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48–112 2009

HEARING ON ENERGY AND TAX POLICY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

APRIL 19, 2007 

Serial No. 110–31 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

JIM MCCRERY, Louisiana 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

JERRY WELLER, Illinois 

KENNY HULSHOF, Missouri 

RON LEWIS, Kentucky 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PAT TIBERI, Ohio 

JON PORTER, Nevada 

JANICE MAYS, Chief Counsel and Staff Director 

BRETT LOPER, Minority Staff Director 

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

RICHARD E. NEAL, Massachusetts, Chairman 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

ALLYSON Y. SCHWARTZ, Pennsylvania 

JIM MCDERMOTT, Washington 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

PHIL ENGLISH, Pennsylvania 

THOMAS M. REYNOLDS, New York 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

PAUL RYAN, Wisconsin 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also, published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of April 12 2007, announcing the hearing ............................................. 2 

WITNESSES 

Jaime Steve, Legislative Director, American Wind Energy Association ............. 6 

William H. Carlson, Chairman, USA Biomass Power Producers Alliance, Redding, California ..................................................................................................... 10 

Karl Gawell, Executive Director, Geothermal Energy Association ..................... 14 

Rhone Resch, President, Solar Energy Industries Association ............................ 25 

Robert R. Rose, Executive Director, U.S. Fuel Cell Council ................................ 37 

Bob Dinneen, President and Chief Executive Officer, Renewable Fuels Association .................................................................................................................... 41 

Nina Bergan French, Ph.D, Director, Clean Coal Combustion Products, ADA– 

ES, Inc., Littleton, Colorado ................................................................................ 45 

SUBMISSIONS FOR THE RECORD 

American Institute of Architects, Statement ......................................................... 83 

Andrew J. Skok, Statement .................................................................................... 84 

Association for Commuter Transportation, Statement ......................................... 85 

Avista Corp., Statement .......................................................................................... 86 

Blue Mountain Energy, Statement ........................................................................ 87 

Commuter Check Services Corp., Statement ........................................................ 88 

Environmental Power Corp., Statement ................................................................ 90 

FuelCell Energy, Inc., Statement ........................................................................... 94 

Jerry Whitfield, PhD, Statement ............................................................................ 95 

Karen K. Sisk, Statement ....................................................................................... 96 

National Rural Electric Cooperative Association, Statement .............................. 97 

National Venture Capital Association, Statement ................................................ 104 

Patrick Boyle, Statement ........................................................................................ 104 

Soap and Detergent Association, Statement ......................................................... 106 

Statement of Jerry Whitfield, PhD, Statement ..................................................... 108 

Statement of Plug Power Inc., Statement ............................................................. 109 

Statement of Technology Network, Statement ...................................................... 111 

United Corrstack, Incorporated, Statement .......................................................... 114 

UTC Power, Statement ........................................................................................... 117 


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HEARING ON ENERGY AND TAX POLICY 

THURSDAY, APRIL 19, 2007 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON SELECT REVENUE MEASURES, 

WASHINGTON, D.C. 

The Subcommittee met, pursuant to notice, at 2:00 p.m., in room 

B–318, Rayburn House Office Building, Hon. Richard E. Neal 

[Chairman of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–5522 

April 12, 2007 

SRM–3 

Chairman Neal Announces Hearing on Energy 

and Tax Policy 

House Ways and Means Select Revenue Measures Subcommittee Chairman Richard E. Neal today announced that the Subcommittee on Select Revenue Measures 

will continue the Ways and Means Committee’s series of hearings on energy and 

tax policy. The hearing will focus on the current framework of tax incentives encouraging the development of alternative sources of energy. This hearing will take 

place on Thursday, April 19, 2007, in B–318 Rayburn House Office Building, 

beginning at 2:00 PM. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. A 

list of invited witnesses will follow. 

BACKGROUND: 

The Committee on Ways and Means has previously heard testimony on how the 

United States can help reduce the real and growing risks posed by climate change 

by encouraging the development and use of alternatives sources of energy. Tax incentives are one way in which the Federal Government can accelerate the development of these technologies. The tax code currently provides tax incentives encouraging the development of alternative sources of energy. The industries utilizing 

these incentives are best positioned to describe the utility of tax incentives in helping develop and expand these innovative technologies. 

In announcing the hearing, Chairman Neal said, ‘‘We need to know which current tax incentives are working and which are not so that we can take that 

knowledge and apply it to future policy decisions. This hearing will take 

a deeper look into our tax code to find out if there are ways to update and 

improve existing tax incentives that encourage the development of alternative sources of energy.’’ 

FOCUS OF THE HEARING: 

This hearing will focus on the utility of tax incentives in encouraging the further 

development, expanded production, and increased utilization of clean and renewable 

energy. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘110th Congress’’ from the menu entitled, 

‘‘Committee Hearings’’ (http://waysandmeans.house.gov/Hearings.asp?congress=18). 

Select the hearing for which you would like to submit, and click on the link entitled, 


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‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, completing all informational forms and clicking ‘‘submit’’ on the 

final page, an email will be sent to the address which you supply confirming your 

interest in providing a submission for the record. You MUST REPLY to the email 

and ATTACH your submission as a Word or WordPerfect document, in compliance 

with the formatting requirements listed below, by close of business Thursday, May 

3, 2007. Finally, please note that due to the change in House mail policy, the U.S. 

Capitol Police will refuse sealed-package deliveries to all House Office Buildings. 

For questions, or if you encounter technical problems, please call (202) 225–1721. 

FORMATTING REQUIREMENTS 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

*** 

Chairman NEAL. We began this process back in February, talking to scientists and experts on climate change and global warming. We urged Congress to act to reduce carbon dioxide emissions, 

which are a primary cause of global warming. 

Today we will hear from some industry experts who will advocate 

for certain tax incentives to support or enhance alternative energy 

sources in carbon reduction. Next week we will hear from Members 

of Congress, who will share with us their ideas for tax incentives 

to help American go green. 

Pick up any paper these days, and you are bound to see a number of stories on global warming, and how this country must go 

green to combat this serious threat. Being green is hot, not just in 

Hollywood, but here in Washington, too. Tom Friedman wrote—and 

I would recommend it to you—last week in the New York Times 

magazine section, ‘‘The concept of green has gone main street.’’ 


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So, is that enough to warrant the Committee’s attention? I think 

it is really much more than a trend. As Friedman argues, going 

green is geostrategic, geo-economic, capitalistic, and patriotic. In 

essence, he says, ‘‘Green is the new red, white, and blue.’’ 

Already, a number of U.S. businesses have announced their proposals to go green setting specific energy efficiency targets. They 

have concluded that being green is good for the bottom line, as well 

as for the environment. 

But Friedman is not the only one to assert that our energy independence is a national security issue. Even the military is trying 

alternative energy sources in the battlefield. Too much of our economy and national decisionmaking is influenced by the price of oil. 

To break that connection we need a thriving and independent alternative energy sector. 

This Committee is here to review, and perhaps update or expand 

tax incentives for these alternatives renewable energy sources. We 

will hear that these incentives are still needed, to some extent, in 

order for these energy sources to remain competitive in the marketplace. So we are having these hearings, and I expect the full Committee to mark up tax legislation on these issues. 

So I am pleased to welcome our witnesses today. Representing 

the American Wind Energy Association, we have Jaime Steve, who 

is the legislative director of the association. 

Representing the USA Biomass Power Producers Alliance, we 

have Bill Carlson, the Chairman. Mr. Carlson is also a principal of 

Carlson Small Power Consultants, in California. 

Testifying on behalf of the Geothermal Energy Association we 

have Karl Gawell, the Executive Director. While he has represented Geothermal for the last decade, I understand he also has 

a substantial background in wind energy, as well. 

On behalf of the Solar Energy Industries Association, we have 

Rhone Resch, President of the association. Mr. Resch is a true believer in alternative energy. He has a six kilowatt photovoltaic system in his home. 

Testifying today from the U.S. Fuel Cell Council, we have Robert 

Rose, the Executive Director. 

From the Renewable Fuels Association, we have Bob Dinneen, 

the President and CEO. Mr. Dinneen is the ethanol industry’s lead 

lobbyist in Washington. 

We also welcome Dr. Nina Bergan French, Director of Clean Coal 

Combustion at ADA Environmental Solutions, Incorporated, a 

strong supporter of permanent and robust research tax incentives. 

Her company develops technology to measure and capture emissions. 

We all look forward to your testimony today, and I would like to 

recognize my friend, Mr. English, for his opening statement. 

Mr. ENGLISH. Thank you, Chairman Neal. I particularly want 

to thank you for calling this extraordinarily timely and important 

hearing. I am encouraged to see that you are clearly intending to 

build on the work of past Congresses in developing creative solutions to the energy challenges facing our nation. 

As you know, the Energy Policy Act of 2005 provided an unprecedented amount of tax incentives for alternative, clean, and renewVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00008 Fmt 6633 Sfmt 6602 E:\HR\OC\48112.XXX 48112

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able energy. In fact, that bill enacted tax incentives for every one 

of the technologies represented by the witnesses here today. 

It is really an exercise and a matter of common oversight to determine whether we should continue to offer these tax subsidies, 

and what level, and for how long. There is no doubt that renewable 

energy resources, including eternal ones, such as wind power and 

solar energy, have a critical role to play in the energy—the future 

energy portfolio of this country. 

We cannot ignore practical realities, however, as we consider how 

to enhance climate change and energy independence for the coming 

decades. I recognize that the Energy Information Agency predicts 

in its 2007 energy outlook report, that by 2030, wind energy may 

only increase from.4 to.9 percent of the total electricity generated 

in the United States. 

As a long-time supporter of wind energy, I think wind energy is 

important. But by contrast, more than half of the electricity generated in this country comes from coal. This country has massive 

reserves of coal which could eliminate our dependence on foreign 

sources of energy for many decades to come. 

In my view, any proposal to address climate change and energy 

independence which does not provide for options like clean coal 

technology may be inadequate. 

That is why the 2005 energy bill included a number of incentives 

for advancing clean coal energy. This Congress should use the opportunity this hearing presents to explore what else we could, and 

should do. The promise coal gasification technology holds is to deliver cheap oil or no carbon power. 

New possibilities exist for other cutting edge technologies in 

areas like nuclear, oil shale, and geothermal. We can assess these 

based on science, not ideology or politics. The promise of alternative energy is great, and I look forward to working with you, Mr. 

Chairman, and with the majority in drafting legislation to help advance these technologies. And I thank you for the opportunity to 

comment. 

Chairman NEAL. Thanks, Phil. And now, we would like to recognize Mr. Herger, who, I believe, would like to greet personally one 

of his constituents. 

Mr. HERGER. Thank you very much, Chairman Neal, and Ranking Member English. I would like to welcome a constituent of mine, 

Bill Carlson, who will testify on behalf of the USA Biomass Power 

Producers Alliance. Bill, it is good to see you again. 

A resident of Redding, and our—California’s—second Congressional district, Bill is retired from years with Shasta Wheelabrator 

Technologies and Energy Company. as a consultant. Bill has spent 

the majority of his career advancing the interests of the open-loop 

biomass industry, and has seen or helped install almost all, if not 

all, of the open-loop facilities in the United States. 

Thank you for testifying for us today, Bill. Thank you, Mr. Chairman. 

Chairman NEAL. Thank you, Wally. Without objection, any 

other Members wishing to insert statements as a part of the record 

may do so. And all written statements made by the witnesses will 

be inserted into the record, as well. Mr. Steve, thank you for being 

here. 


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Mr. STEVE. Thank you. 

STATEMENT OF JAIME STEVE, LEGISLATIVE DIRECTOR, 

AMERICAN WIND ENERGY ASSOCIATION 

Mr. STEVE. Thank you, Mr. Chairman. Members of the Committee, thank you. My name is Jaime Steve, and I serve as Legislative Director of the American Wind Energy Association, based here 

in Washington, D.C. 

Mr. Chairman and Members, today’s typical wind turbine can 

generate as much as 2 megawatts of electricity, or enough power 

for about 540 households. It is also interesting to note that Texas 

is now the number one producer of wind power in the United 

States. That was a claim held by California for the last 20 years. 

Also interesting, the Statue of Liberty’s torch is currently powered through a purchase of wind power. Starbuck’s, Safeway, and 

Staples are all purchasing wind power electricity. 

Examples of wind energy jobs include 500 workers building towers at Beaird Industries in Shreveport, Louisiana, and another 350 

workers building towers in DMI Industries in West Fargo, North 

Dakota. 

The most interesting point is that wind developers pay roughly $5,000 in rental fees—$5,000 per wind turbine—per year for 20 

years. That is a lot of income to the farmer, or rancher, or another 

land owner. And that is happening from Maple Ridge, New York, 

to Abilene, Texas. 

My last example, an empty beer bottle, which I can assure you 

all that I liberated the contents of at a point prior to the beginning 

of this hearing—in an undisclosed time prior to the beginning of 

this hearing—but the point being that that entire beer produced by 

the New Belgium Brewery in Fort Collins, Colorado, is produced 

with 100 percent wind power. We are seeing this more and more. 

These examples show that supporting wind and other forms of 

clean, renewable energy means creating jobs, spurring rural economic development, stemming global warming, and enhancing our 

National energy security. And the best ways to invest in rural energy are long-term extensions at full value of the existing provisions for renewals. 

The production tax credit, which expires December 31, 2008—not 

that far away, is less than 2 years from now. Extending the existing solar investment tax credit, but also opening that up for use 

by small wind turbines, much smaller type of wind turbine, which 

you have probably seen elsewhere, something that you could use to 

power your own home, your own farm, or small business. Last, 

clean renewable energy bonds, which help non-tax paying entities, 

and public power entities. 

These incentives are needed, because wind energy is not yet fully 

cost competitive with mature electric generation technologies. In 

fact, over the last 2 years, wind energy costs have been increasing, 

making the Production Credit of full value even more crucial than 

before. 

First, I would like to thank Representative Pomeroy and Representative Ramstad for their bill, H.R. 197, aimed at providing a 

5-year extension of the Production Tax Credit at full value. The bill 

now has 85 cosponsors, 10 of whom serve on the full Committee. 


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I would also like to thank Representatives Blumenauer and Cole 

for their bill, H.R. 1772, to open the separate investment tax credit 

for the solar that I referred to, and open that up to the small wind 

systems. 

One thing that we have seen over time is that these issues are— 

always have been, on this panel, very bipartisan issues, and we are 

very proud of that. Since 1999, the PTC, the Production Tax Credit, 

has expired and been extended 5 times—that’s since 1999—always 

for short, 1 or 2-year periods, and more often than not, with economically painful periods of expiration for the industry. 

The effect has been to create a boom-and-bust cycle within the 

industry, which stops us from achieving further cost reductions and 

holds us back from our potential. Simply stated, when the credit 

is available, we produce jobs and clean energy. When it is not 

available, we lose jobs and we produce very few new projects. Access to a long-term PTC can break this boom-and-bust cycle. 

Another piece of background. In 1998, wind energy produced 

roughly enough electricity to power about 500,000 homes in the 

U.S., and wind was virtually a California-only industry. Today, 

Texas has surpassed California, as I mentioned, and we’re operating in over 30 states and producing about—enough power for 

about 3 million American homes. That’s roughly all of the homes 

and all of the population of the state of Virginia. 

We have come a long way. But this growth has been driven by 

short-term Production Tax Credits. What we need is a long-term 

credit. With a long-term credit we can do so much more. A longterm Production Tax Credit would spur increased development of 

wind and other renewables, while also creating much-needed manufacturing jobs, particularly in the Midwest, which we have seen, 

particularly in the auto industry. 

A long-term extension would also reduce the cost of wind power 

to consumers. A 10-year Production Tax Credit would deliver thousands of megawatts of new power, and a 15-percent reduction in 

the cost of wind power. A shorter, 5-year extension would produce 

about half of those benefits. What we are looking for is the ability 

to plan, invest, and create new jobs. And that would reduce prices 

in the long run. 

In conclusion, Mr. Chairman, to keep providing these new jobs, 

spurring economic development, and addressing global warming, 

the wind industry—and all the industries, really—need long-term 

credits. We ask the Congress to pass long-term extension of these 

credits, the full value, so we can keep the tower factories humming 

from Shreveport, Louisiana to West Fargo, North Dakota. Keep 

producing more wind power in Texas, of which we’re just booming 

in Texas, and keep producing from Maple Ridge, New York, all the 

way to Abilene. Thank you very much. 

[The prepared statement of Mr. Jaime Steve follows:] 

Statement of Jaime Steve, Legislative Director, American Wind Energy 

Association 

Chairman Neal and Members of the committee, my name is Jaime Steve and I 

serve as Legislative Director for the American Wind Energy Association (AWEA) 

based here in Washington, D.C. 


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Mr. Chairman, today’s typical wind turbine can generate as much as two 

megawatts of electricity, or enough power to meet the needs of about 540 households. It is also interesting to note that: 

• Texas is now the #1 wind-producing State in the nation, having recently surpassed California which held that claim for over 20 years. 

• The Statue of Liberty’s torch is powered through a purchase of wind energy. 

• Starbucks, Safeway, and Staples are all purchasing wind-generated electricity. 

• Examples of wind energy jobs include 500 workers building towers at Beaird 

Industries in Shreveport, LA and another 350 workers building towers at DMI 

Industries in West Fargo, ND. 

• Wind developers pay about 5,000 per turbine, per year for 20 years in lease payments to hard-pressed farmers, ranchers and other land owners from Maple 

Ridge, NY to Abilene, TX. Wind projects also make significant contributions to 

the local tax base of many rural communities. 

• A single wind turbine avoids the same amount of carbon dioxide as is emitted 

by about 4,800 cars. 

These examples show that supporting wind and other forms of clean, renewable 

energy means creating jobs, spurring rural economic development, stemming global 

warming, and enhancing our national energy security. 

And, the best way to invest in renewable energy is through long-term extensions 

of the renewable energy tax credits and bonds, specifically: 

(1) The renewable energy Production Tax Credit (or PTC) which expires December 31, 2008 

(2) The existing solar Investment Tax Credit—with the addition of small wind systems used to power homes, farms, and small businesses, and 

(3) Clean Renewable Energy Bonds for non-taxpaying, public power entities. 

These incentives are needed because wind energy is still not yet fully cost competitive with mature electric generation technologies. In fact, over the last two 

years, wind energy costs have been increasing, making the Production Tax Credit 

even more crucial than before. 

First, a thank you to Reps. Pomeroy and Ramstad for their bill, H.R. 197, aimed 

at providing a 5-year extension of the PTC through December 31, 2013. This bill 

now has 75 cosponsors, ten of whom are Members of this panel. I also thank Reps. 

Blumenauer and Cole for their bill (H.R. 1772) to open the separate investment tax 

credit for solar power systems for use by individual landowners who purchase small 

wind systems. The history of these incentives in this committee clearly shows that 

support for renewable energy tax credits has always been a bipartisan issue. 

Since 1999, the PTC has expired and been extended five times—always for short 

one- or two-year periods and more often than not with economically painful periods 

of expiration between extensions. The effect has been to create a boom-and-bust 

cycle that stops us from achieving further cost reductions and holds back our potential. Simply stated: when the credit is available, we produce jobs and clean energy— 

when it is not available we lose jobs and build very few new projects. Access to a 

long-term PTC can break this boom-and-bust cycle, and allow wind energy to become an even far greater contributor to our energy mix. 


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In 1998 wind energy produced enough electricity to power about 500,000 homes 

and wind was virtually a California-only industry. Today, Texas has surpassed California as the top wind energy producing state and high-tech wind turbines are operating in 30 states producing the equivalent amount of electricity needed to power 

about 3 million American homes—or, about the amount of energy used by the entire 

population of the state of Virginia. This growth has been driven in large part by 

access to short-term PTC extensions. Imagine what we could do with a long-term 

extension. 

A long-term PTC would spur increased development of wind and other renewables, while also creating much-needed manufacturing jobs, particularly in the Midwest. A long-term extension also would reduce the cost of wind power to consumers. 

Industry estimates indicate that a 10-year PTC would deliver thousands of 

megawatts of new wind power and a 15 percent reduction in the cost of electricity 

produced from wind. A shorter 5-year extension would deliver about half as much 

power and about half (roughly 8 percent) of the cost reductions. In a nutshell, a 

long-term extension would eliminate the every-other-year turbine manufacturing 

cycle by allowing large investments in the supply chain for turbine components. 

This ability to plan and invest would create jobs, and reduce costs and stem price 

increases for wind turbines, thus lowering energy costs to consumers. 

Conclusion 

Mr. Chairman, to keep providing new jobs, spurring rural economic development 

and addressing global warming, the wind industry needs long-term access to renewable energy production tax credits, investment tax credits and bonds. 

We all ask Congress to pass long-term extensions of these tax credits at full value 

so that we can keep the tower factories humming from Shreveport, Louisiana to 

West Fargo, North Dakota. We’ll also keep making much-needed land rental payments to farmers and ranchers, from Maple Ridge, NY to Abilene, TX. 

Thank you, 

Jaime Steve, Legislative Director, 

American Wind Energy Association 

1101 14th Street, NW 12th Floor 

Washington, D.C. 20005 

202–383–2506 

Background: The U.S. wind energy industry installed over 2,400 megawatts (MW) 

of new generating capacity in 2006, making wind one of the largest sources of new 

power generation in the country and a mainstream option with which to meet growing electricity demand. One megawatt of wind power produces enough electricity on 

average to serve 250 to 300 homes. 

AWEA’s annual industry rankings provide a standard reference point for tracking 

the growth of wind power in the U.S. The rankings (as of December 31, 2006) are 

the following: 


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Top Five Wind Energy Producing States 

(Expressed in megawatts (MW) of capacity): 

State # of 

MW 

Texas 2,768 

California 2,361 

Iowa 936 

Minnesota 895 

Washington 818 

Texas is firmly established as the leader in wind power development, with over 

2,700 megawatts of new wind generation installed at the end of 2006, and some 

1,000 megawatts currently under construction. Iowa and Minnesota look likely to 

break the 1,000 MW mark in 2007. Washington will come close, with the 140–MW 

Marengo project that is currently under construction there. 

Top Five Largest Wind Farms Operating in the U.S. 

(Size is expressed in Megawatts (MW)) 

Project # of 

MW Project Owner 

Horse Hollow, TX 1736 FPL Energy 

Maple Ridge, NY 322 PPM Energy/Horizon Wind Energy 

Stateline, OR & WA 300 FPL Energy 

King Mountain, TX 281 FPL Energy 

Sweetwater, TX 264 Babcock & Brown/Catamount 

Five PTC expirations and extensions since 1993: 

In place: January 1, 1993 through June 30, 1999 

1) Credit expired: June 30, 1999 

Extended: December 1999 through December 31, 2001 (credit made retroactive to 

July 1, 2001) 

CREDIT UNCERTAIN FOR 6 MONTHS 

2) Credit expired: December 31, 2001 

Extended: March 2002 through December 31, 2003 (retroactive to January 1, 

2002) 

CREDIT UNCERTAIN FOR 3 MONTHS 

3) Credit expired: December 31, 2003 

Extended: September 2004 through December 31, 2005 (retroactive to January 1, 

2004) 

CREDIT UNCERTAIN FOR 8 MONTHS 

4) Extended: August 2005 through December 31, 2007 

FIRST TIME CREDIT EXTENDED BEFORE EXPIRATION DATE 

5) Extended: Oct. 2006 through December 31, 2008 

SECOND TIME CREDIT EXTENDED BEFORE EXPIRATION DATE 

f 

Chairman NEAL. Thank you, Mr. Steve. 

Mr. Carlson? 

STATEMENT OF WILLIAM H. CARLSON, CHAIRMAN, USA BIOMASS POWER PRODUCERS ALLIANCE, REDDING, CALIFORNIA 

Mr. CARLSON. I would like to thank Mr. Herger for that wonderful introduction. Thank you. Mr. Chairman and Members of the 

Committee. The USA Biomass Power Producers appreciate the opVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 E:\HR\OC\48112.XXX 48112

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portunity to appear today, representing the views of the nation’s 

open-loop biomass power industry. 

We represent more than 1,200 megawatts of baseload grid connected renewable electricity. I will identify the many unique environmental benefits provided by open-loop biomass, and urge the 

Committee to change the Production Tax Credit rules to place us 

on a level playingfield with other valuable and deserving renewable 

technologies. 

The term biomass describes a wide variety of energy technologies. Today I am referring specifically to the production of electricity from the controlled combustion of untreated cellulosic solid 

waste, such as bark, orchard trimmings, rice hulls, and sugar bagasse. Qualified open-loop biomass facilities receive only one-half of 

the current PTC for their electricity, which creates issues I will describe. 

In an national effort to limit greenhouse gases, you must understand that biomass electricity production is the only renewable that 

lowers net greenhouse gas emissions below a zero greenhouse gas 

emissions level. A recent California Public Utility Commission ruling states, ‘‘In particular, the record shows that electric generation 

using biomass that would otherwise be disposed of under a variety 

of conventional methods results in a substantial net reduction in 

greenhouse gas emissions. This is because the usual disposal options for biomass waste emit large quantities of methane gas, 

whereas the energy alternatives either burn the waste that would 

become methane, or burn the methane itself, generating CO2. Since 

methane gas is on the order of 20 to 25 times more potent as 

greenhouse gas than CO2, trading off methane for CO2 emissions 

for energy recovery operations leads to a significant net reduction 

of the greenhouse effect.’’ 

Additionally, biomass power extends landfill life, eliminates air 

pollution from open burning, lowers the incidence of catastrophic 

Western forest fires, and restores forest health. Despite these benefits, the industry declined over 30 percent by 2005 from its 1990 

peak of 135 facilities producing 2,300 megawatts due to low fossil 

fuel prices and contract buy-outs. 

We thank the Members for recent actions stabilizing the situation for our industry. In the 2004 Jobs Act, Congress expanded the 

PTC to acknowledge, for the first time, the valuable contributions 

of open-loop biomass. 

In the 2005 energy bill, the PTC was further modified to provide 

us a 10-year credit duration for new facilities. These actions, coupled with strong programs in numerous states, have arrested the 

decline in biomass power, and initiated a nearly 400 megawatt increase in capacity that will be completed by the end of next year, 

roughly a 20 percent rebound. 

This increase consists of two business models: the restarting of 

closed biomass or converted coal plants; and the addition of combined heat and power installations at forest product facilities. 

These models are quicker and more economic than building a new 

greenfield facility. 

Nationally, use of just these two business models grossly underutilizes a significant green, renewable resource. Currently, the 

combination of the high cost of greenfield development, and the 


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availability of only one half the PTC, prevents developers from 

being competitive in new capacity solicitations held by utilities 

under state renewable portfolio standard requirements. These 

widely used auctions are almost universally won by those receiving 

the full section 45 PTC. 

The single most important thing that the Committee could do to 

foster the growth of biomass power and capture these unique environmental benefits is to approve legislation creating parity in the 

credit rate for biomass and other renewables with that of wind and 

geothermal energy. Only then will the nation be able to tap the 

thousands of megawatts of biomass power potential identified by 

the Western Governors’ Association, 25x’25, and others. 

I am pleased to announce that Representatives Herger and Meek 

of this Committee, yesterday introduced H.R. 1924, which would 

create such tax parity. 

Another impediment facing our facilities is IRS Notice 2006–88, 

that requires facilities sited at industrial plants to net the electrical consumption of the industrial plant from the production of 

the biomass power facility, and claim the credit on only the net 

amount, if there is any, even if the biomass power facility is not 

serving the industrial facility electrical load. 

The ruling would affect more than two-thirds of the biomass 

projects currently proposed, destroying their viability. Working 

with the American Forest and Paper Association, we urge you to 

include a reversal of this rule in any upcoming energy tax legislation. While EPA and DOE diligently work to encourage such highly 

efficient combined heat and power facilities, the IRS would eliminate them by this ruling. 

In closing, let me reiterate that our number one priority is to 

achieve parity in the PTC tax credit to obtain more than a handful 

of new facilities a year. And to transform a portion of our Nation’s 

electric supply from a major source to a negative emitter of greenhouse gases, the full credit is required. A simple extension of the 

credit will not bring the broader benefits of open loop biomass technology to the nation. 

Thank you. I would be happy to answer any questions, and we 

hope that we can serve as a resource for your ongoing efforts. 

[The prepared statement of Mr. William Carlson follows:] 

Statement of William H. Carlson, Chairman, USA Biomass Power Producers 

Alliance, Redding, California 

My name is William Carlson and I appreciate the opportunity to appear before 

the Subcommittee in my role as the Chairman of the Steering Committee of the 

USA Biomass Power Producers Alliance (USABPPA), representing the views of the 

nation’s open-loop biomass power industry. USABPPA is the only trade group organized solely to represent the nation’s grid connected biomass power supply, and as 

of today we represent more than 1,200mW of base load renewable electricity. The 

thrust of my testimony today is to identify the many unique environmental and 

other public benefits provided by open-loop biomass, and to urge the committee to 

change the production tax credit (PTC) rules to place this technology on a level playing field with other valuable and deserving renewable technologies. 

As you know, the term biomass can be, and is, used to describe a very broad variety of energy technologies. In my testimony today, I am referring to the production 

of electricity from the controlled combustion of untreated solid cellulosic wastes such 

as bark, orchard trimmings, rice hulls and sugar bagasse. These production facilities 

generate firm base load power that provides local voltage support and enhanced reliability, and is added in small disbursed increments that do not require transmission 

system upgrades. Qualified open-loop biomass facilities are eligible to receive only 


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one-half of the current PTC for their electricity, which creates issues I will describe 

later in my testimony. 

To see the potential role of open-loop biomass as a necessary component in any 

national effort to limit greenhouse gases, it is important to understand that openloop biomass electricity production is one of the few renewables that lowers net 

greenhouse gas (GHG) emissions below a zero greenhouse gas emission level. This 

is because biomass waste materials, an unavoidable fact of modern life, disposed of 

conventionally (landfilling, onsite decomposition, open burning) all generate substantial quantities of methane, a very damaging greenhouse gas, while biomass 

power converts all that potential methane to CO2, resulting in a net negative greenhouse gas emission profile. California has now formally recognized this benefit, in 

a California Public Utility Commission ruling in CPUC Decision 07–01–039, which 

implements SB 1368, the GHG emissions performance standard: ‘‘In particular, the 

record shows that electric generation using biomass (e.g., agricultural and wood 

waste, landfill gas) that would otherwise be disposed of under a variety of conventional methods (such as open burning, forest accumulation, landfills, composting) results in a substantial net reduction in GHG emissions. This is because the usual 

disposal options for biomass wastes emit large quantities of methane gas, whereas 

the energy alternatives either burn the wastes that would become methane or burn 

the methane itself, generating CO2. Since methane gas is on the order of twenty to 

twenty-five times more potent as a GHG than CO2, and since methane has an atmospheric residence time of twelve years, after which it is converted to atmospheric 

CO2, trading off methane for CO2 emissions from energy recovery operations leads 

to a significant net reduction of the greenhouse effect.’’ 

Additionally, biomass power extends landfill life, eliminates air pollution from 

open burning of agricultural and forestry residuals, helps lower the incidence of catastrophic Western forest fires, and allows cost effective restoration of our nation’s 

overstocked and unhealthy forests, resulting in better watershed health, wildlife 

habitat, forest fire resilience, improved growth rates for enhanced carbon sequestration and overall forest health. The list of societal and environmental benefits from 

an expanded biomass power industry is long and impressive. 

Historically, the national high-water mark for open-loop biomass facilities occurred around 1990, with an inventory of approximately 135 facilities producing as 

much as 2,300mW. From the early 1990s to 2005, the industry experienced a precipitous decline of approximately 30% of U.S. biomass power production due to the 

expiration of fixed contract rates and contract buyouts. Furthermore, changes in federal forest policies diminished the supply of materials flowing from National Forests, negatively impacting the fuel supply for many of the plants. 

I wish to thank the Members of the Committee for their role in recent actions 

positively impacting open-loop biomass. In the 2004 JOBS Act, Congress expanded 

the PTC to acknowledge the valuable contributions of open-loop biomass and other 

renewable technologies (though at only 1⁄2 the rate of some other renewable technologies). Then, in the 2005 Energy Bill the PTC was further modified to provide 

all qualifying technologies with 10 year credit duration for new facilities. 

The actions taken to date, coupled with strong positive actions by numerous 

states, have arrested this decline in U.S. biomass power production. The combination of federal and state actions has initiated a nearly 300mW increase in U.S. capacity since 2005 that will be completed by the end of this year, which is roughly 

a 15% rebound. An additional 100+mW is expected to be placed in service by 12/ 

31/08 as a response to the extension of the PTC placed in service date enacted as 

part of the Tax Relief & Health Care Act of 2006. This increase in capacity is attributable to two factors—first, the restarting of biomass plants (and conversion of a 

couple of older coal-fired plants to biomass) that had been closed since the early 

1990’s and second, the addition of combined heat and power (CHP) installations at 

forest product facilities utilizing low valued mill residual materials. Restarting idle 

facilities and installing CHP at existing facilities takes less time and can be more 

economic than building a new greenfield biomass facility from the ground up. 

In the scale of our national electrical power requirements, however, we are significantly underutilizing a significant green, renewable resource. Currently, the combination of the relatively high cost of new greenfield open-loop biomass power, and 

the availability of only one-half the PTC, prevents the open-loop operators from 

being competitive in the new capacity solicitations held by various utilities under 

state renewable portfolio standard (RPS) requirements. These auctions are almost 

universally won by those renewable technologies having access to the full Section 

45 PTC. 

Therefore, the single most important thing that the Ways & Means Committee 

could do to foster the growth of biomass power and thus diversify the types of renewable electricity within the nation’s energy portfolio, is to approve legislation 


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equalizing the credit rate for biomass and other renewables by equalizing the PTC 

rate for open-loop biomass to that of wind and geothermal energy. Only then, will 

another 900 megawatts of biomass capacity in projects that have been identified and 

proposed become a reality and allow numerous other projects to enter the planning 

phase. 

Another significant impediment to the production of electricity by open-loop biomass facilities is a rule published last year by the IRS that affects only biomass 

among renewable technologies. Under Notice 2006–88, facilities sited at industrial 

plants must net the electrical consumption of the industrial facility with the production of the biomass power facility and claim the credit on only the net amount, even 

if the biomass power facility is not serving the industrial facility electrical load. This 

ruling will affect more than 2⁄3 of the biomass projects currently proposed, destroying their viability. 

The USABPPA, working with the American Forest & Paper Association, urges 

you to include a reversal of this rule in any upcoming energy tax legislation (a copy 

of a joint letter on this issue is attached to my testimony). Other federal agencies, 

such as the EPA and DOE, are working to encourage the very types of combined 

heat and power (CHP) cogeneration facilities that IRS would eliminate by this ruling. These CHP facilities are among the most efficient and cost effective ways to 

utilize biomass fuel and lower fossil fuel use. This type of activity should be encouraged by IRS regulations, not penalized. 

Like other technologies on this panel, we would urge the Ways & Means Committee to extend the Section 45 Production Tax Credit beyond the current ‘‘placed 

in service date’’ expiration of December 31, 2008. Biomass projects not currently 

under equipment purchase and construction contracts are already halting planning 

and permitting activities until Congress extends Section 45. Like some other renewable technologies, new biomass power has a fairly long time horizon from conception 

to ‘‘placed in service’’, typically 3–4 years. Consequently, one long-term extension 

would send a more powerful market signal to investors than would a series of one 

and two year extensions. 

In closing, let me reiterate that the No. 1 priority of the open-loop biomass power 

industry is to achieve parity in the PTC credit rate. To obtain more than five to 

ten new facilities a year, to obtain a significant number of completely new facilities, 

and to transform a portion of our nation’s bulk electric supply from being a major 

emitter of greenhouse gases, not just to a neutral position, but to a negative emitter 

of GHG, the full Section 45 credit is required. Simply maintaining the Section 45 

status quo via a ‘‘placed in service date’’ extension will not bring the broader benefits of open-loop biomass technology to the nation. Thank you again for this opportunity to present to the Subcommittee and I hope that USABPPA can serve as a 

resource to your ongoing efforts. 

f 

Chairman NEAL. Thank you. 

