rose late in
An omnibus House energy bill (H.R. 4,
the year 2000. Also, the 2001 electricity
Securing America’s Future Energy Act),
shortages in California have brought a new
includes many, if not most, of the
emphasis to the role that renewable energy
recommendations from Bush Administration’s
may play in electricity supply.
National Energy Policy report. Its renewable
energy provisions include R&D funding
In the 107th Congress, debate over
authorizations, incentives for alternative fuel
renewable energy programs has focused on tax
vehicles, biomass development on federal
credits, incentives, and the omnibus energy
lands, expedited geothermal leasing,
policy bill, H.R. 4.
investment and production tax credits, and

renewables funding derived from oil
Also, worldwide emphasis on
development in the Arctic National Wildlife
environmental problems of air and water
Refuge (ANWR).
pollution and global climate change, and the
related development of clean energy
In response, the Senate version of H.R. 4
technologies in western Europe and Japan
(Energy Policy Act, S.Amdt. 2917 to S. 517)
may remain important influences on
passed the Senate. It also has provisions for
renewable energy policymaking. Concern
R&D funding and alternative fuels, but differs
about technology competitiveness may also
by including – for example – a federal
remain a factor in debate.
purchase requirement, net metering, and a
renewable energy portfolio standard (RPS).
For DOE’s FY2003 Renewable Energy
Program, the Administration seeks $407.0
The Job Creation and Worker Assistance
million, an $11.3 million (3%) increase
Act of 2002 (P.L. 107-147, H.R. 3090) was
relative to the FY2002 appropriation. The
enacted on March 9, 2002. Section 603
main increases are $8.9 million for Hydrogen,
extends the renewable energy production tax
$7.4 million for Electric/Storage, $5.3 million
credit retrospectively, from December 31,
for Renewable American Indian Resources,
2001 to December 31, 2003. H.R. 4 and
$3.5 million for International Renewables, and
S.Amdt. 2917 to S. 517 would extend the
$3.0 million for Wind. However, there are
credit for an additional 4 years, to January 1,
major cuts in proposed spending, which
2006.
include decreases of $7.4 million for Solar,

$7.0 million for Biomass/Biofuels, and $3.0

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MOST RECENT DEVELOPMENTS
On May 1, 2002, the Senate appointed conferees for the omnibus energy bill, H.R. 4.
On April 25, 2002, the Senate incorporated S. 517 (S. Amdt 2917) into H.R. 4 (Energy Policy
Act of 2002) as an amendment in the nature of a substitute. The Senate version of H.R. 4
responds to the omnibus House energy bill (H.R. 4, Securing America’s Future Energy Act
of 2001), which passed the House on August 2, 2001. Both bills have provisions for R&D
funding, alternative fuels, and renewable electricity, but have major differences in their
coverage of several areas. In particular, the Senate version has provisions for a renewable
portfolio standard (RPS) and a renewable energy fuel standard that do not appear in the
House version.
On March 18, 2002, the House Appropriations Committee issued revised figures for the
FY2003 DOE budget request for Renewable Energy. The main increases are $8.9 million
for Hydrogen, $7.4 million for Electric/Storage, $5.3 million for Renewable American Indian
Resources, $3.5 million for International Renewables, and $3.0 million for Wind. However,
there are major cuts in proposed spending, which include decreases of $7.4 million for
Solar, $7.0 million for Biomass/Biofuels, and $3.0 million for Program Direction.
On March 9, 2001, the Job Creation and Worker Assistance Act of 2002 (P.L. 107-147,
H.R. 3090) was signed into law. Section 603 extends the production tax credit for wind,
closed-loop biomass, and poultry waste, retrospectively, from December 31, 2001 to
December 31, 2003. The Omnibus Energy bills (H.R. 4 and S.Amdt. 2917 to S. 517) would
broaden eligibility for this credit to other renewable energy sources and extend it for an
additional three years.
On February 27, the House Appropriations Committee’s Subcommittee on Energy and
Water Appropriations held a hearing on the FY2003 budget request for the DOE Renewable
Energy Program. On February 4, the Administration issued its budget request for FY2003.
(The DOE FY2003 Budget Request is on the DOE web site at
[http://www.mbe.doe.gov/budget/03budget/content/es/renewabl.pdf].)
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
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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/].)
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 in renewable energy production through 2020, resulting in a 26%
total increase. 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.”
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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 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. 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 FY2003 Congressional Budget Request,
DOE/ME-0003, v. 3, February 2002.)
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. P.L. 107-147 extends the credit through December 31, 2003.
