Deatherage A Green New Deal


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This presentation describes the federal incentives under the Stimulus Bill for renewable energy, energy efficiency, carbon capture and storage, and alternative transportation fuels. There are significant incentives available for these and other related developing technologies and companies engaged in these projects.

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Deatherage A Green New Deal

  1. 1. A Green New Deal? The Stimulus Bill, Climate Change, and Opportunities for Renewable Energy and Other Green Technologies Scott D. Deatherage Partner, Thompson & Knight LLP
  2. 2. President Obama on New Approach to Energy [T]he possibilities of renewable energy are limitless. We’ve heard promises about it in every State of the Union for the last three decades. But each and every year, we become more, not less, addicted to oil ─ a 19th-century fossil fuel. 2
  3. 3. Climate Change Regulation Timeline 2005 1992 EU UNFCCC ETS 2009-2010 2003 1997 2007 2008 2006 --US Climate Regional Kyoto --Mass v. US Pres. --California Bill Change Protocol Greenhouse EPA Election --Western Legislation Gas --Lieberman- Climate Initiative 2009 --Post-Kyoto Initiative Warner US GHG Climate Voted Out Reporting Change of Sen. Regulation Treaty Comm. --Greenhouse Gas Reporting Legislation --Midwestern Greenhouse Gas 3 Reduction Accord
  4. 4. What to Expect This Year Nationwide Renewable Energy Portfolio Standard Bill Requiring 10% by 2012 and 25% by 2025 of electricity to come ► from renewable energy sources Climate Change Bill Cap and trade program to limit greenhouse gas emissions ► EPA issued proposed greenhouse gas emission reporting rule ► to be finalized by June 2009 If Congress does not act, Obama Administration may do so under the Clean Air Act after U.S. Supreme Court decision in Massachusetts v. EPA EPA to allow California and other states to set limits on ► greenhouse gas emissions from vehicles May lead to EPA rules on greenhouse gas emissions under ► Clean Air Act 4
  5. 5. What Will This Mean? Carbon-Constrained Economy Greenhouse gas emissions will be limited and every ► stage of industrial and commercial activity will be evaluated for modification to reduce these emissions or reduce energy use Second Industrial Revolution Biggest change since the industrial revolution ► 5
  6. 6. Understanding the Business Between Incentivized Activity and Climate Change Renewable Energy Carbon Alternative Energy Transportation Efficiency Credits Fuels Carbon Capture and Storage 6
  7. 7. Potential Future Carbon Market US market predicted to rise quickly to $150 to $300 billion Global market by 2020 predicted by some to rise to $2 to $3 trillion No one knows what actually size may be Probability it will be very large Thus, individuals and firms that understand this and act on accordingly may find tremendous business opportunities 7
  8. 8. “Stimulus Bill” or the American Recovery and Reinvestment Act of 2009 (ARRA) Four Main Areas Renewable Energy: wind, solar, biomass, geothermal, ► etc. Energy Efficiency: Use less electricity, fossil fuels, etc. ► Carbon Capture and Storage: capture CO2 primarily and ► store or sequester underground (where it originated) Alternative Transportation Fuels: ethanol, biodiesel, ► natural gas, hydrogen, electricity, etc. 8
  9. 9. Magnitude of Energy-Related Incentives Appropriations for projects is about $35 billion Other funds may be obligated from other sources Tax incentives are not included in this number Loan Guaranty program equals $6 billion in government funds but is designed for a ten-fold private multiplier and this would equal $60 billion in total loans Clean Renewable Energy Bonds and Energy Conservation Bonds equal $4 billion Beyond the DOE, the Treasury Department has the authority to approve grants in lieu of tax credits, and no limit is place on this program 9
  10. 10. Tax Incentives Extends deadlines for § 45 Production Tax Credits (PTC) Wind projects extended through Dec. 31, 2012 ► Biomass, geothermal, landfill gas, waste-to-energy, ► hydropower, and marine renewables projects extended through Dec. 31, 2013 10
  11. 11. Tax Incentives Project investors in projects previously qualifying for § 45 PTCs may elect to take § 48 Investment Tax Credits (ITCs) Current law allows § 45 PTC to be taken over a 5 or 10 year ► period (10 years for wind) Current law allows § 48 ITC to be taken in the year the project is ► placed in service (30% credit for solar, fuel cell, small wind property; 10% credit for other qualifying technologies) ARRA provides that technologies previously qualifying for the ► PTC (including wind, biomass, geothermal, landfill gas, waste- to-energy, hydropower, and marine facilities) may now claim a credit equivalent to the 30% ITC 11
  12. 12. ARRA Allows the Treasury Dept. to Issue a Grant in Lieu of Tax Credits Treasury will provide grants in lieu of § 48 ITCs Projects eligible for § 45 PTCs can be converted to ITCs to qualify for grant program Construction must begin prior to 12/31/2010 ► Projects must be placed in service before: ► 2013 for wind (30% credit) 2014 for biomass, geothermal, landfill gas, waste-to energy, hydropower & marine renewables (30% credit) 2017 for fuel cell, solar, small wind (30% credit) 2017 for geothermal, microturbine, combined heat & power and geothermal heat pump property (10% credit) 12