Mr. Gawell? 

STATEMENT OF KARL GAWELL, EXECUTIVE DIRECTOR, 

GEOTHERMAL ENERGY ASSOCIATION 

Mr. GAWELL. Thank you, Chairman Neal, and Members of the 

Subcommittee. I appreciate the opportunity to testify before you 

today. I am going to leave my statement in the record, and basically try to address what I think are some of the highlights for the 

Committee. 

The first is most people don’t know what geothermal energy is. 

We have produced in a few states, and Mr. Thompson and Mr. 

Herger know, because we are in their backyard. But you get outside of a few western states, and people aren’t quite clear. What 

is this geothermal energy stuff? 

But the states where we produce today, which are now five— 

Alaska has been added—like California, we are known as one of 

the most reliable baseload renewable power sources around. And 

we are seeing tremendous growth, and there is tremendous potential. Let me just point out, really quickly. 


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There have been three reports done in the last 6 months. One— 

this is just an executive summary by Dan Fleischman, who worked 

for us over a year, looking at what’s happening today in the western states. And he found there is well over 100,000 megawatts of 

what’s called conventional hydrothermal potential to be tapped if 

the economics is there. 

There is also a report by the National Renewable Energy Lab, 

looking at geothermal energy in a variety of ways, and found several areas where 100,000 or more could be brought—co-production 

in the Gulf of Mexico, EGS, coal production from oil fields, as well 

as conventional hydrothermal. 

And we probably—you may have all heard a bit about the MIT 

report that came out, which showed if you developed the engineering techniques to work the reservoir, you can expand this resource 

dramatically. What I am here to tell you is that that is what we’re 

saying is happening today. 

One of the things which the Energy Policy Act did was it gave 

geothermal a boost, and really started projects moving. A few years 

ago, I was asked by a Committee during the energy crisis in California, ‘‘How much could you bring online?’’ And we looked. 

And, you know, step-outs of existing plants could come on quickly. We said, ‘‘Well, maybe you could see 300, 400 megawatts move 

out pretty quickly.’’ Today, the survey I put in the testimony shows 

that we have identified, today, almost 2,000 megawatts of projects. 

I think we have 61 projects now moving forward. And I would say 

80 to 85 percent of those came in after Energy Policy Act. A lot of 

those are in the early stages of development. 

But what Energy Policy Act has done is really pushed the envelope. We have added a new state, we added Alaska. In the next 2 

years, I suspect we will add Idaho, Wyoming, Oregon, Colorado, 

and Texas to the existing list of Utah, Nevada, Hawaii, California, 

and Alaska. 

But where do you go from there? When you look at the MIT report, and you look at where they think you can go with this deep 

geothermal, or EGS, where the maps show you, you don’t go to the 

full potential. You just go to a tier above it. 

What you end up with is having Washington, Montana, South 

Dakota, Louisiana, Arizona, North Dakota, West Virginia, South 

Carolina, Illinois, Iowa, Nebraska, Arkansas, Florida, Tennessee, 

and on. You have 38 states that they feel you could do geothermal 

power potential with continued development of the industry and 

continued technology development. And that is what the PTC has 

started, it has helped us move in that direction. 

What do we specifically need? I think Jaime Steve pointed out 

what all of us would say, is we need a long-term policy. We have 

all seen the roller coaster of energy policies. Remember the energy 

crisis? You turn around two days later and it’s gone? Well, guess 

what? It is back again, and then it’s gone again. 

Our industries have been up and down, year after year. And 

even the 1970s, the big oil crisis. Most of the tax credits passed 

then were starting to be repealed two or three years later. Only 

PURPA really stayed in place to push new projects forward. 

So, we need to have that long-term policy. We need a long-term 

extension of the tax credit. That’s for sure. For my industry—and 


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I think others that produce baseload power plants, we are suggesting you also think about changing placed-in-service. Right now, 

the placed-in-service treatment under section 45 is all or nothing. 

Vince Signorotti, from CalEnergy, sat before this Subcommittee 

in 2005 and told you we need a three-year extension to complete 

our plan. If we get a three-year Production Tax Credit, we will 

build it. The Energy Policy Act of 2005 came out just short, and 

just short of what they could do. That plant is not built. The economics were made by the Production Tax Credit, and their contract 

did not allow them to have multiple pricing. Some of the contracts 

some of our companies sign have two prices. One with and one 

without the tax credit. And so, that project doesn’t move forward. 

But if they had known then what a major power producer knew, 

that if you made the commitment, you’ve got that plant under construction today, that you could at least use the current placed-inservice deadline as your start—— 

Chairman NEAL. If it would be okay with you and Members of 

the panel, we have heard the call of the House, those are the bells. 

So we are going to go off and vote. And I would—this is great attendance that we have had. And if you give us about 15 minutes, 

we will be back. 

[Recess.] 

Chairman NEAL. Mr. Gawell, would you like to wrap up your 

testimony? 

Mr. GAWELL. I will be glad to, Chairman, thank you. As I was 

saying, the way we can move forward, or I should say continue 

moving forward, like I said, lots have been happening. It’s really 

been an exciting time in this industry. The way we can move forward is get a long-term extension of the credit. And, frankly, longterm policies across the board. That really helps people plan to 

build the infrastructure, and make things move forward. 

We had long-term policies in the 1970s to early 1980s. I think 

all of the renewable technologies not only saw growth, but also saw 

cost reduction, too, because you saw the infrastructure being built 

and new projects coming on. So, long-term extension of the tax 

credit—5 to 10 years is critical. 

The second thing is changing placed-in-service so that—we propose that baseload plants can qualify using the current placed-inservice date if they have a power sales agreement and they are actively under construction because they have already made the commitment to go ahead. Because that’s when the company puts its 

money on the line, when it starts construction of a project. That’s 

the big dollar event. 

And the third item we have raised in our testimony is the issue 

of exploration. A lot of the resource in the United States is still difficult to find and high-risk. And from the time you do exploration 

to the time you build the plant can sometimes be as much as 10 

years. So we suggested that the Committee consider exploration 

tax credit just for the exploration drilling expenses at the front 

end. 

Those three things will go a long way toward pushing this even 

further, and I want to, I guess, close by saying it’s—you know, for 

many years I was warned by my friends in the American wind energy industry to look out for what you ask for. They said, ‘‘Oh, 


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1The EPAct research initiatives have been totally undercut by Administration efforts to terminate geothermal energy programs at DOE, and regulations for the the leasing provisions have 

yet to be completed by the Department of the Interior, however. 2 ‘‘An Assessment of Geothermal Resources Development Needs, by Daniel Fleischmann, GEA, 

January 2007 (http://www.geo-energy.org/publications/reports.asp); Geothermal—The Energy 

Under our Feet, by Bruce Green and Gerald Nix, National Renewable Energy Laboratory, November 2006 (http://www.nrel.gov/docs/fy07osti/40665.pdf); The Future of Geothermal Energy, 

An Assessment by an MIT-led interdisciplinary panel, January 2007 (http://web.mit.edu/ 

newsoffice/2007/geothermal.html). 

Karl, you don’t realize this PTC, it’s on again, off again. And, you 

know, if you get it, you’re going to be in places like this saying, 

’Gosh, we need it extended, because it was only two years, and 

then two years, and two years more.’ ’’ 

And, now, I see what they were talking about, in terms of the 

short term of the credit. But I also want to say we’re glad to be 

here, because of what we’ve seen happen in the last two years, 

since this credit was extended. We have gone from having, literally, 

a handful of projects under development to having dozens of 

projects under development in many new states. And I think that’s 

what we can see, if the Committee can move forward with a longterm extension. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Karl Gawell follows:] 

Statement of Karl Gawell, Executive Director, Geothermal Energy 

Association 

Mr. Chairman and Members of the Subcommittee the Geothermal Energy Association (GEA) appreciates the Committee’s interest in geothermal energy and its interest in the importance of tax incentives to this emergent industry. 

The Energy Policy Act of 2005 (EPAct) has resulted in a major, positive impact 

on the geothermal energy industry. In November of 2006, GEA’s survey of industry 

activity showed a substantial surge in developing geothermal power projects in the 

U.S. Some 61 projects were under various stages of development, a substantial increase from earlier years. Table 3, which is attached to this testimony, provides a 

summary of the survey’s results. 

The survey identified new power projects in Alaska, Arizona, California, Hawaii, 

Idaho, New Mexico, Nevada, Oregon and Utah. These projects, when developed, 

would provide just over 2000 MW of new electric power for the grid—enough electricity to meet the needs of cities the size of Albuquerque, Portland, Sacramento and 

Seattle combined. 

Results of the survey provide dramatic evidence that new federal and state initiatives to promote geothermal energy are paying off. The most significant catalyst behind this new industry activity has been Congress’ decision to extend the Section 

45 Production Tax Credit (PTC) to include new geothermal energy facilities, which 

was initiated in 2004 and completed under EPAct of 2005. 

Several provisions in EPAct were intended to promote geothermal energy development. First, Congress made new geothermal plants eligible for the full federal production tax credit, previously available only to wind and closed-loop biomass 

projects. Second, EPAct authorized and directed increased funding for research by 

the Department of Energy (DOE), and gave the Bureau of Land Management (BLM) 

new legal guidance and secure funding to address its backlog of geothermal leases 

and permits.1

If we can build and sustain the momentum that EPAct has given the industry, 

geothermal energy can become a major U.S. energy source. The untapped potential 

of this resource is enormous. Today, geothermal energy provides nearly 3,000 MW 

of reliable electric power in the U.S. Recent reports by the GEA, National Renewable Energy Laboratory (NREL), and Massachusetts Institute of Technology (MIT) 

all point to a much larger for geothermal energy production from a range of technology applications.2 Each of these studies supports the potential to achieve 100,000 

MW or more from the geothermal resource base. 

Geothermal’s role among clean energy technologies is important to recognize. It 

is one of the few technologies that can supply, clean, reliable, low emission fuel that 

is also a baseload resource providing power 24 hours a day, 365 days a year. Geothermal energy could also support our national hydrogen initiative and nation 


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3We believe Congress also intended the new Clean Renewable Energy Bond provision in 

EPAct to promote geothermal energy, among the renewable technologies, and have supported 

the CREBS provisions as well. 

biofuels goals, both of which will require significant amounts of energy to produce 

alternative domestic transportation fuels. 

Tax Policy Advantages of a Production Tax Credit 

The structure of the Production Tax Credit is unique, and when first enacted in 

1992 it represented a radical change from the Investment Tax Credit. The move to 

a production tax credit makes sense from a number of policy perspectives. 

• The Production Tax Credit works—the PTC has historically been shown to stimulate new investment in wind energy; 

• The Production Tax Credit encourages cost reduction and efficiency by rewarding investors based upon project output instead of total expenses; and, 

• The Production Tax Credit requires production for the full period of the credit 

to ensure that projects are legitimate power producers and not tax credit 

‘‘scams.’’ 

Congress’ decision to expand the Production Tax Credit to include geothermal and 

other renewable energy resources was an appropriate policy choice.3 As the GEA 

survey shows, the PTC is having the desired effect. But, to make this truly effective, 

we urge Congress to extend the credit five to ten years. We also urge Congress to 

allow geothermal and other baseload projects to qualify once they have binding contracts and are under construction. Further, we urge Congress to enact a new tax 

incentive for geothermal exploration. We will discuss each of these proposals in 

turn. 

Building Upon The Energy Policy Act 

The Energy Policy Act of 2005 has helped launch a new era for the geothermal 

industry. But, as this Subcommittee knows, this legislation is only the beginning. 

As the November survey of new projects shows, many of these are in their early 

stages, and they will take several years to bring to fruition. These projects are just 

the beginning of what is possible. 

Consistent federal and state policies over a longer period of time will be needed 

to spur develop of our largely untapped geothermal energy resources. The rollercoaster of federal and state energy policies has undermined the development of 

many clean technologies, including geothermal energy. It’s worth noting the recommendation by the Western Governors’ Association’s (WGA) Clean and Diversified 

Energy Advisory Committee (CDEAC): ‘‘A strong, overarching theme . . . is the 

need for stable, long-term policies at both the federal and state levels. . . .’’ 

Energy is too often considered an issue of the moment, or the latest crisis. But 

to effectively address U.S. energy needs, the nation must adopt sustained longerterm energy policies. We hope that the Subcommittee will consider new energy legislation this session to build upon EPAct and provide the long-term, stable policies 

needed through a long-term extension of the Section 45 tax credit. We would urge 

the Subcommittee to support a 5–10 year extension of the placed in service deadline. 

The Developers Dilemma: Short Time Period to Meet Placed in Service Requirement 

and Long Construction Lead Times 

The Energy Policy Act amended the Section 45 PTC to include new geothermal 

facilities, as well as several other renewable facilities, on the same basis as new 

wind facilities. The PTC gives the developer the incentive needed to choose to invest 

in geothermal energy. However, given the longer construction lead-time for geothermal plants—3 years or more—the short period the law allows for new plants 

to be placed in service undercuts its effectiveness. The short timeframe means that 

some of the largest new geothermal facilities may not go forward because they will 

not be able to meet the rigid deadline. Ideally, the placed in service deadline for 

the Section 45 PTC should be extended an additional 5–10 years and Congress 

should provide geothermal facilities greater flexibility in qualifying for the credit. 

If geothermal facilities that secure binding contracts and are under construction by 

the current deadline could be certain to qualify, substantial additional geothermal 

generation would be developed in the next few years. 

In 2005, I accompanied Vince Signorotti of CalEnergy when he testified before 

this Subcommittee about the importance of the PTC to his company’s geothermal 

plans. He said: 

We have a permit, so we could put shovels in the ground tomorrow. We have a 

customer—the Imperial Irrigation District—which strongly supports the developVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00022 Fmt 6633 Sfmt 6621 E:\HR\OC\48112.XXX 48112

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4Testimony of Vince Signorotti, Vice President, CalEnergy Operating Corporation, House 

Ways and Means Subcommittee on Select Revenue Measures, May 24, 2005. 5Testimony of Todd M. Raba, President, MidAmerican Energy Company, Before the Committee on Finance, United States Senate, March 29, 2007. 

ment of geothermal power and has signed a 30-year contract for 95% of the plant’s 

output. We are also ready to go with financing and construction. However, the 

project is not yet commercially viable. Put simply, obtaining a production tax credit 

for this facility is the difference between an economically viable project and a 

dream. The present values of future production tax credits (especially if allowed for 

ten years of energy production) will launch this project and other geothermal 

projects around the country.’’ 

The first issue we ask you to address is the eligibility period. For geothermal 

projects, the placed-in-service date should be extended for an appropriate term to 

make the production tax credit viable. Given the construction time of most geothermal plants, the existing one-year eligibility period does nothing to help make 

our plant a reality and probably won’t help other geothermal developers. Three 

years is the minimum needed to benefit most geothermal developers, who, like us, 

must deal with multi-year lead time challenges of planning, permitting, and construction. I therefore propose that you either extend the Section 45 placed-in-service 

date for at least three years or provide transition rules enabling new geothermal 

projects with binding contracts in place to qualify. This modification would more realistically help to achieve Congress’ intent to provide an incentive for more geothermal development. 

If Congress extends the production tax credit for geothermal energy in this manner, we will build this plant; it’s that simple. And it will greatly increase the odds 

of seeing a Salton Sea 7, 8 and 9, because non-polluting, base load geothermal 

power is seen as an attractive substitute for coal and gas plants. The power from 

our plants near the Salton Sea can be directed west to San Diego, northwest to Los 

Angeles, northeast to Las Vegas, or east to Arizona. These are all areas with urgent 

needs for new, reliable electric power. They are having difficulty meeting current 

clean air requirements and they expect substantial growth in their power demands. 

While they are also subject to state or local renewable portfolio standards that mandate higher percentages of renewable energy, they are not likely to meet those 

standards in the absence of the production tax credit.4

Since that testimony, what has happened? Instead of extending the tax credit at 

least three years, Congress extended the production tax credit for a period of two 

years. As a result, instead of building one of the largest new geothermal power 

plants in the world—likely the first of several—CalEnergy has not built the power 

plant. As Vince said, ‘‘it’s that simple.’’ 

Unfortunately, while EPAct has spurred significant new interest in geothermal 

power, the legislation has failed to spur the development of geothermal’s full potential because of the short time-frame and ‘‘cliff’’ imposed by the current placed in 

service requirement. As Todd Raba, President of MidAmerican Energy Company 

(MEC) explained to the Senate Finance Committee in his March 29th testimony: 

With regard to geothermal, hydro, biomass and waste-to-energy generation, the 

problem is more acute. While these resources are more geographically limited than 

wind, they function as dispatchable, base load resources, enhancing their value. 

Drilling new geothermal wells or upgrading existing hydro facilities to create incremental power expansions is highly capital intensive. The vast majority of these 

projects cannot be completed within the short placed-in-service time frames under 

the existing PTC legislation, thus severely limiting new investments.5

Consider the work underway by Davenport Power LLC to develop what could be 

the first major geothermal power plant in Oregon. The cascade region of Oregon and 

Washington appears to have substantial untapped geothermal resources, and development of the first power projects in the region would have added significance. But, 

according to Todd Jaffe of Davenport, despite the fact that the company intends to 

begin drilling and on-site development this month, without an extension of the PTC 

the project may fail. 

As Mr. Jaffe of Davenport Power explains: 

This project (120MW) will cost in excess of $400 million. NGC is working with 

its investment banker in order to secure the necessary long term equity required 

for the project. This commitment is needed as soon as possible since the majority 

of the well drilling must be financed with equity. In order for this project to be economically successful, the project MUST receive the PTCs. Our investors are assuming that Congress will once again extend the PTCs to cover the in-service dates 

thought 2011 and that the project will receive these credits for the entire 10 years. 


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6Personal Communication, Todd Jaffe, Davenport Power LLC, March 15, 2007. 

If not, NGC will not be able to secure equity funding and the project may have to 

terminate.6

In the 1980s, the combination of federal tax credits and power sales contracts 

issued under the Public Utilities Regulatory Policies Act of 1978 (PURPA), fueled 

dramatic growth in renewable power, including geothermal energy. By the early 90s 

federal tax credits had been eliminated or scaled back, energy prices dropped to historic lows, and PURPA contracts ceased. EPAct has again made the development 

of geothermal projects possible, again. However, the long lead times of geothermal 

projects and the short term of the credit period are undercutting its potential. 

We urge the Subcommittee to support extending the credit and amending Section 

45 to allow geothermal and other baseload power plants to qualify for the credit 

once they have secured binding contracts and are under construction. 

Exploration Incentives 

As the examples above note, the early expenses of geothermal projects are particularly difficult hurdles. Exploration is usually financed with equity, carries high 

risks, and takes a long time to be paid back. The exploration technologies available 

today do not allow confirmation of the resource without drilling, and drilling geothermal wells is expensive, with costs ranging from a few million to over ten million 

dollars for a single well. There are substantial undiscovered geothermal resources 

in the U.S., but a dramatic increase in new exploratory drilling will be necessary 

if potential resources are to be developed into power projects. 

While the PTC helps provide incentives for power projects, it is not as effective 

at encouraging exploration. Early exploration can take place a decade before any 

power will be produced, and can often involve an investor who is not the power developer. The cost and risk of exploration for new geothermal resources is as high 

or higher than those in the oil and gas industry, and the ability to attract capital 

to finance geothermal exploration is far more difficult. 

Providing incentives for exploration is an important part of ensuring a continued 

cue of new projects. We urge the Subcommittee to consider enacting a tax credit for 

30% of the costs of exploratory drilling. 

The Critical Role of Tax Incentives 

Tax incentives are critical to offset the high initial cost and risk of developing new 

geothermal power projects. The California Energy Commission (CEC) estimated that 

the initial capital cost of a typical geothermal facility was roughly $2700 per kilowatt, which is 4–6 times greater than the capital cost of a comparable-output combined cycle natural gas power plant as shown in the following table. 

Table 1: Capital Costs of Natural Gas and Geothermal Facilities 

(CEC estimates 2003) 

Capital Costs Installed Costs In-service Cost 

Combined Cycle Natural Gas 542 592 616 

Geothermal Flash 2128 2410 2558 

Geothermal Binary 3210 3618 3839 

Source: Comparative Cost of California Central Station Electricity Generation Options, Magdy Badr and 

Richard Benjamin, California Energy Commission, 2003. 

The CEC estimate does not reflect recent increases in steel and drilling costs discussed later in this statement, and does not include ‘‘site specific’’ costs such as permitting and transmission. Capitol costs of new plants have been increasing substantially, as the following chart from EnergyBiz Magazine shows: 


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Table 2: Power Plant Capitol Cost Inflation 

Because a geothermal facility has very low fuel costs and no fuel market volatility, in the long run, over 30–50 years, the ‘‘levelized’’ cost of a facility might be 

competitive with the long-term costs of a fossil fuel plant (considering both capitol 

and fuel costs). But without the Section 45 Production Tax Credit (PTC), the initial 

risks, long lead times, and high capital cost will compel many investors to choose 

other alternatives that have shorter lead times, less risk, and lower front-end costs. 

In an important way, the PTC is equalizing risk. Given the high capital cost and 

risk associated with geothermal development, the PTC gives the investor the incentive necessary to consider geothermal energy on a more equal basis with conventional power projects. In addition, by lowering the capital risk for the geothermal 

projects, the ratepayer and the economy benefit by avoiding price spikes and instead 

ensuring long-term stable prices for energy. 

Also, as the Figure below indicates, only about half of the investment needed for 

a new geothermal facility qualifies for the Investment Tax Credit, making a 10% 

credit effectively a 5% credit, while an output-based credit like the PTC makes no 

such distinction. 


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7Factors Affecting Costs of Geothermal Power Development, Cedric Nathanael Hance, August 

2005, available at: http://www.geo-energy.org/publications/reports.asp. 8 Entingh, Daniel J. (December 15, 1998). ‘‘Review of Federal Geothermal Royalties and 

Taxes.’’ Princeton Economic Research, Inc., page 4. 9Owens, Brandon (July 2004). ‘‘Does the PTC Work?’’ PR&C Renewable Power Service, page 

9. 10 ‘‘Does the PTC Work?,’’ by Brandon Owens (PR&C Renewable power Service, July 2004), 

pp. 10–12. 

Figure 1: Typical Cost Breakdown of Geothermal Power Projects 7

Comparative Taxation Rates 

Geothermal facilities pay significant federal, state and local taxes. A study conducted for the Department of Energy in 1998 by the Princeton Economic Research 

Inc states: 

‘‘A lot more Federal income tax is being collected from geothermal electricity than 

from electricity produced from natural gas, on a per kWh basis. It appears that geothermal power systems, while having been granted a number of Federal tax incentives, . . . nevertheless appear to bear much heavier Federal income tax loads than 

are borne by some natural gas power generating systems. This is mostly because 

geothermal systems are much more capital intensive than natural gas power systems, and profits and income taxes are generally proportional to the size of investments.’’ 8

More recent analysis supports this conclusion. Brandon Owens, whowent on to become Associate Director at Cambridge Energy Research Associates, published a 

study entitled ‘‘Does the PTC Work?’’ which found: ‘‘Fossil fuel—fired technologies 

have a lower tax burden relative to all renewable power technologies. The difference 

in tax burden is most pronounced for biomass and geothermal technologies, which, 

in this example, pay 227 percent and 338 percent more in total taxes, respectively, 

than they do for gas-fired combined-cycle units on a per megawatt-hour (MWhr) 

basis.’’ 9

As Vince Signorotti pointed out in his 2005 testimony: 

Providing the geothermal industry with a production tax credit does not get us 

off the hook on the tax front by any means. Indeed, one recent study has shown 

that geothermal plants pay, on average, more than three times the taxes that gasfired combined cycle power plants pay on a per megawatt-hour basis.10 This is largely the result of geothermal’s high capital and related infrastructure costs and the 

fact that a much higher percentage of our costs go to labor than a comparably sized 

gas plant, whose highest cost item is fuel.11 In fact, our pro formas show that over 


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11One study has shown that ‘‘job creation from geothermal energy is 11 times higher than 

from natural gas.’’ ‘‘Renewables Work: Job Growth from Renewable Energy Development in 

California,’’ by Brad Heavner and Susannah Churchill, June 2002 (http://www.calpirg.org/re- ports/renewableswork.pdf). 12One assessment of the marketplace value of the environmental externalities of geothermal 

energy production concluded that geothermal power production prevents emissions of 32 thousand tons of NOx, 78 thousand tons of SO2, and 16 million tons of CO2 per year, which were 

worth $243.7 million in equivalent air emissions value, or roughly 1.6 cents/kWhr of geothermal 

electricity produced. ‘‘Promoting Geothermal Energy: Air Emissions Comparison and Externality 

Analysis,’’ Alyssa Kagel and Karl Gawell, The Electricity Journal, August/September 2005, Vol. 

18, Issue 7. 

gas plant, whose highest cost item is fuel.11 In fact, our pro formas show that over 

the next 30 years, even with the benefits of the production tax credit in place, 

Salton Sea Unit 6 will still pay $100 million in federal income and payroll taxes 

and nearly $200 million in state and local income, property, and payroll taxes. 

Accounting for the Positive Values of Geothermal Energy 

Today, perhaps more than ever before, Americans are aware of the costs of our 

energy habits. The national security implications of our dependence on foreign 

sources of energy are clear. 

Even more foreboding are the increasingly dire warnings about the consequences 

of global climate change. While the health costs of air and water pollution drove 

Congress to enact landmark air and water quality laws, more action is needed by 

Congress to intervene in energy markets with legislation that addresses greenhouse 

gas emissions. 

Geothermal energy is a domestic resource. Because geothermal power plants do 

not burn fuel like fossil fuelplants, they release virtually no air emissions. In general, geothermal energy production results in minimal environmental impacts, 

which are detailed in A Guide to Geothermal Energy and the Environment available 

at: http://www.geo-energy.org/publications/reports.asp. But, the marketplace price of 

energy does not reflect any of these values.12

Providing tax incentives for new production is one effective way of compensating 

for the marketplace’s failure to include such externalities in energy prices. 

The Western Governors’ Clean Energy Initiative 

As Congress considers its next steps after EPAct, we call to the Committee’s attention the recent recommendations from the Western Governors’ Association 

(WGA) Clean and Diversified Energy Advisory Committee (CDEAC), and specifically 

the CDEAC Geothermal Task Force Report and recommendations. The CDEAC effort is unquestionably the most systematic, thorough, and contemporary examination available of the potential for geothermal energy and other clean energy technologies to contribute to the energy needs of the West. The CDEAC effort concluded 

that clean technologies can meet or exceed the West’s need for new energy sources, 

but that sustained federal and state support is needed to achieve this goal. 

The CDEAC Geothermal Task Force made the following specific recommendation: 

Geothermal Priority Recommendations 

1. Federal and state tax credits are important to reduce the risk and high capital 

cost of new projects. The federal production tax credit (and clean renewable bonding 

authority) should be made permanent, or at least extended ten years. 

Such changes would make the PTC an effective and equitable stimulus for new 

investment in geothermal power and result is substantial economic, energy security, 

and environmental benefits. 

Conclusion 

The production tax credit is helping to spur renewed geothermal energy development, but much more is possible. We urge Congress to take the next steps and enact 

a long-term extension of the production tax credit, modify placed in service treatment for baseload power plants, and provide an incentive for new geothermal exploration. Together, these measures would help unleash the potential of this renewable 

energy resource. 


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Table 3: Developing Geothermal Projects by State and Status (November 2006) * 

State Unconfirmed 

PHASE 1 (Identifying 

site, secured rights to 

resource, initial exploration drilling) 

PHASE 2 (Exploratory 

Drilling and confirming) PHASE 3 (Securing PPA and final permits) PHASE 4 (Production Drilling and Under Construction) TOTAL* (PHASE 1 to PHASE 4) 

Number of sites and MW-range ‘‘# of sites/#MW’’ 

AK 1/15 MW 1/20 MW 1/0.6 MW 2/20.6 MW AZ 1/2–20 MW 1/2–20 MW CA 5/320–330 MW 3/326.8 MW 5/139.5 MW 2/35–73 MW 15/821.3–869.3 MW HI 1/30 MW 1/8 MW 2/38 MW ID 2/200 MW 1/26 1/10 MW 2/36 MW NM 2/21 MW 2/21 MW NV 5/72–102 MW 7/304–393 MW 3/49–64 MW 6/157–167 MW 3/37 MW 19/547–661 MW OR 3/86–91 MW 1/40–60 2/60.2 MW 6/186.2–211.2 MW UT 2/135 MW 1/36.6 MW 1/11 MW 2/47.6 MW Total 10 projects 422–452 

MW 

18 projects 762–884 

MW 

11 projects 499.4– 

534.4 MW 

14 projects 364.7– 

374.7 MW 

8 projects 93.6–131.6 

MW 

51 projects 1719.7–1924

*Unconfirmed projects are not counted in the state or final total. 


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Total U.S. Geothermal Projects Identified as Under Development—Confirmed and Unconfirmed—11/10/2006 

61 Projects 2,141.7 MW–2,376.7 MW 

f 

Chairman NEAL. Thank you. 

Mr. Resch. 

STATEMENT OF RHONE RESCH, PRESIDENT, SOLAR ENERGY 

INDUSTRIES ASSOCIATION 

Mr. RESCH. Thank you, Mr. Chairman and Members of the 

Committee, for providing the opportunity to testify today. My name 

is Rhone Resch, and I am president of the Solar Energy Industries 

Association, a national organization that represents close to 500 

companies and over 20,000 employees in the U.S. solar energy industry. 

My testimony today is especially timely. Just two days ago I 

filled out my taxes with TurboTax. And for the first time in 23 

years, there was a box on the form allowing taxpayers to receive 

a tax credit for installing a solar system. I’m happy to say that I 

did install a system in 2006, and I did check that box and got that 

credit. And I want to personally relate the sense of patriotism and 

individual energy independence that I felt upon installing a solar 

system right here, in Washington, D.C. 

This system provides 100 percent of the electricity that my family will use over the course of the year. This is carbon-smart, pollution-free energy, and it works right here, in Washington, D.C. In 

fact, this is an example of the solar panels that we put on my 

house. It’s by a company called Sun Power, a U.S. company. It’s the 

most efficient panel made in America. You can see it looks like a 

flat screen TV. Very different from what most people think solar 

panels look like. 

So, while Jaime brought his beer, I’m happy to say I brought my 

power plant. And if I had been smart, I would have brought 20 bottles of the wines that are made by the solar wineries in Congressman Thompson’s district. But that will be for another hearing. 

So, from this experience I have some brief and concrete suggestions for ways to improve the current investment tax credit for 

solar energy. I am happy to say that the basic structure of an investment tax credit does work for solar. However, the duration of 

the credit is too short, and the scale is too small to encourage investment in U.S. manufacturing, or the construction of new solar 

power plants. 

Therefore, the most important thing that this Committee and 

Congress can do to improve upon the current solar tax credit is to 

pass H.R. 550, Securing America’s Energy Independence Act. H.R. 

550, introduced by Congressman McNulty and Congressman Camp, 

with 54 cosponsors, provides an 8-year extension of the ITC for 

both residential and commercial solar and fuel cell systems, and 

will send a long-term market demand signal that is needed for our 

industry to grow. H.R. 550 also improves the current ITC by modifying the structure for photovoltaics, to increase efficiency and 

drive down costs. 


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The rest of my testimony will focus on why we need an 8-year 

extension. The first is with respect to competitiveness. The development and manufacturing of solar energy is the fastest growing segment of the high-tech industry. Almost all of the growth is occurring in Japan, Germany, and China. 

Once again, technology developed in the United States is being 

commercialized by other countries. Just 7 years ago, the U.S. manufactured 40 percent of the world’s solar electric goods. In 2006, we 

slipped to less than 7 percent of total growth production. 

In contrast, four years ago China had no solar manufacturing, 

and today produces 15 percent of all world supply. The lesson here 

is clear. The U.S. is once again getting beat out by Germany, 

China, and Japan, who have jump-started their industries with 

long-term Federal incentives that create domestic markets and encourage consumers to buy solar energy. 

In contrast to Japan’s 12-year incentive and Germany’s 20-year 

program, the ITC in the United States is for just two years. The 

only way that the U.S. can reclaim global leadership in solar and 

spur growth in domestic manufacturing is through the adoption of 

an 8-year extension of the ITC. 

Second, we need an 8-year extension to move us toward energy 

independence. Expanding the use of solar energy can dramatically 

reduce a reliance on foreign sources of energy. All solar technologies—PV, solar water heaters, and utility scale power plants— 

displace natural gas. But all technologies need a long lead time to 

scale up. 

Utility scale power plants can be built to provide firm, 

dispatchable power to the fastest growing communities in the 

United States. These power plants directly displace expensive polluting and inefficient natural gas peaking plants, and can decrease 

our growing demand for natural gas from the Middle East and Algeria. 

The problem, like that of nuclear and coal fire power plants, is 

that the construction of utility scale power plants takes five to 

seven years, from the planning to startup. And because of this 

lengthy construction time, a short-term extension for solar on the 

ITC will provide absolutely no incentive to build these plants. So, 

if we want to get serious about energy independence and security 

in a carbon-smart way, then the ITC must be extended for eight 

years. 

The third justification for why we need an 8-year extension is to 

establish parity between solar and other energy technologies. And 

parity, here, constitutes equal treatment, not special treatment. 

So, for instance, in the Energy Policy Act of 2005, clean coal technologies were granted favorable tax treatment for ten years. New 

generation nuclear technologies were provided eight years. And as 

Jaime pointed out, even in the production tax credit, section 45, 

when that was originally created, it had an eight-year initial window. 

These long-term policies were an explicit recognition of the fact 

that emerging technologies need financial, regulatory, and market 

certainty that can only be afforded by long-term, consistent Federal 

tax policies. Solar energy should be afforded equal treatment. 


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Therefore, it is critical that the extension of the solar ITC be for 

eight years, as provided in H.R. 550. 

Finally, I would like to point out that solar energy is our Nation’s 

most abundant energy resource, surpassing coal, gas, and oil reserves, combined. The United States has, simply put, the best solar 

resources of any developed country in the world. However, in 2006, 

solar energy produced just 1/30th of 1 percent of all the electricity 

in the United States—1/30th of 1 percent, yet we’ve got the best 

solar resources in the world. 

Take a look at this map. This shows a map of Germany and the 

solar insulation there, and the solar insulation in the United 

States. You can see the difference. Germany, which has the solar 

equivalent of Anchorage, Alaska last year installed seven times 

more solar than we did in the entire United States. 

So, given its abundance, solar energy is an obvious choice for a 

clean, reliable, and domestic energy future. Greater reliance on this 

untapped energy resource will grow our economy, create jobs, increase security and integrity, while heralding independence. 

Passing H.R. 550, the Securing America’s Energy Independence 

Act, is the most meaningful solar policy that Congress could enact. 

I thank the Committee for giving me this opportunity to speak, and 

I am available to answer questions that you may have. 

[The prepared statement of Mr. Rhone Resch follows:] 

Statement of Rhone Resch, President, Solar Energy Industries Association 

Thank you, Mr. Chairman and Members of the Committee, for providing me the 

opportunity to testify today. 

On behalf of almost 500 companies and more than 20,000 employees in the U.S. 

solar energy industry, I urge the Committee to extend and improve the investment 

tax credit (ITC) for solar energy property for eight years, as provided in the Securing America’s Energy Independence Act, H.R. 550. 

I would like to focus my testimony on several key points: 

An eight-year extension of the solar ITC is crucial to establish parity between congressional support for other electricity generation technologies and solar energy. 

