OREC Summary of the Energy Bill

Here’s the conference version of the Energy Bill (pdf)
(in all its 1724 page glory!).  We weren’t able to highlight the provisions relevant to ocean but we’ve summarized them here.  To navigate the bill, we recommend using Adobe’s word search feature to locate certain passages of interest.

We’re happy to report that this is the first piece of legislation in more than two decades that accords federal recognition to ocean renewable energy.  Thus, for the first time, all forms of ocean energy - wave, tidal, current and OTEC - qualify for a renewable energy production incentive (REPI) and are considered eligible renewables for purposes of the mandatory federal purchase requirement.   Even better, the Energy Bill contains various financial incentives that might benefit ocean, including funding programs for rural communities interested in renewables (including ocea), loan guarantees for new technologies and programs to study ocean energy potential on federal lands. 

But while OREC and ocean gained big in the portions of the energy bill, the production tax credit (PTC) for ocean, that was included in the Senate Version of the Energy Bill was dropped at the last hour.  Though ocean renewables would hardly had only a de mininimus impact on the budget, there was a  need to drop programs and ocean was left out.  In addition, because the PTC was extended only two years rather than the five that most renewable groups had hoped, it was believed that ocean would not be able to benefit from the PTC given its short duration.  OREC looks forward to renewing the battle for the PTC both during conference corrections and when the PTC comes up for renewal in two years.

Click on read more for our section by section analysis (prepared by Damian Kunko of SMI, Scott Lindsay and last section by Carolyn Elefant of OREC).

Sec. 202 – Renewable Energy Production Incentive
Ocean Energy was included in the Tier I section along with solar, wind, geothermal, and biomass.  Tier I mandates that 60% of the funds in the REPI program be used to pay utilities for renewable projects.  We were expecting to get in the Tier II program, but were fortunate to end up in the larger, Tier I program.  We estimate that there will be roughly $3 Million in Tier I REPI funding for FY06.  This means that publicly-and cooperatively- owned electric utilities can apply to the Department of Energy (DOE) for direct payments at the rate of 1.5 cent per kWh (adjusted for inflation) for electricity generated using Ocean Energy devices. 

Sec. 203 – Federal Purchase Requirement
Congress has mandated that the Federal government purchase renewable energy (which includes Ocean Energy) of nothing less than 7.5% of total power consumption by 2013.  It is 3% in 2007 through 2009 and 5% in 2010 through 2012.  In 2004, the Federal government used 42,680 GWh with 1,067 GWh coming from renewable sources.

Sec. 209 – Rural and Remote Community Electrification Grants
This section authorizes local governments to apply for grants to use renewable energy sources, including wave power, but not any other Ocean Energy source, to increase energy efficiency.  The grants are authorized to be appropriated based at $20,000,000 for each fiscal year 2006-2012.  This program will be administered by the Department of Agriculture’s Rural Utilities Service.

Sec. 241 - Insular Areas Energy Security
The Secretary of Energy will identify and evaluate strategies or projects with the greatest potential for reducing the dependence on imported fossil fuels, including the increased use of renewable energy, including wave energy, but not any other Ocean Energy source.  In assessing the potential of the projects, the Secretary will evaluate the estimated cost, manageability and any other factors deemed appropriate.  The Secretary will give priority for grants to projects which will have the greatest impact on reducing future disaster losses and seem to be the best fit the region where it will be carried out. The grants are authorized to be appropriated at $6,000,000 for each fiscal year beginning 2006.  This program will be administered by the Department of the Interior.

Title XI. Research and Development

Sec. 931 - Renewable Energy
Programs based on renewable energy research, development, demonstration and commercial application will be conducted under the leadership of the Secretary. These programs will be based on increasing the conversion efficiency of all forms of renewable energy, decreasing the cost of renewable energy generation, promoting the diversity of the energy supply, decreasing the dependence of the United States on foreign energy supplies, improving energy security and decreasing the environmental impact of energy-related activities.  Ocean Energy is listed under miscellaneous projects. All renewable energy research, development, demonstration and commercial application projects are authorized to be funded at $632 million in FY07, $734 million in FY08 and $852 million in FY09.

Title XVI. Climate Change

Sec. 736 – Technology Demonstration Projects
This section directs DOE, the State Department and the U.S. Agency for International Development to promote the adoption of technologies and practices that reduce greenhouse gas intensity in developing countries.  It authorizes these agencies to plan, coordinate and carry out or provide assistance for the planning, coordination, or carrying out of, at lease 10 demonstration projects in eligible countries, as determined by the Secretaries and the Administrator.  Demonstration projects may include renewable projects. 

Title XVII. Incentives for Innovative Technologies

Sec. 1703 - Eligible Projects
This section defines eligible projects as renewable energy systems that employ new or significantly improved technologies as compared to commercial technologies in service at the time.  Thus, ocean energy is eligible to receive tax credits.  The prior section (Sec. 1702) outlines the terms by which the Energy Secretary may consult with the Treasury Secretary to offer loan guarantees for up to 80 % of facility project costs.  The bill authorizes the appropriation of funds necessary to provide loan guarantees for innovative technologies, subject to Congressional appropriations.

Title XVIII.  Studies
Sec. 1835 Renewable Energy on Federal Land

Three months after this act is passed, the Secretary of the Interior shall enter into a contract with the National Academy of Sciences under which the National Academy of Sciences will study the potential of developing wind, solar and ocean energy resources on Federal land available.  This study must be completed within two years of the completion of this act.

Section 388 - Alternative Energy Related Uses on the Outer Continental Shelf
This provision amends the existing Outer Continental Shelf Lands Act (OCSLA) and authorizes the Secretary of Interior to grant "a lease, easement of right of way" on the Outer Continental Shelf for energy related purposes, including renewable energy development.  The Secretary can also collect royalties and fees for use of OCS lands.  Prior to Section 388, some question had been raised as to how developers could secure adequate property interests to construct projects on the OCSLA. 

We understand that the Department of Interior and the Mineral Management Services are gearing up to draft regulations to implement Section 388.  OREC hopes to actively participate in these rulemakings, to ensure that new technologies are exempt from any royalties requirements and that the involvement of another agency in the licensing process does not create more delay.