  13. 13. Broadening of Opportunity for Public Financing ARRA eliminates a limitation on § 48 tax credits that they be reduced if the property is financed with tax exempt bonds or other public money This increases the ability to use public money to fund qualifying projects and still obtain relevant tax credits 13
  14. 14. Investment Tax Credit for Advanced Energy Manufacturing Investment Tax Credit for Investments in Advanced Energy Manufacturing Equipment, 30% of investment, includes manufacturing facilities and related equipment for: Solar ► Wind ► Geothermal ► Fuel Cells ► Microturbines ► Electric/hybrid Cars, Batteries & Equipment ► Renewable Grids / Smart Grids ► Carbon Capture & Sequestration ► Renewable Fuels Refining or Blending ► Energy Conservation Technologies ► 14
  15. 15. Loan Guarantees Renewable energy loan guarantees of $6 billion in appropriated funds should support at least $60 billion in loans “Rapid Deployment” loan guarantees for renewable energy power generation using current commercial technology, including: Renewable energy systems that generate electricity or thermal energy, and facilities that manufacture related components; and Demonstration or pilot projects using leading-edge biofuel technology that is likely to become commercialized and reduce life-cycle greenhouse gas emissions Transmission projects also covered Loan guarantees for biofuel projects limited to $500 million Construction must commence by Sept. 30, 2011 15
  16. 16. Electric Transmission Funding for transmission modernization and smart grid $4.5 billion to DOE for expenses necessary for electricity ► delivery and energy reliability activities: Grid modernization, security and reliability Energy storage R&D and demonstration Energy efficiency measurement Diversifying sources of ancillary services Advancing use of wide-area smart grids 16
  17. 17. Fossil Energy Funds Grants for fossil energy R&D $3.4 billion for the Fossil Energy Research and ► Development program, including: $800 million for selections under DOE’s clean coal round III (which includes petroleum coke fuel input); $1.52 billion in competitive solicitation for a range of industrial carbon capture and energy efficiency improvement projects, including a small allocation for innovative concepts for beneficial CO2 reuse. 17
  18. 18. Examples of Federal Funding of State and Local Programs ARRA flows $11.3 billion dollars through state and local governments for renewable energy and energy efficiency Weatherization program to provide $5 billion to states for low-income families 18
  19. 19. Examples of Federal Programs Federal buildings energy efficiency = $4.5 billon Department of Defense $4.24 billion in funding to improve, repair and modernize ► DOD facilities, renovate Army barracks, and invest in the energy efficiency of DOD facilities $120 million for energy conservation projects, energy ► upgrades, and construction of alternative energy projects, such as wind and solar, at military installations in the United States 19
  20. 20. EPA Funds $211 million announced by EPA for state, local, and tribal governments and nonprofits to implement clean diesel projects that reduce particulate and nitrogen oxide emissions $100 million for Brownfield sites (could be already spent) $200 million underground storage tank cleanups $600 million Superfund Cleanups $4 billion Clean Water Act Revolving Fund $2 billionand Drinking Water Revolving Fund 20
  21. 21. Opportunities for Oil and Gas Companies for Carbon Credit Projects One of the Largest Number of Carbon Credits Issued under the Kyoto Protocol Rang Dong Offshore Oil Field, Vietnam Flared natural gas captured and piped to shore for use UN CDM Executive Board recently granted 4.43 million Certified Emission Reductions (carbon credits) in CO2e Value on European Climate Exchange--approximately 15 euros per CER € 66 million or US $ 103 million 21
  22. 22. Carbon Capture and Storage Alliance Bernstein Report One of the activities that will be ► required to meet global CO2 reduction goals. Injection of CO2 of 7 billion cf by 2015, ► 70 bcf by 2020, and 500 bcf by 2030; and 60 gigatonnes of CO2 by 2030. Injected for enhanced oil and gas ► recovery (could increase yield by 11 million bbl/day). Injected for coal-bed methane recovery ► (increase yield of gas by 3,000 trillion cubic feet). Enhanced oil and gas recovery would offset significant portion of cost of capturing CO2. An enormous number of carbon credits could be generated for use or sale if a CDM method is adopted. 22
  23. 23. GHG Reduction Projects That May Generate Carbon Credits Energy efficiency, such as Fuel switching, e.g., coal to replacing boilers at refinery; natural gas, or biomass for Renewable Energy—wind, fossil fuels; solar energy, geothermal, Capture and flaring or other use and hydropower; of coal-bed methane; Cogeneration; Capture of CO2 from LNG, Biofuels from waste oils (no gas processing plants, coal- approval yet for a biofuel from fired power plants and agricultural crops); injection for enhanced oil and gas recovery, enhanced Projects related to biofuel natural gas recovery from production (e.g., burning of deep coal seams, or into bagasse to produce electricity); deep saline aquifers. Landfill gas to produce electricity or to put in natural gas pipeline; 23
  24. 24. Scott D. Deatherage Partner 1722 Routh Street Suite 1500 Dallas, Texas 75201 214-969-1206 Blog Sites: quot;The New Carbon Cyclequot; and quot;Law and the Environmentquot; 24