| Biomass Energy Incentives |
|
|
 |
|
|
|
- Production Tax Credit
- Renewable Energy Production Incentive
- Volumetric Ethanol Excise Tax Credit
- Tax Credits for Alcohol Fuels
- Special Depreciation Rules for Biomass Energy Facilities
- Sulfur Dioxide Emission Allowances
- Carbon Offsets
- Clean Fuels Deduction
- Alternative-Fuel Fleet Requirements
- Clean Air Act Clean Fuels Program
|
| Oregon Incentives |
|
Small Scale Energy Loan Program
The Oregon Department of Energy makes low-interest loans for projects that produce energy from renewable resources, that conserve energy resources or that use recycled materials to create products. The Small Scale Energy Loan Program (SELP) is a self-supporting loan program funded by the sale of Oregon general obligation bonds.
Borrowers can use loan funds to pay most direct energy project costs and related project costs such as engineering and design, permit fees, loan fees and project management costs. Most Oregonians, Oregon businesses, non-profit organizations, state agencies, schools, cities, counties, special districts, state public corporations and federal agencies are eligible.
Biomass energy projects are eligible for SELP financing. Oregon Department of Energy staff engineers are available to work with engineers and designers early in a project´s design phase, before the loan process begins. When it receives a loan application, the Department of Energy undertakes a comprehensive review of the project´s technical feasibility. Projects must be practical and environmentally sound.
Small loans usually take two to three weeks to approve. Approval of larger loans may take two months or longer. A citizen advisory committee reviews major loans. For complete information, potential borrowers should talk with a SELP loan officer at the Oregon Department of Energy.
Business Energy Tax Credit
A tax credit covering 35 percent of eligible project costs is available to Oregon businesses. The Business Energy Tax Credit (BETC) program is an Oregon incentive for projects that produce energy using a renewable resource or that save energy or recycle waste. Research, design and development of new technology may qualify for a tax credit under the BETC program. Businesses may take the tax credit over five years. Businesses wanting the tax credit must apply before starting the energy project. Project review generally takes about two weeks.
Biomass energy projects located in Oregon are eligible. They must provide a new source of energy or reclaim energy from waste. Tax credit applicants can sell the energy or use it on-site. Applicants must own or be the contract buyer of the project.
Businesses using alternative fuel vehicles and fueling stations dispensing alternate fuels are also eligible for BETC. Vehicle conversions and the cost of alternative-fuel features on new vehicles may qualify. To be eligible, businesses must have fleets of three or more vehicles used for business within Oregon. The Oregon Department of Environmental Quality provides a list of approved vehicles and systems that are eligible for the tax credit.
Ethanol Production Facility Tax Exemption
For qualifying ethanol production facilities, 50 percent of the real market value of the real and personal property is exempt from taxation under ORS 307.701. A qualified facility may claim the exemption for five tax years. This tax incentive expires in the year 2008.
|
| Federal Incentives |
|
Production Tax Credit
Internal Revenue Code Section 45 provides an income tax credit based on production of electricity produced from renewable energy sources. Private entities subject to taxation are eligible for the tax credit if they generate electricity from qualified energy resources and sell electricity to an unrelated party. The "American Jobs Creation Act of 2004" (HR 4520) extended the production tax credit expiration date and expanded the list of qualified resources.
Qualified resources include:
- Wind energy facilities placed in service after December 31, 1993, and before January 1, 2006.
- "Closed-loop biomass" facilities placed in service after December 31, 1992, and before January 1, 2006.
- "Open-loop biomass" facilities that use agricultural livestock waste nutrients (manure) placed in service after October 22, 2004 (date of enactment of HR 4520) and before January 1, 2006, if the the nameplate capacity of the facility is not less than 150 kilowatts.
- All other "open-loop biomass" facilities placed in service before January 1, 2006.
- Geothermal or solar facilities placed in service after October 22, 2004 (date of enactment of HR 4520) and before January 1, 2006.
- Small irrigation power facilities (facities that generate power through an irrigation system without any dam or impoundment of water) placed in service after October 22, 2004 (date of enactment of HR 4520) and before January 1, 2006, if the nameplate capacity of the facility is less than 5 megawatts but not less than 150 kilowatts
- Landfill gas facilities placed in service after October 22, 2004 (date of enactment of HR 4520) and before January 1, 2006.
- Municipal solid waste combustion facilities placed in service after October 22, 2004 (date of enactment of HR 4520) and before January 1, 2006.
Wind facilities and closed-loop biomass facilities may claim a credit of 1.8 cents per kilowatt-hour during a 10-year period after the date the facility is placed in service.
