Order Code IB10041
CRS Issue Brief for Congress
Received through the CRS Web
Renewable Energy:
Tax Credit, Budget, and
Electricity Production Issues
Updated September 24, 2003
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
State and Local Government Roles
Renewables in Omnibus Energy Bills, 108th Congress
Renewable Portfolio Standard (RPS)
Production Tax Credit (PTC) and Production Incentive
Renewable Energy Fuel Standard (RFS)
Renewable Hydrogen
Residential Tax Credit
Alternative Fuels Incentives
Renewables Tax Revenue Effect
FY2004 DOE Budget
FY2003 USDA Budget
Using Renewable Energy to Produce Electricity
Renewables Under Electric Industry Restructuring
Green Power
Distributed Generation
Net Metering
Natural Gas and Renewables
Biomass-Generated Synthetic Natural Gas
Substituting Electricity from Renewables for Gas-Fired Generation
Climate Change and Renewables
LEGISLATION
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
CRS Reports
FOR ADDITIONAL READING
Web Sites

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Renewable Energy:
Tax Credit, Budget, and Electricity Production Issues
SUMMARY
Energy security, a major driver of federal
appropriation.
renewable energy programs in the past, came
back into play as oil and gas prices rose late in
The Senate approved $358.5 million
the year 2000. The terrorist attack of Septem-
(including an $8.0 million transfer) for the
ber 11, 2001, and the Iraq war of 2003 have
DOE Renewable Energy Program and $100.4
led to heightened concern about energy secu-
million for the new Office of Electricity
rity, energy infrastructure vulnerability, and
Transmission and Distribution (OETD), which
the need for alternative fuels. Further, the
replaced the Electric/Storage subprogram.
2001 electricity shortages in California, the
Compared to FY2003, there is $23.4 million
high natural gas prices in 2003, and the
more for renewables and $16.0 million more
northeast-midwest blackout of 2003 brought a
for OETD.
new emphasis to the role that renewable
energy may play in producing electricity,
The Senate version of the Foreign Opera-
displacing fossil fuel use, and curbing demand
tions appropriations bill (S. 1426, S.Rept.
for power transmission equipment.
108-222) has $185 million for “energy conser-
vation, energy efficiency, and clean energy” in
Also, worldwide emphasis on environ-
developing countries to reduce greenhouse
mental problems of air and water pollution
gases.
and global climate change, the related devel-
opment of clean energy technologies in west-
The House-passed omnibus energy bill
ern Europe and Japan, and technology com-
(H.R. 6) has a renewable energy production
petitiveness may remain important influences
tax credit (PTC), renewable energy fuel stan-
on renewable energy policymaking.
dard (RFS), and several other renewables
provisions.
In the 108th Congress, debate over renew-
able energy programs is focusing on tax cred-
After floor action on S. 14 stalled, the
its, incentives, budget, and provisions of the
Senate passed its version of H.R. 6 with the
omnibus energy policy bills, S. 14 and H.R. 6.
text of the Senate version of H.R. 4 from the
107th Congress. It has many renewables
The Bush Administration’s FY2004
provisions similar to those in the House bill,
budget request for DOE’s Renewable Energy
but without refinements that had been worked
Program seeks $444.2 million (including
out for S. 14. One renewable portfolio stan-
$72.9 million for Electric/Storage). The
dard (RPS) floor amendment to S. 14
House-passed Energy and Water Appropria-
(S.Amdt. 1480) is expected to see action in
tions bill recommends $330.1 million for
conference. It would create a 10% RPS target.
Renewable Energy and $77.4 million for a
It is similar to the RPS in the Senate version
new Electricity Transmission and Distribution
of H.R. 6, but it is simpler and less prescrip-
(ET&D) program that replaces the former
tive. The Administration opposes RPS in the
Electric/Storage subprogram. The Renewable
Senate version of H.R. 6, citing higher power
Energy total is $41.2 million less than the
costs. RPS proponents say DOE reports show
request and $4.9 million less than the FY2003
the cost impact is negligble.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On September 16, 2003, the Senate passed the Energy and Water Appropriations Bill,
FY2004 (as H.R. 2754, in lieu of S. 1424, S.Rept. 108-105). Under DOE’s Office of Energy
Efficiency and Renewable Energy (EERE), the Senate approved $358.5 million for the
Renewable Energy Program and $100.4 million for the new Office of Electricity
Transmission and Distribution (OETD), which replaced the former Electric/Storage
subprogram. Three floor amendments for renewables (S.Amdt. 1697, S.Amdt. 1709,
S.Amdt. 1717) do not change funding amounts, but do qualify some funding uses.
Compared to the FY2003 appropriation, the Senate bill has $39.4 million more. This
includes $23.4 million, or 7%, more for renewables and $16.0 million, or 19%, more for
OETD. (For more details, see “FY2004 DOE Budget” and Table 4.)
