Manufacturers Worse Off Under Kerry-Boxer Climate Bill Emissions Allocation Scheme

On Friday, October 23rd, the EPA released its scoring of the Clean Energy Jobs and American Power Act (S. 1733), also referred to as the Kerry-Boxer Climate Bill. The EPA found that the costs of Kerry-Boxer do not differ greatly from the Waxman-Markey climate bill. Both bills are expected to cost around $100 per household. However, this analysis does not fully account for energy efficiency provisions, which ACEEE estimates could save as much as $36 billion by 2030.

On the same day, Senator Boxer released the Chairman's Mark of the Kerry-Boxer bill. This version filled in some of the major sections left out of the original bill. One of the most anticipated sections was the greenhouse gas emissions allocations. The percentage allocations for "energy-intensive, trade-exposed" (EITE) industries are almost the same as the House-passed Waxman-Markey bill, except the Senate bill allocates slightly more allowances in the early years (4% instead of 2% in 2012 and 2013). However, there are about 1% fewer allocations in the Senate bill because it has a slightly stricter emissions cap. Much more importantly, about 20% of lifetime allowances are set aside for other purposes before the rest of the allocations are divvied up. Even though EITE industries receive more allowances in the first two years, the Senate bill will result in about 15% less allowances than the House bill. The Senate bill gives about 6% of all allowances over the life of the bill to EITE industries, while the House bill gives about 8%.

Both the Waxman-Markey and the Kerry-Boxer bills compel the program administrator to determine eligible facilities based on the following criteria: Any manufacturing facility that has either an Energy Intensity or a Greenhouse Gas Intensity of at least 5% AND has a Trade Intensity of at least 15% is eligible. Additionally, any facility has an Energy Intensity or a Greenhouse Gas Intensity of at least 20% is also eligible. It should be noted that only about 1.3% of US manufacturing facilities would be directly affected by a carbon cap.

Definitions:
- Energy Intensity: $energy / $shipments;
- Greenhous Gas Intensity: (20 * Tonnes-CO2e) / $shipments;
- Trade Instensity: ($imports + $exports) / ($imports + $shipments) of the sector;

However, there are still issues with administrability, particularly data collection, that have yet to be properly addressed. In many cases, data for each industry (at the six digit NAICS code level) is not readily available, and current estimates often use surveys such as the Manufacturing Energy Consumption Survey, which are not designed to provide information with the precision required.

Solicitation for Grant Applications to Develop CHP Projects in Pennsylvania

From the EPA CHP Partnership:

The EPA CHP Partnership is informing its Partners of an important funding opportunity. The Pennsylvania Department of Environmental Protection has issued grant solicitations designed for the purchase and installation of renewable energy and energy efficiency equipment, including CHP. The grant program is called Pennsylvania Green Energy Works.

Applications are due by 4:00 P.M. EDT on October 9, 2009.

A collective total of up to $52 million will be available under four Pennsylvania Green Energy Works solicitations with $11 million allocated for CHP. All funding for this program is Federal funding appropriated by The American Recovery and Reinvestment Act of 2009.

Projects must comply with the following in order to be funded:

• All projects must be physically located in Pennsylvania.
  
• The project must result in the creation or retention of part-time or full-time temporary or permanent jobs.
  
• The application must contain letters supporting the financial commitment for at least 25 percent of the cost of the project. These letters of commitment must be from both the applicant and any outside sources of funding, including clear documentation of amounts from each source. Monies "applied for" from other sources may not be included. Other DEP program funds cannot be used to comply with the project match.

For more information on the solicitation, including eligible projects, instructions for how to apply, and application evaluation considerations, visit the Pennsylvania Green Energy Works CHP Solicitation.