Open-loop biomass facilities that use livestock manure may claim a credit of 0.9 cents per kilowatt-hour during a 5-year period beginning on the the date the facility is placed in service.
All other open-loop biomass facilities may claim a credit of 0.9 cents per kilowatt-hour during a 5-year period beginning on the date the facility is placed in service, except facilities placed in service before the date of enactment of HR 4520, for which the 5-year period begins on October 22, 2004.
The other qualified resource facilities are eligible for a credit of 0.9 cents per kilowatt-hour for a 5-year period beginning on the date the facility is placed in service.
"Closed-loop biomass" means "any organic material from a plant which is planted exclusively for purposes of being used at a qualified facility to produce electricity."
"Open-loop biomass" means:
"(i) any agricultural livestock waste nutrients, or
"(ii) any solid, nonhazardous, cellulosic waste material which is segregated from other waste materials and which is derived from -
"(I) any of the following forest-related resources: mill and harvesting residues, precommercial thinnings, slash, and brush,
"(II) solid wood waste materials, including waste pallets, crates, dunnage, manufacturing and construction wood wastes (other than pressure-treated, chemically-treated, or painted wood wastes), and landscape or right-of-way tree trimmings, but not including municipal solid waste, gas derived from the bio-degradation of solid waste, or paper which is commonly recycled, or
"(III) agriculture sources, including orchard tree crops, vineyard, grain, legumes, sugar, and other crop by-products or residues.
"Such term shall not include closed-loop biomass or biomass burned in conjunction with fossil fuel (cofiring) beyond such fossil fuel required for startup and flame stabilization."
Renewable Energy Production Incentive
The Renewable Energy Production Incentive (REPI) is available to states, political subdivisions and nonprofit electrical cooperatives that produce electric power for sales affecting interstate commerce. Under REPI, the U.S. Department of Energy (USDOE) may provide an incentive to of 1.5 cents per kilowatt-hour, adjusted annually for inflation. The incentive is for production of electricity from biomass resources or from solar, wind, or geothermal sources. Projects must begin operation between October 1993 and September 2003. Payments continue for 10 fiscal years after USDOE determines the project is eligible.
The production incentive authorizes direct payments to project owners from annual congressional appropriations Payment depends on availability of funds. Although the REPI is comparable in amount to the Section 45 production tax credit, congressional appropriations have not been adequate to fully fund payments to qualifying facilities. Because of this uncertainty, developers have been cautious in counting on REPI payments when assessing project economics and have regarded REPI payments more as a "bonus." The incentive expires September 30, 2013.
Volumetric Ethanol Excise Tax Credit
The "American Jobs Creation Act of 2004" (HR 4520) included the Volumetric Ethanol Excise Tax Credit (VEETC), which replaced the previous partial excise tax exemption for ethanol fuel.
Effective January 1, 2005, the federal excise taxes levied on gasoline and ethanol blended fuels will be the same: 18.4 cents per gallon. The federal excise taxes levied on diesel and biodiesel blended fuels will be collected at 24.4 cents per gallon. Most of the revenue collected from these taxes goes to the Highway Trust Fund.
Ethanol blenders are eligible for the new VEETC based on the volume of ethanol used. The amount of the credit is 51 cents for every gallon of ethanol blended with gasoline. The credit is based on the volume of ethanol used and not on the blend rate, so that any blend of ethanol with gasoline is eligible for the credit, including E85 (85-percent ethanol blend).
In addition, the new law created a tax credit for biodiesel. The amount of the credit is $1.00 per gallon for biodiesel made solely from virgin oils derived from agricultural products and animal fats and 50 cents per gallon for all other biodiesel (including biodiesel made from waste oils and fats).
The tax credit is applicable to fuel sold after December 31, 2004. The ethanol tax credit expires December 31, 2010. The biodiesel tax credit expires December 31, 2006.
Tax Credits for Alcohol Fuels
Internal Revenue Code Section 40 allows three types of income tax credit for alcohol fuels: the blender´s credit, the producer´s credit and the small ethanol producer credit. These credits are little-used because they are offset by the amount of excise tax exemption received. These tax credits expire in December 2007.
The small ethanol producer credit is available to ethanol production facilities with annual production capacity not exceeding 30 million gallons per year. The value of the credit is 10 cents per gallon for up to 15 million gallons produced per year.