In a September 10, 2003, letter to the energy conference committee, DOE Secretary
Spencer Abraham stated support for the renewable fuel standard (RFS) provision and
opposition to the provisions for hydrogen, renewable portfolio standard (RPS), and research
and development authorizations. The most important and difficult provisions before the
committee, labeled as “tier 1" issues, include the liability aspects of the fuel standard and the
RPS. The conference leadership has set an October 1 target to present a proposal to the
conference committee that addresses the tier 1 issues.
The omnibus energy bill, H.R. 6, has a number of renewable energy provisions. In
particular, the Senate version of H.R. 6, as passed, has an RPS provision in Sections 264 and
271. It is the same provision that the Senate adopted in the 107th Congress. There is no RPS
provision in S. 14. Two RPS floor amendments (S.Amdt. 1480 and S.Amdt. 1530) to S. 14
were filed, but did not see action before the Senate substituted the text of the Senate version
of H.R. 4 from the 107th Congress. Conference action is not expected for S.Amdt. 1530, but
action is expected on S.Amdt. 1480, which may come up as part of a broader proposal on
electricity. S.Amdt. 1480 would have set a 10% RPS and included refinements to the RPS
provision in the Senate version of H.R. 6. (For a comparison of the House and Senate
provisions, see “Renewables in Omnibus Energy Bills, 108th Congress,” below; and see CRS
Report RL32033, Omnibus Energy Legislation (H.R. 6): Side-by-Side Comparison of Non-
tax provisions.)
(The DOE FY2004 Budget Request is on the DOE web site at [http://www.mbe.doe
.gov/budget/04budget/content/es/solar.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
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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 generally
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” at [http://www.nrel.gov/clean_energy/].)
Contribution to National Energy Supply
According to the Energy Information Administration’s (EIA’s) Annual Energy Outlook
2003, renewable energy resources (excluding wood use for home heating) supplied about 5.3
Q (quadrillion Btu’s or quads) of the 97.3 Q the nation used in 2001, or about 5.4% 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, from 1998
through 2001, a drought-driven decline in hydroelectric availability led to a major drop in
national renewable energy use. Industrial use of renewables, supplied primarily by biofuels,
accounts for most of the remaining contribution.
After more than 25 years of federal support, some note that renewable energy has
achieved neither 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 2003 projects that current policies would yield a 2.1%
average annual increase in renewable energy production to 8.8 Q through 2025, resulting in
a 65% total increase. This would amount to about 6.3% of the projected 139 Q total demand
in 2025. (Detailed breakdowns of renewable energy use appear in EIA’s Renewable Energy
Annual 2001 and Renewable Energy 2000: Issues and Trends.)
Role in Long-Term Energy Supply
Our Common Future, the 1987 report of the United Nations’ 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.” Though many renewable
energy systems are in a relatively early stage of development, they offer “a potentially huge
primary energy source, sustainable in perpetuity and available in various forms to every
nation on Earth.” The report suggested that a Research, Development, and Demonstration
(RD&D) program of renewable energy projects is required to attain the level of primary
energy 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 and climate change — requires an
emphasis on “clean and renewable energy sources.” The U.N. Commission on Sustainable
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Development oversees implementation of Agenda 21. The 2002 U.N. World Summit on
Sustainable Development (Johannesburg Summit) adopted a Political Declaration and a
Plan of Implementation ([http://www.johannesburgsummit.org/]), which includes “Clean
Energy” as one of five key policy actions. The U.S. Department of State plans to implement
a $43 million Clean Energy Initiative in 2003 ([http://www.state.gov/g/oes/sus/wssd/]), and
the European Union committed to a $700 million energy partnership.
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 FY2002, the federal government spent about $14.2 billion (in
2003 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 $1.4 billion in FY1979 and
FY1980, then declined steadily to $148 million in FY1990. By FY2002, it reached $403
million in 2003 constant dollars.
This spending history can be viewed within the context of DOE spending for the three
major energy supply R&D programs: nuclear, fossil, and energy efficiency R&D. From
FY1948 through FY1972, in 2003 constant dollars, the federal government spent about $24.3
billion for nuclear (fission and fusion) energy R&D and about $5.5 billion for fossil energy
R&D. From FY1973 through FY2002, the federal government spent $49.1 billion for
nuclear (fission and fusion), $24.8 billion for fossil, $14.2 billion for renewables, and $11.1
billion for energy efficiency. Total energy R&D spending from FY1948-FY2002, in 2003
constant dollars, reached $128.9 billion, including $73.4 billion, or 57%, for nuclear, $30.2
billion, or 23%, for fossil, $14.2 billion, or 11%, for renewables, and $11.1 billion, or 9%,
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
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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 (energy crops or trees grown only for
use as a fuel) systems. P.L. 106-170 expanded this credit to include poultry waste. On
March 9, 2002, 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.