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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
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 2000:
Issues reports that, in 1998, QF renewable power capacity reached 12,700 MW generation
reached 64 billion kwh. Thus, QFs provided about 1.6% of national electric capacity and
about 1.7% of national electricity generation. In comparison, the capacity of all renewables
reached 94,800 MW, or about 12% of national capacity; and generation for all renewables
stood at 418,000, which is about 11.5% of national generation.
DOE’s Strategic and Performance Goals
In August 2001, The President’s Management Agenda was released, setting out the
Bush Administration’s framework for performance management based on human capital,
competitive sourcing, financial performance, electronic government, and integration of
budget with performance. 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 DOE’s Strategic Plan of September 2000, renewable energy
objectives and strategies appear under general goal #1 “Energy Resources.” In its FY2001
Annual Performance and Accountability Report, DOE assesses the results of its performance
goals for FY2001. In the DOE Annual Performance Plan for FY2003, strategic objective
ER2 aims to “... increase the share of renewable-generated electricity [from 8%] to 12% ....
by 2020 ... ” Also, in 2000, the Office of Energy Efficiency and Renewable Energy (EERE)
released a strategic plan, Clean Energy for the 21st Century; 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.
Renewables Provisions in Omnibus Energy Bills
Much of the legislative action on renewables is focused on the House and Senate
versions of the omnibus energy policy bill, H.R. 4. The House version of H.R. 4 includes
renewables provisions that are derived primarily from H.R. 2436, H.R. 2460, H.R. 2511, and
H.R. 2587 and contain many, if not most, of the renewable energy recommendations in the
Administration’s National Energy Policy report. The Senate version of H.R. 4 incorporates
S.Amdt. 2917 to S. 517 which, in turn, replaces S. 1766. As with the House version, many
renewables provisions of the Senate version are derived primarily from S. 388, S. 389, S.
596, and S. 597. Both versions of H.R. 4 have provisions for R&D funding, distributed
power generation, and alternative fuels. However, there are major differences; for example,
House version would fund renewables with income from oil development in the Arctic
National Wildlife Refuge (ANWR), reduces geothermal royalties, and establishes an “Energy
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Sun” label, while the Senate version would establish federal agency power purchases, net
metering, and a renewable energy portfolio standard (RPS).
Renewable Energy Portfolio Standard (RPS). Section 264 of the Senate version
of H.R. 4 (S. 517) proposes that retail electricity suppliers (utilities, except for municipal and
cooperative utilities) be required to obtain a minimum percentage of their power production
from a portfolio of new renewable energy resources. The minimum energy target or
“standard” would start at 1% in 2005, rise at a rate of about 1.2% every two years, and peak
at 10% in 2019.
Eligible resources include solar, wind, ocean, and geothermal energy, most forms of
biomass, landfill gas, and incremental hydropower. A generation offset from renewables
used on site to reduce the measured demand from the grid is also eligible. The base for
calculating the target production level excludes power from eligible renewables, hydropower,
and municipal solid waste. Thus, states with a large amount of existing biomass, hydro, or
other renewable power generation will have a proportionately lower target for new
generation.
Tradable credits are created, which can be purchased in place of power from other
suppliers, to help retailers meet the target at the lowest cost. The credits would function like
the Clean Air Act emission allowance trading system, which has lowered compliance cost
for air pollution regulations. The bill’s credit trading provision is made flexible by allowing
a supplier to “borrow” from expected future credits to fill a present shortfall or to “carry
forward” surplus credits to future years.
A cost cap for the credits is set as the lesser of 1.5 cents/kwh (Section 271) or 200% of
the average market value of the credits. The lower the cost cap, the more it may restrict
portfolio diversity and deter generation from solar and other higher-cost renewable
resources. Utilities sought a cost cap near 1 cent/kwh, while environmental groups sought
a cap near 4 to 5 cents/kwh. State experience suggests that a cost cap is key to compliance
cost control and may also allow compliance cost to flow through as a business cost.
Some see a federal RPS as a way to substitute a more market-oriented mechanism for
the PURPA Section 210 requirement that utilities purchase power from renewables at an
administratively-determined “avoided cost.” Ten states, including Texas, and a few foreign
governments, have an RPS that provides a base of experience for the federal proposal.

(For more on RPS, see CRS Memorandum on Renewable Energy Portfolio Standard.)
Renewable Energy Fuel Standard. Section 820 of the Senate version proposes
to increase the renewable energy content of motor fuel. Starting in 2003, it would require
that motor gasoline contain a certain amount of renewable fuel. There is no comparable
provision in the House version. (For more on the Renewable Energy Fuel Standard, see CRS
Report RL31276.)