Solicitation for Applications to Develop CHP Energy Facilities Serving New Jersey Commercial and Industrial Customers

From the EPA CHP Partnership:

The EPA CHP Partnership is informing its Partners of an important funding opportunity. The New Jersey Board of Public Utilities in consultation with its Business Energy Ombudsman issued a solicitation for applications to develop CHP energy facilities serving New Jersey commercial and industrial customers. This solicitation is to encourage the development of CHP electrical and thermal energy generation projects. The projects must serve commercial and industrial facilities in New Jersey.

The solicitation has a total of $60 million available for grants. The amount of the grant will be based on the actual electric and thermal energy production on an annual basis which shall begin upon the commencement of operations of the CHP project. The grant amount will be calculated based on a 75 percent capacity factor over four years.

• The CHP project shall serve a commercial, institutional, or industrial electricity customer in New Jersey with electric demand of at least 750 kilowatts, or such level of demand as subjects the customer to payment of a Retail Margin.
• The CHP project shall establish by contract or other arrangement that the electric output generated by the CHP system, to the maximum extent feasible, be consumed at the project site by a facility located at the site and that any surplus power produced that is not needed by that facility may be sold into the interstate PJM grid.
• The CHP project shall have an electric generating capacity of greater than 1 MW.
• The CHP project shall be designed to achieve thermal efficiency levels of at least 65 percent for facilities with up to 20 MW of electric generating capacity, and at least 70 percent for facilities with electric generating capacity greater than 20 MW. An existing facility that does not currently achieve the applicable thermal efficiency level shall be eligible to receive a grant if the CHP system will result in achieving thermal efficiency levels of at least 65 percent for facilities with up to 20 MW of electric generating capacity, and at least 70 percent for facilities with electric generating capacity greater than 20 MW.

For more information on the solicitation, including instructions for how to apply, visit the New Jersey Economic Development Authority's Web site.

Department of Treasury Grant Guidance

From the EPA CHP Partnership:

...The U.S. Department of Treasury has issued guidance for grants in lieu of tax credits for energy production facilities contained in the American Recovery and Reinvestment Act (ARRA) of 2009.

The Department of Treasury is not yet accepting applications. This information has been released to allow companies to prepare in advance for submitting a grant application. Applications may only be submitted after the facility to which the application relates is placed in service, or is under construction.

Section 1603 of ARRA allows eligible entities that place in service specified energy production facilities to apply for grants from the U.S. Department of the Treasury in lieu of claiming applicable investment and production tax credits. For eligible CHP projects, the Department of Treasury will make payments to qualified applicants in an amount equal to 10 percent of the system cost. There are also specific provisions for microturbine and fuel cell projects. Eligible microturbine projects can receive 10 percent of the system cost, but the maximum amount of the payment may not exceed an amount equal to $200 for each kilowatt of capacity. Eligible fuel cell projects can receive 30 percent of the system cost, but the maximum amount of the payment may not exceed an amount equal to $1,500 for each 0.5 kilowatt of capacity.

Applications may only be submitted after the facility to which the application relates is placed in service, or is under construction. A completed application will include the signed and complete application form; supporting documentation; signed Terms and Conditions; and complete payment information. All applications must be received before the statutory deadline of October 1, 2011. For a facility placed in service in 2009 or 2010, applications must be submitted after the facility has been placed in service and before October 1, 2011. Treasury will review the applications and make payment to qualified applicants within 60 days from the date the completed application is received by Treasury. For a facility not placed in service in 2009 or 2010 but for which construction began in 2009 or 2010, applications must be submitted after construction commences but before October 1, 2011. If the facility has been placed in service at the time of the application, Treasury will make payments to qualified applicants within 60 days from the date the completed application is received. For the facility not yet placed in service at the time of the application, Treasury will review such applications and notify the applicant if all eligibility requirements that can be determined prior to the facility being placed in service have been met.

For more information including the guidance document, terms and conditions, and a sample application, please visit the U.S. Department of Treasury’s Web site at: http://www.treas.gov/recovery/1603.shtml.

Questions about the program and the application process at: 1603Questions@do.treas.gov.