Parity constitutes equal treatment—not special treatment; 

• An eight-year extension of the ITC will create significant benefits that are not 

possible through more frequent, shorter term extensions of favorable tax treatment; 

• The credit needs to be improved to increase market efficiency and drive down 

costs. Converting it from a cost-based to capacity-based credit will reward greater energy production, not greater costs; and finally, 

• Solar energy improves our energy independence, energy security and environment, and it deserves long-term, stable congressional support now. 

Before addressing the key points above, a couple of contextual points are in order. 

Recent Solar Tax Treatment History and Current Legislation 

The Energy Policy Act of 2005 (EPAct 05) created a new commercial and residential ITC for fuel cells and solar energy systems placed in service from January 1, 

2006 through December 31, 2007. The credit was further extended for one additional 

year in the Tax Relief and Health Care Act of 2006. The solar ITC now expires on 

December 31, 2008. 

The new solar ITC is working and has helped more Americans use solar energy 

in their homes and businesses. However, the credit’s limited size and duration has 

restricted manufacturing investment, failed to significantly increase the number of 

trained installers, which are critical to drive down future costs, and has not resulted 

in the construction of new utility-scale solar power plants. In response, Congressmen Michael McNulty (D–NY) and David Camp (R–MI) have introduced the Securing America’s Energy Independence Act (HR 550) to improve and build upon the existing tax incentive. 


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1For a comprehensive description of the three commercial solar technologies see appendix 

The Securing America’s Energy Independence Act provides a blueprint of the policy changes needed to secure a long-term robust solar marketplace in America. Specifically, the legislation: 

• Extends the ITC for all residential and commercial solar and fuel cell equipment for eight additional years; 

• Modifies the residential and commercial tax credit for photovoltaic cell technology (direct conversion of sunlight into electricity) to $1,500 per half kilowatt; 

• Removes the 30% cap for commercial photovoltaic installations and the $2,000 

cap on residential photovoltaic installations; 

• Provides alternative minimum tax (AMT) relief; and, Provides three year accelerated depreciation for commercial projects. 

The short and long-term benefits of enacting these changes would be significant. 

The benefits include: 

• Increased energy security: Solar technologies help stabilize the nation’s electricity grid, provide clean, reliable power, and reduce the impact of natural disasters and terrorist acts. Producing these home-grown technologies in the U.S. 

will reduce our dependence on foreign sources of energy, while simultaneously 

lowering the cost of energy to consumers. 

• Reduction in the use of high cost natural gas: In most parts of the U.S., 

peak electricity demand occurs when solar electricity is near optimal efficiency 

(9 AM—6 PM). This demand load is almost exclusively served by central station 

gas generation that can be easily cycled on and off and is often highly inefficient. An eight-year extension of the ITC will displace over 5.5 trillion cubic feet 

(Tcf) of natural gas and save consumers over $50 billion. 

• Job creation: Solar systems require high-tech manufacturing facilities and 

produce well paying, high-quality jobs. Extending the tax credit will create an 

estimated 55,000 new jobs in the solar industry and over $45 billion in economic 

investment. 

• Clean energy: Solar energy is the cleanest of all renewable energy sources, 

producing electric and thermal energy with zero emissions, no waste products 

or other forms of pollution.1

The Crucial Nature of the Eight-year Extension 

It is critical that the extension of the ITC be for at least eight years, as provided 

for in HR 550. An eight-year extension will provide the long-term market ‘‘demandsignal’’ that is needed for industry to build new manufacturing capacity, expand the 

installer workforce, and construct new utility-scale solar power plants. 

Similar to other emerging energy technologies such as clean coal and new generation nuclear, utility-scale concentrating solar power (CSP) plants and new solar cell 

manufacturing plants require long lead times that far exceed the two-year time period remaining under EPAct 05 and the Tax Relief and Health Care Act of 2006. 

Development of a CSP plant can take six years, while new photovoltaic cell manufacturing facilities often require four years to be completed. 

Additionally, solar energy is unique from other renewable technologies because it 

is installed on rooftops and requires an entire workforce of skilled electrical workers, 

plumbers, roofers, and others to be trained and certified to install solar systems. 

The creation of an entirely new specialized workforce requires substantial time and 

expenditure by the industry that will not occur without a long-term extension and 

improvement of the tax credit. 

Long-term regulatory and tax treatment certainty is equally important to project 

financing. Solar energy power plant projects are more complex than conventional 

power plants because of the unfamiliarity of the lending industry with the technology. On average, financing can take an additional 12 months for project development. Political and therefore market certainty—in the form of an eight-year ITC— 

is needed to help reduce the cost of capital for these projects. 

Despite the unique needs of the solar energy industry for long-term certainty, concerns have been raised that federal budget constraints may prevent long-term extension of the solar ITC. Similarly, some have argued that all renewable technologies, 

without regard to past treatment or current differences, should receive the same 

length of tax credit extension. 

According to this argument, some maintain that it would be unfair to provide 

solar technologies with a longer duration credit extension than that accorded to 

other electricity generation technologies. This concern misses the mark. An eightVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00032 Fmt 6633 Sfmt 6621 E:\HR\OC\48112.XXX 48112

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year credit extension for solar would approximate equal treatment and does not 

equate to special treatment. This is so for several reasons. 

First, in EPAct 05 clean coal technologies were granted favorable tax treatment 

for ten years and new generation nuclear technologies were provided eight years. 

Wind energy technologies were also initially granted an eight-year duration (1992– 

2000) when the Internal Revenue Code § 45 production tax credit (PTC) was created. 

These long-term extensions were an explicit recognition of the fact that emerging 

technologies need financial, regulatory and market certainty that is only afforded 

by long-term, consistent federal tax credit policy. Solar energy should be afforded 

equal treatment. 

Secondly, energy technologies with more mature markets are governed by the production tax credit (PTC) provisions in Code § 45 (e.g. wind, geothermal, hydropower), 

while renewable technologies with less developed markets (e.g. solar and fuel cells) 

are governed by the ITC provisions in Code § 48 (commercial) and § 25 (residential). 

Due to these differences in market maturity, it is even more critical to provide longterm incentives to the ITC technologies. Long-term support will encourage market 

expansion to the level enjoyed by the PTC technologies. 

It is also important to recognize that the PTC and the ITC mechanisms function 

in fundamentally different ways and should not be viewed identically. As a practical 

matter, a one-year extension of the PTC is tantamount to a ten-year extension of 

the ITC. For instance, if the § 45 PTC is renewed for one year, the duration of the 

favorable tax treatment is actually 10 years. This is because the ‘‘one year extension’’ for the § 45 PTC actually refers to the duration of the ‘‘placed-in-service’’ rule 

governing the credit, not the actual temporal duration of the credit’s availability. Accordingly, under a one year § 45 PTC extension, a claimant has one year to place 

qualifying § 45 property (e.g. geothermal, hydro, wind, etc.) ‘‘in-service’’ to trigger an 

annual, recurring tax credit that lasts for ten years. 

In contrast, the § 48 ITC (or alternatively the § 25 ITC) is a one-time credit for 

a portion of the cost of installing a qualifying solar system. The ‘‘claiming’’ of the 

§ 48 ITC credit does not trigger annual tax credit eligibility in each of the succeeding ten years. This distinction in the practical operation of the two different 

credits is fundamental. Furthermore, financial markets place a special premium on 

long-duration favorable tax treatment. 

To the extent that the metric of Congressional fairness to varying technologies is 

tax extensions of equal duration, then the differences in the mechanics of the § 45 

PTC and the § 48 ITC cannot be overlooked. To do so would fundamentally disadvantage solar energy technologies vis-&-vis competing electricity generation technologies. There is no sound public policy rationale for this lesser and disparate 

treatment. 

The conclusion then, is clear. The ITC for solar energy and fuel cell assets should 

be extended for eight-years without regard to the length of extensions that are accorded other renewable energy assets. This is especially so given the history of favorable tax treatment that has already been afforded to coal, nuclear, ethanol, wind 

and other technologies. 

An Eight-Year Extension of the Solar ITC Creates Unique Benefits 

The value of an eight-year extension of the solar ITC cannot be equated with more 

frequent credit renewals of lesser duration. Four successive extensions of two-year 

durations each will not allow the U.S. to construct new utility-scale CSP plants, reinvigorate our solar manufacturing base and pave the way for significant expansion 

and work-force training in the solar system design and installation industry. Only 

through a single, eight-year extension can the U.S. solar energy industry realize its 

full potential. Nothing better illustrates this point than the graph below in Figure 

1. 


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Figure 1: Source: AWEA, Wind Power Outlook 2006 

As the chart in Figure 1 demonstrates, short duration, frequent renewals of credit 

extensions create a ‘‘boom-and-bust’’ cycle that will not favor the longer term development of a robust, national solar energy industry that maximizes the potential of 

our world-class solar resources. 

Accordingly, it is essential that the extension of the ITC be for at least eight 

years. Such an extension will provide the long-term market demand signal that 

solar energy needs to transition from a nascent market to a mature one. Congress 

must eliminate the stop-start incentive cycle and create market conditions that 

allow solar companies to make new long-term investments that will reduce costs. 

To date, Congress has provided two short-term extensions (two and one year, respectively) that have not provided sufficient policy certainty for businesses to make longterm decisions. 

An eight-year extension is especially critical for the development of large, utility 

scale (e.g. 500 megawatts) solar power plants. CSP plants (also referred to as solar 

thermal electric power plants) are large projects that often take six years to complete from the initial planning stages. In this regard, CSP plants face many of the 

same challenges that other, state-of-the-art power plant designs such as new-generation nuclear plants and ‘‘clean coal’’ power plants confront. In fact, Congress in 

EPAct 05 recognized the unique challenges facing ‘‘clean coal’’ and new nuclear 

power plants when it provided ten-year and eight-year duration favorable tax credit 

authorizations for these technologies, respectively. Congress should accord CSP 

plants similar treatment. 

An eight-year extension is also crucial to reinvigorating the U.S. solar manufacturing base. Because of the capital intensive nature of solar energy hardware production, new U.S. manufacturing facilities will not be constructed unless there is 

business and investor confidence that the U.S. marketplace will experience a long, 

steady and robust demand cycle for solar energy products. This need for a strong 

‘‘demand signal’’ to spur domestic manufacturing applies equally to the solar thermal (water heating), the CSP, and the photovoltaic segments of the U.S. solar manufacturing base. This point also applies with equal vigor to the entire ‘‘solar value 

chain’’ that includes research, engineering, polysilicon manufacturing, plastics manufacturing, glass production, copper wire drawing, metal fabrication, instrument 

manufacturing and battery production, among others. 

Finally, an eight-year ‘‘demand-signal’’ is also necessary if the U.S. is going to 

grow the installer base necessary to sustain robust deployment of solar technology. 

In order to expand the domestic market for solar energy, a significant number of 

electricians, plumbers, roofers and designers need to be trained and certified. Yet 

solar design and installation firms are unable to hire new personnel and bear the 

expense of training unless it is clear that the U.S. solar market is in a period of 

long-term sustained activity and growth. Passage of HR 550 will provide the longterm financial, regulatory and business certainty that business owners require to 

commit significant new capital for workforce training and expansion. 

Improvement of the Existing ITC will Maximize Efficiency and cost Reductions 

Passage of the Securing America’s Energy Independence Act, HR 550, will improve 

the current structure of the credit for photovoltaic (PV) (for more information see 


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appendix) installations from 30% of the cost of the installed system to $1,500/half 

kilowatt, based on the nameplate capacity of the system. This modification would 

mimic the current structure for fuel cells. This change improves the credit by converting it from a cost-basis to a capacity-basis, thereby rewarding greater capacity, 

not greater costs. 

There are several reasons for the PV credit to be modified to a capacity-based incentive. First, capacity-based incentives encourage cost efficiency and expedite the 

reduction of the cost of solar energy. In comparison, a cost-based incentive could discourage true cost reductions until a mature, highly competitive market is developed. 

Second, a capacity-based incentive rewards new technology that can produce electricity at a lower cost. For example, in Washington DC, the ‘‘turn-key’’ cost for an 

installed PV system is approximately 6,000/half-kilowatt. If enacted, the improved 

credit structure in HR 550 would subsidize approximately 25% of the cost of the system. As the market matures and less expensive technologies are deployed, in the 

form of low cost panels or more cost effective installation technologies, it is anticipated that the installed cost would drop to approximately $4,000/half-kilowatt. The 

improved credit would then represent 35% of the cost of a system. Cost reductions 

in technology and installation will then encourage greater numbers of installations, 

further driving down system costs. 

Finally, studies have shown that state programs that incentivize solar technology 

deployment using a capacity-based rebate program result in larger solar installations than state programs that use a straight cost-based structure. This is especially 

important when we consider how solar can reduce demand for natural gas fired 

peak power (the most expensive electricity) and bring lower energy costs to all consumers. Larger initial installations have unique benefits, such as grid stability, 

avoided consumption of high-priced natural gas, myriad environmental benefits, and 

job creation throughout the entire economy. 

The Energy Security, Energy Independence and Environmental Benefits of 

Solar 

Enactment of HR 550 will improve our energy security, move the U.S. closer toward energy independence, and deliver numerous environmental benefits due to the 

inherent non-polluting nature of solar energy. 

Energy Security 

As Congress looks to increase the use of carbon-smart renewable energy, it is critical that priority be placed on technologies that also improve U.S. energy security. 

Solar energy, in all of its forms, is a technology that can greatly improve the U.S.’s 

ability to have a secure and reliable energy supply. 

The electricity infrastructure in the U.S. is aging and energy consumers are increasingly subject to outages that affect critical infrastructure and disrupt business. 

The black out of August 2003 in the Northeast, triggered by a tree limb landing on 

power lines, cost consumers and businesses tens of billions of dollars. Unfortunately, 

this event is not unique and will occur with greater frequency if Congress does not 

take steps to diversify our energy portfolio. 

The good news is that this event could easily have been avoided through greater 

use of solar energy. A 2004 Department of Energy (DOE) study entitled Solution 

to the Summer Blackouts? concludes that if solar energy had met just one percent 

(1%) of local peak demand, we would have avoided the August 2003 blackout and 

other local brownouts. DOE’s explanation was simple: high air conditioning loads 

stressed the grid and caused the blackout. These loads occurred on the hottest and 

sunniest days during the summer—the exact time when output from solar systems 

are greatest. DOE also concluded that over reliance on central generating stations 

led to grid fatigue and failure. This infrastructure vulnerability could have been 

minimized through greater reliance on distributed solar energy. 

Photovoltaic (PV) and solar water heating systems are distributed generation 

(DG) technologies. Like other DG technologies, they provide energy at the point of 

consumption rather than at a central power plant hundreds of miles away. As such, 

DG does not rely on vulnerable regional transmission lines and local distribution 

networks. By producing energy at the source of consumption, solar power alleviates 

stress and vulnerability on the grid. 

The DOE study also concluded that investing in solar energy is a more economically efficient and cost effective way to improve our energy infrastructure than capital intensive and often community-opposed transmission line upgrades. In sum, 

using solar energy is a cost-effective, affordable way to alleviate stress on the electricity grid and improve the overall reliability of our electricity infrastructure. 

Solar is also the most reliable source of energy. This reliable track record has resulted in wide deployment of the technology in applications where power interrupVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00035 Fmt 6633 Sfmt 6621 E:\HR\OC\48112.XXX 48112

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68 Energy Information Administration, Net Generation by Energy Source by Type of Producer, 

October 2006. 

tions are unacceptable, including: oil and gas industry use of solar energy to power 

pumps and meters at remote locations; telecommunications industry use of solar to 

power relay stations and remote equipment; and, every satellite that has been sent 

out into space in the last 30 years has been powered by solar energy. 

Ironically, energy industry acceptance of the technology stands in stark contrast 

to consumer behavior. Consumers are investing hundreds of millions of dollars in 

small gasoline-powered generators. During grid failure and electricity outages, electronic gasoline pumps at the gas stations do not operate, rendering many generators 

idle because of fuel shortage. Solar energy is a technology that can provide reliable 

power during power outages. 

Finally, solar stabilizes volatile energy prices, a critical energy security issue affecting the U.S. today. In the last five years, consumers have seen electricity prices 

escalate between 20 and 78 percent. At the same time, we have seen the price of 

natural gas triple and the price of gasoline routinely exceed $3.00 per gallon. Each 

year the cost of energy is taking a larger percentage of a family’s income than at 

any other time in U.S. history. This energy inflation vulnerability especially impacts 

the poor and elderly on fixed incomes. 

Solar can help address this vulnerability because it requires no fuel to operate. 

Although a solar system is more expensive up front, there are no additional costs 

for operating a system once installed. Furthermore, solar panels are guaranteed for 

20–25 years, allowing consumers to ‘‘lock in’’ their electricity prices for decades. Recognizing the upward trend in energy costs, incentivizing the use of a technology that 

requires no fuel inputs is an important element of any energy security plan. 

Energy Independence 

Solar energy is a domestic and abundant energy source in the U.S. The U.S. has 

the best solar resources of any developed country in the world. Proportionally, U.S. 

solar energy resources exceed those of fossil, nuclear or other renewable energy resources. Despite this tremendous advantage, the U.S. has failed to capture and harness this free and readily available energy. In 2006, solar energy produced just 1/ 

30th of one percent of all electricity in the U.S.; Germany in contrast, with the solar 

resources of Alaska, installed seven times more solar energy property than the entire U.S.2

Congressional determination to increase energy independence hinges upon its 

commitment to developing our unlimited domestic solar resources. To accomplish 

this, Congress must pass an eight year ITC extension, such as that found in HR 

550. 

Figure 2: Germany Insolation Figure 3: U.S. Insolation 

The U.S. is over-dependent on foreign sources of energy. Demand for natural gas 

continues to rise, primarily for the electricity generation. Increasingly we are turning to countries like Algeria to provide us with liquefied natural gas (LNG) to meet 

our growing demand. According to the Federal Energy Regulatory Commission, 41 

new LNG terminals are proposed for construction in U.S. harbors and off U.S. 

beaches. Constructing these plants will exacerbate our addiction to foreign sources 

of energy. Our desire for energy independence demands a different course. 

Solar energy directly displaces natural gas used for heating homes and water. In 

a home, solar can directly replace natural gas used to heat radiant systems and can 

displace up to 70% of the natural gas used to generate hot water. Many countries 


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3Solar Energy Industries Association Natural Gas Displacement Model 4 NREL report, ‘‘Distributed Energy Resources for the California Local Government Commission,’’ October 2000. 5Sandia National Laboratories, Energy-Water Nexus, http://www.sandia.gov/news-center/ 

news-releases/2006/environ-waste-mgmt/mapwest.html 6 NREL Report No. NREL/FS–520–24619: ‘‘Energy Payback: Clean Energy from PV’’ 

that do not have a domestic source of fossil fuels, including Spain and Israel, mandate that all new homes must have solar water heating systems installed. The U.S. 

can demonstrate similar energy independence by using market incentives that spur 

solar investment and market growth. 

Solar energy also displaces natural gas 

used to generate electricity. Almost all 

intermediate and peaking electricity 

plants use natural gas as the source of 

energy. These plants are often very inefficient and produce expensive electricity. Solar energy, which generates 

electricity from 8 A.M.–7 P.M. daily, can 

displace these inefficient, high cost 

power plants, and become a reliable 

source of firm, dispatchable power. 

Given the high price of natural gas to key industrial sectors and consumers, the 

U.S. can no longer afford to neglect its abundant solar resources. Analysis conducted 

by the Solar Energy Industries Association concludes that an eight-year extension 

and expansion of § 48 and 25 tax credits for solar energy will displace over 5.5 trillion cubic feet (Tcf) of natural gas, providing an economic value to consumers in excess of $50 billion.3 This is enough energy to displace the need for all new LNG terminals by 2012. 

In addition to tempering natural gas demand growth, solar can also generate electricity to be used by plug-in hybrids and electric vehicles, thereby displacing gasoline derived from foreign oil supplies. Imagine a gasoline-free electric vehicle that 

also uses electricity derived from the sun rather than a coal-fired plant. The technology is advancing rapidly in this direction, but it is critical that Congress catalyze 

the market by providing incentives to use solar energy. 

Environmental Benefits 

Though the environmental benefits of solar energy might be considered a given, 

it is worth highlighting several points. Solar is the cleanest method of energy generation, in terms of avoided air, waste and noise pollution, energy payback, water 

conservation, radiation, harm to wildlife, or environmental risk in the event of an 

accident. 

Solar energy produces no greenhouse gases, no acid precipitation or toxic emissions, and no other air pollution of any kind. Over the 40–50 year life of a solar 

electric system, every kilowatt (kW) of solar electric power reduces 217,000 pounds 

of carbon dioxide, 1500 pounds of sulfur dioxide, and 830 pounds of nitrogen oxides 

emissions as compared to electricity produced by conventional generation.

4

Photovoltaic solar energy generates electricity without use any water. In contrast, 

fossil fuel and nuclear based electricity generation use substantial amounts of water 

to run steam turbines. Across the U.S., approximately 40% of fresh water withdrawals are used for electric generation.5 If water-starved communities like Phoenix 

and Las Vegas are to continue growing, we must place greater emphasis on waterfree electricity generating technologies. 

Concerns have been raised whether the energy used to produce solar panels is 

surpassed by the amount of energy generated from the panels. This energy relationship is referred to as the ‘‘energy payback period.’’ Currently, the energy payback 

for PV panels varies from 1–4 years depending on different manufacturing variables. This means that a PV panel with a life expectancy of 40–50 years will generate between 10 and 50 times more energy than was required to create the panel. 

Despite this superior ‘‘energy return on investment’’, the manufacturing process is 

still growing more efficient every year as the scale of production increases.

6

Conclusions 

Solar energy is an obvious choice for a carbon-smart, reliable and domestic energy 

future. Greater reliance on this untapped energy resource will grow the economy, 

create jobs, increase grid integrity and security, while heralding energy independence. Unfortunately, all of these benefits are dependent on passage of HR 550. In 


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the absence of long-term Congressional leadership, we will continue down the path 

of over reliance on foreign, highly price-volatile, insecure, carbon-intensive energy 

sources. 

The U.S. stands at an energy crossroads. Independent, carbon-smart energy 

choices can be made today that will benefit generations to come. However, the window of opportunity is quickly closing. This Congress has an opportunity to invest 

in solar energy and ensure that the U.S. reclaims global energy leadership and independence. 

In conclusion, passing H.R. 550, the Securing America’s Energy Independence Act, 

is the most meaningful solar policy that Congress could enact this year. 

I thank the committee for giving me this opportunity to speak, and I am available 

to answer any questions you may have. 

APPENDIX 

Photovoltaics (PV) 

Technology 

Photovoltaic (PV) devices generate electricity directly from 

sunlight via an electric process that occurs naturally in certain types of material. Groups of PV cells are configured into 

modules and arrays, which can be used to power any number 

of electrical loads. 

Crystalline silicon—the same material commonly used by 

the semiconductor industry—is the material used in 94% of 

all PV modules today. PV modules generate direct current (DC) electricity. For residential use, the current is then fed through an inverter to produce alternating current (AC) electricity that can power the home’s appliances. 

The majority of PV systems today are installed on homes and businesses that remain connected to the electric grid. Consumers use their grid-connected PV system 

to supply some of the power they need and use utility-generated power when their 

power usage exceeds the PV system output (e.g., at night). In 41 U.S. states, when 

the owner of a grid-connected PV system uses less power than their PV system creates, they can sell the electricity back to their local utility, watch their meter spin 

backwards, and receive a credit on their electric bill—a process called net metering. The electric grid thus serves as a ‘‘storage device’’ for PV-generated power. 

Markets 

The global PV market has averaged 38% annual growth 

over the last five years. Yet PV still accounts for a small 

percentage of electricity generation worldwide and less 

than 1/30th of 1% in the U.S. Furthermore, the U.S. lags 

behind Germany and Japan in installations as well as in 

manufacturing. Germany and Japan have surged to the 

lead with coherent, long-term national incentive policies, 

despite dramatically inferior amounts of sunshine. 

The U.S. possesses the best solar resources in the world, and yet Germany installs 

seven-times as much PV as the U.S.. Germany and Japan have taken the lead 

in solar manufacturing and installations because of long-term national incentive 

policies designed to make solar power mainstream. Japan instituted a carefully designed rebate program that lasted over ten years, while Germany incentivizes solar 

installations by paying 3–4 times retail electric rates for the electricity generated 

from PV systems for 20 years. The surging player in the industry, China, has gone 

from having no PV industry to manufacturing twice the level of the U.S. in just 

three years. 

While California is the dominant U.S. market for PV, with 73% of the grid-tied 

installations in 2006, other states now offer modest PV incentives for consumers, including Massachusetts, Connecticut, Illinois, New York, Oregon, Wisconsin and 

Washington State. California, Texas and Pennsylvania have long-term policy commitments to develop solar in-state. Major PV manufacturing expansions have occurred in some of the states hardest hit by the outsourcing of U.S. jobs, including 

California, Washington State, Oregon, Michigan, and Massachusetts. 


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Concentrating Solar Power 

Technology 

Concentrating solar power (CSP) plants are utility-scale generators that produce electricity by 

using mirrors or lenses to efficiently concentrate 

the sun’s energy. Two principal CSP technologies are parabolic troughs and dish-Stirling 

engine systems. 

Using curved 

mirrors, 

parabolic 

trough 

systems concentrate sunlight to drive conventional steam turbines. The mirrors 

focus the sun’s energy onto a receiver pipe or heat collection element. From there, 

a high temperature heat transfer fluid picks up the thermal energy and uses the 

heat to make steam. The steam drives a conventional steam-Rankine power cycle 

to generate electricity. A typical collector field contains many parallel rows of 

troughs connected in series. 

A solar dish-engine system 

is shaped much like large 

satellite dishes and covered 

with curved mirrors. The 

dish is programmed to always face the sun and focus 

that energy on a receiver at 

the dish’s focal point, in 

much the same way that a 

satellite dish focuses radio 

waves on a tuner. The receiver is connected to a Stirling engine, which uses the 

thermal power generated by 

the focused solar energy to 

heat liquid hydrogen in a closed-loop system. The expanding hydrogen gas creates 

a pressure wave on the pistons of the Stirling engine, which spins an electric motor, 

creating electricity. Individual dish-Stirling units range in size from 10 to 25 kW. 

With their high efficiency and modular construction, dish-engine systems are expected to be cost-competitive in distributed markets. 

Markets 

During the 1980s and early ’90s, developers built nine concentrating solar power 

plants in California’s Mojave Desert. Then, for nearly two decades, no new plants 

were built—due to the erosion of federal support for renewables and plummeting energy prices. Yet in the current climate of rising natural gas prices, water scarcity, 

air pollution and carbon management concerns, concentrating solar power has the 

potential to play a major role in meeting the Southwest’s future energy needs. 

The Western Governors’ Association recently commissioned a Solar Task Force to 

report on the potential for clean solar development in the Southwest. The Solar 

Task Force Report, adopted in July 2006, identified areas with a potential for CSP 

generation capacity of approximately 200 gigawatts (GW). This capacity could 

produce about 473,000 gigawatt hours (GWh) per year. 

Solar Thermal Systems 

Technology 

Solar thermal systems provide environmentally friendly heat for household water 

and space heating. The systems collect the sun’s energy to heat either air or a fluid. 

The air or fluid then transfers solar heat to your home or water. In many climates, 

a solar heating system can provide a very high percentage (50 to 75%) of domestic 

hot water energy. In many northern European countries, combined hot water and 

space heating systems are used to provide 15 to 25% of home heating energy. 


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Active solar 

water heating 

systems can be 

either ‘‘open 

loop,’’ in which 

the water to be 

heated flows 

directly 

through the 

rooftop collector, or ‘‘closed loop,’’ in which the collector is filled with an antifreeze 

solution that passes through a heat exchanger mounted in or around your normal 

water heater. During the day, in good weather, your water can be heated entirely 

by the sun. In any weather, the heating system can back up your existing heater, 

reducing overall energy costs. 

Markets 

In the absence of coherent national policies, from 

1997 until 2005, the U.S. solar water heating and 

solar space heating market showed little growth, 

averaging about 6,000 installations per year. In the 

past year, numerous states, including New York, 

Florida, Hawaii, and Illinois, have created or expanded incentives to complement the new federal 

tax credits. Accordingly, the market is projected to 

increase 25 to 50 percent in 2007. 

On the manufacturing side, the past year has seen an influx of new entrants into 

the U.S. market, and the introduction of new systems that use polymer-based collectors (as opposed to sheet metal). However, domestic manufacturers have stated that 

with a two-year window for the federal credit, they are unlikely to ramp up production substantially until a long-term market policy has been established. 

f 

Mr. RESCH. And, Mr. Chairman, at this time I would like to request and attach to my testimony several letters that were written 

that, unfortunately, I was not able to get into my original testimony in support of a long-term extension, including: those from 25 

environmental organizations; another letter from the Western Governors’ Association; a letter supporting the bill from the National 

Association of Regulatory Utility Commissioners, NARUC; a letter 

from 13 utilities, including the Edison Electric Institute; a letter 

from the Secretary of Energy from the Commonwealth of Massachusetts, a personal letter to you, sir. 

Chairman NEAL. Smart move. 

[Laughter.] 

Mr. RESCH. I would like to include these with my testimony, if 

possible, sir. 

Chairman NEAL. Without objection. 

[The attachment to Mr. Rhone Resch’s statement follows:] 

Chairman NEAL. Mr. Rose. 

STATEMENT OF ROBERT R. ROSE, EXECUTIVE DIRECTOR, U.S. 

FUEL CELL COUNCIL 

Mr. ROSE. Thank you very much, Mr. Chairman, Members of 

the Committee. I see representatives from several fuel cell centers 


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of excellence here, including Connecticut and Upstate New York. 

And eastern Pennsylvania and California also have significant fuel 

cell capacity. I am Bob Rose, I am representing the U.S. Fuel Cell 

Council. We are the trade association of the industry. And I appreciate this opportunity. 

The Committee showed commendable leadership in 2005 with 

the tax incentive provisions encouraging early deployment and 

adoption of fuel cells and related infrastructure. You know, prior to 

2005, Federal market support for fuel cells was actually quite limited. And when it did come, it was in the form of direct support 

to purchasers. Both our industry and our markets are still adjusting to this new way of doing business that you have presented us 

with. 

And I am pleased to report that it appears that the credit is already beginning to prove its worth to our industry. So the value of 

your leadership can’t be overstated by us, and I want to make sure 

to thank you all today. 

We also, as do my colleagues here, support a long-term extension 

of the investment tax credit for fuel cells. 

Fuel cells are meeting customer needs today in high-value niche 

markets. We list something like 30 products on offer on our U.S. 

fuel council website. Typically, these products have, you know, 

guarantees and other commercial terms. That is so often the case 

with emerging technologies—their price limits their competitiveness in the larger marketplace. 

This Subcommittee has long recognized the importance of Federal tax policy in filling in that valley of death for advanced energy 

technologies that carry a public benefit, and I am sure my colleagues can share with you some of the successes that their industries are now beginning to enjoy, as a result of the Committee’s 

long-term support. My industry is kind of on the threshold of that 

commercial expansion, and so we need your help, really, kind of 

from the very beginning. 

We also support H.R. 550, which has a—not just the long-term 

extension, but also several other provisions that would be of value 

to our industry. I certainly want to recognize Congressmen McNulty and Camp and their 52 cosponsors on that bill. 

As I said, our experience with the incentive is limited. The first— 

the returns from 2006 will really be the first ones where there is 

a significant number of credit claims, although there were a few 

deals done in 2005. We can’t really link sales to the specific sales 

to the availability of the credit, although customers have said 

they’re using it. And at least one energy service company said it 

has managed to place about 100 fuel cells already under the credit. 

For us, that is a significant number. 

Creative minds are also linking the Federal credit with incentives offered by the states and in the—indeed, there are several 

states that have very aggressive programs to help us deploy fuel 

cells. And it’s this combination of incentives, and not the Federal 

credit alone, that has made the crucial difference for some of our 

companies. 

In fact, these companies estimate that closer to $3,000 a kilowatt 

is needed to fully open markets in all the states, particularly those 

states that don’t have programs of their own. 


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I am going to share now my recommendations, which are going 

to sound quite a bit like the other guys’ recommendations. But I 

did want to get on the record our formal view. 

We do seek an eight-year extension of the tax credits in section 

48 and in 25D. This is going to provide us with certainty and stability for our purchasers, stimulate cost reduction. It will also stimulate supply chain interest, which is extremely important to our industry. 

It will also send a positive signal to capital markets, and indeed, 

give our companies the courage and incentive to build out their 

manufacturing capability. 

We hope the Committee will examine the adequacy of the current 

$1,000 per kilowatt cap, which some companies, as I said, report 

as insufficient to open markets for them nationwide. 

We hope the Committee will also signal the most inclusive interpretation of the credit. This is going to insure, we think, that the 

credit achieves its intended purpose, as the range of products and 

markets expands. 

We hope you will clarify the ability to transfer or trade credits, 

which is important for—to get non-tax-paying entities in the game, 

and also to facilitate the formation of investment pools. 

We endorse the AMT modification proposed in H.R. 550. Individuals of means are very often the best early adopters of technologies, as my colleague Rhone has said, in buying his solar system. The AMT negates their access to this tax incentive, and I 

think that would be an important change for us. 

And, finally, we request that the eligibility be explicitly provided 

for systems located in U.S. territories. There are markets there 

that we are having a hard time serving because of the Tax Code 

prohibitions. 

Finally, we also recognize and applaud the Congressional interest in supporting hydrogen infrastructure, which will help fuel 

cells, as well. 

In conclusion, thank you again. We are grateful for your leadership, and we appreciate the chance to come up here and say so. 

[The prepared statement of Mr. Robert Rose follows:] 

Statement of Robert R. Rose, Executive Director, U.S. Fuel Cell Council 

Chairman Neal, Ranking Member English, Members of the Committee, I appreciate the opportunity to appear today to support a long-term extension of the investment tax credit for fuel cells. The U.S. Fuel Cell Council is a trade association of 

more than 105 members spanning all segments of our industry. We support commercialization of fuel cells of all types and for all applications. 

Fuel cells are a family of technologies that generate power electrochemically. 

Since there is no combustion, fuel cells are highly efficient with ultra low emissions. 

Fuel cells can utilize a wide variety of fuels, with unexcelled environmental performance. Overall, fuel cells deliver an exceptional combination of benefits to society. 

Fuel cells can power an extraordinary range of applications, from battery replacements in consumer electronics, to backup and remote power generation, auxiliary 

power units, combined heat and power systems and high efficiency base load electrical generation. They are also being developed for mobile power systems, specialty 

vehicles like forklifts and airport equipment, and for any vehicle that carries people, 

including transit buses and the family car. 

Fuel cells are meeting customer needs today in high-value niche markets, but as 

is so often the case with emerging technologies, their price limits their competitiveness in the larger marketplace. Capturing fuel cells’ benefits for our society will require active public-private partnerships in all stages of development and demonstraVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00042 Fmt 6633 Sfmt 6621 E:\HR\OC\48112.XXX 48112

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tion and in preparing markets through financial incentives, infrastructure investment and removal of regulatory and economic barriers. 

This committee has shown commendable leadership in approving a variety of tax 

incentives to encourage the deployment and early adoption of fuel cells and related 

infrastructure. The value of that leadership to our industry cannot be overstated, 

and we thank you. 

Building on that beginning, a long-term extension of the Sec. 48 fuel cell investment tax credit (ITC) is our highest priority before this Committee. HR 550, introduced by Congressmen McNulty and Camp with strong, bipartisan support, captures the spirit of this need. A long-term extension will provide support now for 

early adopters in the private sector, and also accommodate the reality of our industry—that fuel cells are a family of technologies, with divergent commercialization 

pathways and time tables and an expanding product mix. 