Public Utility Regulatory Policies Act. The Public Utilities Regulatory Policies
Act (PURPA, 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 megawatts (MW)
and generation reached 64 billion kilowatt-hours (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.
State and Local Government Roles. State and local governments have played a
key role in renewable energy development. For example, in the early 1980s, a generous state
investment tax for wind energy in California combined with PURPA and the federal tax
credit to stimulate industry development of the first windfarms. California and New York
have invested some state funds in renewable energy R&D. Recently, Texas and several other
states have used a regulatory tool, the renewable energy portfolio standard (RPS), to
encourage renewable energy. Also, in 2001, the City of San Francisco enacted a $100
million revenue bond (Proposition B, “Vote Solar”) to support solar and wind energy
implementation.
(For more on federal, state, and local policies (incentives, grants, standards) for renewable
energy, see Database of Incentives for Renewable Energy [http://www.dsireusa.org/].)
Renewables in Omnibus Energy Bills, 108th Congress
In the 108th Congress, most legislative action on renewables has focused on the omnibus
energy policy bills, H.R. 6 and S. 14, the renewable fuel standard bills (S. 385 and S. 791),
and the Senate energy tax bill, S. 1149 (replaced S. 597), which is expected to be considered
in conference. On April 10, 2003, the House passed the omnibus energy bill (H.R. 6). It has
a renewable energy production tax credit (PTC), renewable energy production incentive
(REPI), renewable fuel standard (RFS), the residential solar and geothermal tax credit, and
certain alternative fuels incentives. S. 14 and S. 1149 had similar provisions, but with some
differences, including some refinements of the corresponding provisions in the Senate
version of H.R. 6. Other renewables provisions cover hydroelectric relicensing, geothermal
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leasing, biomass grants, and authorizations for renewable energy R&D programs. (For tier
1 issues [RPS, RFS, hydrogen], see CRS Report RL32078, which compares House and
Senate versions of H.R. 6 with S. 14. For side-by-side comparisons of provisions in H.R. 6,
see CRS Report RL32033 [non-tax provisions], CRS Report RL32042 [tax provisions], and
CRS Report RL32041 [electricity provisions].)
Renewable Portfolio Standard (RPS). In the 107th Congress, a 10% RPS
provision was adopted (58-42) into the Senate version of H.R. 4, the omnibus energy bill.
The same provision is in the Senate-passed version of H.R. 6. While S. 14 did not include
an RPS provision, S.Amdt. 1480 would have added one and is expected to be brought up in
conference. The RPS provision in S.Amdt. 1480 has several differences from that in the
Senate version of H.R. 6. The target percentage would ramp up 2.5% once every four years
instead of 1.2% once every two years; and the sunset of the 10% peak would be extended for
10 years through 2030, maintaining the incentive effect in later years. Further, the exemption
for small utilities would be expanded to include those that sell less than 4.0 billion kwh per
year, and a triple credit would be provided for small (one megawatt or less) distributed
generators. Also, the relationship between federal and state RPS measures would be
structured in a more comprehensive yet more flexible way. An entirely new provision would
direct DOE collections from penalties and credit sales to fund a state grant program to
promote renewables, giving a priority to states that have a relatively small share of renewable
energy generation capacity. (For more background information on how the RPS works, see
CRS Memorandum on Renewable Energy Portfolio Standard at [http://www.congress.gov/
brbk/pdf/ebele27.pdf]. For current status of RPS policies in the states, see Database of State
Incentives for Renewable Energy at [http://www.dsireusa.org/].)
The Bush Administration has stated its opposition to the RPS provision in the Senate
version of H.R. 6, noting concern that it could “... raise consumer costs, especially in areas
where [renewable] resources are less abundant and harder to cultivate or distribute.” In
response, proponents of RPS cite the Energy Information Administration’s (EIA’s) 2001
report Analysis of Strategies for Reducing Multiple Emission from Electric Power Plants:
Sulfur Dioxide, Nitrogen Oxides, Carbon Dioxide, and Mercury and a Renewable Portfolio
Standard, which found that the RPS provision in the Senate version of H.R. 6 would have
a negligible impact on consumer electricity prices, due its dampening effect on the cost of
natural gas used for power generation. EIA studies of the RPS provision in S.Amdt. 1480
reached a similar finding. Further, proponents note that S.Amdt. 1480 would create a state
grant program to help resource-constrained states meet the RPS targets. (The EIA study of
the RPS in H.R. 6 is at [http://tonto.eia.doe.gov/FTPROOT/service/oiaf2001-03.pdf], and
the EIA studies of the RPS in S.Amdt. 1480 are at [http://tonto.eia.doe.gov/FTPROOT/
service/servicepubs.htm].)