Other Renewables Provisions. Both the House version of H.R. 4 (Section 3102)
and the Senate version (Section 1901-1906) would expand and further extend the renewable
energy production tax credit that was recently extended by P.L. 107-147 (H.R. 3090). Also,
both versions (House, Section 602; Senate, Section 261) would expand and extend a parallel
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renewable energy production “incentive” for state and local governments. Further, the House
version (Section 141A) would create an “Energy Sun” label for renewable energy equipment
that could serve in a role parallel to that for the “Energy Star” label for energy-efficient
equipment. (The renewables provisions in the House version are summarized in CRS Report
RL31153 and the provisions of the Senate version are summarized in CRS Report RL31276.)
Tax Credits and Incentives
In A Blueprint for New Beginnings, the Bush Administration calls for tax credits for
renewables and alternative fuels to help open markets. Several renewable energy tax credit
bills have been introduced in the 107th Congress. The sections below describe the credits that
have been proposed in the House and Senate versions of H.R. 4. (A comprehensive list of
tax credit, incentives, and other renewable energy bills appears in CRS Report RL31044.)
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. In March 2002, Section 603 of the Job Creation and Worker Assistance
Act (P.L. 107-147) extended the credit retroactively from December 31, 2001, to December
31, 2003.
Residential Tax Credit. Section 2103 of the Senate version of H.R. 4 amends the
Internal Revenue Code of 1986 to create a 15% residential tax credit worth up to $2,000 for
homeowners who purchase photovoltaics equipment and a 30% credit worth up to $1,000
for solar thermal 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. Both versions of H.R. 4 would
extend it. In the House version of H.R. 4, Section 2101-2105 calls for grants to support
alternative fuels and fueling stations. Title XX of the Senate version has tax credits for
alternative fuels, vehicles, and fueling stations. a credit for hydropower facilities.
FY2003 DOE Budget
The FY2003 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
FY2003 Budget (p. 397). In accordance with this policy, DOE proposes to increase solar and
renewables funding under DOE’s Office of Energy Efficiency and Renewable Energy
(EERE) from $386.4 million in FY2002 to $407.7 million in FY2003 (excluding funding for
programs under the Office of Science) — an increase of $21.3 million (6%) above the
FY2002 level. Overall, this is a relatively flat budget request. However, some programs
would get either a significant increase or decrease. The major cuts in proposed spending
include decreases of $15.7 million for Distributed Energy, $11.3 million for Concentrated
Solar, $6.2 million for Biopower, and $2.6 million for Program Direction.
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According to DOE, the cut for Distributed Energy has several parts, including two big
parts. First, two one-time Transmission Reliability projects funded in FY2002 for a total of
$14.0 million did not need further funding in FY2003. However, the cut would be partially
offset by a $3.4 million in increase for reliability compliance, real time monitoring, and load
research. Second, $6.3 million in FY2002 funding for DER Systems Integration was not
carried into FY2003. However, this cut would be partially offset by a $2.7 million increase
to develop a national standard for DER grid interconnection.
DOE says the 85% cut for Concentrating Solar includes a $3.3 million cut for
Distributed Power System Development. Also, it would terminate four subprograms,
including cuts of $3.7 million for Dispatchable Systems, $3.4 million for Advanced
Components, $0.5 million for the Southwest Resource Opportunity (technical study and
assistance), and $0.4 million for the Navajo Electrification Project.
Under Biomass Systems Development, DOE proposes to cut Biopower for Rural
Development by $8.4 million, primarily by not extending a variety of earmark projects
funded in FY2002. This would be partially offset by a $1 million increase for Small Modular
Biopower and a $2 million increase for Gasification R&D. Also, the Regional Biomass
Energy Program would be terminated by cutting $0.8 million.
Offsetting the above net reductions, the primary increases are $15.5 million for
Superconductivity, $10.7 million for Hydrogen, $7.3 for Solar Buildings, $5.5 million for
Renewable American Indian Resources, $5.4 million for Wind, $4.2 million for Biofuels,
and $3.7 million for International Renewables.
P.L. 107-66 (Energy and Water Appropriations Bill) appropriated $386.4 million in
FY2002 for DOE’s Renewable Energy Program.
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 federal
restructuring proposals, some have included a repeal of the mandatory renewables purchase
requirement in Section 210 of PURPA. In the 107th Congress, H.R. 381/S. 552 would repeal
this section of PURPA.