The U.S. Fuel Cell Council reports that more than 30 products are available 

today, typically with guarantees, warranties and other commercial terms. But U.S. 

sales were below $200 million in 2005, based on voluntary reporting. A strong, stable and long-term investment tax credit will stimulate this nascent domestic industry by enlarging early markets. 

§ A long-term extension will increase production volumes and lead to lower costs. 

§ It will give customers experience with fuel cells, helping fuel cell developers improve their products based on that experience. 

§ The credit gives developers—and their investors—confidence to build capacity. 

§ It also helps attract suppliers and their innovations—a matter of fundamental 

importance to our industry. 

§ And, of course, it creates jobs and strengthens the nation’s technological competitiveness. 

§ Finally, a long term commitment recognizes the evolution of the range of fuel 

cell technologies and products. 

This Committee has long recognized the importance of federal tax policy in stimulating acceptance of advanced energy technologies, given energy’s crucial value to 

our economy and security. Tax support for solar and other technologies dates back 

to the 1970s. It has taken time, but those industries are now deploying at a remarkable pace, and that exciting expansion will continue with the continued support of 

this Committee. The fuel cell industry is at the threshold of a commercial expansion 

of its own, and also needs a steadfast commitment from government. 

Experience with the Investment Tax Credit 

The fuel cell installation tax credit is less than two years old so Council members’ 

experience with this incentive has been limited so far. The returns from 2006 will 

be the first to reflect use of the credit in the real world. 

While the nature of the credit does not allow us to link sales directly to the availability of the credit, customers have begun telling fuel cell companies that they intend to take advantage of the credit. I can report anecdotally that more than 100 

fuel cell units have been or soon will be installed by one energy services company 

in transactions involving the credit. 

Federal market support for fuel cells has been modest in the past and when it 

came, it was in the form of direct support to purchasers. Both our industry and our 

markets are still adjusting to this new way of doing business. The certainty provided by a long term extension would help immeasurably. The purchase cycle can 

be as long as 18–24 months for some companies. A long term extension will assure 

customers that the credit will be there when the units arrive. We have every expectation that the credit will prove its worth during 2007 and beyond. 

Creative minds also are linking the federal credit with incentives offered by the 

States. Indeed this combination of incentives—and not the federal credit alone—has 

made the crucial difference for some companies in closing deals. These companies 

estimate that closer to $3,000 per kilowatt is needed to fully open markets in all 

the States. 

Use of the credit also has been affected, frankly, by the difficulty in gaining a formal statement by the Internal Revenue Service (IRS) in response to technical questions about the credit and its application. Perhaps it is because we are new at this. 

But our industry sought the comfort of a formal statement from IRS about how the 

credit would work, similar to those produced by IRS in other cases. 

Our questions concerned the interplay between the ITC and other federal and 

state incentives; clarification of the subsidized energy financing / Industrial Development Bond (IDB) language, ‘‘placed in service’’ language, and application to lease 

arrangements; application of the credit to units like fork lifts and similar material 

handling equipment that are not fixed, but also are not ‘‘passenger vehicles;’’ and 


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the availability of the credit in Puerto Rico. These issues will be interpreted by the 

taxpayer for 2006, and as you might imagine this is the cause of some unease. 

Thus a seemingly small thing, a mere matter of the lack of a few of paragraphs 

in the Federal Register, inadvertently has added uncertainty and confusion to a 

process that carries so much promise for fuel cell developers and users. 

Recommendations 

• The USFCC advocates an eight year extension of the tax credit. This will provide certainty and stability for purchasers, stimulate cost reduction and supply 

chain interest, and send a positive signal to capital markets. • We encourage the committee to examine the adequacy of the current $1,000 per 

kilowatt cap which some companies report is insufficient to open markets nationwide for many fuel cell products. • We hope the committee will also signal the most inclusive interpretation for the 

credit. This will address some remaining questions as to applicability in current 

markets and also assure that the credit achieves its intended purpose as the 

range of products and markets expands. • We ask you clarify the ability to transfer or ‘‘trade’’ the value of the fuel cell 

ITC, so non-taxpaying entities may take advantage of the incentive, and to facilitate the formation of investment pools. • We request that eligibility be explicitly provided for systems located in U.S. territories thus expanding the market and helping industry to respond to existing 

demand. 

The U.S. Fuel Cell Council also recognizes and applauds Congressional interest 

in supporting the emerging hydrogen energy infrastructure, via proposals such as 

H.R. 805. Incentives for hydrogen will help fuel cells enter important near term 

markets. Hydrogen systems that serve niche markets in the short run can be made 

available to supply passenger vehicles a few years from now. 

The Energy Policy Act of 2005 

The Energy Policy Act of 2005 provides an exceptional policy outline for fuel cells 

and supporting hydrogen infrastructure. Yet more is needed if fuel cells are to 

achieve their commercial potential, and yield their benefit to society. The most critical policy needs today are long-term tax incentives for fuel cell purchases, federal 

purchase programs and appropriations for research, development and demonstrations that live up to the promise of EPACT 2005. 

Tax Provisions Affecting Fuel Cells and Hydrogen 

The Energy Policy Act of 2005 established an Investment Tax Credit for business 

property (Section 48) and a parallel Investment Tax Credit for non-business property (Section 25D), which provide the purchaser of fuel cell property a credit equal 

to the lesser of $1,000 per kW or 30 percent of the property cost. 

The Act also provided a credit for Alternative Fueling Stations (Section 30C), in- cluding hydrogen, limited to the lesser of $30,000 or 30 percent. 

The Act provides Fuel Cell Vehicle Tax incentives (Section 30B), based on vehicle 

weight. 

The U.S. Fuel Cell Council 

The U.S. Fuel Cell Council is the trade association of the industry, dedicated to 

commercialization of fuel cells in the United States. Our membership includes producers of all types of fuel cells, major suppliers, automakers and their suppliers, 

universities and other research institutions, fuel cell customers, hydrogen and other 

energy providers, government agencies, nonprofit organizations, and allied trade associations. 

Formed in 1998, the U.S. Fuel Cell Council has grown to more than 105 members, 

who provide leadership on eight working groups focusing on all critical aspects of 

development, marketing and deployment and advocacy of fuel cell systems and related infrastructure for all members of the family of fuel cell technologies. The 

USFCC annually sponsors a Congressional Fuel Cell Expo on Capitol Hill, scheduled this year for May 15 in the Cannon Caucus Room. 

State of the Industry 

While the science of fuel cells was born in Europe in the 19th Century, the first 

commercial fuel cells were made and purchased in the U.S., for the Gemini space 

program. Advanced pre-commercial fuel cell cogeneration systems and the first fuel 

cell buses were deployed in the early 1990s. By the turn of the current century, systems were under active development for an extraordinary range of applications, 

from tiny battery replacements to multi-megawatt power systems, from boats to locomotives, from two-wheel vehicles to transit buses. 


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Several hundred U.S. companies and research institutions are working on fuel 

cells, and private investment continues to surpass government investment. U.S. fuel 

cell companies reported employing more than 3,200 workers, and investing nearly 

$500 million in research. These numbers are the best available, but they based on 

voluntary reporting and they significantly under estimate total investment and employment in the U.S. Fuel cell activity is under way in nearly every state 

There is an intense international competition to commercialize fuel cells. The European Community and individual countries of Europe—including Iceland and Germany—and in Asia, Japan, China and Korea, all have ambitious development programs. Japan’s fuel cell research program has more than tripled since 1995. Japan’s 

aggressive research program for power generation includes deployment of more than 

1,250 units. Japan has set ambitious fuel cell commercialization targets. 

Meeting Customer Needs 

Fuel cells are commercially available today in some markets, such as stationary 

base load power, goods movement, telecommunications and backup power or specialty power systems, where their unique benefits bring special value. Full commercialization in all markets on an accelerated timetable will require collaboration between government and private industry, including a substantial public investment 

in research and development, demonstration and pilot programs, early commercial 

purchases, incentives for early adopters, and removal of market barriers. The public 

investment in fuel cells needs to be no larger than traditional levels of support for 

other domestic energy technologies, and may be more cost effective. The public benefit will far outweigh the cost. 

Perhaps the most encouraging evidence to date of the commercial potential of fuel 

cells is the enormous investment the private sector has committed to the technology 

since 1995. In short, there is a robust private effort already under way. 

As mentioned earlier, fuel cells are a family of technologies. Each has unique technical issues and approaches to commercialization. A comprehensive national strategy for fuel cells should address the unique requirements of the portable (micro), 

stationary and transportation markets and take advantage of the common elements 

that can be identified among the applications. 

This undertaking will require careful consideration of shared infrastructure requirements, the design of research, development and demonstration (RD&D) efforts 

that offer generic benefits, and strategies that reflect the market entry sequence for 

the various fuel cell products. It will also require investment in advanced feedstock 

and hydrogen carrier fuels and in improving technologies to make, store and transport these fuels. Portable (micro) fuel cell products, for example, are expected to lead 

the way in commercialization of fuel cell consumer products and, according to the 

U.S. DOE, will help catalyze other markets. 

Education, training and customer acceptance are an important part of the effort, 

beginning in schools and extending to vocational and professional education and to 

the public. 

Summary 

The current investment tax credit has begun to do its job even in its infancy, and 

our industry is grateful to you for your leadership. We look forward to working with 

you and the Committee on these issues. 

f 

Chairman NEAL. Thank you. 

Mr. Dinneen? 

STATEMENT OF BOB DINNEEN, PRESIDENT AND CEO, 

RENEWABLE FUELS ASSOCIATION 

Mr. DINNEEN. Thank you, Mr. Chairman. Thank you for convening this very timely and important hearing. And I would like 

to thank the Members of the Subcommittee as well who are in attendance today. And I am pleased that we are joined by Congressman Pomeroy and Congressman Weller, whose leadership on renewable fuels has been extremely important to helping to build the 

industry that we have today. 

Rhone mentioned that he put in a solar panel unit in his home. 

I guess it’s incumbent upon me to acknowledge that I drove to this 


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hearing today in an ethanol-powered car. I apologize, however, for 

not doing what Jaime did, in bringing some alcohol fuel to this important hearing, but maybe next time. 

Tax policy can, indeed, be a critically important and effective 

means of changing markets to pursue important public policy objectives. And the proof of that can be seen in the success of the Federal tax incentive program for ethanol over the past several years. 

Today, the ethanol industry comprises 115 plants that are in operation across 19 different States. We process approximately 2 billion bushels of grain into about 6 billion gallons of high quality, 

high octane performance fuel, and about 12 million metric tons of 

feed grain for livestock and poultry industries. 

Ethanol has become ubiquitous in the Nation’s motor fuel system. We’ve blended in 46 percent of the Nation’s fuel today. But 

we’re not done yet. There are, in fact, 79 ethanol plants that are 

under construction today that will add another 6 billion gallons of 

ethanol production capacity. We are among the fastest growing renewable energy industries in the world, and it is a direct result of 

the tax programs that have been put in place. 

Now, the Members of the Subcommittee, not many of them are 

from the Midwest with real ethanol production. Congressman Pomeroy and Congressman Weller have certainly seen firsthand the 

benefits of ethanol production. But I did a quick review, and I can 

tell you that as the ethanol industry grows and expands, we are 

growing far beyond the Midwest. 

There are, indeed, four plants that are in operation in Texas— 

or are under construction in Texas, rather. There is a plant under 

construction in Washington. There are two plants under construction in Oregon. There are two plants under construction in New 

York. There is a plant in operation in Georgia, and one under construction in Georgia, and there are three plants under construction 

in Wisconsin. 

Mr. Chairman, I apologize. I have got nothing in Massachusetts. 

However, it should come to some—— 

Chairman NEAL. That will not help you. 

[Laughter.] 

Mr. DINNEEN. I do want to tell you, though, that the president 

of the industry’s trade association is from Massachusetts, and he 

had the good sense to marry a beautiful woman from Pennsylvania, 

another state, unfortunately, where we don’t have anything yet. 

But we will soon. 

The fact of the matter is, the industry is unrecognizable from 

what it was 5 years ago, and it will be unrecognizable again 5 

years from now, because as new capital comes in to the industry, 

as we move beyond the traditional Midwest, new intellectual capital is coming in, as well. 

The industry is embracing new technologies to become more efficient. We are embracing new feed stocks. And the future of our industry is one in which grain and cellulosic feed stocks, which are 

available in every State in the country and every corner of the 

globe, is going to be part of the future. We are excited about that 

future. 

The ethanol industry today, however, is, indeed, contributing significantly to the Nation’s energy, economic, and environmental seVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00046 Fmt 6633 Sfmt 6602 E:\HR\OC\48112.XXX 48112

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curity. A report that we had done for the association earlier this 

year looking at the 5 billion gallons of ethanol that was produced 

last year showed that ethanol added $41 billion to gross output in 

our Nation’s economy. We are responsible for 160,000 jobs across 

the economy. We added $2.7 billion to Federal tax revenue, and we 

reduced oil imports by 170 million barrels, which are valued at 

more than $11 billion. 

From an environmental perspective, the 5 billion gallons of ethanol that were produced last year reduced greenhouse gas emissions by some 8 million tons. Mr. Chairman, that’s the equivalent 

of taking 1.2 million vehicles completely off the road. 

Maintaining this important industry is critical. We are still just 

a small part of the 140 billion gallon gasoline market in this country. We are making great strides today. But being able to continue 

that, we’re going to have to continue the policies that have made 

that happen. 

So, much as everybody else in the renewable community, it is imperative that we continue the ethanol tax incentive program. Congressman Pomeroy and Congressman Hulshof have introduced legislation, H.R. 196, that would extend the ethanol tax incentives, 

and make this industry—allow us to move forward with a great 

deal more certainty. 

The program has been extraordinarily successful, both in terms 

of building the industry and in terms of its cost effectiveness. While 

the tax incentive costs the taxpayer $2.5 billion last year, we provided $2.7 billion in increased tax revenue. And more importantly, 

the increased demand for grain caused by ethanol production reduced Federal farm program costs by more than $6 billion, returning $4 to the treasury for every $1 invested in this important domestic industry. 

Mr. Chairman, this is an important hearing. We look forward to 

working with you as we move forward. 

[The prepared statement of Mr. Bob Dinneen follows:] 

Statement of Bob Dinneen, President and Chief Executive Officer, 

Renewable Fuels Association 

Good afternoon Chairman Neal, Ranking Member English, and Members of the 

Subcommittee. My name is Bob Dinneen and I am president and CEO of the Renewable Fuels Association, the national trade association representing the U.S. ethanol 

industry. 

This is an important and timely hearing, and I am pleased to be here to discuss 

U.S. energy tax policy. Tax incentives have played a critical role in supporting the 

development of our domestic biofuels markets, making U.S. ethanol and biodiesel 

the fastest growing renewable energy resources in the world today. 

In 2006, the U.S. produced a record 4.9 billion gallons of ethanol, displacing the 

equivalent of 206 million barrels of crude oil valued at $13.6 billion. Since an increasing share of our oil is imported, this displacement means that these dollars 

were spent and invested in the U.S. and not sent abroad to foreign suppliers. Ethanol today is the single most important value-added market for farmers, and is revitalizing rural communities across the country. Finally, as ethanol is produced from 

agricultural feedstocks taking carbon out of the atmosphere, it is the only real strategy to address climate change in place today, actually lowering greenhouse gas 

emissions by 8 million tons in 2006. 


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1The Volumetric Ethanol Excise Tax Credit (VEETC) provides gasoline blenders/refiners with 

a federal tax refund of 51 cents per gallon of ethanol on each gallon of ethanol blended with 

gasoline, providing an important incentive to blend ethanol with their gasoline. The volumetric 

excise tax credit for agri-biodiesel is $1.00 per gallon, and the volumetric excise tax credit for 

biodiesel is 50 cents. 2 Contribution of the Ethanol Industry to the Economy of the United States, Dr. John 

Urbanchuk, Director, LECG, LLC, December, 2006. 3The first federal tax incentive for ethanol was the partial exemption for ethanol from federal 

excise taxes on motor fuel enacted as part of the Energy Tax Act of 1978. The partial exemption 

was set at 4 cents per gallon for motor fuels that contained at least 10 percent ethanol (or 40 

cents per gallon for every gallon of ethanol). The tax exemption was increased to 6 cents per 

gallon in 1984. The Omnibus Budget Reconciliation Act of 1990 reduced the rate of exemption 

to 5.4 cents per gallon. This level was maintained until it was reduced by the 1998 Transportation Equity Act for the 21st Century. This legislation reduced the exemption to 5.3 cents per 

gallon for 2001 and 2002, 5.2 cents per gallon for 2003 and 2004, and 5.1 cents per gallon 

through December 31, 2010. The American Jobs Creation Act of 2004 replaced the partial excise 

tax exemption for ethanol with the VEETC. Under current law blenders and marketers are required to pay the full federal excise tax on motor fuel but can claim a tax credit or refund of 

51 cents per gallon of ethanol blended with gasoline. All excise taxes are deposited into the 

Highway Trust Fund and the VEETC is paid out of the General Fund. 

The single most important federal policy driving these impressive results is the 

tax incentives available to refiners that choose to blend biofuels into gasoline and 

diesel fuel today.1

Background 

Today’s ethanol industry consists of 115 biorefineries located in 19 different states 

with the capacity to process almost 2 billion bushels of grain into 5.7 billion gallons 

of high octane, clean burning motor fuel, and more than 12 million metric tons of 

livestock and poultry feed. It is a dynamic and growing industry that is revitalizing 

rural America, reducing emissions in our nation’s cities, and lowering our dependence on imported petroleum. 

Ethanol has become an essential component of the U.S. motor fuel market. Today, 

ethanol is blended in more than 46% of the nation’s fuel, and is sold virtually from 

coast to coast and border to border. 

The ethanol industry provides a significant contribution to the American economy. 

According to an analysis completed for the RFA2, the approximately 4.9 billion gallons of ethanol produced in 2006 resulted in the following impacts: 

• Added $41.1 billion to gross output; 

• Created 160,231 jobs in all sectors of the economy; 

• Increased economic activity and new jobs from ethanol increased household income by $6.7 billion, money that flows directly into consumers’ pockets; 

• Contributed 2.7 billion of tax revenue for the Federal government and 2.3 billion for State and Local governments; and, 

• Reduced oil imports by 170 million barrels of oil, valued at $11.2 billion. 

In addition to providing a growing and reliable domestic market for American 

farmers, the ethanol industry also provides the opportunity for farmers to enjoy 

some of the value added to their commodity by further processing. Farmer-owned 

ethanol plants account for 43 percent of the U.S. fuel ethanol plants and almost 34 

percent of industry capacity. There are currently 79 biorefineries under construction. With seven existing biorefineries expanding, the industry expects more than 

6 billion gallons of new production capacity to be in operation by the end of 2009. 

Tax Incentives 

The most significant tax incentive encouraging the expanded use of ethanol is the 

VEETC.3 The VEETC gives gasoline marketers and blenders an important incentive 

to blend ethanol with their gasoline. Historically, ethanol has not been competitive 

with gasoline as a fuel. As shown in Figure 1, spot market ethanol prices have been 

almost twice that of spot regular gasoline prices over the past twenty years. 


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LECG, January, 2007 

The VEETC protects ethanol producers from declines in oil and gasoline prices 

over which they have no control. Since ethanol is sold as an additive to motor gasoline, its price is determined more by oil and gasoline than by ethanol supply. An 

analysis of ethanol prices over the 1990 to 2005 period indicates that the spot market price of ethanol increases 4.6 percent for every 10 percent increase in spot market gasoline prices, but declines only 1.8 percent for every 10 percent increase in 

ethanol production. Consequently ethanol producers are price takers with their revenue determined largely by developments in the oil and gasoline markets. 

Economic theory suggests that a new national industry should be able to gain a 

significant market share within the domestic market before tax incentives are 

phased out or abolished. Thus, RFA supports legislation such as the PomeroyHulshof ‘‘Renewable Fuels and Energy Independence Promotion Act’’ (H.R. 196) to 

make permanent the biodiesel and ethanol tax incentive and the small agri-biodiesel 

producer and small ethanol producer credits, creating a permanent foundation for 

these industries. Consistency in Federal policies will send the necessary and appropriate signals to the marketplace. Maintaining and extending the existing tax incentives for ethanol and biodiesel are essential for continued growth of the industry. 

Because the VEETC does not discriminate as to the nation or origin of the ethanol 

blenders’ use, it allows foreign ethanol producers the benefit of the incentive. In 

order to offset the incentive foreign producers are eligible for, Congress implemented 

a credit offset, in the form of a secondary tariff, to prevent American tax payers 

from subsidizing foreign ethanol industries. The balancing act between the VEETC 

and the secondary tariff has proved effective and must be continued to ensure America is not subsidizing foreign ethanol production. 

Finally, it should be noted the federal ethanol tax incentive program has been extremely cost effective. The $2.7 billion in increased federal tax revenue attributable 

to the ethanol industry is in itself 160 million more than the estimated cost of the 

Volumetric Ethanol Excise Tax Credit (VEETC), assuming the 4.9 billion gallons of 

ethanol produced were blended. At a January 10, 2007 Senate Agriculture, Nutrition and Forestry Committee hearing, however, U.S. Department of Agriculture’s 

Chief Economist, Keith Collins, noted that high crop prices, due in part to the 

strong domestic market for ethanol, led to a 6 billion savings for the Federal government from reduced farm program payments in 2006. Thus, with increased tax revenue and reduced farm program costs, the taxpayer realized a $4 return for every 

$1 invested in domestic renewable energy last year. 


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New Technologies 

The ethanol industry today is on the cutting edge of technology, pursuing new 

processes, new energy sources and new feedstocks that will make tomorrow’s ethanol industry unrecognizable from today’s. Ethanol companies are already utilizing 

cold starch fermentation, corn fractionation, and corn oil extraction. Companies are 

pursuing more sustainable energy sources, including biomass gasification and methane digesters. There is not an ethanol company represented by the RFA that does 

not have a cellulose-to-ethanol research program. These cutting edge technologies 

are reducing energy consumption and production costs, increasing biorefinery efficiency, improving the protein content of feed co-products, utilizing new feedstocks 

such as cellulose, and reducing emissions by employing best available control technologies. 

The technology exists to process ethanol from cellulose feedstocks; however, the 

commercialization of cellulose ethanol remains a question of economics. The capital 

investment necessary to build cellulose facilities remain about five times that of 

grain-based facilities. Those costs will, of course, come down once the first handful 

of cellulose facilities are built, the bugs in those ‘‘first mover’’ facilities are worked 

out, and the technology continues to advance. The enzymes involved in the cellulose 

ethanol process remain a significant cost, as well. While there has been a tremendous amount of progress over the past few years to bring the cost of those enzymes 

down, it is still a significant cost relative to processing grain-based ethanol. To continue this technological revolution, however, continued government support will be 

critically important. 

The VEETC reduces the risk associated with investment in new technology, such 

as cellulosic biofuels. Typically, the financial community will invest in higher risk, 

non-traditional activities only with the assurance that their revenues will not be 

threatened by foreign or domestic competition. Continued existence of the VEETC 

is an effective risk reducing instrument for investors and the financial community 

who are key to further expansion of the U.S, ethanol industry, particularly the use 

of cellulosic feedstocks for ethanol production. 

Climate Change 

The RFA sees climate change as an opportunity to pursue policies that make 

sense on a variety of fronts, from protecting the environment to promoting U.S. energy security and economic development. The RFA promotes policies, regulations 

and research and development initiatives that will lead to the increased production 

and use of renewable fuels such as ethanol and biodiesel. The RFA is taking the 

climate change issue very seriously. Our members are producing a product that reduces climate change emissions from cars and trucks. The RFA itself has pledged 

to become carbon neutral. To follow through on this commitment, the RFA has 

joined the Chicago Climate Exchange, the world’s first and North America’s only 

voluntary, legally binding integrated greenhouse gas reduction and trading system 

for all six greenhouse gas emission sources, with offset projects in North America 

and worldwide. Once completed, the RFA will be offsetting 100 percent of its carbon 

emissions. 

The RFA generally supports Federal efforts to address climate change, in part because one set of uniform, national standards can be more effective than several, 

overlapping state and regional approaches. While we cannot speak to the climate 

change impacts of all new technologies and fuels, we can address the greenhouse 

gas (GHG) emissions benefits of renewable fuels such as ethanol. The Pew Center 

for Global Climate Change recently concluded that renewable fuels offer the greatest immediate term opportunity to reduce GHG emissions from the transportation 

sector. This is true because renewable fuels are readily available and can be used 

without significant infrastructural or technological advancement. As you may be 

aware, the United States already uses more than 5.5 billion gallons of ethanol annually. In 2006, ethanol use in the U.S. reduced CO2-equivalent emissions by approximately 8 million tons, according to the Department of Energy. This is the equivalent 

of removing 1.2 million cars from the road from a climate change perspective. 

The U.S. Environmental Protection Agency (EPA) released a Regulatory Impact 

Analysis (RIA) with the Final Rule implementing the RFS on April 10, 2007. Chapter 6 of EPA’s RIA, Lifecycle Impacts on Fossil Energy and Greenhouse Gases 

(GHG), included a displacement index showing the impact of replacing a BTU of 

gasoline or diesel with a BTU of renewable fuel. For every BTU of gasoline which 

is replaced by corn ethanol, the total lifecycle GHG emissions that would have been 

produced from that BTU of gasoline would be reduced by 21.8 percent. For every 

BTU of gasoline which is replaced by cellulosic ethanol, the total lifecycle GHG 

emissions that would have been produced from that BTU of gasoline would be reduced 90.9 percent. 


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The U.S. ethanol industry is in the midst of a remarkable evolution, utilizing new 

more energy efficient technologies with every new plant that opens and with upgrades made at existing biorefineries as the industry retools. Examples of new energy saving technologies include fluidized bed reactors that utilize the syrup from 

a biorefinery’s evaporators to generate steam, and biomass gasification that allows 

ethanol plants to utilize locally grown biomass to power the plant. Still other ethanol plants are locating alongside feedlots, allowing them to feed the distillers 

grains (a high protein co-product of the ethanol production process) without having 

to dry the material first, while at the same time using the manure from the feed 

lot to power the plants. These technologies are not only making ethanol biorefineries 

more competitive, they are greatly reducing the carbon footprint of the industry. 

The electric, natural gas and transportation sectors comprise a large majority of 

U.S. climate change emissions. Any climate program adopted by the Federal Government should encompass all three of these sectors (i.e. not leaving out the transportation sector). Efficiency is the most oft-stated approach to reducing GHG emissions in the transportation sector. It is equally important, however, to diversify the 

fuels market. One of the critical components to any strategy to diversify petroleum 

fuels is increased reliance on Flex-Fuel Vehicles (FFVs). Because FFVs run on virtually any combination of ethanol and gasoline, they help facilitate an unrestricted, 

truly competitive transportation fuels market. Like ethanol, FFVs are available 

now. Automakers including GM, Ford, VW, Toyota and Honda already provide FFVs 

to the Brazilian automobile market at very little cost. Reportedly, 81 percent of vehicles sold in Brazil in November 2006 were FFVs. FFVs are becoming increasingly 

popular in the U.S. However, more could be done to promote their manufacture and 

use. The RFA believes that all vehicles, whether gasoline powered, hybrid or advanced technology, should be flex-fuel. Enhancing incentives to gasoline marketers 

to install E–85 refueling pumps will continue to be essential. Federal policies should 

extend and expand tax incentives for E–85 refueling infrastructure, and create new 

consumer-based tax incentives to encourage the purchase of FFVs. 

Conclusion 

Mr. Chairman, a recent Public Opinion Strategies poll found that 78% of American support increasing the use of domestic renewable fuels such as ethanol. That 

reflects the growing consensus that we need to do everything possible to reduce our 

dangerous dependence on imported petroleum because of the attendant environmental and national security consequences of its continued use. Existing U.S. tax 

policies have made a difference, and can continue to drive investment in domestic 

renewable fuels such as ethanol and biodiesel. The VEETC, in particular, has 

played an integral role in supporting investment and development in ethanol production facilities and the significant growth of the industry. The continued existence 

of U.S. renewable energy tax policy will be critical to the rapid deployment and commercialization of new technologies for biofuels. The RFA looks forward to working 

with the Committee during the 110th Congress to ensure the U.S. ethanol industry 

continues to grow. 

Thank you. 

f 

Chairman NEAL. Thank you very much. 

Dr. French? 

STATEMENT OF NINA BERGAN FRENCH, PH.D, DIRECTOR, 

CLEAN COAL COMBUSTION PRODUCTS, ADA–ES, INC., 

LITTLETON, COLORADO 

Ms. FRENCH. Chairman Neal, Members of the Subcommittee, it 

is my privilege to be here today to present testimony on the importance of coal as a vital source of energy for the United States, and 

how Federal support in the form of R&D funding and tax incentives can be a catalyst to stimulate new clean coal technologies. 

My name is Dr. Nina French. I am Director of Clean Coal Technologies for ADA Environmental Solutions. ADA is an environmental control technology company, and we provide environmental 

emissions control technologies and services to the coal-fired power 

industry. We are the market leader in commercial mercury, control 


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technology, and this year we started working on carbon capture 

technologies. 

We are technology developers. We have 30 years of experience 

helping coal-fired power plants reduce emissions. We believe that 

keeping electricity flowing reliably and cheaply is a critical foundation to our economy. And without—with a strong economy—without a strong economy, the nation will not be able to maintain its 

strong environmental agenda. 

I have three points I would like to make today. The first is that 

coal is critical to our future. It’s an existing, reliable source of energy. It is baseload energy. It is inexpensive. We don’t have to import it, and it is abundant. We have a 250-year-plus supply. 

Coal needs to be part of a mixture for our energy source, a mixture that includes renewables, other fossil fuels, and nuclear. I 

think of coal as having two parts. One is our very vast and large 

existing infrastructure, and the other is coal in the future. The key 

question for the future becomes can we reduce greenhouse gas 

emissions to continue to rely on this important national resource? 

And my answer is this. 

For 40 years, this industry has accomplished significant reductions in NOx, SO2, and particulates. This is from the existing fleet. 

These are from boilers that were actually never designed to burn 

clean. We have made tremendous strides. We have retrofitted and 

adapted technologies to meet this new world clean emissions. 

Then what is necessary to take the next step for clean coal? And 

I have two case studies I would like to briefly mention. The first 

is mercury control. We were faced with a hurdle in mercury. Private industry could not bear the full risk of early development. We 

had no regulations to drive technology development, and we had no 

technologies to provide the basis for regulations. 

We were able to overcome these hurdles with early Federal support, resulting in successful development of commercial technology 

to provide 90 percent mercury reduction. The return on investment 

to the American citizen was tremendous. 

As recently as 2005, studies were saying that mercury control 

would cost 350 billion. We have now shown that we can take 90 

percent of the mercury out of coal-fired power plants for less than 

$2 billion a year. 

The second case study is refined coal. This section 45 tax credit 

has incentivized my company to develop a pre-treatment technology for coal that allows older boilers that don’t have space for 

installation of new equipment to meet new mercury regulations 

and to reduce NOx. This tax credit works because it’s goal-oriented, 

not selecting a winning technology. 

The goal is to reduce emissions. It also includes a 50 percent 

market value test that is workable with legislative clarification. 

This tax incentive has promoted new emission control options that 

would not have been considered, otherwise. 

And that brings us back to the challenge of clean coal, of reducing greenhouse gases, specifically CO2, from coal-fired power 

plants. We have two approaches. The first and the most important 

is increasing efficiency. We need to make less carbon for each 

megawatt of electricity we produce. And for the new fleet, and 

some of the existing fleet of coal-fired power plants, we have techVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00052 Fmt 6633 Sfmt 6602 E:\HR\OC\48112.XXX 48112

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nologies available today. The problem is, there is no incentive to 

use—to build a higher-efficiency plant. There is no incentive to 

spend the money. 

The second part of greenhouse gas reduction is carbon capture 

and storage. There are a number of promising concepts on the 

table, but they are all in their infancy, and they will require massive research and development support to get them going. 

What we know is the scale of carbon capture is enormous. History tells us that technology development implementation is going 

to be long, probably 10 to 20 years. But success is likely. To take 

coal into a carbon-constrained world, we need to carefully balance 

the timing between our carrots, which are tax incentives and technology development funding, and our sticks, which are regulations. 

We need to incentivize goals, not pick winning technologies. For 

example, we need to incentivize carbon reduction, not a specific 

technology. And we need to encourage technology development 

through incentives and risk reduction programs, such as R&D support and tax credits, loan guarantees, and others. 

We believe that, based on past accomplishments in our industry, 

given sufficient resources and incentives, we can make clean coal 

a reality. Thank you for your attention. 

[The prepared statement of Ms. Nina French follows:] 

Statement of Nina Bergan French, Ph.D, Director, Clean Coal Combustion 

Products, ADA–ES, Inc., Littleton, Colorado 

Chairman Neal, Mr. English, and Members of the Subcommittee: It is a privilege 

to present testimony on the importance of keeping coal as a vital part of the Nation’s energy mix and how Federal support in the form of R&D funding and tax incentives can be a catalyst to stimulate the development of innovative and cost-effective technology to address the control of emissions from coal-fired power plants. 

ADA provides the perspective of a technology development company who evaluates 

such measures as part of its business decisions on which market opportunities to 

pursue. 

For the past 30 years, the scientists and engineers at ADA Environmental Solutions have built an international reputation for developing and commercializing 

highly efficient emissions measurement and control technologies for the power industry. In 2000, we began to focus our efforts on research, development, and demonstration of technology for reducing mercury emissions. Today, we are the market 

leader in providing commercial equipment to capture up to 90% of mercury generated by the combustion of coal. These experiences demonstrate the importance of 

the right Federal involvement. 

My Testimony Today 

Today I would like to give you my perspective of clean coal. I will discuss the following points: 

(1) Coal is critical to our future because it is reliable (base load capacity), inexpensive, abundant, and local. 

(2) We have demonstrated the ability to meet environmental challenges with 

NOx, SO2, particulates and mercury. 

(3) Federal incentives (e.g., tax credits) have been effective in advancing technology to ensure options exist and costs are reduced. 

(4) Success for new technologies depends on a careful balance between: 

• Incentives for technology development, 

• Time for risk mitigation, and 

• Regulation or tax-based market drivers (‘‘sticks’’ and ‘‘carrots’’). 

(5) CO2 control seems to be the next concern. Critical points are: 

• The scale is massive. 

• Timeframe is probably long—10 to 20 years. 

• Investment is critical. 

• History tells us success is likely. 


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• Investment and incentives need to be designed to ensure that: 

• multiple paths are followed, 

• and costs and risks are reduced. 

Coal Is Critical To Our Future 

Let me start by discussing why we, as an environmental technology company, believe that the continued use of coal is critical to sustainable, reliable power generation in the U.S. 

America leads the way in environmentally-beneficial technologies. As regulations 

tighten, we continue to improve technology that improves the air we breathe and 

the water we drink. We reap these benefits because our strong economy allows us 

to allocate significant resources to these efforts. We need power generation that is 

inexpensive, reliable, and environmentally safe. Our future depends on it. We believe that coal provides domestic energy security, low-cost energy, and reliability. 

The country today is asking, ‘‘Can we make coal clean enough, and if so, how do 

we do it?’’ Today, more than 1,100 coal-fired boilers produce more than 50% of our 

nation’s electricity. Statistics show that states that choose coal for generation are 

rewarded by low-cost electricity. Figure 1 shows that there is a strong correlation 

between the use of coal and the ability to provide inexpensive electricity. 

Economic development requires enormous investments in all aspects of energy infrastructure and significant increases in power generation. The U.S. is expected to 

need 50% more electrical capacity by 2030. Any expansion of power supplies must 

recognize that no single energy source can meet our growing energy needs. This requires a portfolio of solutions, including efficiency gains, more renewables, new nuclear power capacity and new coal-based generation. 