Production Tax Credit (PTC) and Production Incentive. The existing
renewable energy production tax credit provides a 1.8 cents/kwh credit for businesses that
generate power from wind, closed-loop biomass (energy crops), and poultry waste for sale
to the grid. P.L. 107-147 extended this credit through Dec. 31, 2003. Both the House
version of H.R. 6 (Section 41002) and S. 1149 would extend the credit for three years,
through Dec. 31, 2006. They would also expand the eligible sources to include open-loop
biomass (forest, agricultural, and construction wastes). The House version of H.R. 6 would
further extend the credit to landfill gas and trash combustion facilities. S. 1149 does not
include landfill gas and trash facilities, but would expand credit eligibility to swine and
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bovine waste, geothermal energy, solar energy, small irrigation power facilities, municipal
biosolids, and recycled sludge. Further, S. 1149 (Section 104) sets conditions under which
the credit could be transferable.
Parallel to the PTC, there is a renewable energy production “incentive” (REPI) for state
and local governments. This 1.5 cent/kwh incentive was created by EPACT Section 1212
and it is funded through appropriations to DOE. The House version of H.R. 6 (Section
16072) and S. 14 (Section 502) have identical provisions that would extend this incentive
through 2023 and add landfill gas to the list of eligible resources.
Renewable Energy Fuel Standard (RFS). According to the Renewable Fuels
Association, the ethanol industry produced 2.2 billion gallons in 2002. The House version
of H.R. 6 (Section 17101) sets a target for blending gasoline with renewable fuels, including
ethanol and biodiesel. The RFS would start in 2005 at 2.7 billion gallons per year and grow
to 5.0 billion gallons per year in 2015. Also, it extends exemption from product liability
claims (safe harbor) to methyl tertiary-butyl ether (MTBE) producers. S.Amdt 850
(approved 67-29) to S. 14 added an RFS provision that sets a 5.0 billion gallon target for
2012. Further, it bans use of MTBE. Also, S.Amdt. 854 was approved (voice vote) as a
second-degree amendment to S.Amdt. 850. It encourages the use of cellulosic ethanol to
attain the target by raising the value of 1.0 gallon of cellulosic ethanol from a previous level
of 1.5 gallons of renewable fuel to 2.5 gallons. Several amendments (nos. 843, 844, 851,
853) to allow waivers or exemptions from the RFS were defeated.
Renewable Hydrogen. The House version of H.R. 6 (Section 60003) would create
a program to produce hydrogen from a variety of sources, including renewable energy and
renewable fuels, as part of a broader effort to develop hydrogen fuels, vehicles, and
infrastructure. Some hydrogen provisions of S. 14 (Sections 801-825) include references
(e.g. Section 802) to renewables.
Residential Tax Credit. The House version of H.R. 6 (Section 41001) and S. 1149
(Section 303) would create a 15% residential tax credit worth up to $2,000 for homeowners
who purchase photovoltaics and solar water heating equipment. The Solar Energy Industry
Association says the credit would be more effective with a $4,000 cap and shorter eligibility
period. S. 1149 also provides a 30% credit worth up to $1,000 for wind energy equipment.
Alternative Fuels Incentives. In the House version of H.R. 6, Sections 15011-
15024, 15046, 17102-17108, and 21703 have measures related to alternative fuels and
vehicles. In S. 1149, Sections 201-209 contain incentives for ethanol, biodiesel, and other
alternative fuels.
Other renewable energy provisions are identified in Table 1.
Table 1. Omnibus Energy Bills: Other Provisions
Provision
H.R. 6 (House)
S. 14
Hydropower
13001-13204
511
Cogen. / Small Power
16062
1145
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Provision
H.R. 6 (House)
S. 14
Net Metering
16071
1141
Federal Lands
16073, 30501-30503
121-126
Resource Assessment
16074
501
Funding Authorization
21301-21322
931-935
Biomass / Biopower
21706, 30301
531-534
Indian Energy
30301
303
Geothermal Energy
30601-30614
521-526
Insular Areas
30801
505
Federal Purchases
H.Amdt. 72
504
Renewables Tax Revenue Effect. Table 2 compares the estimated 10-year
revenue effect of renewable energy and alternative fuel tax provisions in H.R. 6 (House) and
S. 1149. It also shows percentage share of renewables relative to the total in each bill.
Table 2. Omnibus Energy Bills, Tax Revenue Effect
($ billions)
H.R. 6 (House)
S. 1149
Renewable Production Tax Credit
$ 3.19
$ 2.95
Residential Solar Tax Credit
$ 0.11
$ 0.11
Alternative Fuels and Vehicles
$ 0.31
$ 2.32
Total, Renewables & Alternative Fuels
$ 3.61
$ 5.38
Total, All Tax Provisions
$18.67
$15.25
Renewables Share of Total
19.3%
35.3%
Source: Joint Tax Committee. Estimated Revenue Effects of H.R. 1531, April 3, 2003, and Estimated Revenue
Effects of S. 1149, May 30, 2003.