Renewables Under Electric Industry Restructuring. To encourage 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 the CRS Electronic Briefing Book on
Electricity Restructuring at [http://www.congress.gov/brbk/html/ebele1.shtml].)
Renewable Energy Portfolio Standard (RPS). The RPS is a market-based policy
to encourage new power generation from renewables in a setting where renewables cost more
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than conventional power. (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 quality, reliable energy supplies that may have less environmental
impact than traditional fossil fuel generators. Technologies for distributed electricity
generation use 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 and easy to site near the use, it has low
operating and maintenance costs, and its power output curve follows the peak electrical
demand. Its main disadvantage is its initial capital cost. (More information about DOE’s
Distributed Power Program is available at [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. 4 (Sections 2121-2128), S.Amdt. 2917 to S. 517 (Sections 102,
242, 1211), H.R. 1045, and H.R. 2496 have provisions 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 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, S.Amdt. 2917 to S. 517 (Section 245),
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H.R. 954, H.R. 3037, H.R. 3089, H.R. 3406, S. 597, and S. 1333 would provide for net
metering.
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
electronic briefing book on Global Climate Change at
[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
2
been 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
Legislative Activity in the 107th Congress
Much of the action on renewables has focused on two omnibus energy policy bills, H.R.
4 and S.Amdt. 2917 to S. 517 (which replaces S. 1766). More than 100 renewable energy
bills have been introduced during the 107th Congress. These bills cover policy issue areas
that include tax credits, regulation, funding, goals, education, farms, and environment; and
a range of resources and technologies that include alcohol fuels and biofuels, biopower,
geothermal, hydrogen, hydropower, solar, and wind. Some key renewable energy bills are
listed in the Legislation section below. A detailed, comprehensive list of 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
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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.
P.L. 107-115 (H.R. 2506)
Foreign Operations, Export Financing, and Related Programs Appropriations Bill,
FY2002. Appropriates funding for renewable energy and energy efficiency under programs
of the Global Environment Facility (GEF), U.S. Agency for International Development
(AID), Overseas Private Investment Council (OPIC), and other bilateral and multilateral
programs. House Appropriations Committee reported (H.Rept. 107-142) July 17, 2001.
Passed House July 24. Senate Appropriations Committee reported (S.Rept. 107-58)
September 4, 2001. Conference held November 14. Conference reported (H.Rept. 107-345)
December 19, 2001. Signed into law January 10, 2002.
P.L. 107-147 (H.R. 3090)
Job Creation and Worker Assistance Act of 2002. Section 603 extends the renewable
energy production tax credit for 2 years, retrospectively from December 31, 2001 to
December 31, 2003. Also, Section 602 extends a credit for electric vehicles and Section 606
extends a deduction for clean fuel vehicle property. House Committee on Ways and Means
reported (H.Rept. 107-251) bill on October 17, 2001, with two-year extension of renewables
production tax credit. 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 on November 9. Section 404 of the Senate version proposed one-year extension of
renewables production tax credit. Brought to the floor November 13. Amended in Senate
(S.Amdt. 2896) and passed Senate February 14, 2002. House approved agreement with
Senate Amendment March 7, 2002. Signed into law March 9, 2002.
P.L. 107-171 (H.R. 2646)
Farm Security Act. Section 6013 provides loan guarantees for renewable energy
equipment and broadens the range of renewable energy equipment available for loans. Title
IX (p. 347-358) has several renewable energy provisions. Section 902 requires federal
purchases of biobased products, biofuels development, and biodiesel education. It also
provides renewable energy loans (up to $10 million) and grants (up to $200,000). Section
903 extends the Biomass R&D Act of 2000 (P.L. 106-224) through FY2006 and mandates
a $15 million per year appropriation for each year from FY2002 through FY2006. Section
904 provides technical and financial assistance, loans, and loan guarantees for renewable
energy development by rural electric cooperatives. Section 905 addresses measures to
sequester carbon and reduce greenhouse gas emissions. Section 906 directs the Department
of Agriculture to promote renewable fuels production. Section 907 continues and expands
the bioenergy program at the Dept. of Agriculture. House bill introduced July 26; referred
to Committee on Agriculture. Reported (H.Rept. 107-191, Parts I, II, and III) August 2.
Passed House October 5. Senate bill reported in lieu of S. 1628 on November 27, 2001.
Committee on Agriculture, Nutrition, and Forestry filed written report (S. Rept. 107-117) on
December 7. Amended, incorporated into H.R. 2646 as an amendment in the nature of a
substitute, and passed Senate, February 13, 2002. Conference report (H.R. 107-424) issued
May 2. Signed into law May 13, 2002.