As renewables such as solar and wind power become a greater portion of our energy mix, it becomes even more important to maintain a source of reliable power 

that can operate continuously, day and night, and in all weather conditions. The reliability of coal-fired power plants has improved significantly over the years. Our 

plants have increased operational capacity from 59% in 1990 to between 80% and 

85% in 2006. It’s simple; we care more now. Electricity is a much more valuable 

commodity than it has ever been. This is the motivation that drives us to optimize 

our current investment. We really have no other choice as it would take decades 

to replace our current infrastructure. 

Figure 1. Cost of Electricity in a State as a Function of the Percentage of 

Electricity Produced from Coal. 

Coal can also play an important role in national security by reducing our dependence on foreign energy sources. The United States has the largest coal reserve in 

the world, and America has more coal than any nation has of any single energy resource. At current consumption rates, these coal reserves could supply 250 years of 

fuel. This is far greater than our reserves of natural gas and oil combined. 

For these reasons, coal remains an essential part of the U.S. generation mix as 

a secure, plentiful, and relatively inexpensive fuel source. However, we as a nation 

must determine how to continuously improve emissions. Our goal needs to be Clean 

Coal. 


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Clean Coal Background 

The emissions control industry has made huge advancements in technology to improve emissions from coal-fired power plants. Collaboration among research organizations, universities, and power generation partners has enabled emissions of criteria pollutants sulfur dioxide (SO2), nitrogen oxides (NOx), and particulates from 

the existing fleet of coal fueled power plants to be lower today than they were in 

1970, even as power produced from coal plants has increased by 173% (See Figure 

2). 

Reductions in NOx, SO2, and particulate emissions were driven by a balance between technology development incentives and emissions regulations. Each made the 

other better. As an example, in the early 1970’s flue gas desulfurization equipment, 

commonly referred to as ‘‘scrubbers,’’ were new and suffered from poor reliability 

and performance. Over time, as experience was gained and equipment modified, efficiencies rose from about 70% SO2 removal to today’s 95 to 98%, with similar improvements in reliability. The emissions of criteria pollutions shown in Figure 2 will 

continue to decrease each year as emission control equipment is installed on more 

plants as a result of new regulations such as the Clean Air Interstate Rule. 

Figure 2. NOx, SO2, and particulate emissions from coal-fired power plants 

continue to decrease even though we are. 

Challenges in Developing New Emission Control Technology for the Power 

Industry 

To understand how to make coal cleaner, it is helpful to appreciate how emissions 

control technology has developed for this industry. Since the first Clean Air Act of 

1970, the power industry has gone through several rounds of implementing emissions control technology for NOx, SO2, and particulates. In each case, there were 

very similar experiences as the new technology was applied in an industry where 

reliability and compliance are mandatory. We learned the following important lessons:: 

• Be prepared for unexpected reactions between flue gas constituents and chemical reagents used to control the pollutants; 

• Do not underestimate the differences in coal and plant operating conditions to 

cause wide variations in emissions; 

• Try to plan for significant O&M problems that might not show up until after 

long-term operation; and 

• Look for secondary effects on other components of the power plants. 

In each case, new-technology challenges had a significant impact on the reliability 

of power generation. The plants were forced to operate at reduced loads and suffered 

many unplanned shutdowns for maintenance and repair. Over time, technologies 

were improved to an acceptable level of cost and reliability. This is the true measure 

of acceptance. The impact depends on how widespread the technology was applied 

during the early adopter phase. For example, Hot-Side Electrostatic Precipitators 

(for particulate control) have cost the industry over a billion dollars. After initial 

successes, the technology was quickly applied to 150 power plants only to have a 

fatal flaw subsequently discovered. 


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One of the challenges with implementing new emissions control technology is that 

everything is so big. The scale is massive. For example, emissions control equipment 

for a 500 MW plant treats two million cubic feet of flue gas every minute. Scrubbers 

may be as large as the power plant to which they are attached. Remember that we 

need to add new emissions control technology without taking the plant off-line. We 

have learned that the best way to bring new technologies to an existing coal-fired 

power plant is to proceed through a carefully chartered course: 

1. Laboratory testing: provides a cost effective means to determine general feasibility and test a variety of parameters. 

2. Pilot-scale: test under actual flue gas conditions but at a reduced scale. 

3. Full-scale field tests: scale up the size of the equipment and perform tests 

under optimum operating conditions to define capabilities and limits of the 

technology. 

4. Full-scale field tests at multiple sites: each new site represents new operating 

conditions and new challenges. 

5. Long-term demonstrations at several sites: Some problems will not show up 

until the first year or so of operation. 

6. Widespread implementation: Problems will still be found at new sites, but most 

of the fatal flaws will have already been discovered and resolved. 

We know from experience that trying to accelerate technology development by 

skipping these steps can result in large-scale operating problems and untimely and 

expensive plant outages. We also know that it takes ten to twenty years to successfully implement a major technology in this industry and implementation presents 

significant risks to the developer and user at each stage. In addition to the technology risk, there is significant financial risk to the developer. This is especially 

true when there is no regulation to guarantee a market will exist for a technology 

to control an emission that has not been previously regulated. There is often a 

‘‘chicken and egg’’ dilemma in which there is no regulation to incentivize the development of a new technology and therefore there is no technology on which to base 

a regulation. Such was the case in the recent past, when the power industry was 

faced with reducing mercury emissions for the first time. 

ADA–ES Experience in Developing and Implementing Mercury Control 

Technology 

It is instructive to present a case-study on how Federal initiatives effectively provided incentives and risk mitigation that allowed industry to successfully develop 

cost-effective mercury control technologies for coal-fired power plants. 

Methylmercury, which builds up in certain fish, is a neurotoxin that leads to developmental problems in fetuses of pregnant women. Mercury contained in coal represented the largest man-made source of mercury. In December 2000, the EPA announced that it was beginning to consider regulating mercury emissions from the 

nation’s coal-fired power plants. 

In anticipation of future regulations, the Federal government and industry funded 

research to characterize the emission and control of mercury compounds from the 

combustion of coal. Some estimates showed that 90% mercury reduction for utilities 

would be expensive for the industry because of the large volumes of gas to be treated, the relatively low mercury concentrations, and the difficulty of capturing certain 

species of mercury in its vapor phase. 

With potential regulations rapidly approaching, it was important to concentrate 

efforts on the most mature retrofit control technologies. Injection of dry sorbents 

such as powdered activated carbon (PAC) into the flue gas and further collection of 

the sorbent by ESPs and fabric filters represented potentially the most cost-effective 

control technology for power plants. 

The DOE realized the criticality of demonstrating and optimizing scale-up of sorbent injection technology to provide performance data for regulations. The DOE National Energy Technology Laboratory cost-shared these demonstrations, with additional funding from several power companies, the Electric Power Research Institute, 

and private ADA–ES funding. 

The DOE-supported field tests resulted in great advances in technologies to capture mercury emissions and decreased costs. A 2005 report by the DOE Energy Information Administration concluded that because technology for 90% mercury control from Western (Powder River Basin) coals was not available, an overall 90% 

mercury control rule could cost $358 billion. However, use of these new technologies 

later demonstrated that the 90% reduction for PRB coal could be achieved for less 

than $1 billion per year. This saving represents a huge return on the investment 

made by the Federal government in supporting early development and demonstration of mercury control technology. 


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This success has allowed a dozen States to take mercury control into their own 

hands and implement stringent regulations on power plants in their respective 

states. This action has created the first real commercial market for the new mercury 

control technology. 

Refined Coal Tax Credit (Section 45) 

Tax incentives also play a vital role in achieving even further emission reductions. 

The 2004 American Jobs Creation Act included a production tax credit designed to 

incentivize clean coal at the front end—changing the way the coal burns—for older 

plants with limited resources or space to add back-end emission control. The tax 

credit was written with clear emissions reduction goals: 20% NOx reduction and either 20% mercury or SO2 reduction. An additional market value test, requiring that 

the product result in a 50% increase in market value over the feedstock coal still 

needs clarification (a baseline and enforcement guidelines), but the credit is significant in that it represents a strong goal-oriented, rather than specific technologydriven, tax incentive. 

ADA responded to the incentive of the tax credit and assembled a team to apply 

our mercury control expertise to invest in technology development for a refined coal 

product that will allow older cyclone boilers to reduce mercury emissions by 90%— 

enough to meet stringent State regulations, simply by burning refined coal. Clarification on the market value test will allow us to move to full-scale demonstrations 

to optimize and deploy our refined coal technology, and realize the goals Congress 

intended by the legislation. 

Clean Coal: Carbon Challenges 

Carbon, in the form of carbon dioxide (CO2), is a greenhouse gas that is believed 

to contribute to climate change. Our goal is to reduce CO2 from both new and existing coal-fired power plants. This presents a number of challenges for technology development. It is not our purpose detail the technologies being advanced to address 

these issues. There will be a comprehensive report issued by the National Coal 

Council this summer that will provide in-depth background on the various approaches. At this point, I would like to briefly mention three key areas for technology development. 

1)First, increased efficiency. The most effective way to quickly decrease carbon 

emissions is to increase efficiency of power production on new and existing boilers. 

Today we have more than 1,100 coal-fired boilers in the U.S. with an average age 

of 45 years. When many of these plants were built during the 1950’s and 1960’s, 

we did not care much about efficiency because coal was readily available, and cheap. 

Figure 3 shows that we produce 25% less CO2 as boiler efficiency increases from 

35% to 50%. That is 25% less carbon that we have to separate and sequester. In 

May 2001, the National Coal Council produced a report which identified technologies that could increase the amount of electricity from the existing fleet of coal 

plants by 40,000 MW in a three-year period. Those recommendations remain viable 

today. To increase the amount of electricity generated by the existing fleet by 40,000 

MW without the need to build a single new plant of any fuel type represents a tremendous greenhouse gas mitigation opportunity for this country. 

However, although increased efficiencies result in lower CO2/MW-hr, they also require higher /MW-hr. Currently there is no incentive to absorb the increased costs 

for reduced carbon dioxide emissions. 

2)Carbon separation. Nitrogen comprises 78% of the flue gas from a coal-fired 

power plant. We have to separate the carbon from the nitrogen. Known technologies 

to do so include oxygen-fired combustion and amine (MEA) scrubbing for pulverized 

coal (PC) boilers, or chemical separation for integrated gasification combined cycle 

(IGCC) systems. The challenges now relate to scale and cost. 

3)Carbon storage and sequestration. Once the carbon is separated, we must store, 

or sequester, it. Known technologies to do so include injection for enhanced oil recovery (representing only a small percent of CO2), deep well injection, and deep ocean 

injection. The biggest challenges are the unknown long-term effects, which will determine long-term ownership and legal liabilities. Transportation of CO2 from plants 

to storage sites will require very large and expensive infrastructure. 


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Figure 3. CO2 emissions as a function of Net Plant Efficiency. 

The Size of the CO2 Problem 

Carbon dioxide emissions from coal-fired power plants are bigger than anything 

we have ever tackled. The average 500MW plant produces 900,000 lbs of CO2 per 

hour, and for a typical PC boiler, this CO2 is highly diluted in the flue gas. Compare 

this amount of CO2 to about 0.01 lbs of mercury per hour for the same plant. The 

scale for carbon capture and storage technology is daunting and the costs will be 

high. 

Technology maturation for carbon capture and storage will take time. The technologies are in their infancy. However, based on advances to date, they will become 

available and less costly, within the next 20 years or sooner. Carbon capture and 

storage technologies can be expedited, but they cannot be willed into existence overnight by changes in policy. CO2 emissions from the U.S. are only a fraction of the 

world’s carbon emissions. Technology developed in the U.S., can be transferred to 

countries like China and India that will allow the U.S. to leverage its investment 

in technology development. 

New Coal-fired Generation 

Utilities are designing new coal-fired power plants to incorporate carbon separation and capture technologies as they become available. New coal plants will include 

both supercritical and ultra-supercritical PC boilers, as well as IGCC systems. They 

will incorporate the same carbon separation and storage technologies described 

above. 

The Role of Carrots and Sticks in Encouraging Investment in Technology: 

Not choosing a Winning Technology 

Coal-fired electricity is cleaner today as a result of a balance between ‘‘Carrots’’ 

(e.g., government-funded technology development or tax incentives) and ‘‘Sticks’’ 

(e.g., government regulation or restrictions). You cannot impose the Stick until technologies are ready, or nearly ready, and you need the Carrots to ready the technologies. 

In promulgating carrots and sticks, it is also important that the government defines a goal (e.g., reduced carbon emissions), but does not choose winning technologies. This notion is supported by most recent collaborative studies on reduced 


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carbon emissions. For example, the recent MIT Interdisciplinary study, ‘‘The Future 

of Coal,’’ suggests that the government must not select specific technologies, but 

rather should incentivize technology development towards a common goal. 

Timing is Critical: If we impose clean coal restrictions (e.g., in the form of carbon taxes or emission limits) before separation and storage technologies are available, electricity costs will spiral, unraveling our economy and our ability to afford 

new technologies. However, history has demonstrated that if we first incentivize 

technology development, provide for risk reduction, and carefully time restrictions, 

the market will develop and provide winning technologies. 

Summary 

Clean Coal is an important and viable part of our energy future. To move coal 

into a carbon-constrained world, we need to: 

• Preserve base load electricity-generating capacity with reliable, inexpensive 

sources. 

• Balance base-load capacity with renewable sources.Carefully balance timing between the carrots (tax credit and technology development funding) and the stick 

(e.g., regulations). 

• Incentivize the achievement of goals, not specific technologies (i.e., we should 

reward any carbon reduction, not just the known technologies to do so). 

• Encourage more technology development (R&D tax credits, demonstration tax 

credits, etc., and coordination with DOE R&D funding). 

We need to invest now in tax incentives and support for technology development. 

We don’t know enough, yet, to decide which technology will be most cost-effective 

for each particular facility. Following multiple paths will increase the likelihood of 

sufficient successful options for application in the future, and will not preclude outof-the-box technologies that have not yet been envisioned. 

We believe that based upon our past accomplishments, given sufficient resources 

and incentives, we can make Clean Coal a reality. 

Thank you for your attention to this important National matter. We look forward 

to working with the Committee and the Congress in meeting the challenges ahead. 

We would be happy to provide any additional information, analysis, etc., that you 

or your staff require. 

f 

Chairman NEAL. Thank you. Mr. Gawell, I found your testimony 

on geothermal energy very informative. We have heard that shortterm incentives mean the projects won’t get off the ground, but you 

even cite specific examples where this has happened. 

Could you detail your recommendation that any tax incentive include a longer placed-in-service allowance along with contract requirements? 

Mr. GAWELL. The proposal, Mr. Chairman, made by 

MidAmerican Energy. Jonathan Weisgall, from MidAmerican, is 

my board president. They own a subsidiary, CalEnergy in California, that produces geothermal power. 

Their situation was, they said, ‘‘We have got a huge investment 

here. I mean, geothermal renewable technologies are comparatively 

much more expensive. I have to take the risk, and I have to make 

it on the deadline, because if my plant comes online January 2, 

2008, I get 0 of the tax credit.’’ At least that’s what my accountant 

is going to say. And their accountant said, ‘‘We can’t take that risk, 

it’s too much for us to go forward.’’ 

And what we have seen is people now don’t build plants, they 

pull them back. What he proposed was he said, ‘‘If you could simply 

allow them the option that if we get that plant, we have our contract, we’re selling to—let’s say, in their case, you’ve got a firm 

power sales contract that says we’re selling baseload power 24 

hours a day.’’ 


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Second, we’ve begun construction, which means in most of these 

firms, signed performance contracts for construction. So you’re 

locked in. You’re going to pay all the money, you’re going to build 

the plant. You would, at your option, be able to use that date as 

the start date for your credit period. 

Now, it may take you another year or two to actually get your 

plant built, and you would lose a year or two of the credit. But in 

their conditions, they said, ‘‘For us, this would make the difference. 

If we knew that, you know, if we missed the deadline a little bit, 

we will still get, you know, 80 percent of the current credit,’’ they 

would have moved forward with the project. But otherwise, they 

just couldn’t take the risk. 

Now, to be honest, Mr. Chairman, some people will gamble. As 

you know, I used to work with the wind industry. And, you know, 

all these businesses, there is a lot of entrepreneurial people, and 

some people are going to take a gamble. But others won’t. And others feel they have got a fiduciary responsibility with their board 

and tax—they can’t do it. 

And so, they recommended that that be allowed, if they’re under 

construction and they’ve got a power sales agreement, that they 

could have their option, use the placed-in-service date as their start 

date, even though they might lose some of the credit. That would 

give them enough for them to move forward and say, ‘‘We will 

make the commitment and build the plant.’’ 

Chairman NEAL. Mr. Carlson, your testimony was very similar, 

regarding the length of time necessary for placed-in-service in biomass facilities. I am assuming you are in agreement with your colleague, Mr. Gawell. 

Mr. CARLSON. Yes, I would be, Mr. Chairman. A typical biomass power project would take some three to four years to develop. 

And so, consequently, if an extension is not there for that period 

of time, a placed-in-service date definition change that would allow 

signed contracts to qualify would certainly be a benefit to our technology. 

Chairman NEAL. The gentleman from New York, Mr. Reynolds. 

Mr. REYNOLDS. I thank the Chairman. It has been a very enlightening hearing today. And, ironically, as I listen, fuel cells are 

a big aspect of parts of my district, as to an ethanol plant under 

construction in my district, as to the amount of wind underway in 

production, and solar in Buffalo, New York. 

One of the things Chairman Neal and I were talking about is it 

seems that each of you talk about the fact that some of the tax 

credits that Congress has found in the time that you’ve filed an extension have not been long enough to look at doing the job for site 

determination, permitting, and construction. 

It also seems evident in much of your testimony that without 

that tax credit, there will not be further advances in much of this 

type of energy consideration. Any in the panel disagree, that without the extension in 2008’s expiring tax assistance, that we will be 

moving forward at full steam? 

[No response.] 

Mr. REYNOLDS. Hearing that, I would assume that Congress 

needs to consider its workmanship. 


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In coal, that old coal plant that is next to my district, with the 

promise where the state looked at five different sites and chose an 

old, traditional coal-burning plant for power, the condition was 

clean coal technology. And, of course, the message to Senator Schumer and Senator Clinton, to myself and Congresswoman Slaughter 

would be, ‘‘We are going to need a sizeable tax assistance in order 

to meet that.’’ 

But one of the things that I thought might be helpful, Doctor, in 

outlining to us is how coal plants today compare, in terms to emissions and efficiency, the older coal-fired power plants. Sometimes 

I think we have a tendency to draw what we know, versus what 

is beginning to get on the books, or under construction. And it 

might be helpful if you could address a little bit that furthers the 

aspect of what you outlined in testimony. 

Ms. FRENCH. I think it is very instructive to look at where we 

have been with coal. Coal-fired power plants were mostly built in 

the 1940s, 1950s, and 1960s. These—the average age of our fleet 

of 1,100 boilers is 45 years old. Those boilers were not designed 

with particulate control, NOx control, SO2 control in mind. We 

didn’t know about those kinds of pollutions then. 

Since 1970, our electricity usage has increased 172 percent from 

coal alone. And yet, our NOx, SO2, and particulates continue to decrease. We have made tremendous strides. And much of this, as I 

said in my testimony, is retrofits. 

But now, if you look at the world of a new coal-fired power plant, 

they are much, much cleaner than anything we can do right now, 

even. And they are state-of-the-art. Everything that is on the books 

right now is state-of-the-art for coal. And most of what is being designed is being designed with carbon capture and storage in mind. 

Does that answer your question? 

Mr. REYNOLDS. Yes. One other question I might have. Does the 

marketplace already provide sufficient enough incentives for companies to develop and deploy clean coal technology? And if not, 

what incentives would be appropriate to encourage—— 

Ms. FRENCH. I think the incentives for mercury control are 

coming. They are there in several states that have mandated their 

own mercury reduction rules that are more stringent than the 

Clean Air Mercury Act. And it’s those regulations alone that will 

bring mercury control down to the levels it is capable of now. I 

don’t think there are any more incentives, besides regulations, required there. 

The incentives for carbon are different. Incentives for CO2 are 

two, as I said. The first is you need to incentivize higher efficiency 

plants. If I am going to build a plant right now, you want me to 

build the most efficient plant I can, because then I make less carbon for each megawatt of electricity that I produce. 

But my—a higher efficiency plant is going to cost more. And if 

I have to sell that electricity for more, electricity is electricity. It’s 

the same, no matter if it’s a high efficiency plant or an old, dirty 

plant. 

So, what we need to do right now is incentivize high-efficiency, 

new coal plants. That’s the first place to start. If I can take efficiency from the high thirties, where we are now, to almost 50 percent, I produce 25 percent less CO2. That is 25 percent less CO2


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that I have to capture and store, or deal with. And that is really 

the place to start. 

The carbon technologies themselves are in their infancy. And I 

think we need to incentivize the research and development. But as 

I said, we have to time the regulations with the technology development. So we need massive investments in research and development to get there, which I think we can, but we need to start now. 

Mr. REYNOLDS. All right. Thank you, Mr. Chairman. 

Chairman NEAL. The gentleman from Washington, Mr. 

McDermott, will inquire. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. I appreciate you 

having this hearing, and opening up a subject that hasn’t been 

opened in Congress since 1993. That’s the last time we had a green 

amendment before this Committee. Sakowski said to me 1 day, 

‘‘Get some green amendments. I don’t know what they are, but see 

if you can get some.’’ 

[Laughter.] 

Mr. MCDERMOTT. And we started in 1993, went a few years, 

and then we were leading the world and we dropped it. The Danes 

now produce. Wherever you go you would find a Danish turbine 

doing the job. That’s because the Congress, for the last 12 years, 

has not paid attention to this issue. 

Now, one of the things that troubles me in listening to this—and 

I look at the people here at the table, and I see the 800-pound gorilla that is not at the table, which is energy conservation. I would 

like to hear you folks talk about how we should allocate a certain 

amount of tax credits we’re going to have, keeping in mind that for 

every watt we save we don’t have to build another one. 

And how do we make those decisions? Why should we choose 

wind or solar or coal—clean coal, if there is such a thing—over not 

building? Because Americans have had this long history of showing 

that we’re a rich nation by wasting. You go down any major city 

in the United States, when you look up in the buildings, all the 

lights are on, and we are wasting energy all the time. 

And it seems to me that there ought to be some kind of decision 

made in this Congress about what we do about tax credits and incentives that have to do with energy conservation. And I would like 

to hear you people talk about it. I know it’s not what you came to 

talk about. You came here selling your particular version of the 

way to go for the future. 

But let’s talk realistically. We don’t have all the money in the 

world. So if anyone wants to talk, I am glad to listen. 

Mr. DINNEEN. I will start, Congressman. Other people will 

want to join in, but I think at least for us, we certainly agree that 

conservation needs to be part of the energy answer. 

We have a big job ahead of us. And I think all the renewables, 

other alternatives, and conservation, has to be part of any sane energy policy moving forward. 

I would say with particular respect to ethanol, because ethanol 

today is a—we do hope to be able to utilize a lot more flexible fuel 

vehicles that are running on E85, like the one I did drive to this 

hearing today. It’s not the most efficient technology. It doesn’t really take advantage of the fuel qualities that ethanol could provide, 

and there is a 30-percent reduction in mileage when ethanol is 


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used, which makes the economics that much more difficult. But it 

also says something about the energy efficiency. 

And I would hope that in working with the auto companies as 

well, that there are incentives in place for them to maximize the 

efficiency of those flexible fuel technology vehicles. So I certainly 

agree that that is problematic, sir. 

Mr. RESCH. Congressman, if I may, I think they absolutely go 

together, energy efficiency and renewable energy. And I would hate 

to get into a thing where it’s either/or, because I truly think we 

need both if we’re going to get serious about being carbon smart 

as an economy, if we’re going to be serious about scaling up manufacturing, and if we’re going to be serious about actually levelizing 

energy prices for consumers. 

When I installed the system on my house, I installed it to be 80 

percent of our electricity load, and I put pressure on the family to 

come up with the other 20 percent. So we put in compact 

fluorescents, we improved the energy efficiency, using, you know, 

basic, off-the-shelf measures, but we were able to drop it down by 

20 percent, and see some real-time performance. And now the system actually does generate 100 percent. 

So, that’s a good example of how the two go together. And I 

would hate for Congress to say, you know, ‘‘We only have so much 

money, we can only do one or the other.’’ We need to make a fundamental transformation in the way energy consumers both understand energy, deal with energy, and move forward decisions on energy. 

And I mean, one of the things that I am most, I guess, frustrated 

by is the fact that most people don’t understand where energy 

comes from, electricity, or even natural gas. And you know, there 

needs to be an education there. And I think the one thing that 

sends the biggest signal is when Congress says, ‘‘I am empowering 

you to go change your lifestyle. I am giving you a credit to go improve your energy efficiency, or to put on solar,’’ or whatever it 

happens to be. 

Mr. MCDERMOTT. I think the reason is I just bought some appliances for a remodel of my house. And if you get that star on 

there, you get some money back, and there is a lot of stuff. 

It seems to me that that’s a very important place that we should 

be putting some of our tax credits. They shouldn’t all be in the direction of the creation of more energy, but rather the creation of 

clean energy. Because I suspect that all utilities are operating on 

some kind of 10 percent or 20 percent growth per year, as we have 

done since 1950. I mean, I was in the State Legislature in the 

State of Washington when we put together—so I know about nuclear energy, and what they told us about how it was going to 

cost—we built a bank with that kind of stuff. 

So, I really—the conservation question really is one that I wonder about in building construction. Mr. Weller and I have a bill on 

building construction and post-construction, and I wonder about 

how much of that we should put in. Mr.—yes? 

Mr. GAWELL. Mr. McDermott, I think, first of all, let me point 

out that most of us here also are part of a group called the Sustainable Energy Coalition, because we do support both. 


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And we realize—well, frankly, when you look at the issues we— 

I can’t tell you how many phone calls I get on climate change. I’m 

sure you do, too. I mean, how do you address some of these big 

issues? I think you’re going to probably need a little bit of everything to even stand a good chance to get the kind of reductions you 

need. 

But I don’t think it’s fair to assume all the utilities are looking 

at growth—at least not in the West. I mean, in California, they 

aren’t. They are looking at a fairly aggressive piece of legislation 

that is going to push carbon reduction and set a model, hopefully, 

for the country, on how to do that. 

But even when you’re looking at the California model, you still 

need to be replacing—I mean, the point made about clean coal is 

true. Our fleet, even for the power we need, is getting quite old. 

We have a lot of central station problems, we have a lot of peaking 

problems. You are going to use both. 

It’s infinite wisdom to figure out which. I mean, I could tell you 

during the 1992 energy bill I used to work in the Senate. And of 

all people, we would have these discussions in the back room with 

Senator Paul Wellstone and Senator Malcom Wallop. We would 

both sit there, going, ‘‘Well, how do we know any of this stuff really 

works? How do we know what drives that marginal dollar of investment?’’ 

And it is tough. I mean, everybody—you know, when we had the 

hearings back in 1992, we sort of had—I said we had the level 

playingfield hearings. Every witness, every technology, every interest group came in and had their thing they wanted, and it was all 

for the level playingfield. 

But it’s tough to see, but I will say the one thing about the renewable production tax credit is I think it does demonstrate that 

it works. It has shown that, unfortunately, when it is not there, 

things start cramping down very quickly. 

So, I think you do need a mix. I think we all support that. But 

I think we also all want to see results. I think if you want to give 

tax credits that show you they are driving real investment in all 

these things, and somehow try to factor that into your policies, 

would make a lot of sense. 

Chairman NEAL. Thank you. The gentleman from Georgia, Mr. 

Linder. 

Mr. MCDERMOTT. One thing. I hope that at some point we can 

talk about public power and the whole Production Tax Credit, and 

what the 15 percent of power that’s created by them, how they get 

into this when it’s basically been set up for the private sector. 

Chairman NEAL. I appreciate the gentleman’s line of questioning. The gentleman from Georgia, Mr. Linder. 

Mr. LINDER. I thank the gentleman. Mr. Dinneen, when you 

take all the renewable fuels put together—solar, biomass, et 

cetera—what percentage is the total energy output? 

Mr. DINNEEN. I am not sure what—maybe somebody else? 

About two percent? 

Mr. LINDER. About 2 percent? Mr. Resch, you said your solar 

product produces about 1/30th of 1 percent of all the energy needs. 

What is your 30-year goal or 20-year goal? What do you think you 

can get? 


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Mr. RESCH. It depends a little bit on the tax incentives, of 

course, but we estimate that if you have an eight-year extension of 

the tax credit—we did in that timeframe—solar, by the end of that 

tax credit, will be providing 50 percent of all new generating capacity. Right? 

So, we recognized that if demand for energy is going up like this, 

and we have to build new power plants, by the end of that 10-year 

window, solar will be providing 50 percent of that growth. So, as 

we go forward, solar becomes an important part of the mix. And 

at the end, we’re still small, because we’re competing in a very, 

very large, you know, 40 or 50-year installed capacity. We will end 

up being about—— 

Ms. FRENCH. It’s 50 percent, yes. 

Mr. RESCH. Yes, so we will be about three percent, growing to 

five percent shortly thereafter. Up to 30 years, it could be significantly larger. Mr. LINDER. Mr. Rose, you said that fuel cells cost $3,000 per 

kilowatt. Is that what you said? 

Mr. ROSE. Congressman, fuel cells are a family of technologies, 

and they are being developed for just an extraordinarily wide range 

of applications. I can’t give you a single number for the cost of a 

fuel cell, but it’s—some power generation systems do charge—or do 

cost in that range, yes. Others are more expensive. 

Mr. LINDER. What is nuclear cost per kilowatt? Do you have an 

idea? 

Mr. ROSE. I don’t. It’s not my field. 

Mr. LINDER. Anybody have an idea? 

[No response.] 

Mr. LINDER. What does coal cost per kilowatt? 

Ms. FRENCH. I don’t know, but I can find out. 

Mr. LINDER. I would like to know. 

Ms. FRENCH. I will do that. 

Mr. LINDER. Mr. Dinneen, you said that ethanol and its indus- try puts $2.7 billion into the revenue stream. Is that right? 

Mr. DINNEEN. That’s correct. 

Mr. LINDER. How much does it take out? Is that a net number 

or a gross number? 

Mr. DINNEEN. That would be a gross number. 

Mr. LINDER. How much does it take out? 

Mr. DINNEEN. $2.5 billion is the cost of the tax incentive last 

year. 

Mr. LINDER. How much per gallon of ethanol is subsidized by 

the taxpayers? 

Mr. DINNEEN. Well, they get an incentive for every gallon of 

ethanol they use, to the tune of $.51 a gallon, so the—— 

Mr. LINDER. Taxpayers get $.51 for every gallon? 

Mr. DINNEEN. Well, the taxpayers are receiving about $4 back, 

because of the reductions in farm program costs I talked about, and 

the increased economic activity associated with ethanol production. 

Mr. LINDER. Mr. Steve, you said that farmers make $5,000 per 

month you said? 

Mr. STEVE. Land owners, farmers, ranchers make about $5,000 

in payments per wind turbine per year. 

Mr. LINDER. Per year. 


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Mr. STEVE. For a period of 20 years. 

Mr. LINDER. Do you know what—how much it is per kilowatt? 

Mr. STEVE. Per kilowatt? No, I don’t have that calculation. I can 

get it for you, though. But I can tell you that we do hear stories 

from folks who say, ‘‘This allows me to put my kid through college. 

This allows me to keep farming, where I couldn’t farm before.’’ It 

is very helpful for—— 

Mr. LINDER. Do any of you represent a product that can succeed 

commercially without a taxpayer subsidy? 

Mr. ROSE. May I? This is my opinion, and not my organization’s 

opinion, but I think they—the Members—would share it. 

The answer is yes. I think what would happen is—well, in fact, 

fuel cells are competing in markets today. There are niche markets, 

relatively small markets. And what we are looking at with the—— 

Mr. LINDER. Are they commercially reasonable? 

Mr. ROSE. I’m sorry. 

Mr. LINDER. Are they commercially reasonable? 

Mr. ROSE. They are being purchased in preference to other technologies that are on the marketplace, so I would say yes. 

But what we’re talking here is, first, accelerating the transition 

to wider adoption of the technology. I mean, there is a public value 

in that transition, or we wouldn’t be here. And I think that is— 

it isn’t so much the cost, it’s the value that’s extracted, I think, 

from all of these technologies for the larger community. 

And fuel cells can’t compete in the marketplace in some markets 

today, and will find other markets. But they will not move into 

markets, as many markets, nor will they move into those markets 

as fast, without the support of the taxpayers. 

Mr. LINDER. Good. 

Mr. RESCH. It’s kind of interesting to point out that every satellite that has gone into space in the last 30 years has been solar 

powered. The largest consumer for solar energy, for years, was the 

oil and gas industry, and they used solar remote applications to 

power pumps and meters and telecommunications equipment. 

You walk down K Street, you’re going to see parking meters that 

are solar powered. The reason why is in remote applications. It’s 

going to cost you a lot more to run a power line out to that unit, 

versus buying a solar system. So in a very small niche market like 

Bob is describing, solar certainly is cost-effective, and we are seeing 

it in wider and wider uses. I have seen cities that have air quality 

specifications, and so they are turning to solar, or other non-polluting technologies to generate electricity. 

Mr. GAWELL. Mr. Linder, I just want to add, I think it—for 

some of the technologies, like geothermal, we’re not just a technology, we are also a resource akin to oil and gas. 

So, there are some areas where people develop pretty economically, but those are the cherries. But then you get out to larger 

areas that cost more and more, and you have got to have a push 

to get there through an incentive, or you’ve got to have major technology development. 

So, we’re not exactly a widget with one price. We’re a resource 

base with a range of prices, depending on what you look at. 

But I want to also point out that there was a study done by Dallas Burtraw of Resources for the Future, and he actually looked at 


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all the renewable technologies and what happened to them. What 

happened to their prices between 1978 and 1990? And what he 

found was that every technology here met their price reduction 

goals during that period when we were building power plants. But 

the other thing that happened was during that same period, the 

average price of electricity from ‘‘conventional sources’’ dropped 40 

percent. 

So, while many of the technologies did get their cost reductions, 

effectively the goal line moved at the same time. So these are fairly 

dynamic factors. And I think each technology has certain aspects. 

Even with wind, there are different wind regimes. Some wind regimes you’re going to get different economic factors than others. 

So, you build out over time. If you want to get to this large end, 

we need to be building plants forward. Are we commercial in some 

areas? You might get commercial product. Most of those have been 

built, where you start moving up that supply curve. 

Mr. CARLSON. The largest user and producer of energy, also the 

most heavily integrated user of their own internal energy resources—55 percent of all the energy used by the forest products 

industry in the U.S. is produced internally. 

And so there are—just like the others have said, there are certain markets like that. For instance, if you’re producing electricity 

for your own internal use, such as a pulp and paper facility, you’re 

able to essentially sell it at retail. 

But what we’re talking about is trying to move this technology 

out into the mainstream, so that we can utilize more of those underutilized biomass resources, where someone else may not already 

have paid the cost to collect them, move them to a central location, 

as you will in a manufacturing facility. 

And can we make the leap to selling it wholesale today? In most 

of the markets, the answer is, ‘‘No.’’ But all those internal resources have been used for many years to make a highly integrated 

forest products industry that has very well utilized the less expensive resources to produce internally. 

Mr. LINDER. What is the most efficient biomass technology, in 

terms of producing enough power to sell off, versus what it uses to 

produce the power? 

Mr. CARLSON. In a stand-alone new facility, that facility will 

sell 90 percent of its output externally, about 91 percent. 

Mr. LINDER. That’s about twice what it was 10 years ago. 

Mr. CARLSON. It is—internally, yes. The uses have gone down 

substantially. And so we are not efficient technology, because of 

fuel—very low Btu and very high moisture. So you wouldn’t call 

it—they can’t compete with the numbers that the doctor gave for 

coal, as an example. 