FY2004 DOE Budget
The House (H.R. 2754, H.Rept. 108-212) recommends $330.1 million for the
Renewable Energy Program and $77.4 million for a new Electricity Transmission and
Distribution (ET&D) program that replaces the former Electric/Storage subprogram. Under
the Committee’s structure, the total for the Renewable Energy Program is $4.9 million less
than the FY2003 appropriation. This includes $19.7 million less for Biomass/Biofuels, $14.7
million less for Solar Energy, $4.3 million less for Geothermal, and $3.7 million less for
Program Direction. Partially offsetting these cuts, there is $28.2 million more for Hydrogen
and $3.6 million more for Facilities & Infrastructure. Further, the Committee seeks $7.1
million less for ET&D. Also, the House renewables total is $41.2 million, or 11%, less than
the request.
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The Bush Administration’s request seeks $444.2 million (including $72.9 million for
Electric/Storage and $4.0 million for the Production Incentive). The request presents a new
budget structure that follows from a major reorganization of the EERE Office. The FY2004
request for DOE finds that hydrogen energy is the “most promising long-term revolution in
energy use that can help the nation “liberate itself from dependence on imported oil,”
according to the Budget of the U.S. Government FY2004 (p. 105). The FY2004 request for
DOE’s Renewable Energy Program elaborates that its aim is to “accelerate progress” and
make hydrogen technologies “cleaner, safer, and lower in cost.” Further, it stresses that the
new National Climate Change Technology Initiative will create “competitive solicitations”
in applied research that aims to reduce greenhouse gas emission and will “complement”
existing R&D programs.
FY2003 USDA Budget
In the 108th Congress, debate has surfaced over appropriations for executing the
mandatory spending requirements for renewable energy and energy efficiency programs, set
by Title IX (Section 9006) of the Farm Security and Rural Investment Act of 2002.
The Department of Agriculture’s (USDA) renewable energy programs have recently
grown, spurred by federal bioenergy initiatives (P.L. 106-224, Executive Order 13134), the
President’s National Energy Policy, and the Farm Security Act (P.L. 107-171). According
to USDA, renewable energy program funding reached $247.6 million in FY2002. Table 3
shows some funding details. Also, for FY2003, Section 6013 of the Farm Security Act of
2002 provides loan guarantees for renewable energy equipment and broadens the range of
renewable energy equipment available for loans. Sections 2101 and 6401 of the Act provide
other programs and incentives for renewable energy (For more information about USDA
Bioenergy Programs, go to the website at [http://www.ars.usda.gov/bbcc/index.htm]).
Table 3. USDA Funding for Renewable Energy Programs
($ millions)
FY2001
FY2002
FY2003*
Biobased Products and Bioenergy Programs
Agricultural Research Service
48.9
64.2
67.4
Commodity Credit Corporation (CCC)*
40.7
150
——-
Cooperative State Research, Education, Extension
23
12.3
14.2
Forest Service
12.5
12.5
17.5
Other
8
8.2
3.4
Subtotal, Biobased Products and Bioenergy Programs*
133
247.2
102.5
Substitution: Solar and Wind Energy Programs
0.4
0.4
0.4
Farm Security Act, Title IX (mandatory appropriations)
——-
——-
39
Total*
133.4
247.6
141.9
*The appropriations for the FY2003 CCC Bioenergy Incentives Program have not yet been
set. The Senate has recommended $50 million and the House has recommended $150 million.
Source: USDA. Office of Energy Policy and New Uses. Selected tables from Roger Conway, October 29,
2002.
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Using Renewable Energy to Produce Electricity
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. H.R. 6 (Section
16062) and S. 14 (Section 1145) include a conditional repeal of the mandatory renewables
purchase requirement in Section 210 of PURPA. (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].)
Renewables Under Electric Industry Restructuring. To encourage a continued
role for renewable energy under restructuring, some states and utilities have enacted such
measures as a renewable energy portfolio standard (RPS), public benefits fund (PBF), and/or
“green” pricing and marketing of renewable power. In the 107th Congress, the Senate version
of H.R. 4 had an RPS (see above under “Renewable Energy Portfolio Standard”).
Green Power. The term “green power” generally refers to electricity supplied in
whole or in part from renewable energy sources. Green power marketing (retail or
wholesale) is underway in California, Illinois, Massachusetts, New Jersey, New York,
Pennsylvania, and Texas. 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. Utility green pricing
programs reach more than one-third of the nation’s consumers. (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 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. (More information about DOE’s Distributed Power Program is
available at [http://www.eren.doe.gov/distributedpower/]).
Net Metering. Net metering allows customers with generating facilities to “turn their
electric meters backwards” when feeding power into the grid; they receive retail prices for
the excess electricity they generate. This encourages customer investment in distributed
generation, which includes renewable energy equipment. In 2002, California enacted laws
(AB58, Chapter 836; AB2228, Chapter 845) that encourage net metering, including a
provision that permanently raises the size limit from 10 kw to 1 Mw. Also, H.R. 6 (Section
16071) and S. 14 (Section 1141) provide nearly identical language for net metering.