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H.R. 4 (House Version)
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. It provides for
biomass on federal lands and geothermal leasing; authorizes R&D funding; creates tax
credits for residential solar and alternative fuel vehicles, and renewable power production;
and for hydropower development and licensing. 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.
H.R. 4 (Senate Version)
Energy Policy Act. There are several renewable energy provisions in this bill. S. 1766
was replaced by S. 517 which, in turn, was incorporated into the Senate version of H.R. 4 as
an amendment in the nature of a substitute and passed the Senate April 25, 2002.
S. 1766 (Daschle-Bingaman)
Energy Policy Act of 2002. There are many provisions for renewables throughout the
bill. The provisions of S. 1766 were incorporated in S. Amdt. 2917, as proposed for
consideration in the Senate. S. Amdt. 2917 was amended on the floor and agreed to as a
substitute amendment to S. 517, formerly the National Laboratories Partnership Improvement
Act. S. 517, the Energy Policy Act, as amended, was subsequently incorporated in H.R. 4 and
H.R. 4 passed the Senate in lieu of S. 517.
S. 1979 (Baucus)
Energy Tax Incentives Act of 2001. Expands and extends the renewable energy
production tax credit. Reported (S. Rept. 107-140) March 1, 2002. S. Amdt 3286
incorporated this bill into S. 517 (S. Amdt 2917) April 23, 2002.
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
U.S. Congress. Senate. Committee on Appropriations. Subcommittee on Energy and
Water. DOE FY2003 Budget Request for Energy Efficiency and Renewable Energy.
Hearing held April 18, 2002.
U.S. Congress. House. Committee on Appropriations. Subcommittee on Energy and Water.
DOE FY2003 Renewable Energy Budget Request. Hearing held March 13, 2002.
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]
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/]
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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.
CRS Reports
CRS Memorandum. Renewable Energy Portfolio Standard (RPS), 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.shtml]
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].
—— Renewable power industry status overview. EPRI December 1998. 1 vol. (EPRI TR-
111893).
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—— 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.
Forecasting the growth of green power markets in the United States. October 2001.
—— 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. Executive Office of the President. The President’s Management Agenda, Fiscal Year
2002. August 2001. 64 p.
U.S. Executive Office of the President. National Energy Policy Report. May 2001. 170
p. [http://www.whitehouse.gov/energy/National-Energy-Policy.pdf]
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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.
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 Hague Climate Change Conference (COP-6, Part 1). November 2000.
[http://cop6.unfccc.int/]
The Bonn Climate Change Conference (COP-6, Part 2). July 2001.
[http://www.unfccc.de/cop6_2/]
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]
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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 FY2001-FY2003
($ millions)
OFFICE OF ENERGY EFFICIENCY AND
FY2001
FY2002
FY2003
Request-
Pct.
RENEWABLE ENERGY
Apprn.
Apprn.
Request
FY2002
Diff.
Biofuels - Total
87.0
93.0
86.0
-7.0
-8%
Biofuels/Utility Power
-----
-----
-----
-----
-----
Biofuels/Transportation
-----
-----
-----
-----
-----
Geothermal
27.0
29.0
26.5
-2.5
-9%
Hydrogen
27.0
31.0
39.9
8.9
29%
Small Hydro
5.0
5.3
7.5
2.2
41%
Solar Energy
93.5
95.0
87.6
-7.4
-8%
Concentrating Solar Power
-----
-----
1.9
-----
-----
Photovoltaics
-----
-----
73.7
-----
-----
Solar Buildings
-----
-----
12.0
-----
-----
Wind
40.0
41.0
44.0
3.0
7%
TECHNOLOGIES SUBTOTAL
279.5
294.3
291.5
-2.8
-1%
Electric/Storage
52.0
63.0
70.4
7.4
12%
Renewable Support & Implementation
21.6
14.5
23.9
9.4
65%
Dept. Energy Management
2.0
1.5
3.0
1.5
100%
International Renewables
5.0
3.0
6.5
3.5
117%
Production Incentive
4.0
4.0
4.0
0.0
0%
Renew. Amer. Indian Res.
6.6
3.0
8.3
5.3
177%
Program Support
4.0
3.0
2.1
-0.9
-31%
NREL (incl. construction)
4.0
5.0
5.0
0.0
0%
Program Direction
18.7
19.2
16.2
-3.0
-16%
RENEWABLES, Subtotal
375.7
396.0
407.0
11.0
3%
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: DOE FY2003 Cong. Budget Request, v. 3; Feb. 2002; House Appropriations Committee Revisions,
March 18, 2002.
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