But that efficiency has come up, and—but it is still at the low 

20 percent range, on an overall efficiency basis. 

Mr. LINDER. Thank you all. 

Chairman NEAL. I think Mr. Dinneen would just like to—has a 

brief comment. 

Mr. DINNEEN. Real brief. Congressman Linder, the ethanol industry is thrilled to be able to produce six billion gallons this year 

and we’re going to double in size in a couple of years, but we’re still 


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selling into the 140 billion or 150 billion gallon gasoline market. 

And our customer is our competitor. 

And so, there is no real incentive for them to, you know, turn 

over a part of their gallon to us, in the absence of the tax incentives that Congress has put in place. As we continue to grow, and 

we get much more volume—and you’re producing ethanol from cellulose and other feed stocks—you may then have the volume where 

tax incentives are not necessary, because we will be a more meaningful part of the marketplace. 

Chairman NEAL. Thank you, Mr. Dinneen. 

Ms. FRENCH. Can I make one very brief comment, similarly? 

Chairman NEAL. Thank you. 

Ms. FRENCH. I don’t think that clean coal requires subsidies. I 

think we need to incentivize the technology development. And during that time, what you will see is you will see the cost of those 

clean coal technologies decrease, which is really the same thing the 

whole panel is saying. The costs will decrease, the reliability will 

increase. And it creates a market for these clean technologies. And 

that is very different than a subsidy. 

Chairman NEAL. Thank you. And, Dr. French, your comments 

on the cost of coal per kilowatt will also be made part of the record. 

Ms. FRENCH. I will—— 

Chairman NEAL. Thank you. The gentleman from Connecticut, 

Mr. Larson, will inquire. 

Mr. LARSON. Thank you, Mr. Chairman, and I thank the panel 

for your expert testimony. And I just want to thank Mr. Rose for 

pointing out that Connecticut is, indeed, the center of fuel cell excellence, led by UTC Power, which does an extraordinary job, trying to compete with Mr. Reynolds on a regular basis to maintain 

the fuel cell world. 

I decided to point out quickly, because I ask a couple of questions, that the greatest subsidy taxpayers currently pay is the 

amount of money that we export abroad to foreign companies who 

are utilizing oil. 

And I think as Thomas Friedman points out, our current foreign 

policy is, essentially, ‘‘Leave no moolah behind,’’ because we find 

ourselves in a situation where we are not only exporting more than 

$200 billion annually abroad, but that money finds its way into— 

it ends up funding terrorists and Islamic extremists who are fighting our troops over there, where we are currently spending over 

$400 billion in the war in Iraq. 

And so, this, in so many respects, is not only a tax situation, this 

is more of a national security. I want to commend Speaker Pelosi 

and Chairman Markey for the hearing the other day that is simpatico, Mr. Chairman, with your concerns to making sure that we 

get after the need to provide energy independence and the whole 

concept of global warming. There was a hearing in which we had 

both admirals and generals testifying, and talking about the need 

for us to make this transition. 

My two questions are as follows. First, it’s one that is a bit selfserving, but the focus today is on renewables, and yet often time 

in renewables we don’t focus on emissions. And so, Mr. Rose, I will 

start with you and ask don’t you think that that should be included 

as part of the standards? That, ultimately, if we are trying to reVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00068 Fmt 6633 Sfmt 6602 E:\HR\OC\48112.XXX 48112

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duce the carbon footprint, that we ought to, when we’re awarding 

and deciding and providing tax incentives, that we ought to make 

sure that emissions is as important as something being renewable? 

Mr. ROSE. Well, I believe I’m required to say ‘‘yes,’’ Congressman. 

[Laughter.] 

Mr. ROSE. And, therefore, I will. The—I am fond of saying, as 

you know, that it’s really a combination of benefits that fuel cells— 

and, indeed, some of our colleague technologies—bring that really 

make the difference. 

And we have three problems. We have the problem that you have 

described. We have the other problem of smog, and the need to protect public health against the ravages of air pollution. And we also 

have an energy security problem. And it’s not a cafeteria plan, you 

know. We have to address all of those in order to really achieve the 

kind of future we all hope. 

And so, therefore, I am not sure that anybody has succeeded in 

monetizing those kinds of benefits in the past. It certainly is an 

area where we think we deliver the goods—— 

Mr. LARSON. I am going to assume that most of the panel is— 

agrees with that. But I—if there is someone who doesn’t, you’ve got 

the mic. 

[No response.] 

Mr. LARSON. Since everyone agrees with that, let me move on 

to my second question. In an article over this weekend, Thomas 

Friedman very succinctly laid out what he sees as the problem. In 

fact, he looked at it from an entrepreneurial standpoint—something my dear friend and colleague, Mr. Blumenauer, has been exploring for years. And I want to proceed along the same lines that 

Mr. McDermott did, in terms of asking a question that’s a little bit 

outside of the box. 

Essentially, he ends this whole story line about talking about the 

green—American importance as it relates to national security and 

reducing the carbon footprint by saying, ‘‘All talk in conversation 

about this is pointless, unless American citizens, unless the entrepreneurs, Members of government, including Congress, are willing 

to step up to the plate and face, head on, the issue of a cap in 

trade, and more importantly, a carbon tax.’’ Do you agree with 

that, yes or no? 

Mr. RESCH. Yes. 

Mr. LARSON. Well, let’s take—I guess I will start with you. 

Ms. FRENCH. I think it is very, very important to look at the 

timing of that. If we unravel our economy by sending electricity 

prices sky high—I’m talking about the baseload—— 

Mr. LARSON. Even if some of the tax funds went directly to 

achieving some of the goals—the boilers that you laid out earlier, 

and tried to provide the incentives for you to so-call ‘‘get at’’ clean 

coal? 

Ms. FRENCH. Yes. I think we can get there, but I think we have 

to look very, very—— 

Mr. LARSON. So when, in your estimation, would that be? 

Ms. FRENCH. I don’t know, because the technologies are not—— 

Mr. LARSON. You don’t know. 


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Ms. FRENCH [continuing]. Available yet. But if you put the stick 

in place with no technologies, there is nothing to support—— 

Mr. LARSON. So Friedman has got it wrong. 

Ms. FRENCH. No. I think he doesn’t—I’m not saying not to do 

it, but I am saying that we have, in this country, an environmental 

agenda because we have a strong economy. If we take the meat out 

of our strong economy by sending electricity prices sky high, we 

won’t have an environmental agenda. 

The poor countries don’t have an environmental agenda; they 

can’t afford to. We can. But we have to act cautiously. And I think 

those answers—those questions are excellent questions, but I don’t 

think we have the answer right now. 

Mr. LARSON. So the answer is we don’t have the answer? 

Ms. FRENCH. We don’t have the technologies right now. The answer is we need to invest in technologies—— 

Mr. LARSON. None of these technologies will help, here? 

Ms. FRENCH. They won’t cover the baseload. They won’t cover 

the foundation of our economy right now. They are very, very important. As everybody has said, we need a mixture of technologies. 

Mr. LARSON. Would the other panelists respond? 

Mr. STEVE. Mr. Larson, we could use significantly more. These 

technologies offer great promise to this country. We are not going 

to claim that we can run the entire country on any single technology, that’s true—of base line technologies that we have already. 

You need a mix of resources. 

What we are saying is give us the tools, give us a long-term credit, we will get out there and we will build more. We will create 

more jobs. We can do it. 

Mr. RESCH. Congressman, your point is a very good one, and I 

would say, from a solar industry perspective, regardless of what 

the structure is, we would want to make sure that there is a clear 

market signal that is coming from this, all right? 

So, if it’s a Btu tax, or if it’s a carbon tax, whatever it happens 

to be, what you’re then providing to consumers and to industry is 

a clear market signal. It’s not a stick, it’s a market signal that allows, as Mr. McDermott talked about, energy efficiency. 

All of the sudden, your first choice is energy efficiency, and consumers, if you’re paying more for electricity, guess what? You’re 

going to do that first. Second thing you are—— 

Mr. LARSON. Combine that, as he said, with conservation? 

Mr. RESCH. Conservation, efficiency—— 

Mr. LARSON. Keep your limits that you’re looking at, or more? 

Mr. RESCH. And then I think you have got a true energy revolution in this country that hasn’t occurred since, literally, electricity 

was invented and then went mainstream, back in the 20th century. 

Mr. ROSE. May I also comment—— 

Mr. LARSON. Mr. Chairman, I think my —— 

Chairman NEAL. Well, let’s choose this time to push forward. 

There is only one vote, and what I would like to do is to run over 

and vote. Mr. Larson can take the chair and I will come right back 

so we can continue the hearing. So Mr. Larson can control the 

time. Continue. 

Mr. ROSE. The Congressman knows the kind of answer he is 

going to get from me, I think. I do want to say that, seriously on 


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this point, it’s an important point for our industry, and I believe 

for sustainable technologies, generally. 

Any program, whether it be a tax program, or a so-called cap in 

trade program, has got to recognize that a lot of our technologies 

are making this transition a few kilowatts or a few hundreds of 

kilowatts at a time. And the challenge with programs like cap in 

trades is that they tend to go after the big guys. 

And so, any program that is developed, I hope, will recognize 

that these kind of small-scale, distributed technologies—— 

Mr. LARSON [Presiding]. Mr. Rose, I would, because of the 

shortness of time, and my dear friend and colleague has to be on 

the floor—— 

Mr. ROSE. Oh, sure. 

Mr. LARSON. So I am going to yield to Mr. Blumenauer for 

more—he has an amendment on the floor, and will not be able to 

come back. 

Mr. BLUMENAUER. Thank you. I appreciate your being here. I 

have three questions—two that I would just offer, and seek you to 

provide this information when you have a chance. 

I was—Mr. Linder’s point about the subsidies that you all enjoy, 

and are seeking to make more use of, I just wondered if you, from 

your perspectives, could offer a brief assessment of the subsidies 

that all the sources of energy enjoy. To the best of my knowledge, 

there is no source of energy that hasn’t enjoyed massive subsidy at 

some point, and continuing. 

Some of my friends in alternative energy have—when I can pose 

these questions, they say, well, they would be happy to settle for 

what the subsidy has been for the petroleum industry for a short 

period of its history, but the cost of—I appreciate what Mr. Larson 

talked about, in terms of what the cost of a gallon of oil would be 

if we factored in our investment in the Middle East to secure lines 

of supply and the vulnerability that we heard about at our hearing—a fascinating hearing—yesterday from the defense experts. 

So, if you could, at your leisure—but some time sooner, rather 

than later—give us a sense, from your perspective, of the subsidization of energy in this country, past and current, and how your 

niche fits into that. 

My second question, again, at your leisure, would be directly related to that, how we rationalize where we go from here. I am absolutely convinced that you need a reasonable window, not rolling the 

dice, is it going to expire in two years, is it go again in three? Some 

are different from geothermal, different for ethanol. 

I, personally, am interested in both of these Committees that Mr. 

Larson and I serve on, to be able to rationalize this in a way that 

people know what they expect, that there is always, you know, 

maybe a three-year window, that there is a rolling expiration date, 

things of that nature. If you could help us think about how it could 

be rationalized, in terms of structure and amount. 

My specific question, if any of you have anything off the top of 

your head that you would wish to respond to, I want to know what 

the Federal government can do now to exploit, enhance, and develop the markets for the technologies that you have right now. 

A specific example. The Department of Defense is seeking $22 

million for a diesel generator for Guantanamo. Fuel that has to be 


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brought in, huge sums of money, for just the prison facility. Any 

of you think that there are applications that might reduce that part 

of the carbon footprint, whether it’s the Department of Defense, Interior, Transportation, the GSA, or the 300 million square feet of 

office space that we have across—can you give us some thoughts 

about what the Federal government can do right now in the budget 

in a cost-effective way to promote what we’re talking about? 

Mr. LARSON. I think we can do that in a minute and 16 seconds, but—— 

Mr. BLUMENAUER. I do, a very quick answer. And then there 

is one quick one that is probably outside the purview of this panel, 

in particular, is a Federal purchase requirement for renewables. 

We, the Federal government, will lead by example, purchase X 

percent—say 15 percent—of power through renewable resources at 

all times. Currently, the Air Force is purchasing wind power, and 

they were a purchaser of wind power, as well. This can be done. 

Mr. STEVE. We have a—— 

Mr. LARSON. As the panelists are, I’m sure, aware, we have a 

vote that is currently going on. It’s the Chair’s intention to ask Mr. 

Weller to speak, and then we will briefly recess and come back and 

finish the hearing. But I just wanted to thank my colleagues for 

their forbearance. And with that, we will turn to the gentleman 

from Illinois. 

Mr. WELLER. Well, thank you, Mr. Chairman, and thank you 

for including me in this hearing. I am a Member of the full Committee, but not a Member of this Subcommittee, and I am pleased 

to be here to see a number of folks that I had the opportunity to 

work with on what I believe has been good policy over the last few 

years. 

Particularly, as I look back over the last 12—now more than 12— 

years of the Ways and Means Committee, I think one of our proudest moments was about 21⁄2 years ago, when President Bush signed 

into law the Energy Policy Act of 2005. A good policy that promoted 

alternative fuels, emphasized energy. 

And one common theme I am hearing today is that the extension 

for a significant, long, period of time for provisions before this Subcommittee and this hearing today, because good policies work. And 

I have seen that in my district, because we encourage more power 

plant—Transco, a small manufacturer in my district, has gone from 

40 to 120 employees supplying the insulation for power plants. 

Hundreds of millions of dollars in wind energy investment. 

With all the glacial—in my district we have glaciers in it, the 

higher point of ground, a positive place to build wind farms. We 

have six, either in operation or in construction. 

Biofuels, with the more than doubling of biofuel uses in the energy bill that President Bush signed into law in 2005, I participated in ground breaking for the 300 million gallon biodiesel plant 

in Seneca, Illinois. That would be the largest biodiesel plant in the 

world. Presently under construction is a 100 million gallon plant 

going through the permitting process in my district. 

So, clearly, in this case, the rural areas in my district are big 

winners when it comes to that kind of development and investment. So the good policies in the energy bill of 2005 is working. 


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And my friend, Mr. McDermott, noted a bill that he and I are 

working on to extend the energy efficiency provisions that were in 

the 2005 energy bill. I offered a residential tax credit with others 

on the commercial building tax credit. Energy efficiency must be 

part of our policy, as we continue to move forward. And I advocate 

long-term extension. 

I am also, you know, Mr. Chairman, an advocate of the 25x’25 

proposal, and it kind of all sounds outdated. I am clearly not—you 

can listen to the rhetoric out there, but if we were to provide— 

produce 25 billion gallons of biofuels, we would eliminate Venezuela as a supplier of oil and gas to the United States. Think 

about that, what that would mean in the foreign policy arena, and 

what it would mean to the national security concerns of this country. 

And Mr. Dinneen, you mentioned you drove to this hearing 

today, or drove to work today, in a flexible fuel vehicle. There is 

a new technology out there called a hybrid flexible fuel technology. 

Two U.S. manufacturers, Ford and GM, are moving forward to introduce that in the marketplace. Other manufacturers are moving 

forward in that. That marries the hybrid technology with flex fuel 

technology. So you have the hybrid engine plus the E85 capability. 

And it is said, according to an economic analysis, that if 5 percent of all the vehicles in America were hybrid flex fuel vehicles, 

we would eliminate 140 million barrels of imported barrels a year. 

Think about what that would mean to our National security, let 

alone our economy, if we could do that. 

I have legislation I will discuss with the Senate Committee next week that provides a $3,500 tax credit to purchasers of a hybrid 

flex fuel vehicle. Kind of mirrors the incentive we had in place for 

the hybrid, which worked to create that marketplace, and—— 

Mr. LARSON. I don’t mean to interrupt the gentleman from Illinois, but there is about—just more than a minute-and-a-half to—— 

Mr. WELLER. Well, very quickly—— 

Mr. LARSON. We have to get over and vote, which—— 

Mr. WELLER [continuing]. Look at that type of incentive, as you 

talk about promoting flex fuels? 

Mr. DINNEEN. I think it would be extraordinarily helpful to 

move that technology forward. A flexible fuel hybrid, as far as I understand, would get about 700 miles to the gallon of gasoline that 

would be used. So it is absolutely something that we need to be 

looking very closely at, and I appreciate your leadership on that. 

Mr. BLUMENAUER. Seven hundred miles to the gallon. Think 

about that. 

Would you also submit to the Subcommittee, for the record in a 

written form, discussion of the potential for alternative sources of 

biomass—— 

Mr. LARSON. Without objection, that will be made part of the 

record. And we will recess. When we come back, we will still continue with you up here, and I apologize for the fact that we had 

to vote for the second vote. We will stand in recess, but we will be 

back. 

[Recess.] 

Ms. SCHWARTZ [Presiding]. We will gather again. Mr. English 

is recognized for five minutes. 


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Mr. ENGLISH. I want to thank the Chair for the opportunity. 

And I must say, although I was held up on the floor, I found out 

I was going to be a participator in this hearing. I have been very 

impressed by the testimony that I have read. 

And my first question is to Dr. French. Reading your testimony, 

the question that arises is does coal and liquid technology hold the 

promise of making the United States independent at some threshold from imports of foreign sources of oil? And if so, what carbon 

sequestration challenges would exist in a coal and liquid—— 

Ms. FRENCH. Mr. English, thank you for the question. I am not 

an expert on coal-to-liquid. My background is combustion. So, let 

me speak from the environmental background, my combustion 

background, and recognize that I am not the country’s expert on 

coal-to-liquids. 

I think that there is no question that coal, as a transportation 

fuel, as a liquid transportation fuel, holds a big role in national security, reducing our dependence on foreign imported oil. I don’t 

know enough about the numbers to say that—you said a threshold—couldn’t become independent. I don’t know the numbers. 

In terms of the carbon from coal-to-liquids, I imagine you’re talking about the carbon in the process of making a liquid fuel from 

coal, compared to the process of making a liquid fuel from crude 

oil. Is that correct? 

Mr. ENGLISH. Yes. 

Ms. FRENCH. Okay, so we’re talking the process itself. And, 

again, I am not an expert on this. The carbon capture and storage 

technologies for that process will be very similar to the carbon storage capture technology through higher carbon production. 

So, I believe, as I said before, those are within our realm. We 

have a lot of smart people working on this. The technologies are 

in infancy now, but there are some very promising concepts on the 

table. 

Mr. ENGLISH. Beyond that point, Dr. French, in your view, does 

the marketplace already provide sufficient incentives for companies 

to develop and deploy clean coal technologies? And if not, what 

other incentives are appropriate to encourage this activity? 

Ms. FRENCH. Yes, Mr. English. I answered a portion of this 

question before. I think the incentives for clean coal, as up to and 

including mercury, exist already. The mercury control, as I stated 

in my oral testimony, is driven by regulations. The regulations 

exist in several states that go beyond the Federal mercury rule, 

and that has incentivized mercury control technology, and that is 

now commercially available for 90 percent mercury reduction. 

When we look at clean coal as it relates to CO2 capture, there 

are two parts to that. The first part is incentivizing efficiency. We 

want to incentivize the companies building new coal-fired power 

plants. And to some degree, part of the existing fleet. We want to 

incentivize efficiency. If we can move efficiency from 37, 39 percent, 

where we are now, up to closer to 50 percent, we reduce carbon by 

25 percent. That is the place to start. That is 25 percent less carbon that I have to capture and store. 

And those technologies exist right now, but we need—there is no 

incentive to pay more for a power plant that is more efficient. So 

we need to incentivize efficiency, as a first step. 


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And the second step is actually carbon capture and storage. 

Those technologies are in infancy. They require massive investment 

in research and development, and they require careful timing between the regulations and the technologies. We oppose regulations 

before the technologies are ready. 

Mr. ENGLISH. Thank you, Dr. French. Mr. Steve, I am somewhat familiar with what has been happening with wind power, in 

part because I have a major employer, GE, which is involved in the 

business, and I have been particularly struck by the technological 

changes that have gone on within wind power that seem to be telescoping its potential. 

I wonder if we could talk briefly about how technological changes 

that at one point were being pioneered in Europe are now ripening 

within the United States, and whether the extension, particularly 

of the tax incentives we’re talking about, are going to encourage 

technological innovation. 

Mr. STEVE. Certainly. I will talk briefly, as well. Essentially, today’s wind turbines are quite high-tech. The blades turn—they’re 

computerized to turn into the wind. Very high-tech. 

What we need out of a long-term extension of the credit is actually something that will help us on the low-tech side, believe it or 

not, which is GE, for example, who, with all the resources they 

have, have a very difficult—they build wind turbines, but they 

have a very difficult time ironing out their supply chain, because 

people don’t want to build things on an off again, on again basis 

every other year. 

We are talking about large components, like the castings used 

that hold the—essentially, the guts of the machine at the top. They 

hold the generator at the top of the machine. Folks don’t want to 

hire people every other year. So you can’t get enough people to do 

the production that is possible. That’s why we need that long-term 

credit, is it—so that we can ramp up production. 

Mr. ENGLISH. Well, that makes a lot of sense, Mr. Steve, because the people in my district, on balance, would prefer not to be 

hired every other year. 

[Laughter.] 

Mr. ENGLISH. I yield back the balance of my time. 

Chairman NEAL [Presiding]. Including the gentleman from 

Pennsylvania. 

The gentlelady from Pennsylvania, Ms. Schwartz, is recognized. 

Ms. SCHWARTZ. Okay, thank you, Mr. Chairman. I appreciated 

your testimony. And before I ask my question, I want to associate 

myself with comments made earlier on conservation, and about the 

importance of—we really have to reduce the—well, individuals and 

businesses, as we ramp up and promote more production. We need 

to produce more, but we also don’t want to end up with so much 

excess. We want to be conserving energy. 

I also wanted to mention something that has not been talked 

very much about. I will just mention—it’s not exactly germane, but 

we talked very little about public transportation. And here, too, 

there may be technologies that would go into public transportation. 

I come from an area that may—Mr. Blumenauer isn’t here, but my 

guess is that he would be more expressive. 


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So, it would be interesting if there are other options we can discuss today. 

What I wanted to ask you about was if you could—we touched 

on this earlier—the standards that have been set by 23 states, 

have really had as dramatic, or possibly more dramatic an effect, 

than some of the tax incentives that we have created, and when 

we speak to the states moving ahead of us at the national level in 

creating that market for you, and really creating those standards. 

So, how much—can you actually talk about the mix of—whether 

setting those standards has had more of an impact than the tax 

credits? And sort of a follow-up, what do you think about a national 

standard, and whether that actually would do more for engaging 

private investors in encouraging production? Thank you. 

Mr. CARLSON. Ms. Schwartz, I will start, if I could, from the 

biomass perspective. 

Yes, there has been a dramatic growth in the RPS standards 

around the country, to the point now where almost two-thirds of 

the country’s population is covered by a standard requirement, you 

know, which goes to how effective is the national standard at the 

rate of growth of the state standards—I mean, several states this 

year have just boosted. Colorado did, New Mexico did, just recently. 

The problem that some of us have in the implementation of the 

RPS is that there is still not the same level of tax credit for the 

different technologies. And so, those technologies with the highest 

tax credit—section 45—are able to bid the lowest bid into the auction, and then they win the bids in the auction. Everything else 

being equal, the growth of these renewable portfolio standards 

would be a wonderful thing for renewables of all kinds. But until 

we have that level playingfield, so to speak, there are some that 

win bids, and there are those who come close. 

Ms. SCHWARTZ. Maybe you can—if I have time, I would like to 

ask a follow-up question about how do we actually level the 

playingfield and not create—the most effective, the most efficient, 

and cleanest—— 

Mr. GAWELL. I think it is important to note—— 

Ms. SCHWARTZ [continuing]. And I think the most costly, I 

guess—go ahead. 

Mr. GAWELL. I think this is a really important question, is this 

inter-relationship between the renewable portfolio standards and 

the tax credits. It comes up all the time. We get it, as well. 

First of all, I think it’s important to note that for a developer, 

or for technology, they do different things. What the California RPS 

does is give you the opportunity to get a contract for your power. 

It doesn’t provide you the investor, it doesn’t find you the resource, 

it doesn’t do other things. 

The other thing is there is one thing about America people got 

to learn. Everybody wants green power, Mr. Chairman, but nobody 

wants to pay for it. Nobody wants to pay extra. And many of the 

states, like California and others, they want your bid to come in 

at, essentially, a commercial range. 

And what has been working, I think, for most of the utility-scale 

renewables, is the combination of the two, where you’ve got the 

ability to competitively get new contracts, so you know you can sell 

your power, and then the investment tax credit, or the production 


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tax credit, to help buy down the cost of that high capital investment, so that you can bid in at a reasonable rate. 

And also, you should know in most of the states we do business 

in, in the West and out in California, the state actually has to examine your contracts, to make sure you have passed through any 

tax credit you received adequately. California came this close to 

saying you had to pass through 100 percent, you know. But they 

didn’t. They still require review of each contract to make sure that 

you aren’t, in a sense, keeping it, but you are at—the consumer is 

benefiting most from use of it. 

So, I think that they actually can be very complementary, and 

they need to be thought of as complementary. But I will throw in 

one zinger about RPS’s. And, Mr. Larson, this goes back to your climate issues. You know, everybody thinks—I think everybody at 

this table thinks—we need to do something about climate. But the 

devil is in the details. 

These state RPS’s and whether they work right, or don’t work 

right, or help this technology or that technology, I mean, some of 

these RPS laws that have been passed are voluminous. And there 

is something in there to make sure everybody gets their little piece 

of something, and they don’t work well when some of them do well. 

So—but there is a lot to learn from what the states are doing. 

There is a lot of activity at the states, both in tax credits and in 

RPS’s. And it’s a very complex mix of—they can work together, and 

where they do work together, you’re seeing very dramatic change. 

Mr. RESCH. Congresswoman, a very quick response from the 

solar perspective. The answer is that state renewable portfolio 

standards do not work for solar energy. There are 23, but the trend 

that we have seen on the states to actually have distributed generation, or solar carve-outs—Maryland, which just passed one last 

week, will be signed into law on the 24th, is going to be the most 

aggressive, that actually says, ‘‘A certain percentage of our electricity has to come from solar.’’ And that actually does work for us. 

And so, the Berkeley National Laboratory did a study just two 

weeks ago for the Department of Energy to look at state RPS’s. 

How do we encourage the use of solar? Because it’s clearly not 

working. And they found that a straight RPS does not build new 

solar. A three-X multiplier does not build new solar. You actually 

have to have a specific carve-out that you want created. 

And so, what I would say in a national RPS is that we should 

take a look really not toward just a solar carve-out, but more for 

a distributed generation carve-out, right? So it allows fuel cells and 

small wind and solar, all to compete in a distributed generation. 

We get the benefit of a true mix, so that it’s not just centralized 

power plants, but it’s also distributed generation power plants, as 

well, that stabilizes the grid, as well as to increase the use of renewables. 

Ms. SCHWARTZ. My suspicion is I don’t have time, but I think 

it is certainly a mix, and I think there will probably be more discussion about how we create as we proceed. So, thank you, Mr. 

Chairman. 

Chairman NEAL. I thank the gentlelady. I believe Mr. Weller 

has some time left. Mr. Weller? 


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Mr. WELLER. Thank you, Mr. Chairman, for the opportunity to 

reclaim my time. Thank you. And the opportunity to be here today. 

I would comment to my colleague from Pennsylvania, I also support the idea of a national portfolio standard. I advocated 25x’25 

approach, and I would like to see this be bipartisan. 

Mr. Dinneen, a question I had I would like to follow up, because 

I was very rushed as we were trying to run over to vote. You know, 

in Illinois, if you raise corn and soybeans, you’re a pretty happy 

guy. We have prices of corn over 4, soybeans are over $7. Corn 

prices have more than almost tripled since the 2005 energy bill was 

signed into law. So if you raise those products, that’s pretty good. 

And there is going to be a big cost of production this year, but if 

you’re a livestock producer or you’re a miller, there is concern. 

There is tremendous potential down the road regarding alternative sources of biomass used for biofuel production. And can you 

share with the Subcommittee what you see as the likely time table 

with that technology being developed? And then, also, as a secondary question—and others may have talked about this—but 

what type of incentives would you consider to expedite the new 

technologies, particularly in the area of cellulose and ethanol? 

Mr. DINNEEN. Thank you, Congressman. A couple of really 

quick points. Indeed, the price of grain has gone up because of the 

increased demand for ethanol, as a result of the Energy Policy Act. 

But because the markets respond, they have responded, and 90.5 

million acres being planted with corn this year has already had an 

impact on the marketplace, and those corn prices are coming down. 

The marketplace will find a new equilibrium that is going to allow 

for plenty of grain to be grown for energy use and fuel use and 

fiber use, and it’s an amazing thing, the marketplace. 

The other thing, just real quick. As you well know, when you’re 

processing grain into ethanol, you are just borrowing the starch. 

And what is left behind is a very high-value feed product that is 

then sold to livestock and poultry markets. So that is having a beneficial impact for those livestock industries, as well. And I am sort 

of the poster child for the fact that we probably have too much 

starch in our diet, anyway. So, we are making some progress. 

Nonetheless, there is no question that we recognize that there 

are limits to what we are going to be able to produce from gain. 

And because of that, there is not an ethanol company that I represent that doesn’t have a very aggressive cellulose to ethanol resource program underway, in part because they already have some 

cellulose already coming into their facilities. 

And if you are looking for a time table, I think that you will see 

the commercialization of ethanol from cellulose in the fiber that exists in the corn kernel probably happening first, and it could be as 

early as this year, when that technology might be commercialized. 

There are any number of companies that are looking at different 

technologies, whether it’s corn stove or municipal solid waste, or 

switchgrass. 

And there are technologies that range from gasification to enzymatic conversion to acid hydrolysis, all of which have received 

funding from the Department of Energy recently, to move the 

projects forward. And while some cynics will tell you that cellulose 

to ethanol is still a long ways away, I believe that the time table 


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is far sooner then conventional wisdom would suggest, and perhaps 

as much as 18 or 24 months, when you add commercial production 

of cellulosic ethanol. 

I cannot tell you which technology, I cannot tell you which feedstock, but as the industry has grown, as new capital has come in, 

as new intellectual capital has come in, and with all the focus that 

is being placed on cracking the Code to even produce ethanol from 

cellulose, I’m certain it’s going to happen really soon. 

Mr. WELLER. Well, the energy bill provided funding for that research. 

Mr. DINNEEN. It did. 

Mr. WELLER. And the institutions in my state are participating 

in that research. But from a tax policy standpoint, any further recommendations that you would recommend to further along the development of the cellulose ethanol—— 

Mr. DINNEEN. Well, not just because he is on the dais, but I 

think that the legislation that Congressman Pomeroy has introduced, that would make the tax incentives that exist for ethanol, 

and extending those and making them permanent, is going to allow 

the industry to continue to invest in these new technologies, and 

to continue to invest in new feedstocks. 

And I think that would be the most important thing to move this 

agenda forward. 

Mr. WELLER. Thank you. 

Chairman NEAL. I thank the gentleman. Mr. Pomeroy is recognized. 

Mr. POMEROY. Thank you very much, Mr. Chairman. I want to 

begin by thanking you for this hearing. As I said earlier, it’s been 

a long time since we had a discussion like this one, and it couldn’t 

come at a better time, trying to sort this all out. 

It’s basically been a hodge podge of renewable energy incentives 

in our tax codes to try and evaluate how they’re all working, and 

building a coherent rule, strategy. Thank you to this panel, because 

I think your testimony has been absolutely excellent. 

You see something very transforming in renewable energy from 

sources as diverse as wind to clean coal, and the ethanol. And 

closed loop systems, I believe, is just starting to really—we don’t 

know, but it is really transformative. 

I would like to just focus on wind for a moment, to discuss the 

extraordinary growth in capacity. You’re talking about a very serious power supply, you mentioned, being reduced now by wind. And 

a lot more coming up. Can you speak to that, please? 

Mr. STEVE. Certainly. Wind is growing fast, but we have to 

admit we’re still less than 1 percent of the power generated in this 

country. We think we can do a heck of a lot more than that. And 

again, I think—— 

Mr. POMEROY. What do you think you can do? 

Mr. STEVE. We think we can do something approaching 20 percent of the power in this country, given the tools, given the incentives. And those incentives are—like I keep saying—long-term extension of this credit. Because what we have seen over time—we 

have been very appreciative of every extension of the production 

tax credit that this Congress has passed, very appreciative, howVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00079 Fmt 6633 Sfmt 6602 E:\HR\OC\48112.XXX 48112

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ever, they have been in short durations. They have been 1 year, 

one-and-a-half years. 

And what we have said to folks is, ‘‘Give us at least 5 years, 

something on the order of 10 years. Two years plus 2 years plus 

1 year does not equal 5 years, because of the boom and bust.’’ It 

is—— 

Mr. POMEROY. I think the extenders—prior Congresses actually 

allowed the expiration, and totally disrupted from top to bottom—— 

Mr. STEVE. Right. 

Mr. POMEROY. In Grand Forks, North Dakota, the end of 2003 

they had 25—— 

Mr. STEVE. Exactly. 

Mr. POMEROY [continuing]. Because of the expiration—— 

Mr. STEVE. Yes, and that’s exactly what happens with an onagain, off-again policy. And this tortures the books of companies in 

North Dakota and Shreveport, Louisiana, and elsewhere, is that 

they have literally got to lay people off. And you don’t get those 

people back if those good-paying jobs—— 

Mr. POMEROY. You think the technologies that—— 

Mr. STEVE. Definitely. 

Mr. POMEROY. Very well. The question I had on ethanol has 

largely been asked, Mr. Dinneen, but there is a lot of skepticism 

about how quickly we can move—we can bring cellulosic ethanol 

into some dimension of ethanol production in our country. Would 

you care to speak to that? 

Mr. DINNEEN. Sure. There was skepticism in the summer of 

2005, when the energy bill was being passed, and people said, ‘‘Oh, 

there is no way in the world that the ethanol industry is going to 

be able to produce 7.5 billion gallons of ethanol by 2012. That’s way 

too much.’’ And I think the marketplace has gotten the signal that 

this is real, and this is the place to invest. We are going to hit that 

7.5 billion gallon target not in 2012, but probably by July of 2007. 

I mean, that’s how fast the marketplace has responded. 

So, I think when you give the proper signal, the investors are 

anxious to get in. They just want to make sure that there is going 

to be a market, and it’s going to be competitive, and this is the 

place to invest. 

Mr. POMEROY. We are not as far along as Iowa or Minnesota 

in the ethanol capacity, but we now have plants under construction—I’ve been to the groundbreakings—that are being built right 

this minute that will increase our ethanol production tenfold, and 

we’re probably not done yet. I think that’s an example of what’s 

coming across the Midwest. It’s unbelievable. 

Coal. You know, we’ve got an awful lot of coal resource. You’re 

not asking for tax credits, you’re asking for up front grants on technology research? 

Ms. FRENCH. What we’re asking for is incentives to invest— 

both technology development and tax incentives to invest in the 

massive amount of research required if we want to limit and control carbon from coal-fired power plants. 

Mr. POMEROY. Sequestration is a principle strategy? 

Ms. FRENCH. There are two aspects. One is carbon capture, 

which in an air-based system means you have to separate out the 


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carbon from the nitrogen, and the second is carbon storage. Sequestration is the same. 

Mr. POMEROY. Jim McDermott mentioned that municipals 

don’t benefit from tax credits. We tried to do a clean renewable energy bond alternative. Is that a prototype that we ought to continue 

to use to get rural electric coops and municipals—non-taxable systems into the—I see my time is expired, Mr. Chairman, so I—— 

Chairman NEAL. Proceed, proceed. 

Mr. POMEROY. I have no more questions, but I would sure like 

to—— 

Chairman NEAL. That’s fine. 

