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Energy Act Roundup (long)
Aug 13, 2005 (From the CalCars-News archive)
CalCars-News
This posting originally appeared at CalCars-News, our newsletter of breaking CalCars and plug-in hybrid news. View the original posting here.
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I've been waiting until the dust settled to send a report around. Though H.R.6, the Energy Bill is very much a mixed bag, as you'll see below, it does contain the first substantive provisions that can benefit development and commercialization of plug-in hybrids.

PHEV advocates, especially in California, Washington, DC and Texas, and from other locations, worked together effectively, along with individuals from many other organizations to reach individual members of Congress, the bipartisan Centrist Coalition in the Senate, conference members and their staffs. And many CalCars-News subscribers contacted key officials at a critical time. All this sets the stage for work on the implementation regulations and for future legislative initiatives.

Felix Kramer

CONTENTS BELOW:

1. Summary by Anne Korin of SetAmericaFree.org of the pluses and minuses of the entire bill.
2. Statement by Sen. Barack Obama about his $40 million provision funding research for plug-in hybrid, flexible-fuel, hydrogen cars that can get 500MPG of gasoline. (Sen. Obama's staff have assured us they intend to monitor this program to make sure it achieves its goals.)
3. Excerpts from an August 3 report by Dean Taylor, Electric Transportation Analyst at Southern California Electric on specific provisions, written before the Transportation or Energy bills were signed. This is very specific, and if you decide to sign off before digesting all the details, Dean and the other hardworking members of the team will be sure to stay on top of it all!
4. Not included but worth reviewing is the summary by the Electric Drive Transportation Association (EDTA): http://www.electricdrive.org/­index.php?tg=articles&topics=127

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August 12, 2005 Update from SetAmericaFree.org

The sum of all lobbies. After years of deliberations and failed attempts to reach accord on energy legislation the U.S. finally has an energy bill. That's the good news. The bad news is that the 1,725 page bill does almost nothing to drive down record-high gasoline prices, reduce America's dependence on imported oil and protect us from the harming economic impact of supply interruptions. Instead, the bill provides billions of dollars of tax breaks, royalty relief and loan guarantees to the oil and gas industries at a time that these industries are reporting the largest quarterly profits of any corporation in our history. "Right now Adam Smith is spinning in his grave so fast that he would qualify for a subsidy in this bill as an energy source," said Rep. Edward Markey of Massachusetts.

It's important to keep in mind that unlike in the 1970s, when a significant portion of U.S. electricity was generated from oil and shifting to other power sources such as nuclear, coal, solar, wind and so forth could make a dent in our oil consumption, today only 2% of U.S. electricity is generated from oil so the provisions in the energy bill intended to encourage those sectors essentially do nothing to reduce our dependence on foreign oil - we've already weaned our electricity supply from foreign oil. Today, two thirds of our oil consumption is in the transportation sector. Two thirds of that is gasoline, and most of the rest is diesel. That means that cars and trucks account for most of the oil consumption in the U.S., which in turn means that to reduce our dependence on foreign oil we need to diversify our fuel supply beyond oil based fuels while also making vehicles that stretch each gallon of fuel further. Suffice it to say that the energy bill shied away from focusing on the manufacturing side of the transportation sector. It's not that the bill is all bad. It contains tax breaks for purchasers of fuel-efficient cars, a program to encourage commercialization of hybrids and plug-in hybrids which are also flexible fuel vehicles, and provisions to expand domestic biofuel production. But this is hardly enough to make a dent in the barrel.

Unfortunately, the House failed to adopt some of the provisions in the Senate version. Today our oil consumption stands at 21 million barrels a day (mbd,) a quarter of total world demand. Including everything, the U.S. holds just over 3% of world oil reserves. A Senate call for a national commitment to reduce oil consumption by a mere one million barrels a day by 2015 (by which time absent action our oil consumption is projected to grow by 4 mbd as compared to today) was killed by the House conferees. So was the provision to label tires for fuel efficiency so that motorists can make an informed decision about which replacement tire to buy (good tires can reduce gasoline consumption by 4%.) The result is an energy bill that lacks the vision and the focus necessary to wean the nation from the ruinous dependence on imported oil. "This bill is a lobbyists' paradise and a citizens' nightmare," wrote the Philadelphia Inquirer. Naturally many of the lawmakers from both parties who spent sleepless nights deliberating the bill think differently, as does President Bush who said at the signing ceremony: "I'm confident that one day Americans will look back on this bill as a vital step toward a more secure and more prosperous nation that is less dependent on foreign sources."