The blender´s and producer´s credits apply to both ethanol and methanol production from biomass. The value of the credit depends on the alcohol content of the fuel. It ranges from 40 to 60 cents per gallon of alcohol. To claim the credits, the alcohol must be mixed with gasoline or another fuel used in internal combustion engines. Blenders include producers, terminal operators or wholesalers. Companies making retail sales of fuels containing at least 10-percent alcohol at filling stations or that use the fuel directly in a trade or business without a retail sale may claim the tax credit.
Special Depreciation Rules for Biomass Energy Facilities
Short depreciation lives are available for certain biomass energy facilities. A five-year tax life applies to property qualifying as a "small power production facility," which includes facilities that produce electricity from biomass and have a capacity of 80 megawatts or less. A seven-year tax life applies to property used in the conversion of solid waste and biomass into a solid, liquid or gaseous fuel.
Sulfur Dioxide Emission Allowances
The Clean Air Act Amendments of 1990 included incentives to reduce sulfur dioxide (SO2) emissions. Public utilities may receive one emission allowance for each ton of SO2 avoided through efficiency or renewable energy projects. The emission allowance program includes the conservation and renewable energy reserve, which is a bonus pool of emission allowances to reward utilities for new renewable energy projects. Utilities may reduce SO2 emissions by curtailing generation from facilities that emit SO2 if the curtailments are offset by efficiency or renewable energy projects.
The program of SO2 emission allowances is an incentive for the development of renewable energy projects, including biomass energy projects. Fuel-switching is one way for utilities to reduce SO2 emissions at coal-fired power plants. At generating facilities using high-sulfur coal, co-firing with biomass can reduce SO2 emissions.
Carbon Offsets
Under the Energy Policy Act of 1992, public utilities may voluntarily report actions undertaken to reduce or sequester greenhouse gas emissions. Industry participants in the U.S. Climate Challenge Program, sponsored by the U.S. Environmental Protection Agency, have made non-binding commitments to reduce or sequester these emissions. Actions to reduce greenhouse gas emissions can include biomass energy projects such as projects that divert biomass fuels from landfills or that use landfill gas to generate electricity.
A trading program for greenhouse gas emission allowances, similar to the trading program for sulfur dioxide, was discussed at the Kyoto environmental conference in 1997. Such a trading program has not been adopted. However, voluntary reporting provides a baseline from which to measure future reductions that may help establish an entitlement to allowances under a future trading program.
Clean Fuels Deduction
Internal Revenue Code Section 179A provides an income tax deduction for qualified clean-fuel vehicles and refueling property. A "clean fuel" includes any fuel containing at least 85-percent alcohol. The deduction ranges from $2,000 to $100,000.
Alternative-Fuel Fleet Requirements
The Energy Policy Act of 1992 requires the use of alternative-fuel vehicles in fleets owned and operated by federal, state and municipal governments, and by companies involved in alternative-fuels production, distribution or marketing. Executive Order 12844 expanded the purchase requirements for alternative-fuel vehicles in federal fleets.
A national goal under the Act is a 30-percent displacement of petroleum motor fuel consumption by the year 2010. Replacing gasoline with alternative fuels in cars and trucks would reduce petroleum fuel use. Replacement fuels may include transportation fuels produced from biomass, such as ethanol, methanol, biodiesel and hydrogen. Other alternative fuels include electricity, natural gas and propane.
To stimulate production of alternative-fuel vehicles and development of an alternative-fuel infrastructure, the Energy Policy Act requires new fleet purchases to include alternative-fuel vehicles. Seventy-five percent of new light-duty vehicles purchased by state governments must be alternative-fuel vehicles. Alternative-fuel vehicles must make up 90 percent of new light-duty fleet purchases by companies involved in alternative fuels production, distribution or marketing.
The Act provides tax incentives for buying alternative-fuel vehicles, for converting conventional gasoline vehicles to alternative fuels and for development of retail service stations. The incentives phase out in 2004.
Clean Air Act Clean Fuels Program
The Clean Air Act Amendments of 1990 require certain fleet operators to use clean-fuel vehicles in 22 metropolitan areas that have significant air quality problems. A "clean-fuel vehicle" is a vehicle that meets low emission vehicle standards or better and operates on the fuel used for certification. Clean fuels include alternative fuels, oxygenated fuels and reformulated gasoline.
Unlike the Energy Policy Act, which was intended to accelerate the use of alternative fuels, the primary goal of the Clean Air Act is to improve air quality through reduced emissions of pollutants. The Clean Air Act program applies only to fleets in certain ozone or carbon monoxide non-attainment areas. In contrast, the Energy Policy Act alternative-fuel fleet requirements apply nationwide.
|
|
| |
|
|
