The energy tax credits in the bailout bill, Part 1: Solar power and plug in hybrids win big

The bailout legislation passed by Congress and signed into law by President Bush on Friday has a $17 billion energy tax package. This post will focus on the clean energy credits. Part 2 will focus on the dirty ones.

The biggest winner is certainly solar. As Scott Sklar, former head of the Solar Energy Industries Association and now President of the Stella Group summarizes:

This package extends the 30-percent federal investment tax credit for both residential and commercial solar, small wind, ground-coupled heat pumps installations from 4 – 8 years. This bill also completely eliminates the $2,000 monetary cap for residential solar electric installations. This bill also provides a [new] ITC for water energy applications (tidal, wave, and ocean currents and thermal) and combined heat and power. The federal production tax credit was extened for biomass power, geothermal and wind energy as well.

In particular, the 8-year extension of the ITC for is a crucial step in ensuring the success in this country of one of the most critical climate solutions — solar baseload or concentrated stored thermal electric. Everyone I spoke to in the industry thought this was the single most important thing the federal government could do to provide for stable growth.

Plug in hybrids also got a very big boost that should help jump-start the market:

The credit is a base $2,500 plus $417 for each kWh of battery pack capacity in excess of 4 kWh, to a maximum of $7,500 for light-duty vehicles; $10,000 for vehicles with gross vehicle weights of more than 10,000 but less than 14,000 pounds; $12,500 for vehicles with a GVW of more than 14,000 but less than 26,000 pounds; and $15,000 for any vehicle with a GVW of more than 26,000 pounds.

Phaseout of the credit is to begin after the total number of qualified PHEVs in the US sold after 31 December 2008 is at least 250,000.

Qualifying vehicles must have a battery pack with at least 4 kWh of capacity–a provision that will preclude the inclusion of the first generation of Toyota PHEVs as well, potentially, as other lower all-electric range plug-ins.

You may notice that $417/kwh seems like an awfully non-round number compared to, say, the Gang-of-20 draft bill, which had an identical formula except it used $400/kwh. According to Edmunds Green Car Advisor blog, the Chevy Volt has a 16-kilowatt-hour battery. So the $417 just happens to be just what is needed to give the Volt the full $7500 tax credit. Glad to know somebody writing this bill was looking out for General Motors and can do math!

This is a heck of a kickstart for plug-in hybrids, especially since $1 billion has been set aside for this tax credit. The Electric Drive Transportation Association also reports “The credit is available against the alternative minimum tax,” which is very good news. That means the upscale first buyers of this $45,000 car will actually be able to take advantage of this credit (see here).

Lots of other clean technologies benefited. For instance, “The measure increases the tax credit limitation for fuel cells from $500 to $1,500 per half kilowatt of capacity.” Frankly, $500 was the equivalent of doing nothing, whereas $1,500 may actually make some stationary fuel cells competitive. Geothermal heat pumps and cogeneration systems both get a well-deserved new 10% ITC.

The most complete summary of all the clean (and dirty) provisions that I have found on line so far is at this DailyKos post. Here is a list of the key energy conservation and efficiency provisions:

  • authorizes the issuance of qualified energy conservation bonds to finance local government conservation and greenhouse gas reduction projects;
  • extends the tax deduction for energy efficient commercial buildings through 2013;
  • extends the new energy efficient home tax credit ($1,000 for homes meeting 30 percent efficiency standard, $2,000 for homes meeting 50 percent efficiency standard) through 2009;
  • revises the amounts allowable under the tax credit for energy efficient appliances produced after 2007 (i.e., dish washers, clothes washers, and refrigerators) and extends such credit through 2010;
  • allows an accelerated recovery period for the depreciation of qualified smart electric meters and smart electric grid systems;
  • extends through FY2012 the authority to issue tax-exempt bonds for qualified green building and sustainable design projects.

Some of this is certainly useful, but serious energy efficiency for homes and commercial buildings can be achieved only by aggressive new building codes and appliance standards and by having every state adopt electric utility regulations as good as those in California (see “Energy efficiency, Part 4: How does California do it so consistently and cost-effectively?“)

The bottom line: This is a small but important down payment on jumpstarting the clean tech transition, especially for solar and plug-ins. Part 2 will look at the dirty stuff in the bailout.

12 Responses to The energy tax credits in the bailout bill, Part 1: Solar power and plug in hybrids win big

  1. paulm says:

    Note worthy…
    Thinking Outside the Grid: An Aggressive Approach to Climate and Energy

    “The issue of our time is the combination of energy security and climate change,” said former Congressman Sherwood Boehlert……

    Time for Climate Change direct action is now!

  2. hapa says:

    good, now we need only hope that the absence of useful emergency finance measures doesn’t seize up all credit, and wreck us. let’s hear it for the placebo effect!

  3. charlie says:

    um, exactly how is NOT taxing rich people going to save the world?

  4. rjm says:

    so Bush is a green hero now?

  5. Doug says:

    so Bush is a green hero now?

    Considering that he essentially required a $700B bribe in order to sign a bill including these measures, I think that would be a “no.”

  6. Matt says:

    To be fair, Bush was supporting the extension of the PTC’s which came through the Senate because that same bill also adjusted the AMT. So Bush was happy enough fixing the AMT to pass the PTC…that doesn’t make him a green hero, but it also doesn’t mean that he needed a $700B bribe to make them reality either.

  7. David B. Benson says:

    Nothing for wind?

  8. Jonas says:

    Even though Romm never mentions the most important renewable energy source – that is: carbon-negative biomass – it’s good to see that it receives its credits too.

    Biomass is already by far the most important of the renewables, and by far the most cost-effective, which is perhaps why it doesn’t receive incentives as high as those for unproven, risky technologies.

    Still, it would be nice to see some tech-neutrality. All renewables should receive the same incentives.

  9. Fred says:

    So where’s part 2 of this article on the “dirty” energy?

  10. Jonas
    I just looked at the Google plan. they project 23 gWt from biomass and municipal waste by 2030.

    We need all the tools we can use, for sure, and I like the idea that converting manure and such to methane kills two birds with one stone; capturing methane that will end up in the atmosphere, and generating power from it.
    But how would you get hundreds of gigawatts from it?
    I’m not saying it’s not possible.
    Does it entail using land to grow crops?

    I feel that uses of land for crops that make sense are:

    1. growing non food crops for bioplastics. We use 5% or more of our oil to make plastics which we mostly throw away. It’s become a huge proplem in the ocean. Bioplastics that are completely compostable are being made by Metabolix, from corn presently, but they are looking at using switchgrass.
    They can also make biofuel feedstock as a byproduct.
    The whole process is carbon neutral from start to finish. The bioplastic part at least.

    2. growing industrial hemp to make paper and save millions of trees. We are destroying Canada’s Boreal Forest to provide Americans with products like pampers, paper towels, toilet paper, and catalogues. This is the second or third largest carbon sink on earth. Much of our watershed depends on it. It is either feeding or breeding grounds for a huge percent of birds in North America. Hemp has lots of other uses, including food. The seeds are high in Omega 3 and protein. Clothing, building materials etc. Around the time of the founding of the U.S., it was considered patriotic to grow hemp. It may be patriotic again.

  11. msn nickleri says:


    Phaseout of the credit is to begin after the total number of qualified PHEVs in the US sold after 31 December 2008 is at least 250,000.