We are told that the bill is the best available compromise to stimulate U.S. energy production and conservation in coming decades. But history shows that compromise alone is not enough to solve what is a pressing national security emergency. Problems of such scale can only be solved through boldness, clear vision, determination and, above all, leadership. If this energy bill is the best Congress can do to address the problem maybe its time for Americans, 93% of whom believe that oil dependence is a serious problem, to remind their representatives who they really work for.

The Set America Free Coalition, for its part, will continue to work with its allies in Congress to develop a sound and serious energy policy to address our growing dependence on foreign oil. The energy bill's failure to address the problem calls for a discrete oil savings bill which sets a national goal and embarks on accomplishing it. As oil prices break through $65 a barrel America cannot afford to do less.

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Friday, July 29, 2005

FOR IMMEDIATE RELEASE
Washington Contact: Robert Gibbs or Tommy Vietor, (202) 228-5511
Illinois Contact: Julian Green, (312) 886-3506

Obama Says Energy Bill Helps Illinois by Doubling Ethanol Use, Investing in Clean Coal

WASHINGTON - U.S. Senator Barack Obama Friday voted in favor of the comprehensive energy bill, saying it will help Illinois and start America down the path to energy independence by doubling ethanol use, greatly increasing the availability of E85 ethanol pumps, and investing in combination plug-in hybrid and flexible-fuel vehicles, as well as clean-coal technology. However, he warned that bolder action is required if lawmakers are really serious about dealing with the high energy costs that are plaguing American consumers.

"This bill, while far from a solution, is a first step toward decreasing America's dependence on foreign oil," said Obama. "It requires that 7.5 billion gallons of ethanol be mixed with gasoline by 2012. That's 7.5 billion gallons of fuel that will be grown in the corn fields of Illinois, and not imported from the deserts of the Middle East. The bill will also help triple the number of E85 ethanol fueling stations in the next year by providing a tax credit for their construction. This will help the millions of people who already drive flexible-fuel vehicles to fill their tanks with fuel made from 85 percent ethanol that is 50 cents cheaper than regular gasoline."

"I am also pleased that the bill includes funding I requested for research into combination plug-in hybrid and flexible fuel vehicles that could travel up to 500 miles per gallon of gasoline, as well as more investment into clean-coal technology."

The Energy bill will do the following:

  • Create a Renewable Fuels Standard that will nearly double the amount of ethanol used by 2012.
  • Provide up to a $30,000 tax credit for the construction of E85 ethanol fueling stations.
  • Provide a $1.8 billion tax credit for investments in clean-coal facilities.
  • Provide $85 million to Southern Illinois University, Purdue University, and the University of Kentucky for research and testing on developing Illinois basin coal into transportation fuels.
  • Provide $40 million for research on combined plug-in hybrid and E85 flexible fuel vehicles that have the potential to drive 500 miles per gallon of gasoline used.
  • Provide incentives to promote biofuels from agricultural resources.

While voting for the bill, the Illinois Senator also said he believes that the legislation still falls short of what could and should be done to put America on the path to energy independence.

"Although this a step forward, it's not a very big step," said Obama. "The Department of Energy predicts that American demand will jump by 50 percent over the next 15 years. Meanwhile, the conservative Heritage Foundation says this bill will do virtually nothing to reduce our dependence on foreign oil. And it won't reduce the price of gasoline paid by hardworking Americans. Even President Bush and supporters of the bill in Congress concede as much."

"We could have done more today, and we should do more in the future. We must accept and embrace the challenge of finding a solution to our dependence on foreign oil as one of the most pressing problems of our time. It won't be easy and it won't be without sacrifice, but we owe it to ourselves and to our children so that we can bring down gas prices, protect our environment, and strengthen our national security. This should be one of our top priorities in America."

"So, I vote for this bill reluctantly today, disappointed that we have missed our opportunity to do something bolder that would have put us on the path to energy independence. This bill should be the first step, not the last, in our journey towards energy independence."

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Analysis by Dean Taylor, Southern California Edison

The Set America Free PHEV ad hoc team did very well - considering how late we started to try and get things done. And we have many opportunities to work on the details of the Energy bill programs so the PHEVs get a good deal.