Mr. STEVE. If I can give an answer to that one, from a wind perspective, yes. That works. And we need to see more money available for those type of efforts by the public power entities, because 

they do not have—they cannot make access to the Production Tax 

Credit. This is kind of a—the flip side of the Production Tax Credit. 

Chairman NEAL. I thank the gentleman. The gentleman from 

New York, Mr. Crowley, is recognized to inquire. 

Mr. CROWLEY. Thank you, Mr. Chairman. I appreciate very 

much your extending me the courtesy of—not being a Member of 

the Subcommittee—being here today. And thank you, also, for 

opening this hearing today. I think it’s one of the most important 

issues facing our Nation, in terms of reliance upon fossil fuels and 

especially parts of the world that we rely upon them from, and our 

dependance upon them. 

So, as we move toward weaning us off of—as the President referred to—fossil fuel, I appreciate all the work of the people who 

are engaged and have been for some time now. 

And my question is to fuel cell technology development, that 

technology, and solar energy as well. I represent parts of Queens 

and the Bronx in New York, and I have the distinction of representing a studio where the—which has green groups in it. I had 

the opportunity to tour the facility. It’s on old building, but on top 

of that building they have plants growing, and it’s a big source of 

energy, substantially, with that green roof. 

Also, in the Bronx portion of my district there was a new housing 

Committee that is being developed called ‘‘Villa Verde,’’ supported 

by the Bloomberg Administration, it is providing more housing in 

the city, and is also environmentally friendly. And I welcome that. 

Now, at the Federal level, an issue I have been looking into is 

the of the tax law for fuel cells installed in non-residential buildings, the same tax treatment as commercial solar installations. 

And I understand that fuel cell technology has not taken off as it 

could, due to certain caps, as I have been told, certain caps and 

limitations within the Tax Code. 

I was wondering your thoughts on both the tax parity for fuel 

cells with solar, and possibly a move toward changing the current 

tax law to extend the 30 percent fuel cell investment tax credit for 

an additional 5 years—at least 5 years—with a provision that 

would strike the $1,000 per kilowatt cap for the purpose of the tax 

credit, applicable solely to commercial fuel cell installations, and 

eliminating the cap, or increasing the cap, to $3,000 per kilowatt. 

What are your thoughts on this, and the overall issue of using the 

Tax Code to promote technology parity? 


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Mr. ROSE. I will start, if—Mr. Congressman. The fuel cell council’s number one priority is the certainty that a long-term extension 

gives us. And the—that’s the consensus view of our industry. 

That said, as I mentioned in my testimony, there are some Members of the fuel cell family who are not able to get access to markets nationwide, except in a few states where there are additional, 

rather aggressive support programs. And these companies say that 

an increase in the cap as much as $3,000 would be of substantial 

benefit to them, and accelerate their deployment. 

But the—so at least as far as the official view of the council is, 

if we had to choose between the lower amount and the longer term 

and the higher amount and the shorter term, we would prefer the 

lower amount and the longer term. Ideally, we would prefer the 

higher amount and the longer term, obviously, and I guess that 

goes without saying, Mr. Chairman. But—and I hope that answers 

your question. I think, you know, some of our Members are—feel $1,000 is 

enough. Some of our Members feel that it is not, and that we need 

additional support. And some of our Members are not there yet in 

terms of product, and they don’t know yet what the right level is. 

So, I think the one thing that helps the family of technologies the 

most, given what we can see today, is the certainty that the longer 

term credit can give us, and then perhaps we can talk about the 

appropriate level, and talk in a little more detail about how some 

of the companies are able to—what limitations it imposes on some 

of the companies. 

Mr. RESCH. I will just provide just a very short response. I actually put this picture up. It’s North Bergen, New Jersey. It’s not 

quite your district, but it does show—this is the second largest 

market for solar in the country, behind California. So New Jersey 

has prioritized the use in California, because of the grid instability, 

and the fact they can’t build new power plants, it’s just too congested. Same thing in Connecticut, actually, a very, very rich program starting to develop there. And then, Long Island, in fact, is 

the third largest market, and New York, the entire state. 

The question you raise is a very good one, which is the proper 

size and structure of the tax credit. And on the PV side, we’re actually, in H.R. 550, looking to modify the tax credit from a cost-based 

structure to a capacity-based structure, similar to the fuel cell tax 

credit. And the reason why? That’s a more efficient tax credit. It 

incentivizes lower-cost systems, and encourages competition to 

drive down costs. 

And originally, in the energy bill, that 30 percent tax credit was 

created, and that was great. It was good recognition. But we have 

worked with economists, we have worked with experts to say, 

‘‘Okay, what is a tax structure that, within a timeframe of 8 or 10 

years, is going to drive down the cost of solar so we don’t need a 

tax credit?’’ 

We are not looking for permanency, we are looking for a duration 

that we know is going to deliver results as we scale up manufacturing, create jobs, drive down costs, so that solar becomes cost 

competitive at the retail level for—in every part of the country. 

And so, the structure for fuel cells, in going up to $3,000 per kilowatt probably makes sense, because that’s the structure we are cerVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00082 Fmt 6633 Sfmt 6602 E:\HR\OC\48112.XXX 48112

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tainly turning to, in particularly, with basically a $1,500 per halfkilowatt structure. So we would certainly support that. We think 

it’s a more efficient type of tax policy. 

Mr. CROWLEY. Thank you. 

Mr. STEVE. Let me just add very briefly from a wind perspective, a smaller portion of our industry is a small wind turbine that 

you use to power your home or farm, going for the exact same market as is the technology we have just been talking about with the 

exact same treatment. There is currently no tax treatment for purchases of small wind turbines. We’re looking at the same thing. 

Mr. CROWLEY. Thank you. Thank you, Mr. Chairman. 

Chairman NEAL. I thank the gentleman. The gentleman from 

California, Mr. Nunes. 

Mr. NUNES. Thank you, Mr. Chairman. It is a pleasure to be 

here. 

I just want to make sure that we clarify some of the things that 

have been said today. The Energy Policy Act of 2005 invested $9 

billion into nearly all of your industries—I think every one of your 

industries—and it was the largest investment in the history of the 

United States into renewable energy. 

And I just want to see, is there anyone here at the table that 

thought the Energy Policy Act that passed with very broad, bipartisan support, anyone here, do they oppose the Energy Policy Act 

of 2005, or do you think it was good for the industry? 

Mr. GAWELL. I support it. 

Mr. NUNES. Everyone down the line? I know some of you mentioned in your testimony—— 

Mr. GAWELL. One observation, and it comes back to a couple of 

comments. You asked us what we could do about things. Well, first 

of all, at least from the geothermal perspective, you could start implementing—or the administration could start implementing—all of 

the provisions they haven’t done rules for. I think we all support 

it, and we would like to see the Energy Policy Act really implemented now. 

Mr. NUNES. Sure. 

Mr. ROSE. And may I also comment? I think it’s an important 

point that you really asked two different questions. One, I think we 

all support the Energy Policy Act, but that doesn’t necessarily 

mean that it has been fully effective for my industry, at least. 

One of the issues that came up was this issue of Federal purchases of fuel cell units and other advanced energy technologies, 

and that has not yet been funded by the government, nor have appropriations been requested by the President. We are working with 

the Department of Energy now, we’re in the third year of those discussions. 

And that—you know, in my industry, if you want to help us buy 

some units—and I think that is a critical piece of—one of the reasons why we’re here, is we’re here helping the private sector buy 

units, and the Federal government can also step up. And so I’m 

sorry for that elaborate answer, but—— 

Mr. NUNES. I think all of us here, you know, including myself, 

have ways, you know, that we want to improve, you know, renewable energy in this country. I have had a bill, and I think everyone 


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here in the Ways and Means Committee has a bill that they have 

worked on in the past. 

But I just want to make sure that everyone knows that in 2005, 

the Energy Policy Act was—it did open the door. We know it hasn’t 

been fully implemented, but it’s working. And in large part, I think 

it’s been good for our economy. 

I want to ask Mr. Dinneen a question. I have an interest in cellulosic ethanol, and I know that you are very familiar with that subject. But there is this ongoing issue, is it really viable. And I know 

that I read, at least in some news reports, that the government just 

gave out some grants for cellulosic ethanol startups. 

Can you tell the Committee at all, give a date or time that we 

can actually expect to go out and visit or see cellulosic ethanol 

being produced? Do you have a timeframe, or a time line that we 

can expect to see that? 

Mr. DINNEEN. Well, I tried to talk a little bit about that earlier. 

I do think that you’re going to see commercial sale of ethanol production soon, likely from fiber, first. There is a plant—— 

Mr. NUNES. Like straw? 

Mr. DINNEEN. The fiber I’m talking about is from the corn kernel itself, the corn fiber. 

Mr. NUNES. That’s what you were talking—— 

Mr. DINNEEN. Because it’s already coming into the facility. And 

even breaking that down—that’s cellulose and breaking that down 

has been a challenge. But the technology is very close to being commercialized. 

Because of the Energy Policy Act you have been talking about, 

which provided some grant funds, DOE about 3 weeks ago did announce 6 different grants, 382 million, to 6 different companies in 

6 different parts of the country, using 6 different feed stocks. And 

I can’t tell you which one is going to succeed first. 

I do know this summer there will be a groundbreaking at a cellulosic ethanol in Emmitsburg. A comment about needing to make 

sure that the Energy Policy Act is, indeed, fully implemented. 

There are a couple of those cellulosic facilities that are still looking 

for the loan guaranteed funds to be appropriated, in order to move 

forward with their plans. 

But there are companies that are looking to break ground as 

soon as loan guarantees are secured on a wheat straw ethanol 

plant in Idaho, on a waste-to-ethanol plant in Los Angeles, on a 

woody biomass cellulose plant in Georgia, on a waste plant in New 

York State. So we are right there. We are on the cusp, and I do 

believe within—I hate to try to give a timeframe, because inevitably you’re wrong, but you know, within two years, three years, 

there is going to be commercial production of cellulosic ethanol in 

a significant way. 

Mr. NUNES. Well, I think that is very exciting, and I am glad 

you are here before the Committee, because I think we really need 

to—the sooner that can happen, I think the better, and people will 

start to believe in cellulosic ethanol. 

So, thank you all for being here, for your testimony, and thank 

you, Mr. Chairman. 

Chairman NEAL. Thank you. Mr. Steve, you highlighted my argument that green was the new red, white, and blue, by testifying 


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that the torch of the Statue of Liberty was lit by wind power. 

Thank you for reinforcing that position. 

Can you tell the Committee what are the most expensive aspects 

of producing energy which causes your industry to need incentives? 

Mr. STEVE. Yes, certainly. The biggest one, I would have to say, 

is access to electric power transmissionlines. There are areas of the 

country where you can produce vast amounts of wind power. And 

what we’re looking for particularly in the Dakotas, areas of Texas 

as well—really, throughout the whole kind of heartland of the 

country—you don’t have a big enough extension cord in order to get 

that power out of there to where it’s needed in, say, Chicago, in the 

population centers. 

So, we can produce the power, but the country really needs to invest in a 21st century transmission system, not just for wind, but 

for all resources, for all renewal resources, for coal, for, you know, 

any kind of electric generation source possible. That’s the biggest 

cost right now. 

Again, I keep hammering on this point. Long-term credit at full 

value is going to help us bring this—— 

Chairman NEAL. Thank you. I would like to recognize Mr. 

Weller, if he would like to do a follow-up question. 

Mr. WELLER. Thank you, Mr. Chairman. And, you know, Mr. 

Carlson, you use biomass generation of electricity, and we have 

talked about cellulosic ethanol. Let me just ask what might be an 

obvious question. Is there plenty of biomass to go around? 

We are going to be using biomass for production of ethanol, as 

well as electric. Is there going to be a point where we’re going to 

be—— 

Mr. CARLSON. Well, there have been several studies on that, 

most recently by the 25x’25, which I’m on the steering Committee, 

which I have referenced a couple of times. And they show that 

there are staggering amounts of biomass, and it could be very— 

whether they be in dedicated energy crops, or whether we grow 

things on conservation reserve program lands, you know, which is 

the more controversial. 

And then, of course, the one that our industry relies on, to a 

large extent, and could make the largest contribution, and that is 

the health of nation’s public forests, restoring that health by removing some of the excess materials that are out there that fuel 

these catastrophic wildfires that you all read about in the newspapers every summer, and they get larger every year. And so, there 

is a staggering amount of cellulose material that could be produced 

in the U.S. 

I think the goal of, you know, 25 percent of the nation’s total energy, primarily driven, again, by biomass resource is, indeed, obtainable. 

The nice part about the work that Mr. Dinneen does in renewable fuels, versus the work that I do in biomass power, is that 

there is compatibility between those two, where those facilities that 

produce renewable fuels also use a large amount of energy internally, and that is where they can provide—combined heat and 

power, both electricity and steam, that they need for those processes. 


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And they may—the breaking down of the cellulose also frees up 

the component which basically makes the corn stalk stand up, and 

basically then—if that’s a more difficult task, for them to break 

that down, then that could become a fuel for our industry. So all 

of these work in tandem, and I think all of this resource will be 

used completely. 

And I think that there is a staggering potential for this in the 

U.S. I mean, there are temporary dislocations, as have been mentioned, like corn ethanol growing so rapidly that the price has gone 

through the roof. But on a more long-term basis, I mean, I think 

there is almost an unlimited capability. The U.S. is—there is a tremendous amount of biomass that goes to waste—— 

Mr. WELLER. There is a—in my district —— 

Mr. CARLSON. Yes. That’s right. I mean—— 

Mr. WELLER [continuing]. That produces watermelons. I’m told 

that they throw away 800 million pounds of watermelons a year. 

There is never a short on watermelons. 

Mr. CARLSON. Where I am from in California, they actually 

grow watermelons just for the seeds. Now, there is a waste. 

Mr. WELLER. But the 25x’25 concept, can we achieve a 25 percent portfolio of renewable sources, you know, alternative sources, 

for our nationwide energy consumption prior to 2025? Do we need 

the next 18 years to achieve that goal, or can it be done more 

quickly? 

Mr. CARLSON. Well, if you look at the recommendations of 

25x’25, it started with the incentives that are there, and they created some new programs to enhance those. And of course—the answer is of course. We could achieve it before 2025 if we really wanted to put either the market drivers in place—some of this has been 

talked about today, in terms of other taxes. And you can do this 

all with incentives, obviously. 

And—but it’s so difficult. They are—it’s very expensive to increase the incentives, obviously. But you don’t value the things 

that you have saved. You don’t value the national security, the benefits. If you would, you would find that these incentives are very 

well paid for, justified, to give us by 2020 or 2018, because, you 

know, the—it’s—I mean, there is still a lot of entrepreneurs out 

there that are willing to put their capital into a market that they 

know is going to be there. 

Mr. WELLER. Thank you. Thank you, Chairman. 

Chairman NEAL. I want to thank the panelists today. I thought 

your testimony was exceptional. And it is going to be very helpful, 

as we move forward, in crafting our legislation. 

I also think it’s important to acknowledge the number of Members who attended today, and Members who are not on the Subcommittee, in fact, showed up. I think that highlights the intense 

level of interest in energy issues, as they relate to the national security. 

So, please note that there may be some written follow-up questions from Members. And without objection, the record will remain 

open for these questions and answers. If there are no further comments, I wish to adjourn this meeting and say thanks to all. 

[Whereupon, at 4:50 p.m., the Subcommittee was adjourned.] 

[Submissions for the Record follow:] 


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1http://buildingsdatabook.eere.energy.gov/docs/1.1.3.pdf 

2http://www.architecture2030.com 

Statement of American Institute of Architects 

The American Institute of Architects, the voice of the architectural profession and 

the resource to its 80,000 members in service to society, strongly supports governmental policies, programs, and incentives that encourage energy conservation—especially as they relate to the built environment. We applaud the efforts of Chairman 

Neal and the Members of the subcommittee for holding this important hearing on 

how tax incentives can increase the development of alternative energy technologies 

and improve energy efficiency. 

In order to significantly improve energy efficiency in the United States, we must 

make a serious commitment to designing and constructing more energy efficient 

buildings. The building sector is one of the largest consumers of energy in our nation and is responsible for a massive share of the electricity used. One way to spur 

the development of energy efficient buildings, and thus reducing the amount of energy the building sector consumes, is through tax incentives. Specifically, extending 

and enlarging the Energy Efficient Commercial Buildings Tax Deduction (Public 

Law 109–58, § 1331) will provide the necessary incentives to spur the design and 

construction of more energy efficient buildings in the United States. 

According to the Department of Energy’s Energy Information Administration, the 

building sector accounts for 39 percent of total U.S. energy consumption, more than 

both the transportation and industry sectors.1 The same report found that buildings 

are responsible for 71 percent of U.S. electricity consumption. Therefore, if we in 

the United States want to be serious about energy efficiency, buildings must become 

a significant part of the discussion. 

Over the next 30 years, the character of the built environment will change dramatically. Currently, U.S. building stock sits at 300 billion square feet. Experts predict that between now and 2035, 52 billion square feet will be demolished, 150 billion square feet will be remodeled, and another 150 billion square feet will be newly 

constructed.2 Because buildings are such a major consumer of energy, the AIA believes that if Congress and our nation want to significantly improve energy efficiency, addressing energy consumption in the next generation of buildings is a vital 

endeavor. Providing incentives for designing and constructing energy efficient buildings and for installing energy efficient systems in them is an effective way for the 

Federal Government to promote a sustainable future. 

Federal tax incentives designed to spur the construction of energy efficient buildings are currently in place, but in order for these incentives to be utilized to their 

potential, some changes are needed. Specifically, within the Energy Policy Act of 

2005 (Public Law 109–58), Congress approved a provision that created a tax deduction for the design and construction of commercial buildings that meet a high standard of energy efficiency. 

Known as the Energy Efficient Commercial Buildings Tax Deduction, this incentive allows building owners to claim a tax deduction of up to $1.80 per square foot 

of building area for the installation of systems that reduce the total energy and 

power costs by 50 percent or more when compared to a specific industry standard 

for energy efficiency (ASHRAE 90.1). The building systems eligible to secure the tax 

deduction include interior lighting systems; heating, cooling, ventilation, and hot 

water systems; and building envelope systems. 

Some energy efficient systems are more expensive to design, build, and install 

than their traditional counterparts. Thus the initial increased capital costs often dissuade owners from installing these systems. The Energy Efficient Commercial 

Buildings Tax Deduction addresses this situation and provides building owners with 

the financial incentive to build in an energy efficient manner. 

The AIA strongly supported the enactment of this tax deduction; however in order 

to ensure that it can continue to be used to encourage the construction of energy 

efficient buildings, the deduction must be extended and enlarged. The current deduction can only be claimed for buildings placed into service by December 31, 2008. 

As it often takes years to move from the building’s initial design stage to final completion, many buildings on drawing boards today will not be placed into service until 

long after the deduction has expired and therefore are unable to reap the intended 

tax benefit for installing energy efficient systems. Therefore, the AIA encourages 

Congress to extend the Energy Efficient Commercial Buildings Tax Deduction for 

a sufficiently long and predictable period to allow designers of future structures to 

factor it into their financial calculus. 

Legislation has been introduced in both the House and the Senate that will extend the Energy Efficient Commercial Buildings Tax Deduction. H.R. 539, The 


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Buildings for the 21st Century Act, will extend the tax deduction until 2013. This 

bill, introduced by Rep. Allyson Schwartz, has attracted 136 bi-partisan cosponsors 

and if adopted, would ensure that any buildings that meet the efficiency requirements under the deduction and are placed into service by 2013 will be able to claim 

the deduction. In an effort to further increase the deduction’s effectiveness, H.R. 539 

increases the deduction from the current $1.80 per square foot to 2.25 per square 

foot. The AIA strongly supports this bill because exceeding ASHRAE 90.1 by 50% 

is a significant leap in energy efficiency and, in most cases, will require capital expenditures in excess of $1.80 per square foot to reach it. 

We applaud the Subcommittee for addressing this issue and urge it to extend and 

deepen the Energy Efficient Commercial Buildings Tax Deduction. 

f 

Statement of Andrew J. Skok, Fuel Cell Power Association 

The Fuel Cell Power Association (FCPA)appreciates the opportunity to submit 

this statement in support of extending and expanding the current tax credits available for fuel cells. The FCPA consists of companies involved in stationary applications of fuel cells for electric power plants on both a commercial and research and 

development level. 

Fuel cells are ultra-clean systems that produce power at very high efficiencies at 

scales ranging from a few kilowatts per installation to multi-megawatt power 

plants. They are applicable to both distributed generation and central station power 

and can also operate in a cogeneration mode to utilize waste heat from the system. 

Fuel cells can also operate on a variety of fuels including natural gas, gasified coal, 

digester gases from waste treatment facilities, other biofuels, and hydrogen. Their 

versatility, efficient operation, and environmental characteristics have made them 

a very desirable alternative to current fossil fuel fired power systems and have resulted in considerable support for their accelerated development through research 

and development programs of the Department of Energy. 

Considerable progress has been made in fuel cell development over the years and 

several products are at a commercial threshold. As with many new technologies 

such commercialization has been inhibited because of high initial cost of products 

and the resulting low volume of sales. Large investments in production capacity are 

unlikely without incentives to drive down the cost of the initial commercially offered 

systems so that significant volumes of fuel cell sales may reduce unit costs for the 

systems. 

This Committee has recognized both the environmental and efficiency benefits of 

fuel cells as well as the need for incentives to accelerate their commercial introduction through enactment of the Section 48 fuel cell investment tax credit included 

in the 2005 Energy Bill. The FCPA appreciates the Committee’s action in this regard. In combination with State-based incentives these incentives have helped 

FCPA members complete agreements for the installation of fuel cells in a handful 

of states that offer such incentives, particularly California. However, such installations are only viable in a small number of states and only when very high cost 

power is the competition. In order to compete nationally in the short term, fuel cells 

need to receive additional incentives. We believe, based on incentive levels in California, that an investment tax credit of $3,000 per kilowatt is necessary. Such a 

credit will encourage a comprehensive base of fuel cell installations in much broader 

applications than are currently financially viable. It will provide a significant increase in the volume of fuel cell sales, which in turn will encourage larger manufacturing capacity. These actions will result in significant reductions in fuel cell manufacturing costs making the technology viable in more markets. 

In addition to an increase of the ITC to 3,000 per kilowatt, the FCPA joins the 

U.S. Fuel Cell Council in requesting that the provision be extended for eight more 

years. Such an extension will allow for a stable industry to be formed, as well as 

encourage the introduction of new, even higher efficiency, technologies now under 

development by the industry. It will also encourage increases in production capacity 

and construction of facilities related to new fuel cell technologies and foster the viability of markets for the resultant products. 

Finally, the FCPA understands that currently if an entity opts to take advantage 

of the ITC it may not utilize the Production Tax Credit (PTC) available for electricity produced using biofuels. Removal of the prohibition on using both credits 

would make fuel cell use in renewable applications much more financially viable, 

particularly where competing electricity prices are low. 


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The fuel cell industry is in a position to provide very-high efficiency power in both 

distributed and central station power applications with a minimum of environmental emissions. The technology has received significant support from the Federal 

government over a considerable period of time and is now at the threshold of commercial viability. Continuing and improving the tax incentives originally provided 

by this Committee is in the interest of this nation as it strives to reduce the environmental impact of electricity generating technologies and reduce overall energy 

use and dependence on foreign sources of energy. Therefore, the FCPA recommends 

that: 

• The ITC be increased to $3,000 per kilowatt, 

• The ITC be extended for 8 years, and 

• Fuel cell users be permitted to claim both the ITC and the renewable energy 

PTC for electricity from biomass sources. 

f 

Statement of Association for Commuter Transportation 

The Association for Commuter Transportation (ACT) congratulates the House 

Ways & Means Committee for holding a series of committee hearings on energy and 

tax policy. Additionally, ACT would like to urge the Ways & Means Committee to 

hold additional hearings on this subject matter, specifically regarding tax policy & 

the demand side of energy consumption. 

As the Ways & Means committee considers policies to establish energy independence, it is important to consider not only the supply side of the equation, but also 

the demand side. Much of Congress’ focus to date has centered on the need for 

cleaner, more efficient energy supplies, i.e. hybrid automobiles, alternative fuels, 

ethanol, etc. While these are all certainly worthy causes, their benefits will diminish 

if the demand for energy continues to increase at the current rate. This is particularly relevant in the transportation sector. Increase vehicle miles traveled (VMT) 

has negated any increase in fuel efficiency rates over the past decade. Additionally, 

increased VMT leads to increased congestion which leads to an increase in fuel consumption. An energy bill will not be complete without taking aim at reducing VMT. 

ACT has developed a white paper (attached) which identifies 4 key strategies for 

reducing VMT, promote innovative solutions to congestion relief, engage employers 

in an effort to reduce congestion, improve the congestion mitigation and air quality 

program, and expand options for commuters. Within these four strategies are a 

number of recommendations and implied legislative remedies. While some of these 

recommendations lie outside of the jurisdiction of the ways and means committee, 

ACT has a number of recommendations it feels would improve an energy bill. 

• Create parity between the transit/vanpool and parking portions of IRC 132(f) 

(HR 1475); 

• Approve the Bike Commuter Act (HR 1498); 

• Resurrect the Investment Tax Credit established by the 1978 Energy Policy Act; 

• Provide tax credit for the purchase of equipment used for teleworking; 

• Tax Credit for Employers who subsidize their employees alternative commutes; 

among others. 

ACT developed this white paper and recommendations with budget realities in 

mind. Many of the recommendations come at no cost to the Federal government. 

These recommendations also provide cost effective results. 

For example, if the Investment Tax Credit for vanpools originally in the 1978 Energy Policy act were resurrected, it is estimated that vanpooling nationwide could 

triple over the course of several years. If the growth, as expected, were to occur, it 

would mean an additional 16,000 vanpools operating nationwide, leading to the conservation of hundreds of millions of gallons of gas each year. The 10-year cost to 

the Federal treasury would be roughly 50,000,000. Consider this when looking at 

other tax credits currently being discussed. The chart below compares the daily consumption of fuel for commutes to and from the work place. A typical vanpool is 3 

times more fuel efficient than 10 new hybrid autos, and 6x more fuel efficient than 

10 new autos. Plus, every vanpool placed into service reduces the number of peak 

hour autos in commute traffic by a factor of 10. 


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Fuel Efficiency of Single Occupant Autos vs. Hybrid Autos vs. Vanpools 

10 Peak Hr Autos 

@ 1.1 Avg. Occupants 

10 Peak Hr Hybrid 

Autos .........................

@ 1.1 Avg. Occupants 

1 Peak Hr 

Vanpool 

@ 11 Avg. Occupants 

Mileage per Gallon 22 mpg 43 mpg 13 mpg 

Daily Commute 50 miles 50 miles 50 miles 

Fuel Consumed/Vehicle 2.27 gallons/vehicle 1.16 gallons/vehicle 3.85 gallons/vehicle 

Total Fuel Consumed 22.7 gallons 

(10 autos) 

11.6 gallons 

(10 hybrid autos) 

3.85 gallons 

(1 vanpool) 

ACT is hopeful that it will be afforded an opportunity to share more of its views 

before the Ways & Means committee at a hearing dedicated to demand side energy 

tax policies and proposals. If you have any questions, please contact Jason 

Pavluchuk, ACT’s government relations liaison. 

Jon Martz 

President 

Nicholas Ramfos 

Vice President 

Lynn Osborn 

Secretary 

Brian Shaw 

Treasurer 

Elizabeth Stutts 

Immediate Past President 

Mark Wright 

f 

Executive Director 

Statement of Avista Corporation 

We are writing to urge you to (1) extend the 30 percent Investment Tax Credit 

(ITC) for solar energy property for a minimum of eight years; and (2) remove the 

current ‘exclusion’ in Internal Revenue Code section 48 that prevents electric utilities from claiming the energy ITC. 

The 30 percent commercial solar property ITC, which is scheduled to expire on 

December 31, 2008, provides an incentive for development of commercial solar 

projects that has spurred new growth in U.S. solar power generation. In order to 

maintain this potential, it is critical that Congress provide a long-term extension of 

the 30 percent commercial solar ITC. 

In addition, an obvious way to support large-scale development of solar power in 

this country is allow the sector that may have the most to offer toward this goal— 

electric utilities—to claim the same tax incentive that other businesses can. Granting electric utilities the ability to take advantage of the solar investment tax credit 

by removing the section 48 electric utility exclusion will encourage broader and 

more efficient development of solar power, resulting in more use of solar power and 

lower cost to the consumer. 

Many in the electric utility industry are increasingly hopeful and optimistic about 

the long term potential of solar power as an important contributor to our nation’s 

energy generation portfolio. A long-term extension of the existing commercial solar 

ITC for eight years or more and removal of the section 48 electric utility exclusion 

will provide the market stability necessary in the solar sector to encourage longterm large-scale solar investments, including by utilities. These changes would help 

underpin what we hope will be dramatic growth in solar power generation in this 

country. 

We appreciate your support for the long-term extension of the commercial solar 

ITC and the removal of the section 48 electric utility exclusion. 

f 


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Statement of Blue Mountain Energy 

Thank you for the opportunity to submit testimony regarding energy efficiency tax 

credits and inclusion in upcoming legislation. My name is Paula Young representing 

Blue Mountain Energy (BME). BME is a consulting company who provides professional scientific and technical expertise for research and development projects. We 

are working in conjunction with our local distribution company, Southwest Gas Corporation, to develop and demonstrate gas-fired heat pumps in the Southwest United 

States. 

We are pleased that H.R. 1385 and S.822, the EXTEND Act includes investment 

tax credits for both residential and commercial gas fired heat pump purchases. We 

have worked extensively with the Natural Resources Defense Council, the American 

Council for an Energy Efficient Economy and the Alliance to Save Energy to ensure 

that these credits are for only very high efficiency equipment and that they move 

us towards a cleaner and more efficient energy future. 

Tax credits for gas fired heat pump technology is included in the EXTEND act 

in Sections 102 (for Residential equipment) and in 204 (for Commercial equipment). 

The credit would be only for those systems with a coefficient of performance of at 

least 1.1. Two types of small gas-fired equipment are expected to be eligible for the 

credit. 

1) Absorption Heat Pumps use a refrigerant, absorbent and heat to create a cooling effect. Simply put, the cooling effect is accomplished with the removal of heat 

through evaporation of a fluid (refrigerant) at low pressure and the rejection of heat 

through the condensation of a fluid (refrigerant) at a higher pressure. In the chiller 

unit, heat provided by a gas burner boils the ammonia out of the water and condenses it in an outdoor coil. The ammonia is then evaporated at low pressure, cooling a circulating water system. The chilled water circulates through the area to be 

cooled via a piping system eliminating the need for ductwork and making the system well suited to a variety of applications. The ammonia is then reabsorbed into 

the water (the absorption process) and the cycle repeats. In heat pumping mode, the 

cycle is reversed. 

2) Natural Gas Engine Driven Heat Pumps utilize proven, built-for-purpose natural gas engines, robust compressors, and standard air conditioning components. In 

heating mode, the technology is able to take advantage of waste heat from the engine for extremely high efficiencies. The technology runs very much like electric 

equipment; however, the engine running the compressors operates on natural gas 

directly instead of electricity. 

Gas-Fired cooling (air conditioning) is currently used in approximately 3% of 

buildings nationwide with all of that being in the large tonnage arena (medium size 

to large size commercial buildings). There are only a couple manufacturers building 

packaged gas-equipment for the small commercial and residential market with sales 

being in the less-than 500 per year range. The greatest advantage of increased national use of natural gas-fired cooling is the more efficient use of our natural gas 

and the reduction in peak electricity loads in the hot summer months. Gas heat 

pumping is entirely new technology that is significantly more energy efficient than 

current gas heating technologies. 

Societal Benefits of the Technology that warrant the credit 

• Energy Efficiency: These technologies are at least 50% more efficient in heating 

mode than existing natural gas heating. In cooling mode, there is little to compare to except incumbent technology, which runs on electricity; however, overall 

use of natural gas is reduced when it is used directly at the unit. Additionally, 

in cooling mode, the COPs are better than those currently being achieved by 

large sized gas cooling technology. 

• Conservation of our nation’s natural resources: Electric generation power plants 

are generally less than 50% efficient, with many plants having significantly 

lower efficiencies. The direct use of natural gas will can achieve a two to threefold increase in efficiency. Additionally, combined cycle power plants use approximately one third of a gallon of water to produce one kilowatt-hour of electricity, whereas these technologies require either no water (in the case of the 

engine technology) or very little (in the case of absorption). 

• Reduction of Peak Electricity Demand: Summer air conditioning has lead to 

higher peak demand in the summer increasing electric rates substantially. In 

addition, during the summer, the electric peaking plants tend to generate both 

the most inefficient and the most expensive power. Increasing direct use of natural gas in the summertime will significantly reduce this peak demand for electricity and even out the demand for natural gas. 


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• Cost savings for consumers: Utilizing natural gas directly at the gas heat pump 

will provide meaningful year round energy cost savings. Thus, the lifecycle costs 

are lower when installing gas fired equipment. Natural gas heat pumps use natural gas during the ‘‘off peak’’ summer months, which in turn, reduces the customers overall electric demand charges by significantly reducing their electrical 

requirements during the times when electrical prices are the highest. A natural 

gas heat pump is also a more efficient heating system; consequently, the 

amount of natural gas used in the winter months is less than a conventional 

gas furnace, providing even more energy savings and conservation benefits. Additionally, when manufacturing volumes increase, first cost could be on par with 

the incumbent technologies. • Low Environmental Impact: The direct use of natural gas provides a two to 

three-fold increase in efficiency. This increase in efficiency saves both natural 

gas and water over the long run. The technologies also do not use harmful refrigerants. • National Security: Natural gas is primarily a domestic resource and our overall 

energy security is enhanced through the reliance of this abundant domestic energy source. The natural gas industry’s underground pipeline delivery system 

is very efficient and reliable and not as vulnerable to attack or natural disasters 

as electricity delivery systems. • Fuel Diversity: Consumers currently do not have fuel choice in their air conditioning needs. These products would be the first to offer that choice • Consumer benefits: Unlike most electric technology, the systems can have multiple zones for comfort control, they are very quiet and safe to operate with 

minimal moving parts 

We urge inclusion of the equipment provisions under sections 102 and 204 of the 

EXTEND act by included in any energy tax legislation moving through the congressional process this year. Thank you for the opportunity to comment. 

f 

Statement of Commuter Check Services Corporation, Watertown, 

Massachusetts 

As the House Ways and Means Committee analyzes ways in which the tax code 

can be used to promote alternative energy, Commuter Check Services would like to 

take the opportunity to urge the Committee to also be mindful of those actions and 

initiatives that Congress can take which will reduce demand energy consumption. 

One of those initiatives is to promote usage of the transit portion of the transportation fringe benefit, specifically, report HR 1475, introduced by Congressman 

McGovern (D–MA) which would create parity between the parking and transit portions of the commute benefit. 

Issue. Transit Benefits are authorized by Section 132(f) of the Internal Revenue 

Code, which allows for pre-tax salary deductions for transit and parking or employer 

subsidized transit or parking. The transit provisions include vanpool services. The 

current tax-free limit for transit is 110 per month; the limit for parking is 215. The 

inequity discourages public transit use, encourages automobile commuting and consumption of gasoline, and the associated impacts on air quality, climate change and 

related concerns. 

History. The transit benefit was first ‘‘codified’’ in 1984 and limited to 15 per 

month. Its popularity and consistent support by Congress has resulted in the benefit 

being increased and expanded as follows. 

1984: Legislation codifies transit benefits, $15 per month maximum (‘‘cap’’), limited to employer subsidy 

1991: IRS raises transit benefit cap to $21 

1992: Legislation raises cap to $60 per month 

1995: Inflation adjustment raises cap to $65 

1998: Legislation adds the employee-paid pre-tax payroll deduction option 

2002: Legislation raises the monthly maximum benefit cap to $100 

2005: Inflation adjustment raises cap to $105 

2007: Inflation adjustment raises cap to $110 

Participation. Employers of all sizes and types, in the public, private and nonprofit sectors, use the transit benefit, from the smallest employers to the largest private companies, as well as local and State governments and the U.S. Government. 

