Search Penny Hill Press

Loading...

Monday, February 28, 2011

Energy and Water Development: FY2011 Appropriations


Carl E. Behrens, Coordinator
Specialist in Energy Policy

The Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers (Corps), the Department of the Interior’s Bureau of Reclamation, the Department of Energy (DOE), and a number of independent agencies.

Key budgetary issues for FY2011 involving these programs may include the following:
  • the distribution of Corps appropriations across the agency’s authorized planning, construction, and maintenance activities (Title I);
  • support of major ecosystem restoration initiatives, such as Florida Everglades (Title I) and California “Bay-Delta” (CALFED) and San Joaquin River (Title II);
  • alternatives to the proposed national nuclear waste repository at Yucca Mountain, Nevada, which the Administration has abandoned (Title III: Nuclear Waste Disposal);
  • several new initiatives proposed for Energy Efficiency and Renewable Energy (EERE) programs (Title III); and
  • funding decisions in DOE’s Office of Environmental Management. 
Funding for FY2010 Energy and Water Development programs is contained in H.R. 3183, which the House passed July 17, 2009. The Senate passed its version of H.R. 3183 July 29. The Conference Committee issued its report (H.Rept. 111-278) September 30, and the House passed the conference bill October 1, and the Senate October 15. The President signed the bill October 28 (P.L. 111-85).

President Obama’s proposed FY2011 budget for Energy and Water Development programs was released in February 2010. On July 15, 2010, the House Appropriations Subcommittee on Energy and Water Development approved a bill to fund these programs. In the Senate, the Energy and Water Development subcommittee approved a bill on July 20, and the full Appropriations Committee reported out S. 3635 (S.Rept. 111-228) on July 22. On September 30, the Senate and the House passed H.R. 3081 (P.L. 111-242), a continuing resolution that funded government programs at the FY2010 level through December 3. Most recently, P.L. 111-322 extended funding through March 4, 2011. On February 14, 2011, H.R. 1 was introduced, continuing funding through the rest of FY2011 at the FY2010 level, but with many specified exceptions in which funding was reduced.



Date of Report: February 16, 2011
Number of Pages: 57
Order Number: R41150
Price: $29.95

Follow us on TWITTER at
http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail
Penny Hill Press  or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Wednesday, February 16, 2011

ARRA Section 1603 Grants in Lieu of Tax Credits for Renewable Energy: Overview, Analysis, and Policy Options


Phillip Brown
Analyst in Energy Policy

Molly F. Sherlock
Analyst in Economics


Congress created the Section 1603 grant program as part of the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). This program, administered by the U.S. Department of the Treasury, provides cash grant incentives for renewable energy projects. Initially, the Section 1603 grant program was scheduled to expire at the end of 2010. A one-year extension was enacted as part of the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) at an estimated cost of $3 billion. Absent Congressional action, the Section 1603 grant program will expire at the end of 2011.

As of December 6, 2010, grants totaling approximately $5.6 billion had been awarded to 1,495 entities, since Section 1603 became law in February 2009. Wind has received approximately 84% of the grant award value, while solar electric represents approximately 75% of entities that have received grant awards. “Other” technologies (qualifying energy property not represented by wind or solar electricity) have also received grant awards, although the value and number of awards represented by this category is relatively small compared to wind and solar electricity.

Prior to the availability of Section 1603 grants, qualifying renewable energy projects were federally supported primarily through the production tax credit (PTC) or investment tax credit (ITC). It has been common industry practice for renewable energy developers to partner with taxequity investors, where the tax-equity investors offer cash in exchange for project ownership, project cash flows, tax credits, and depreciation benefits. The Section 1603 grant program was motivated by difficult economic conditions and the perceived lack of tax-equity capacity to support renewable energy projects. Analysis of the tax equity marketplace reveals fluctuations in the dollar volume, number of participants, and required rates of return between 2007 and 2010.

Market response, since Section 1603 was established, has been mixed. The solar industry expects a record year of installations in 2010 (approximately 1 Gigawatt), while the wind industry forecasts a 50% decline compared to 2009 (approximately 5 Gigawatts installed in 2010 compared to 10 Gigwatts installed in 2009). It is important to note, however, that many factors influence annual renewable energy installations, the cash grant being just one.

If Congress considers additional extensions to or modifications of the Section 1603 grant program, economic and cost factors may also be taken into account. Grants, as opposed to tax credit, may be a more efficient mechanism for delivering public funds to the renewable energy sector. As is the case with most tax or subsidy programs, however, there are concerns that grants may be going to projects that would have moved forward without added federal incentives.

Finally, this report presents various policy options Congress may want to consider regarding the Section 1603 grant and related tax credits for renewable energy. The first option presented is to allow the grant program to expire. Even if the grant program were to expire, tax incentives would remain available. A second option is to extend the Section 1603 grant program. An extension of the grant program may be considered alongside and extension of the PTC for wind, which is set to expire at the end of 2012. A modification to the ITC and PTC, that could potentially enhance the benefits associated with the existing tax incentives, is presented as a third option.