I do know that some of the report language we and others had circulated on Section 703 helped and caused the conferees to make some changes to the wording of Section 703 that helped us. This section allows utilities and state government to reduce petroleum in about any way as an alternative path under the EPAct fleet requirement. It is so broad that it may not result in HEVs and PHEVs in these fleets, but fleets that want to do them can. See the end of this e-mail for more details on Section 703 as it relates to existing law.

The other big news: Section 911, which funds billions in DOE vehicle efficiency programs ,specifically mentions plug-in HEVs for the first time. And as you know the bill also has Section 706 by Senator Obama which authorizes $40 million in RD&D for plug-in HEVs and flex fuel HEVs. To my knowledge this are the first times that PHEVs have ever been mentioned in a federal law on R&D. (NOTE- they are in the 1992 Energy Policy Act tax breaks as HEVs primarily powered by electricity).

Plug in HEVs also should be able to compete for almost all the sections I mention below... Some examples:

  • All of the fuel cell work can also be for plug-in hybrid fuel cells.
  • Or, the 10 year $3 billion new grant program by USEPA in section 712 to promote domestic production of HEVs and advanced diesel could and should be structured to promote PHEVs as the very best and deserving of the biggest consumer or manufacturer incentives (section 712 is broadly written).
  • At minimum the medium and light duty PHEV projects should see large tax credits under Section 1341 and we should ask EPA to measure the fuel economy not just on gasoline only mpg of the PHEV, but to generously include the probability of electric miles. While the statute is silent, EPA could do this if we pressed them.
  • Several other grant programs should allow PHEVs
  • Several new studies and commissions have the opportunity to examine and hopefully recommend PHEVs.

Here are some details on the other sections of the bill that caught my eye. ---------------

Overview of the Dominici-Barton Energy Policy Act of 2005 impact on vehicles and fuels:
Summary - The Energy bill (H.R. 6) is on its way for signature by the President. It includes new flexibility for fleets under the 1992 EPAct alternative fuel vehicle purchase requirements. It includes tax credits and grants for hybrid EVs alternative fuel vehicles (AFVs) and fuel cell vehicles (FCVs) as well as tax credits for some types of alt fuel infrastructure and fuel use and billions for research and development for advanced technology vehicles. It also includes about $1.5 billion for new grant programs for fleets to reduce their diesel emissions, and demonstrate advanced technology clean vehicles. It has a substantial program for investment in hydrogen and fuel cell vehicles as well as a new loan guarantee program to encourage innovative vehicle production (including components).

Tax credits and major grant programs:

  • Section 1341 Alternative Motor Vehicle Credit:
    • The fuel cell vehicle credit is up to $8000 for light duty vehicles, up to $10,000 for medium duty vehicles, and up to $40,000 for heavy duty vehicles.
    • The hybrid EV and advanced lean burn diesel vehicle tax credits for light duty vehicles are between $640 and $3400 based a fuel savings For medium duty HEVs the tax credit is up to $7500, and for heavy duty HEVs the tax credit is up to $30,000, fuel economy gains and the incremental cost of the HEV. The credit expires Dec 31, 2010. The credit phases out in the second calendar quarter following the first calendar quarter in which the number of qualified vehicles manufactured by the manufacturer sold in the United States after December 31, 2005 is at least 60,000. The applicable credit for the first 2 quarters after is 50% decreasing to 25% in the 3rd and 4th quarters following and ending thereafter.
    • The alternative fuel vehicle tax credit is up to $5000 for light duty vehicles, up to $10,000 for medium duty vehicles, and up to $40,000 for heavy duty vehicles. Expires in 2010. Alternative fuel is more narrowly defined to include CNG, LNG, propane, hydrogen, or 85% methanol blends. Electricity, ethanol and other types of AFV are excluded. The conferees rejected tax credits for low speed (neighborhood EVs) and full size battery EVs, even though the Senate proposed this.
    • For all of the credits above, they expire on Dec 31, 2010 and for non-tax paying entities, the seller of the vehicle can take the credit.
  • Section 1342 Alternative Fuel Vehicle Refueling Infrastructure
    • The alternative fuel vehicle refueling property credit is 30% of the cost up to $30,000 for businesses and $1,000 for others such as residential use. The definition of AFV here is also narrower than usual including only biodiesel blend, ethanol, CNG, LNG, propane, and hydrogen. Electricity, methanol and other alternative fuels are excluded. For non-tax paying entities, the seller of the fueling equipment can take the credit. The existing $100,000 tax deduction for alt fuel vehicle refueling infrastructure expires on Dec 31, 2005.
  • Fuel Use Tax Credit -NOTE - shifted from Energy Bill to section 1113 of the Transportation Bill HR 3 which is on the Presiddent's desk.
    • A portion of the Senate's CLEAR ACT was shifted to the Highway bill. In it several fuels including CNG, LNG, propane, and hydrogen receive a 50 cents per gasoline gallon equivalent excise tax credit for three years. However, partially offsetting this is a raise in the motor fuel excise tax from 4.3 cents per gallon to 18.3 cents per gallon for many of the fuels. Biodiesel has a similar fuel use tax credit under existing law for a limited time.
  • Section 1343 Reduced Federal Fuel Tax on Emulsified Diesel-Water Fuel Blends.
    • The federal tax is reduced from 24.3 cents to 20 cents per gallon, if the water content is 14%.
  • Section 706 Joint Flexible Fuel/Hybrid Commercialization Iniitiative
    • $40 million for corporate, non-profit and university grants for development of flex fuel HEVs and plug-in HEVs
  • Section 711 Authorizes DOE to accelerate improvement of batteries and other rechargeable energy systems, power electronics, hybrid system integration, and other systems used in HEVs. No additional money is authorized.
  • Section 911 Authorizes vehicle efficiency systems research including hybrid EVs and plug-in HEVs as part of very broad $2.5 billion 3 year RD&D effort.
  • Section 712 Creates a $300 million/year EPA program (for consumers and/or manufacturers) of grants to encourage domestic production and sales of HEVs and advanced diesel vehicles (2006-2015) Includes foreign manufacturers with domestic production.
  • Section 721 - 723 - Clean Cities $200 million pilot program to acquire alt fuel vehicles, NEVs, medium and heavy duty hybrids, fuel cell vehicles, ultra low sulfur heavy duty diesels, and related infrastructure, operation and maintenance at 30 demonstration sites.
  • Sections 742, 791 - 797 Cleaning up Diesels- about $230 million per year. Section 742 - Diesel Truck Retrofit and Fleet Modernization Program
    • $100 million over 3 years for a grant program to states. Preference is given to ports and other major hauling operations. AFVs are likely to qualify, as preference is given to technologies which achieve the greatest emission reductions. Sections 791 to 797 creates $1 billion 5-year new EPA grant program to states, locals and non-profits for reducing emissions from diesel engines.
  • Section 1601 and following sections. Creates an interagency task force to develop a climate change strategy to reduce greenhouse gas intensity, develop greenhouse gas reducing technologies, and promote international markets for greenhouse gas reducing technologies There is an entire title on ethanol being required in gasoline. So ethanol probably becomes the biggest alt fuel because of this blending requirement. Also there are several biofuels RD&D sections, including cellulosic biofuel.

Other sections of interest

  • HOV lane Access section moved to Transportation bill H.R. 3 which is on the President's desk EEnables existing California law to go into effort. The CA law allows EVs, NGVs, other AFVs and HEVs (over 45 mpg) to gain access to the carpool lane even with a single occupants.
  • Section 752 - EPA Report on Mobile emissions trading in non-attainment areas to offset emission requirements for stationary sources.
  • Section 756 - Reduction of engine idling of diesel heavy duty vehicles and diesel truck refrigeration units using electrification or auxiliary power unit (APU) technologies. This section authorizes $140 million in funding, requires several new studies, and changes federal weight requirements to benefit APUs.
  • Section 915 creates a $12 million three year program on secondary use of batteries from EVs.
  • Section 1823 on alternative fuels reports to see if biodiesel and hythane can become major, sustainable alternative fuels. Section 757 creates a Biodiesel testing program with $25 million over 5 years. Sections 923 and 941 create very large biofuels RD&D programs. Section 943 creates production incentives for cellulosic biofuels.
  • Section 771 - $3.5 million additional funds/yr for NHTSA fuel efficiency rulemaking (06-10) to increase vehicle fuel economy.
  • Section 772 - Extension of CAFE bonus credits for AFVs, bi-fuel and flex fuel vehicles.
  • Section 1701 to 1704 sets up loan guarantees for innovative technologies to provide up to 80% of the cost of a wide range of technologies that reduce or sequester greenhouse gases and air pollutants and employ significantly improved technologies. Examples of technologies eligible include production facilities for HEVs, and advanced diesel vehicles, efficiency end use energy technologies, and many others.
  • Section 801 et al authorizes a significant $4 billion RD&D program for mobile and stationary fuel cell and hydrogen. This benefits plug-in hybrid fuel cells, and other technologies that enable FCVs. Several other sections benefit hydrogen R&D including Sections 974, 965, 952, 933, 931.
  • Section 731 - Fuel Cell Transit Bus Demonstration $50 million over 5 years.
  • Section 741- Replacement/Retrofit of School Buses (alt fuel, hydrogen and clean diesel) in a 5-year, $275 million program.
  • Section 743 - Fuel Cell School Buses $25 million over 5 years for a cooperative demonstration program with local government and private developers
  • Section 781 and 782 - Federal and state fleet procurement of fuel cell vehicles and hydrogen energy systems - $105 million between 2008 and 2010 is authorized.
  • Section 783 requires federal procurement of stationary, portable and micro fuel cells and authorizes $350 million over 5 years.
  • Section 759 requires dual fuel vehicles manufactured after September 1, 2006 to carry a label on their fuel compartments describing their flexibility
  • Section 773 - Requires NHTSA feasibility study on 2014 potential for significant reduction in fuel consumed by automobiles.
  • Section 1421 1424 Creates US commission to make recommendations of a coordinated energy policy sets up a new commission for US, Mexico and Canada to achieve energy Self sufficiency by 2025.
  • Sections 1819, 1820, 1826 ,1825 and 773 on hydrogen and fuel cell studies
  • Section 751 - $65 million public private program over 3 years to develop new lower emission, fuel efficient technologies for railroads.