Natural Gas and Renewables
Biomass-Generated Synthetic Natural Gas. The natural gas price spike in 2003
has created interest in using renewables to dampen natural gas demand. EIA data presented
at a June 10 hearing of the House Energy and Commerce Committee show not only that
natural gas is used for heating, but that a growing share is used for electric power generation.
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Renewable energy (mainly biomass) can be used to produce methane (the main component
of natural gas) to substitute for natural gas directly. Also, a variety of renewables can
generate electricity that indirectly displaces natural gas use for power generation. DOE
projects that, by 2020, biomass and energy crops could produce 15% of natural gas needs.
Substituting Electricity from Renewables for Gas-Fired Generation. The
American Wind Energy Association (AWEA) says that the installed base of wind farms,
including those that will be installed by the end of 2003, will produce enough electric power
to lessens the natural gas shortfall by 10% to 15% in 2004. With certain assumptions about
power transmission capacity, AWEA further projects that wind power production could reach
the equivalent of 1.1 Tcf per year in four years. Similarly, with certain assumptions about
federal policy changes, DOE’s report Scenarios for a Clean Energy Future (Table 7.11)
projects that biomass-based power production could be greatly accelerated through 2010.
(See ACEEE’s September 2003 report, Impacts of Energy Efficiency and Renewable Energy
on Natural Gas Markets.)
Climate Change and Renewables
Because most forms of renewable energy generate no carbon dioxide (CO ), renewables
2
are seen as a key long-term resource that can substitute for fossil energy sources used to
produce vehicle fuels and electricity. The percentage of renewable energy substitution
depends on technology cost, market penetration, and the use of energy efficiency measures
to control energy prices and demand. DOE’s 2000 report Scenarios for a Clean Energy
Future estimates that new policies could triple non-hydro renewables electricity production
in 2010 from a projected business-as-usual 86 billion kilowatt-hours (Bkwh) to 265 Bkwh.
EPA’s Climate Action Report-2002 describes federal renewable energy programs aimed at
reducing greenhouse gas emissions. In Climate Change 2001: Mitigation, the
Intergovernmental Panel on Climate Change looks at the role that renewables can play in
curbing global CO emissions.
2
Since 1988, the federal government has accelerated programs that study the science of
global climate change and has initiated programs aimed at mitigating fossil fuel-generated
carbon dioxide (CO ) and other human-generated emissions. The federal government funds
2
programs for renewable energy as a mitigation measure at DOE, the Department of
Agriculture (USDA), the Environmental Protection Agency (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, which absorbs
CO , offsets this release. Hence, net emissions occur only when combustion is based on
2
deforestation. In a “closed loop” system, biomass combustion is based on rotating energy
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crops, there is no net release, and its displacement of any fossil fuel, including natural gas,
reduces CO emissions.
2
LEGISLATION
H.R. 6, House Version (Tauzin)/H.R. 6, Senate Version (Domenici)
Omnibus Energy Bill. House version includes provisions for renewable energy
production tax credit (PTC), renewable energy production incentive (REPI), renewable
energy fuel standard (RFS), renewable hydrogen, residential solar tax credit, alternative fuels,
and others. Incorporates renewable energy provisions of H.R. 39, H.R. 238, and H.R. 1531.
Introduced April 7, 2003; referred to Committee on Energy and Commerce and several other
committees. Passed House, amended, April 10. Senate version incorporates text of omnibus
energy bill (H.R. 4) that the Senate adopted in the 107th Congress. Passed Senate July 31,
in lieu of S. 14.
H.R. 2754 (Hobson)/S. 1424 (Domenici)
The Energy and Water Appropriations Bill, FY2004. Includes funding for the DOE
Renewable Energy Program and the Electricity Transmission and Distribution Program.
House bill reported (H.Rept. 108-212) July 16, 2003. Passed House July 21. Senate bill
reported (S.Rept. 108-105) July 17. Passed Senate, amended, September 16.
H.R. 2800 (Kolbe) / S. 1426 (McConnell)
Foreign Operations, Export Financing, and Related Programs Appropriations Bill, 2004.
House bill reported (H.Rept. 108-222) July 21, 2004. Senate bill reported (S.Rept. 108-106,
p. 17) July 17. Under Environment Programs, Senate bill appropriates $185 million for
“energy conservation, energy efficiency, and clean energy” in developing countries to reduce
greenhouse gases.
S. 14 (Domenici)
Omnibus Energy Bill. Renewable energy appears as Title V. Also, Title VII A covers
alternative fuels, Title VIII covers hydrogen, Title IX covers R&D authorizations, and Title
XI on Electricity includes provisions on PURPA and net metering. S. 1149 (energy tax bill)
and S. 385 and S. 791 (renewable fuels mandate) are expected to be incorporated into S. 14.
