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Statement of Andrew J. Skok, Fuel Cell Power Association
The Fuel Cell Power Association
(FCPA)appreciates the opportunity to submit this statement in support of
extending and expanding the current tax credits available for fuel cells. The FCPA consists of companies involved in stationary applications of fuel cells
for electric power plants on both a commercial and research and development
level.
Fuel cells are ultra-clean
systems that produce power at very high efficiencies at scales ranging from a
few kilowatts per installation to multi-megawatt power plants. They are
applicable to both distributed generation and central station power and can
also operate in a cogeneration mode to utilize waste heat from the system. Fuel
cells can also operate on a variety of fuels including natural gas, gasified
coal, digester gases from waste treatment facilities, other biofuels, and
hydrogen. Their versatility, efficient operation, and environmental
characteristics have made them a very desirable alternative to current fossil
fuel fired power systems and have resulted in considerable support for their
accelerated development through research and development programs of the
Department of Energy.
Considerable progress has been
made in fuel cell development over the years and several products are at a
commercial threshold. As with many new technologies such commercialization has
been inhibited because of high initial cost of products and the resulting low
volume of sales. Large investments in production capacity are unlikely without
incentives to drive down the cost of the initial commercially offered systems
so that significant volumes of fuel cell sales may reduce unit costs for the
systems.
This Committee has recognized
both the environmental and efficiency benefits of fuel cells as well as the
need for incentives to accelerate their commercial introduction through
enactment of the Section 48 fuel cell investment tax credit included in the
2005 Energy Bill. The FCPA appreciates the Committee’s action in this regard.
In combination with State-based incentives these incentives have helped FCPA
members complete agreements for the installation of fuel cells in a handful of
states that offer such incentives, particularly California. However, such
installations are only viable in a small number of states and only when very
high cost power is the competition. In order to compete nationally in the short
term, fuel cells need to receive additional incentives. We believe, based on
incentive levels in California, that an investment tax credit of $3,000 per kilowatt
is necessary. Such a credit will encourage a comprehensive base of fuel cell
installations in much broader applications than are currently financially
viable. It will provide a significant increase in the volume of fuel cell
sales, which in turn will encourage larger manufacturing capacity. These
actions will result in significant reductions in fuel cell manufacturing costs
making the technology viable in more markets.
In addition to an increase of the
ITC to $3,000 per kilowatt, the FCPA joins the US Fuel Cell Council in
requesting that the provision be extended for eight more years. Such an
extension will allow for a stable industry to be formed, as well as encourage
the introduction of new, even higher efficiency, technologies now under development
by the industry. It will also encourage increases in production capacity and
construction of facilities related to new fuel cell technologies and foster the
viability of markets for the resultant products.
Finally, the FCPA understands
that currently if an entity opts to take advantage of the ITC it may not
utilize the Production Tax Credit (PTC) available for electricity produced
using biofuels. Removal of the prohibition on using both credits would make
fuel cell use in renewable applications much more financially viable,
particularly where competing electricity prices are low.
The fuel cell industry is in a
position to provide very-high efficiency power in both distributed and central
station power applications with a minimum of environmental emissions. The
technology has received significant support from the Federal government over a
considerable period of time and is now at the threshold of commercial
viability. Continuing and improving the tax incentives originally provided by
this Committee is in the interest of this nation as it strives to reduce the
environmental impact of electricity generating technologies and reduce overall
energy use and dependence on foreign sources of energy. Therefore, the FCPA
recommends that:
- The ITC be increased to $3,000per kilowatt,
- The ITC be extended for 8 years, and
- Fuel cell users be permitted to claim both the ITC and the
renewable energy PTC for electricity from biomass sources.
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