Section 703 on Alternative Compliance for Alternative Fuel Provider and State Government Fleets Subject to the Existing EPAct Fleet Requirements. Background

  • Utilities today must comply with federal law passed during the 1992 Persian Gulf War that requires 90 % of our new light-duty vehicle purchases be alternative fuel vehicles (AFVs).
  • Existing law also provides flexibility by allowing purchase of credits from other fleets that have over-complied with light, medium or heavy-duty AFVs.
  • Existing law also allows a fleet to only purchase 45% of new light-duty vehicles as AFVs if the fleet purchases a certain annual amount of biodiesel-blended fuel At least 20% biodiesel and 80% traditional diesel which is commonly called B20. for use in any of its vehicles. New provisions:
  • HR. 6 in Section 703 adds a new type of flexibility called a waiver. HR 6 covered fleets may receive a waiver from DOE of EPAct purchaser requirements upon showing that the fleet will achieve a reduction in the annual consumption of petroleum fuels by the fleet equal to the reduction that would result from 100% cumulative compliance with the existing section 501 fuel use requirement.
  • Section 703 was intentionally written to be technology and fuel neutral. It is widely expected that any type of petroleum reduction by a fleet would be allowed by DOE including hybrid electric vehicles of all sizes, alternative fuel forklifts, fuel efficient conventional vehicles, trip reduction, etc.
  • The new section 703 which requires DOE to grant waivers apparently will require rulemakings on the details. Unlike most bills, Congress apparently is not publishing a document on its intent behind any of the sections in H.R. 6. Issues include:
    • How DOE will set fleet' baseline? E.g. can it include existing actions?
    • Can a fleet use a combination of waivers, AFV purchases/ credits and special biodiesel credits?
    • Can a fleet begin purchasing HEVs and electric forklifts or other actions immediately? Rejected provisions
  • HR. 6 keeps all the provisions of existing EPAct in tact without any changes for utilities.
  • Efforts to sunset the EPAct fleet requirements were rejected by the Senate.
  • Efforts by biodiesel advocates to allow 100% compliance with the existing generous biodiesel credits (see above) were rejected by the conferees.
  • Although the Senate bill expanded existing EPAct rules so that one purchase of a hybrid EV would earn in most cases as much credit as buying existing AFVs, the conferees rejected this. This provision was supported by utilities, automakers and environmental groups but opposed by other interests. Other EPAct sections
  • Section 701- Dual Use Vehicles federal fleets using flexible fuel vehicles including ethanol/ gasoline, plug-in HEVs must use alternative fuel unless the agency receives a waiver. Utilities are already required to do this. Section 702 requires federal agencies to spread the incremental cost of AFVs across all other vehicles.
  • Sections 704, 705, &1831 Review of 1992 EPAct fleet AFV purchase requirement programs' impact on alt fuel vehicle development, availability, costs and several other factors.
  • Section 707 Creates an EPAct exemption for utilities' emergency vehicles -- including vehicles directly used in the emergency repair of transmission lines and in the restoration of electricity service following power outages, as determined by the Secretary.


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