Date of Report: February 8, 2011
Number of Pages: 38
Order Number: R41635
Price: $29.95

Follow us on TWITTER at
http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail
Penny Hill Press  or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Tuesday, February 15, 2011

Implications of Egypt’s Turmoil on Global Oil and Natural Gas Supply


Michael Ratner
Analyst in Energy Policy

The change in Egypt’s government will likely not have a significant direct impact on the global oil and natural gas markets. There may be some short-term movements in price, mostly caused by perceived instability in the market place, but these would most likely be temporary. However, prolonged instability that raises the specter of spreading to other oil and natural gas producers in the region would likely add to upward price pressures. Although Egypt is considered an energy producer or net exporter overall, its oil and natural gas exports are not large enough to affect regional or global prices. The most serious impact would be on regional recipients of its natural gas exports.

Egypt’s main influence on energy markets is its control of the Suez Canal and the Suez- Mediterranean oil pipeline (SUMED). The current low utilization of these two pieces of infrastructure would likely limit any affect of their closure in the near term. Both the oil and natural gas industry would, over time, find alternative routes to circumvent the canal and pipeline if necessary.



Date of Report: February 11, 2011
Number of Pages: 9
Order Number: R41632
Price: $19.95

Follow us on TWITTER at
http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail
Penny Hill Press  or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

The Market for Biomass-Based Diesel Fuel in the Renewable Fuel Standard (RFS)


Brent D. Yacobucci
Specialist in Energy and Environmental Policy

The market for biomass-based diesel (BBD) fuel, most notably biodiesel, has expanded rapidly since 2004, largely driven by federal policies, especially tax credits and a mandate for their use under the federal Renewable Fuel Standard (RFS). Most expect that the majority of the BBD fuel quota in the RFS will be met using biodiesel produced from soybean oil. Biodiesel from other feedstocks, and other biomass-based substitutes (e.g., synthetic diesel from cellulosic feedstocks or algae) could play a larger role in the future, although currently these other alternatives are prohibitively expensive to produce in sufficient quantities.

Biodiesel production remains expensive relative to conventional petroleum-based diesel (even with tax credits), largely due to the reliance on soybean oil (a relatively expensive commodity) as a feedstock. Biodiesel and other BBD fuel production remains dependent on both tax incentives and the RFS mandates, as evidenced by a drop in production from 2009 to 2010. The expiration of the BBD tax credits after 2009 more than counteracted the increase in the RFS mandate from 2009 to 2010. Whether enough biodiesel production capacity will come online in 2011 to meet an even larger mandate remains to be seen.

The absence of the tax incentive for most of 2010, along with high soybean oil prices, caused 2010 biodiesel production to drop significantly—to the point that 2010 production may be below that needed to meet the RFS mandate. Any shortfall in supply for the 2010 BBD mandate may be met using credits generated in 2011, leading to even tighter markets going forward. These credits—referred to as RINs (Renewable Identification Numbers)—may be used by fuel suppliers to meet their obligations, banked for the next calendar year, or traded to other entities. In this way, analysis of the financial market for RINs may serve as a useful method for evaluating the overall market for BBD fuels. As BBD RINs become scarce, their price has increased dramatically (by nearly an order of magnitude over the past year). At some point, the value of the RINs may increase enough to bring idled production capacity back online or promote an increase in new capacity development and/or imports, especially if BBD producers expect RIN prices to stay high in the future.

This report discusses the current market for BBD fuels and their corresponding RINs under the RFS. It examines the role that the RIN market may play as an economic incentive for the production of biodiesel and other BBD fuels in the future. Lessons learned from the experience with the BBD quota and the associated RIN market may provide insights into the future RIN markets for other advanced biofuels and perhaps for the RFS as a whole.



Date of Report: February 11, 2011
Number of Pages: 15
Order Number: R41631
Price: $29.95

Follow us on TWITTER at
http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail
Penny Hill Press  or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.

Industrial Demand and the Changing Natural Gas Market


Robert Pirog
Specialist in Energy Economics

The U.S. industrial demand for natural gas has been the largest of the five demand sectors identified by the Energy Information Administration (EIA). It also has been the only sector that has exhibited a decline in its total consumption over the decade of the 2000s. Some have attributed this decline in demand to high, fluctuating natural gas prices.

Rising natural gas prices in the 2000s were related to expectations of increased demand coupled with an apparently scarce resource base and declining production. In recent years, the perception of increasing scarcity and the need to open the market to larger volumes of imports has been replaced with estimates of increasing domestic production from a resource base that might provide supply for a hundred years at current consumption rates. The tangible market result of these changing perceptions and economic conditions has been lower natural gas prices in 2009 and 2010.

The industrial demand for natural gas ranges from use as a feedstock in the nitrogen-based fertilizer industry to re-injection in oil wells to enhance production. The ways natural gas is used, the substitutes that are available, and the importance of gas in the cost structure of the industry vary widely. As a result, many factors potentially could contribute to the decline in demand.

The factors identified in this report as contributing to the decline in industrial sector natural gas demand include, in addition to price behavior, the recession, industrial consolidation, electricity substitution, technological improvements, and environmental regulations. These factors are likely to affect different consuming industries to varying degrees, depending on economic conditions.

The nitrogen fertilizer industry is an example of how the dynamics of natural gas prices in conjunction with the other identified factors contributed to decreased demand. While high natural gas prices and a number of other factors caused imports to expand their market share, it is uncertain whether the industry will recover domestically as a result of lower gas prices.



Date of Report: February 10, 2011
Number of Pages: 13
Order Number: R41628
Price: $29.95

Follow us on TWITTER at
http://www.twitter.com/alertsPHP or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail
Penny Hill Press  or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.