Introduced April 30, 2003. On July 31, after floor action on S. 14 stalled, the Senate
substituted the energy bill (H.R. 4) that the Senate had sent to conference in the 107th
Congress, and passed it as the Senate version of H.R. 6.
S. 944 (Jeffords)
Renewable Energy Investment Act. Would establish a renewable portfolio standard
(RPS) that reaches 20% by the year 2020. Introduced April 9, 2003; referred to Committee
on Energy and Natural Resources. The provisions of this bill were incorporated into an
amendment (S.Amdt. 1530) to S. 14, but action stopped when the Senate substituted the
energy bill (H.R. 4) that it had sent to conference in the 107th Congress.
S. 1149 (Grassley)
Energy Tax Incentives Act of 2003. Supersedes S. 597. Contains provisions for
renewable energy production tax credit (Title I, Section 101), alternative fuels incentives
(Title II), and residential solar energy property (Title III, Section 301). Committee on
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Finance reported (S.Rept. 108-54) May 23, 2003. Expected to be considered in the energy
conference committee on H.R. 6.
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
U.S. Congress. House. Committee on Energy and Commerce. Subcommittee on Energy
and Air Quality. The Hydrogen Energy Economy. Hearing held May 20, 2003.
U.S. Congress. Joint Committee on Taxation. Description of Revenue Provisions Contained
in the President’s Fiscal Year 2004 Budget Proposal. (Energy Provisions)
[http://www.house.gov/jct/s-7-03.pdf]. March 2003. p. 122-145.
U.S. Congress. House. Committee on Appropriations. Subcommittee on Energy and Water.
FY2004 Renewable Energy Budget Request. Hearing held March 13, 2003.
U.S. Congress. Senate. Committee on Appropriations. Subcommittee on Energy and
Water. DOE FY2004 Budget Request for Energy Efficiency and Renewable Energy.
Hearing held March 12, 2003.
CRS Reports
CRS Issue Brief IB10116. Energy Policy: The Continuing Debate, by Rob Bamberger.
CRS Memorandum. Renewable Energy Portfolio Standard (RPS), 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, page on “Reliability,” by
Amy Abel. At [http://www.congress.gov/brbk/html/ebele16.html].
CRS Report RS21442. Hydrogen and Fuel Cell Vehicle R&D: freedomCAR and the
President’s Hydrogen Fuel Initiative, by Brent Yacobucci.
CRS Issue Brief IB10054. Energy Tax Policy, by Salvatore Lazzari and Mark Holt.
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.
American Solar Energy Society. Renewable hydrogen forum. April 10-11, 2003. 50 p.
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Barry, Courtney. Winds of change in Texas. Public Utilities Fortnightly, v. 141, no. 7, April
1, 2003. p. 27-31.
Blankinship, Steve. A sunny outlook for grid-connected PV. Power Engineering, v. 107, no.
1, May 2003. p. 32-40.
Cato Institute. Policy Analysis. Evaluating the case for renewable energy: is government
support warranted? January 10, 2002. 16 p.
Edison Electric Institute. [http://www.eei.org/]
Electric Power Research Institute (EPRI) and EPRI Journal Online. [http://www.epri.com/]
——. Renewable power industry status overview. EPRI December 1998. 1 vol. (EPRI TR-
111893).
Energy Future Coalition. Challenge and opportunity: charting a new energy future, report
of the bioenergy and agriculture working group. [http://www.energyfuturecoalition
.com/]. 2003. 13 p.
International Energy Agency. Renewables information 2003. September 2003. 201 p.
[http://www.iea.org/stats/files/renewables.htm]
Loiter, Jeffrey M. and Norberg-Bohm, Vicki. Technology policy and renewable energy.
Energy Policy, v. 27, 1999. p. 85-97.
Polachek, Jay S.. Cape Cod: twisting in the wind? Public Utilities Fortnightly, May 15,
2002. p. 28-37.
Sklar, Scott and Sheinkopf, Kenneth. Consumer guide to solar energy: new ways to lower
utility costs, cut taxes, and take control of your energy needs. 2002. 195 p.
U.S. Department of Interior. Bureau of Land Management. Assessing the potential for
renewable energy on federal lands. May 2002. 89 p.
[http://www.nplnews.com/toolbox/fedreports/renewablereport.pdf]
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]
——. Energy Information Administration. Federal financial interventions and subsidies
in energy markets 1999: primary energy. (SR/OIAF/99-03). 1999.
——. Lawrence Berkeley Laboratory. Case Studies of State Support for Renewable Energy.
September 2002.
——. Lawrence Berkeley Laboratory and National Renewable Energy Laboratory.
Forecasting the growth of green power markets in the United States. 2001.
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——. National Renewable Energy Laboratory. Domestic energy scenarios. 2003. 25 p.
[http://www.nrel.gov/docs/fy03osti/32742.pdf]
——. Enhancing homeland security through renewable energy — Richard Truly’s remarks
to the National Press Club. March 14, 2002. 7 p.
[http://www.nrel.gov/news/news.html]
——. Status report to Congress on current and proposed activities under the clean energy
technology exports (CETE) initiative. 2001. 58 p.
[http://www.pi.energy.gov/cete2001statusreport.html]
——. The Clean Air Act and renewable energy: opportunities, barriers, and options.
(NREL/CP-620-29654). 2001.
U.S. Environmental Protection Agency. Climate action report: The United States of
America’s third national communication under the United Nations Framework
Convention on Climate Change. June 2002. 260 p. [http://yosemite.epa.gov/oar/
globalwarming.nsf/content/ResourceCenterPublicationsUSClimateActionReport.html]
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. National Energy Policy Report. May 2001. 170
p. [http://www.whitehouse.gov/energy/National-Energy-Policy.pdf]
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.
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 Council for Renewable Energy. [http://www.americanrenewables.org/]
American Solar Energy Society. [http://www.ases.org/]
American Wind Energy Association (AWEA). [http://www.awea.org/]
California Energy Commission. [http://www.energy.ca.gov/renewables/index.html]
Database of State Incentives for Renewable Energy (IREC). [http://www.dsireusa.org/]
Databook of Renewable Energy Power Technologies.
[http://www.nrel.gov/analysis/power_databook/chapters.asp]
Earthtrack (Database of Energy Subsidies). [http://www.earthtrack.net/]
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National Association of Regulatory Utility Commissioners. [http://www.naruc.org/]
Eighth Session of the Conference of Parties to the United Nations Framework Convention
on Climate Change (New Delhi, COP-8). October 23 - November 1, 2002.
[http://unfccc.int/cop8/index.html]
Renewable Energy Policy Project. [http://solstice.crest.org/]
Renewable Energy Web Site. International Energy Agency (IEA).
[http://library.iea.org/renewables/index.asp]
Solar Electric Power Association (SEPA). [http://www.solarelectricpower.org/]
Solar Energy Industries Association (SEIA). [http://www.seia.org/]
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/]
Vote Solar Initiative. San Francisco’s $100 Million Solar Revenue Bond Initiative.
[http://www.votesolar.org/sf.html].
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Table 4. DOE Renewable Energy Budget for FY2003-FY2004
(selected programs, $ millions)
FY2004
Senate
OFFICE OF ENERGY EFFICIENCY
FY2003
FY2004
FY2004
Diff. from
AND RENEWABLE ENERGY
App.
Request
House
Amount
FY2003
BIOMASS / BIOFUELS
89.4
69.8
69.8
75.0
-14.4
Power
——-
——-
——-
——-
——-
Transportation
——-
——-
——-
——-
——-
GEOTHERMAL
29.8
25.5
25.5
26.3
-3.5
HYDROGEN
39.7
88.0
68.0
88.0
48.2
HYDROPOWER
5.3
7.5
5.5
5.0
-0.3
SOLAR ENERGY
94.4
79.7
79.7
89.7
-4.7
Concentrating Solar
——-
0.0
——-
5.0
——-
Photovoltaics
——-
76.7
——-
——-
——-
Solar Building Technology Research
——-
3.0
——-
——-
——-
ZERO-ENERGY BUILDINGS
——-
4.0
——-
——-
——-
WIND
43.7
41.6
41.6
41.6
-2.1
INTERGOV. / RENEW. SUPPORT 1
21.4
18.8
18.8
19.3
-2.1
Dept. Energy Management
1.5
2.3
2.3
1.8
0.3
International Renewables
4.0
6.5
6.5
4.5
0.5
Production Incentive
5.0
4.0
4.0
4.0
-1.0
Tribal Energy
6.0
6.0
6.0
5.0
-1.0
Program Support
5.0
0.0
0.0
4.0
-1.0
NAT. CLIMATE CHANGE INIT.
——-
15.0
0.0
0.0
——-
FACILITIES & INFRASTRUCTURE
5.5
5.0
9.1
8.5
3.0
PROGRAM DIRECTION
15.9
16.6
12.2
13.1
-2.8
RENEWABLES, SUBTOTAL
345.0
371.3
330.1
366.5
21.4
Prior Year Balances
-10.0
——-
——-
——-
——-
Transfers
——-
——-
——-
-8.0
-8.0
RENEWABLES, TOTAL
335.0
371.3
330.1
358.5
23.4
Office of Electricity T&D (OETD) 2
84.4
72.9
77.4
100.4
16.0
RENEWABLES + ET&D, Total
419.5
444.2
407.5
458.9
39.4
1 Combines “Intergovernmental Activities” and “Renewable Support and Implementation.”
2 Replaces “Electric/Storage” in FY2003 and “Electricity Reliability” in FY2004 request.
Source: S.Rept. 108-105; July 17, 2003; H.Rept. 108-212; July 16, 2003; DOE FY2004 Cong. Budget
Request, v. 3; Feb. 2003 (p. 244-247).
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