It is estimated that over 50,000 employers use transit benefit programs, which are 

operated by local transit agencies, regional planning agencies, private businesses 


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and chambers of commerce. It is estimated that over 1.5 million commuters now use 

the transit benefit, in every State of the country. 

Need for Increase. Use of the existing program has been strong, but the lack 

of parity for the transit and parking provisions limit the effectiveness of the transit 

benefit. The $215 limit for tax-free parking allows parking to be fully paid on a taxfree basis for all but a very small share of auto commuters. Numerous U.S. DOT 

and EPA studies have identified free parking as a major if not the single most important urban transportation problem. In contrast, the 110 cap for transit means 

that many transit riders in all of the major U.S. transit markets are unable to get 

their transit pass with tax free funds. Transit fares exceed 110 per month for transit 

operators in Boston, Chicago, New Jersey, New York, Philadelphia, San Francisco, 

Virginia, Maryland and elsewhere. The vast majority of all transit rides taken are 

in these cities. 

Impacts. Even with the lower tax-free limits for tax-free support of transit, numerous studies, including one performed by the National Academy of Science, have 

documented the effectiveness of the transit benefit in building transit use. The transit benefit is especially effective in building transit use because it focuses on the 

worksite, the destination for commuting trips. It is a cost-effective way to target tax 

support for to reduce peak period congestion and the associated environmental impacts. A summary of the many studies performed on the effectiveness of the transit 

benefit appears on the following page. 

Cost Offset. To offset the cost of creating parity, the tax-free limit of $215 per 

month for parking would be reduced to $200, and the cost-of-living adjustments included in Sec. 132(f) would be frozen in order to pay for the increase of the transit 

portion. 

Simple Elasticities 

Considerable data on the impacts of transit benefit programs is available, but the 

obvious and well-documented relationship between fare levels and ridership is the 

simplest confirmation. Decades of experience show that for every 10% increase in 

fares ridership falls by 3%. The reverse is also generally true; fare reductions build 

ridership by approximately 30% of the price reduction. Thus, if an employer benefit 

program reduces employee fares by 40%, the ridership growth would be expected to 

be 12%. As shown below, actual impacts appear to be greater, i.e., that employerbased tax incentives are more effective in building ridership than fare reductions 

are. This is likely because transit benefits are an incentive that focuses on the largest opportunity to build ridership—auto users. 

National U.S. Study (National Academy of Sciences, TCRP, 2005) 

‘‘Employer programs contribute 5 to 25% of total transit rides and 5 to 40% of 

revenues.’’ 

‘‘Transit ridership generally increases 10% or more at participating worksites.’’ 

‘‘More than half of the surveys reported an increase in transit riders between 10 

and 40%, and nearly one quarter reported increases of more than 60%. 

‘‘Two surveys (San Jose and Atlanta) suggest that transit ridership more than 

doubled after a transit benefits program was implemented.’’ 

Bay Area Study 

General: Transit subsidies generated an increase in transit commute trips of 25% 

in San Francisco and 48% in outlying areas. 

Apple Computer: Number of participants in transit program tripled when transit 

voucher program replaced pass program. 

Lawrence Livermore National Laboratory: ‘‘Use of transit rose 50% when we 

began offering Commuter Checks.’’ 

Hewlett Packard: Transit use rose 100% when the employer pass program was 

changed to a transit voucher program. 

Bay Area Rapid Transit District (BART): Employer programs serve over 60% of 

peak period employed riders (2006 study). 

Philadelphia Region 

35% of participating employees indicated they use transit more often than before 

they started using TransitCheks. 

8.5% were new users to transit. 

13.7% increased the total number of trips per week (2⁄3 from new users, 1⁄3 from 

added frequency). 

Average number of new trips per week = 6.6. 


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New York 

14% of TransitChek users said they did not use transit before receiving 

TransitChek. 

10% of TransitChek users reported increased transit use for commuting after receiving TransitChek. 

24% of TransitChek users reported increased transit use on weekends after receiving TransitChek. 

15% of TransitChek users reported increased transit use on weekday evenings 

after receiving TransitChek 

Accor Services USA 

f 

Statement of Environmental Power Corporation 

Good Morning, Mr. Chairman. I am Joe Cresci, the Chairman of the Board of Environmental Power Corporation. EPC was founded in 1982 and is headquartered in 

Portsmouth, New Hampshire. Since its founding, Environmental Power has developed only generating facilities powered by non-conventional fuels and renewable energy sources, including hydro-electric and waste coal-fired generation. 

The focus of my comments this morning is our subsidiary, Microgy, Inc., 

headquartered in Golden, Colorado. Microgy develops biogas systems, utilizing anaerobic digesters, which are very efficient at extracting methane-rich biogas from a 

combination of livestock manure and other organic and food industry wastes. To 

date, we have completed or announced projects in Wisconsin, California, Texas, and 

Nebraska. With appropriate public policy, we see large market opportunities in 

many other areas of the country, including large and small agricultural areas that 

are home to dairy and feed cattle farms as well as swine production areas. 

We refer to our biogas as RNG—Renewable Natural Gas. Our RNG is used to 

produce ‘‘green’’ pipeline-grade methane, thermal energy or electric power. Microgy, 

along with our Danish licensor, has significantly improved conventional anaerobic 

digestion technology, enabling us to generate RNG at volumes and costs that are 

commercially attractive. 

Although SEC regulations and competitive considerations do not permit me to discuss cost and pricing matters in detail, I can say that we believe our RNG will be 

competitively priced compared to projected prices for LNG imports. At the same 

time, our technology and manure handling processes also significantly reduce greenhouse emissions, improve water quality and dramatically reduce odors around animal operations. 

There are three areas where support from the government could allow this expanding technology to compete with the highly capitalized and government-subsidized existing energy infrastructures. 

1) First, a credit for the production of biogas from certain renewable feedstocks: 

this production tax credit should be on a parity with biodiesel from waste oil, which 

is the most comparable product for a renewable fuel already on the books. The credit also needs to be transferable under rules and regulations created by the Secretary 

of the Treasury. A tax credit which is not monetizable is significantly less valuable 

to a small, emerging industry which may not yet be turning a profit. 

2) Second, a counter-cyclical safety net program for biogas producers: this would 

be a payment first used to pay down loans and other obligations from the building 

of a facility if the average daily price of natural gas fell below a predetermined price 

for a prescribed period. 

3) Third, transportation incentives for smaller operators: these would help 

incentivize multi-farm collection and transportation of qualified energy feedstocks 

from smaller livestock operations to a qualified facility or for the purchase or construction of equipment or facilities for collection and transportation. 

Why is this technology development so important? Anaerobic digesters (AD) are 

devices that capture, control and enhance the degradation of organic material. Two 

principal benefits occur: production of energy and environmental benefits—including 

large scale greenhouse gas capture and manure management. The biogas produced 

by anaerobic digestion is composed of about 60% methane, the principal ingredient 

of natural gas, with most of the rest being carbon dioxide. Methane, which is 21 

times more damaging as a greenhouse gas than CO2, would ultimately escape into 

the atmosphere if not captured in the AD process. Biogas can be used ‘‘as is’’ as a 

power source, or cleaned up to be used as a renewable substitute for natural gas, 

propane or other fossil fuels. If to be used for interconnection with the natural gas 


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pipeline, the biogas must be scrubbed until it is in excess of 95% methane. It is 

worth noting that with current scrubbing technologies, the additional capital and 

operating cost is only justified in the case of larger-scale systems. 

In the U.S., until recently, use of AD has been limited to old-generation, smallscale technology. Currently, however, advances in technology have made AD more 

cost competitive with other types of energy. While viability is well established at operating facilities, large scale deployment of this type of energy production requires 

support comparable to that provided to competing sources of energy in order to expand and develop the potential market into a significant renewable energy source 

that can truly impact the country’s needs for alternatives to fossil fuel. 

Digesters are normally designed to process the feedstock available to them and 

can be scaled up and down in size. However, in order to access the commercial 

mainstream—that is, to be economically viable and make a significant impact on 

our energy supply—larger-scale systems are necessary to achieve economies of scale 

in both production and market access, including access to the existing infrastructure 

for marketing, transportation and distribution of conventional fuels. 

Our on-the-ground experience and market research has shown us that the smallscale, single farm systems face a host of difficulties. They have relatively high expense due to a lack of economies of scale, and often, poor operational results. The 

systems are typically operated by the farmer, who is not and does not want to be 

an expert on AD and manure management. Smaller operations also have interconnection issues. The small energy producer is not worth a utility’s time and effort 

and have even more limited private sector financing opportunities. Their economic 

viability relies heavily on existing USDA and state grant and subsidy programs. 

Larger-scale systems allow for professional management, negotiation of energy 

agreements with utilities and other energy end users, efficiencies and economies of 

scale, and especially, the volumes of output required for refinement into pipeline 

quality renewable natural gas for delivery via our nation’s existing transport and 

distribution infrastructure, the interstate pipeline system. Such projects have numerous commercial financing options. The farmer, rather than diverting his efforts 

to his own system, can receive a slice of a larger pie, without a financial or management investment on his part. In Microgy’s business model, we seek to become the 

partner of the farmer, with our specialty being the day to day operation of the anaerobic digester. 

AD utilizing animal and other byproduct materials can generate significant quantities of energy in the United States. We estimate that AD systems on larger-scale 

dairy, swine and beef farms, if fully operational and with a complete supply of all 

feedstock materials, could produce well over 340 billion cubic feet of natural gas 

equivalents per year. Note that 1000 cubic feet of natural gas equals approximately 

1 million btus. The potential production of 340bcf has the energy equivalent of approximately 2.5 billion gallons of heating oil per year. 

In addition, a significantly larger market would be available if expanded to smaller farms: over 90% of all the cows in the U.S. are on farms smaller than 2,000 head. 

However, in order for energy production to be cost-effective on such farms the manure from these farms would be combined for use in larger, centralized facilities. 

In this way smaller farms can also benefit from economies of scale and the other 

benefits accruing to larger-scale systems. Without support, however, today’s transportation costs could limit their opportunities to participate. 

Processing manure and other materials by AD also creates significant environmental benefits, including greenhouse gas emissions reductions, as methane that 

would otherwise have been released into the atmosphere is captured. Note that 

methane is 18-21x more powerful a greenhouse gas than CO2. Other air quality improvements include significant reductions in odor, ammonia and particulates. Utilizing AD also generates water quality improvements, including reduction of excess 

nutrient run-off—such as occurs with phosphates, nitrates, and BOD materials, and 

help to farmers in addressing significant water pollution challenges. In addition, the 

systems produce value-added products. Each one million gallon digester would also 

generate 100 tons NH3; 153 tons P205 and 184 tons K20 fertilizers, as well as approximately 10 cubic yards of bedding, compost or mulch. At full development of the 

potential AD to Energy market, these value added products would equal over 

500,000 tons of NH3, 800,000 tons of P205, 900,000 tons of K20 and 52,000 cubic 

yards of bedding, all per year. Note also that many of the synthetic products such 

as fertilizers that would be replaced by the residuals from AD energy production are 

themselves produced from petroleum. 

These projects bring significant economic benefits to the areas where they are 

built, normally in rural often isolated regions. Although we realize that real ‘‘economic gain’’ is not part of the Congressional scoring process, we believe it is extremely important to point out that, based on our experience we conservatively estiVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00095 Fmt 6633 Sfmt 6621 E:\HR\OC\48112.XXX 48112

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mate approximately $3 to $30 million dollars in direct development and construction 

investment as well as annual direct spending of up to $2.5 to $4 million per year. 

Applying the standard 5 to 1 multiple to account for the ‘‘ripple effect’’ of regional 

economic impact, we estimate construction period impact in each project area of $15 

to $150 million and annual extended economic impact of up to 20 million. Specifically we expect large, eight-tank AD projects such as the one in Stephenville, TX 

to incur about $2.5 million in annual direct spending with a $12–15 million ripple 

effect and about 1/8 of that on smaller projects like our AD at the Norswiss farm 

in Wisconsin. These are big impacts in the generally small regional communities 

where they are located. 

A variety of renewable (as well as non-renewable) fuels receive Federal Government assistance. This government assistance is expressed in a variety of terms, depending on the fuel and/or end product produced, such as per gallon of fuel produced, per kwh of electricity generated, etc. In order to compare these subsidies, it 

is useful to express them all in terms of dollars of subsidy per units of energy 

(mmbtu) produced. When viewed in this manner, it is apparent that renewable liquid fuels receive greater support than others. For example, biodiesel produced from 

agri-fuels receives approximately $8.55 per mmbtu; ethanol receives $6.16; and biodiesel from waste oil receives 4.27. On the other hand, generating electricity from 

renewable sources, such as wind or solar, receives substantially less, in a range of 

2.57 per mmbtu. 

Biogas is akin to a renewable liquid fuel and, from a support perspective, should 

be treated similarly to biodiesel and ethanol: 

• Biogas and biodiesel are derived from the processing of similar feedstocks. 

• Renewable liquid and gas fuels have more flexible end uses: pipeline delivery as 

a fossil fuel alternative in industry and homes, local applications as a fossil fuel 

substitute, or power generation. 

• Liquid and gas fuels are efficient from a micro perspective. Producing electricity 

from a liquid or gas fuel results in significant energy losses. For example, only 

35% or so of the energy content of a fuel ends up as electric power. The rest 

is wasted as lost heat. 

• Liquid and gas fuels are efficient from a macro investment point of view. For 

example, because wind generates power intermittently (only when the wind 

blows), utilities must also keep available significant extra generation capacity 

fired by conventional fossil fuels. Digesters, in contrast, run 24 hours per day, 

7 days per week. 

In sum, the production and use of biogas as a replacement for fossil fuels could 

potentially provide numerous benefits such as: 

• Use of biogas as a replacement for significant quantities of fossil fuels and deliverable via conventional fuel distribution infrastructure 

• Reduced greenhouse gas emissions 

• Potential reduction in criteria air pollutant emissions 

• Improved water quality through better manure management Less dependence 

on declining fossil fuel supplies 

• Better energy security (through a reduced dependence on imported energy), and 

• Stimulation of rural economies 

These are benefits to society rather than merely financial benefits for the farmer 

who produces the biogas. Consequently, it is appropriate for the government to provide support for the development of the biogas industry, an industry that did not 

exist when legislation was written for other renewable fuels. 

If the biogas industry is to prosper, government must help launch policy initiatives that will provide the same direct financial incentives or tax credits that are 

now earned by programs that focus on renewable ethanol, biodiesel, and electricity. 

Three areas are key: 

• Monetizable production tax credits for biogas from certain renewable feedstocks. 

• A counter-cyclical safety net for biogas producers and their lenders. 

• Transportation incentives for biogas production for small operators. 

We look forward to working with the Committee, and I would welcome you to visit 

our facilities around the country, particularly in Texas, where we are delivering 

RNG (our trademarked substitute for natural gas) to the pipeline. Thank you for 

your careful consideration and support. 


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Market Size 

More easily accessible larger-scale systems: 

• Beef cattle: Herds with over 10,000 head: 268 

• Dairy farms: Farms with over 2,000 head: 380 

• Swine Farms with over 20,000 animals: 452 

f 


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Statement of FuelCell Energy, Inc. 

FuelCell Energy, Inc. (FCE) appreciates the opportunity to submit this statement 

to support the extension and expansion of the current tax credits available for fuel 

cells. FCE (www.fce.com) is the leading fuel cell manufacturing company with headquarters in Danbury, Connecticut that produces and sells fuel cell systems. We currently have over sixty units in operation worldwide that have generated approximately 155 million kilowatt hours of electricity. 

Fuel cells are ultra-clean systems that produce power at very high efficiencies, at 

scales ranging from a few kilowatts per installation to multi-megawatt power 

plants. They are applicable to both distributed generation and central station power 

and can also operate in a cogeneration mode that uses waste heat from the system. 

Our fuel cells operate on a variety of fuels including natural gas, gasified coal, digester gases from waste treatment facilities, other biofuels and hydrogen. Their 

versatility, efficient operation and superior environmental characteristics make 

them a very desirable alternative to conventional fossil fuel fired power systems. 

As with many new technologies, capturing sufficient order volume to lower product costs is the remaining challenge for large-scale deployment. Consistent and robust incentive programs are essential to facilitate the order volume that is necessary to drive down product costs. The resulting order volume will generate thousands of new, high quality, manufacturing and engineering jobs in the U.S. 

This Committee recognized both the environmental and efficiency benefits of fuel 

cells as well as the need for incentives to accelerate their commercial introduction 

through enactment of the Section 48 fuel cell investment tax credit included in the 

2005 Energy Bill. FCE appreciates the Committee’s action in this regard. In combination with state-level incentives, FCE has been able to complete agreements for 

the installation of fuel cells in a handful of states that offer such incentives, particularly California. As a result, states with fuel cell incentive programs and high cost 

power are the early target markets. 

The fuel cell industry is in a position to provide very-high efficiency, low greenhouse gas power in both distributed and central station power applications with a 

minimum of environmental emissions. Continuing and improving the tax incentives 

originally provided by this Committee is in the best interest of our nation as it 

strives to reduce the environmental impact of electricity generating technologies, reduce overall energy use and dependence on foreign sources of energy. Therefore, 

FCE recommends that: 

• The ITC be increased to $3,000 per kilowatt 

• The ITC be extended for a minimum of 5 years, and 

• Enable fuel cell users to claim both the ITC and the renewable energy PTC for 

electricity from biomass sources. 

In order to compete nationally in the near term, fuel cells must receive an equivalent incentive in states where they are not currently available. Our experience, 

based on incentive levels in California, indicates that an investment tax credit of 

$3,000 per kilowatt is necessary. Such a credit will allow for a omprehensive base 

of fuel cell installations across the country instead of those few locations that provide state-level incentives. It will provide a significant increase in the volume of fuel 

cell sales, which in turn will allow fuel cells to be cost competitive with conventional, more polluting technologies. 

In addition, FCE requests that the ITC provision be extended for at least five 

years. Such an extension will allow for rapid growth of the fuel cell industry. An 

extension will allow for the development of healthy markets and capital investment 

in production facilities to serve those markets. In addition, the extension would 

avoid the boom and bust cycles that occurred with other technologies as a result of 

short term tax credits. 

Finally, FCE understands that if an entity opts to take advantage of the ITC it 

may not use the Production Tax Credit (PTC) available for electricity produced 

using biofuels. Removal of the prohibition on using both credits would promote the 

use of environmentally friendly biofuels for renewable applications such as fuel cell 

based power generation. FCE has several installations running on digester gas and 

would benefit greatly in this market if this prohibition is removed. 

Thank you for your consideration of these matters. Please contact me with any 

questions you may have. 

f 


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Statement of Jerry Whitfield, PhD. 

Mr. Chairman and Members of the Committee, the Biomass Investment Group 

(BIG) of Gulf Breeze, Florida, appreciates the opportunity to submit this statement 

for the record on the potential role of the ‘‘closed-loop’’ biomass tax credit in helping 

to achieve our nation’s energy security and environmental policy objectives. We at 

BIG are very excited about the possibilities associated with this technology, and 

urge the committee to extend the placed-in-service date window for the ‘‘closed-loop 

biomass’’ production tax credit for at least five years. 

The term ‘‘closed-loop biomass’’ was coined to describe the production of energy 

from a dedicated biomass crop. The ‘‘loop’’ refers to the balanced and sustainable 

planting, growing, and harvesting of the biomass crop, its transformation into electrical energy, and finally, the redistribution of remaining ash over the plantation 

as a fertilizer for further plant growth. As described below, the use of a dedicated 

crop potentially provides a number of energy and environmental benefits, including 

displacement of fossil fuels for production of electricity by renewable biomass derived fuels, and absorption of atmospheric carbon via photosynthesis and carbon sequestration in the roots of the plants. In addition, there are energy and environmental benefits from the increases in facility efficiency due to the ability of the operation to control the type and condition of the feedstock. In the context of this testimony, ‘‘closed-loop’’ refers specifically to the Internal Revenue Code Section 45(c)(2) 

definition ‘‘any organic material from a plant which is planted exclusively for purposes of being used at a qualified facility to produce electricity.’’ 

As you know, the closed-loop biomass production tax credit was enacted as part 

of the Energy Policy Act of 1992. At that time, electricity production from a closedloop biomass process was not economic, and no closed-loop facilities existed. Since 

the early 1990’s, to the best of our knowledge, no production tax credits for electricity from closed-loop Section 45 biomass electricity production tax credits have 

ever been claimed (there may be some current activity associated with the co-firing 

of biomass with coal, which has a separate definition in the tax code). 

Until recently, one of the most significant technological hurdles facing prospective 

closed-loop developers involved finding a way to efficiently convert the feedstock into 

an intermediate liquid biofuel that could subsequently be transformed into energy. 

Another hurdle that vexed entrepreneurs involved the search for a feedstock that 

would grow rapidly enough to keep a baseload power facility stocked with fuel from 

an economically sized farm. As I will describe, we at BIG believe that we have developed solutions for these two challenges that will allow our facility to be very efficient in transforming the feedstock into electricity, thereby making it more economical, and we also have identified an energy crop that can generate the tons of raw 

biomass necessary to keep our turbine in operation 24 hours a day, 7 days a week, 

year round. 

Although we have made great strides in bringing the cost of our green, renewable 

electricity closer to being competitive in the market, we will not be able to further 

narrow that gap until we have gotten a first commercial facility up and running. 

After the flagship plant is placed in service, and after the period wherein the plants 

grow mature root systems, we will doubtless spend several years perfecting the 

process to allow us to obtain the maximum amount of energy from each ton of biomass fuel. 

As you might guess from the above discussion of our infant technology, the availability of the production tax credit is an absolutely essential ingredient in our plans. 

One of the impediments to convincing the financial community to partner with us 

in building this first facility is the recent trend wherein Congress provides one- or 

two-year extensions of tax credits. These extensions are not sufficiently long to allow 

taxpayers to design, finance, and build a groundbreaking commercial facility. Five 

years is a more realistic timeline. Therefore there has never been a period of certainty within which an investment decision on this type of plant can be made knowing that PTCs will be available when the plant comes on-line. As you can see, these 

short extensions, relative to the timeline for building such renewable energy facilities, appear to be counterproductive to the original intention of these production tax 

credits, namely promoting the development of renewable biomass energy. 

Since this is all new technology, I will provide some details of our plans. BIG is 

developing the first commercial scale, farm based, closed-loop biomass-to-electricity 

plant in the U.S., using a dedicated farm energy crop as fuel. The facility will be 

located in South Florida, where the climate is suitable for year round growing and 

harvesting, enabling continuous base load electricity production. Without a longterm extension of the Section 45 closed-loop biomass production tax credit, I can assure you, we will not be able to obtain the financing necessary to get this first facility built. 


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Our facility is designed to produce 130 MW of electricity from a high yielding energy crop known as E–GrassTM requiring 18,000 acres of cultivation and providing 

electricity for over 80,000 homes. This crop is a perennial plant and after initial 

planting and grow-out, only requires harvesting and hauling to the centrally located 

fuel processing and power plant facility. The fuel conversion utilizes a fast pyrolysis 

process to produce a combustion turbine grade liquid bio-oil from the E–GrassTM

feedstock. Electricity is produced from an integrated combined cycle power plant for 

optimum power generating efficiency. 

We believe that this type of facility could play a critical role in reducing the nation’s dependence on fossil fuels, eliminating atmospheric carbon emissions from 

electricity production, and helping to create jobs and boost the economy of our farmers. Importantly, this biomass-to-electricity power plant model has significant environmental attributes. It will save 930,000 tons of CO2 emissions per year compared 

to the same size coal-fired power plant, or 440,000 tons of CO2 from a natural gasfired plant. Indeed, the integrated farm and power plant process will be CO2 negative since although the crop will absorb the same amount of CO2 as released by the 

power plant, the below-ground biomass (rootstock) will sequester additional CO2

over the 20+ year life of the crop. Air emissions will meet all air quality standards 

for this type of facility. Mineral matter (ash) absorbed by the crop during growth 

will be recovered during the fuel conversion process and returned to the farm as 

a soil amendment, thus completing the ‘‘loop.’’ 

BIG has successfully secured a Power Purchase Agreement with Progress Energy 

of Florida to purchase 100% of the power produced for a term of 35 years (including 

extensions). The project is planned to be placed in service in 2010. Design and development of this facility is well underway, but it will not be built unless investors are 

certain that the facility will be eligible to receive the PTCs under the placed-in-service date window. 

I urge this committee to extend the qualifying period for the Section 45 closedloop biomass energy production tax credit by at least five years to enable developers 

of this type of technology to make investment decisions with the knowledge that 

these important incentives will be in place when such a facility comes on-line. 

Again, we appreciate the opportunity to provide this information. If Members, or 

staff, have any questions regarding the technology, we would be pleased to serve 

as a resource to the Committee on closed-loop biomass issues. 

f 

Statement of Karen K. Sisk 

My story, as sent to Senator Kit Bond, MO.: 

I, Karen K. Sisk, have an income from Social Security. Disability that does not 

allow me extra funds to pay 100% of my medications in the donut hole (reached 4/ 

1/2007). In 2006, I spent co-pays through my donut hole period. There is no longer 

a donut hole coverage in 2007. 

My income is above the % of poverty and I have no assets, thus the system at 

present is determining my fate. Changes in poverty guidelines developed in the 

1950’s, along with cost of living in past 5 years (food, gas, taxes) has soared, but 

poverty limits remain almost the same and are based on family feeding plans of the 

1950’s. Along with increases in pharmaceutical and health care costs, now I am 

being told if I don’t pay my medical bills in 10 days—I will not be served by my 

doctors of 14 years. 

I am a nurse (professional), diabetic and injured at work lifting a patient. Prior 

to 2006 Medicare Part D, I was being supported by Pharmaceutical Assistance Programs. As of 2006 Medicare Part D, I am not covered because I have Medicare Part 

D. Now, Medicare Part D will not cover me in donut hole. Without medications I 

will DIE! 

Do I live on the street? 

Take my Medicines? 

Not eat? 

Go into Diabetic Shock! 

Sure sounds like Euthanasia of future Baby Boomers! 

1) Change poverty guidelines—Update to today 2007, Standards. 

2) Find solution for (professionals) with higher Social Security & no assets—to be 

able to eat—take medications and encourage corporations to utilize (their) minds 

without having to use physical labor. 

3) I don’t know what. . . . 


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I have served on the Board for the East Missouri Community Action Agency for 

2 years, Jefferson County Missouri: Disabilities Support Systems for 3.5 years, 

Greater Mineral Area: 

Emergency Food & Shelter Program for 2 years, Madison County Advisory Council for the EMAA for 2 years, Madison County Council for the Developmentally Disabled for 2.5 months. Poverty guidelines vary for each agency that is available for 

emergency assistance, as well as, each agency filing the same papers over and over 

again (? decrease in paperwork act / not for those in poverty. 

Why can’t there be a clearing house for original background paperwork, that these 

other agencies (pharmaceutical companies, community action agencies, service providers that use sliding scales . . .) can be referred to, for this information. 

In the past 2 weeks, I have filed the same papers to 16 different agencies. 

I have been trying for the last month to receive a copy from my Part D carrier 

stating that I have reached the donut hole. This is necessary to ask for assistance 

from the pharmaceutical companies. 

I have been given many misinformed, as well as, out right lies that this paper 

would be there in three days. I will be without medications by next week. 

After contacting The Department of Senior Services and they did not know 

to whom they should refer me to >>>>> 

I called Rod Jetton’s Office, Speaker of the House of Representatives in 

Missouri, about this. >>>>>>>> 

I was referred to the Southeast Missouri Area on Aging and they were told 

by Community Care RX that they will get that in the mail as soon as possible. 

We are still waiting! 

I informed these offices, if need be, they might just see me on the front steps of 

the the Jefferson City Courthouse waiting to die—over the next few months. 

I know I am not the only one in this situation. Most Poverty individuals do not 

have the resources, education and persistence to do this or the computers to write 

their responses to committees such as you. 

Many improvements can be made, to access healthy affordable living, empowering 

jobs that don’t require you to work 2 more jobs to support your family, and a campaign to educate people on the utilization of resources such as; Vocational Rehabilitation Programs for those with learning disabilities so they can get a suitable job 

. . . 

I draw a social security check 1,234.00 net each month and have took on a part 

time job, 2/2006, at Movie Gallery (8–10 hours/week, minimum wage/260.00per 

month in 2007) to help me pay co-pays for my medications. 

It was still inadequate, the funds I made were 300 shy of the cost for that year, 

‘‘with coverage in the donut hole’’. My medication costs per month were approximately are $2,400.00. 

With the use of MO RX program that becomes $1,200.00. Prices under Part D 

have increased since 2006 and coverage under donut hole is nonexistent. 

When President Lincoln chose ‘‘The’’ Woman to develop the Dept. of Health and 

Human resources in that era I doubt that either one of them could foresee what 

the situation is today. 

Or for that fact, ‘‘The’’ Woman who developed the Nutritional and Poverty guidelines in 1950’s. 

Speaking of Women, Dr Donna Marie Beagle, Ed.D., a child of homelessness and 

poverty, speaks today on ‘‘See Poverty . . . Be The Difference!’’ and has written a 

book on this. 

She, EMAA, many other community action agencies through out the state, myself 

and other individuals who are interested in stopping poverty in these ‘‘here’’ United 

States are meeting at the steps of Jefferson City, Courthouse on May 2, 2007 to 

speak to legislatures. All are invited. 

Come to the ‘‘SHOW ME STATE‘‘ and let’s lay down some foundations for institutional and systematic change. 

f 

Statement of National Rural Electric Cooperative Association, Arlington, 

Virginia 

Clean Renewable Energy Bonds 

I am pleased to provide testimony today about a program of great importance to 

the members of the National Rural Electric Cooperative Association—the Clean Renewable Energy Bond. I would like to start by thanking Congressmen Earl Pomeroy 

(D–ND) and Ron Lewis (R–KY) for introducing H.R. 1965, which provides for addiVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00101 Fmt 6633 Sfmt 6621 E:\HR\OC\48112.XXX 48112

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tional funding and the continuation of the CREBs program. I would also like to 

thank Congressmen McDermott (D–WA), Ramstad (R–MN) and many others on the 

Committee for their strong leadership on and support of the Clean Renewable Energy Bond. 

Background on electric Cooperatives 

NRECA is the national service organization representing the interests of cooperative electric utilities and their consumers. In addition to advocating consensus views 

on legislative and regulatory issues, NRECA provides health care, pension, financial 

investment and many other programs for its members. 

Electric cooperatives are not-for-profit, private businesses governed by their consumers (known as ‘‘member-owners’’). Today, 930 electric cooperatives serve 40 million consumers in 47 states. Cooperatives are a unique sector of the electric utility 

industry, serving an average of only 7 consumers per mile compared with the 35 

customers per mile served by investor-owned utilities (IOUs) and 47 customers per 

mile served by municipal utilities. To put this in greater perspective, electric cooperatives serve only 12% of the population—but maintain 42% of the nation’s electricity distribution lines covering three quarters of the land mass. Cooperative revenue per mile averages only $10,565, while it is more than six times higher for investor-owned utilities, at $62,665 and higher still for municipal utilities, at $86,302 

per mile. In summation, cooperatives have far less dollars than the other electricity 

sectors to support much more of the distribution infrastructure. In addition, electric 

cooperative households generally have less income than the rest of the nation, with 

nearly half of the cooperative service territories suffering poverty rates that are 

higher than the national average. 

These numbers illustrate why bringing power to rural areas is a costly endeavor, 

resulting in electricity prices that are often higher in cooperative service territories 

than those served by IOUs. The key to success in bringing the most reliable and 

affordable power possible to these low density areas lies in the cooperative business 

model. The term ‘‘cooperative’’ has been described by Federal court decisions and 

IRS rulings and pronouncements. The IRS requires that businesses adhere to the 

following guidelines to qualify for cooperative status: 

1) Subordination of capital. Most benefits of the cooperative must remain with 

members. The cooperative is not to be operated for the primary purpose of paying 

a return on investment. 

2) Democratic control by the members of the cooperative. Each cooperative 

is run by a board of directors elected by the entire cooperative membership. Votes 

are on a one member, one-vote basis. 

3) Operation at cost. Costs must be fairly allocated to all members. Any revenue 

that is collected from members above what it costs to operate the co-op plus retain 

a reasonable margin for future needs is returned to all members on an equitable 

basis. In the case of electric cooperatives, net margins returned to members are referred to as ‘‘capital credits.’’ 

To sum up these requirements, the cooperative’s benefits must flow to its member-owners. Any benefits received from the Federal Government, therefore, also flow 

to the cooperative’s consumers. Although most electric cooperatives are exempt from 

federal income tax, all electric cooperatives pay state and local property taxes, sales 

tax and payroll and excise taxes—$1.09 billion in 2003. 

Electric Cooperatives and Climate Change 

Electric cooperatives increasingly seek to provide safe, reliable and affordable electricity generation to their consumers. They are investing in technology such as renewable generation to reduce their emissions. This generation augments coal, nuclear, hydropower and gas generation that is necessary to provide output of sufficient scale for the growing economy. It should also be noted that intermittent generation from wind or solar energy would cause an unreliable grid if not backed up 

with these conventional resources, which unlike wind, are able to provide electricity 

on demand 24 hours a day. Renewable energy (not including renewable hydropower) 

accounts for only two percent of the current generation mix in the U.S., and the 

need for that renewable energy is growing along with the need for all other types 

of generation as our population, particularly in rural America, grows. The attached 

chart (chart 1) displays the current U.S. generation mix. 

This Committee has been considering how tax policy fits with meeting the goals 

of addressing climate change. I submit that tax incentives that drive energy technology are among the most important programs Congress will establish to meet climate change goals. Electric cooperatives support the goal of reducing carbon emissions if it is an economy-wide goal, maintains fuel diversity, protects the economy 

from significant negative impacts and does not result in regressive income impacts 


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on lower and middle-income households. In addition, any climate change plan 

should recognize that new technologies, including the capture and sequestration of 

carbon dioxide from power plants, will be critical to addressing this issue. But costeffective, commercially-available technologies are still more than a decade away 

from large-scale commercial applications. This is where tax policy can play a role 

to accelerate the research, development, demonstration, and commercialization of 

new technologies. Tax incentives should be available to all segments of the utility 

industry—including incentives tailored to cooperatives—for advanced electric generation, transmission, and distribution technologies. 

With respect to potential climate goals, the Electric Power Research Institute, 

which provides technological research to the electric utility sector, has identified the 

need to bring all potential energy resources, efficiency measures and technologies 

to bear as they each hold only a part of the potential needed to reduce U.S. carbon 

emission intensity (CO2 emissions per MWh). Note that the utility sector is responsible for just over a third of all of the nation’s CO2 emissions. Using the Energy Information Agency’s Annual Energy Outlook 2007 as a base case for carbon emissions 

over the next 25 years, EPRI calculated the CO2 reductions that would result from 

reasonable but aggressive deployment programs in seven specific areas. The attached chart (chart 2) shows the role that renewable energy, efficiency, advanced 

coal, nuclear and other technologies could play if certain technological advances are 

assumed. Note that an economic analysis of the costs of pursuing these is not included in the chart and has not yet been produced by EPRI, but as utilities, it is 

mandatory that we balance the need for new technologies against affordable rates 

for our member owners. 

There are many details of a carbon reduction program that will need to be addressed as Congress develops a bill, and cooperatives will be actively engaged in the 

debate over how to structure a program to reduce greenhouse gas emissions. 

Electric Cooperatives and Alternative Energy 

One of the details of a climate proposal will be the development of tax incentives 

for alternative energy. With respect to renewable energy, twenty-two states have approved renewable portfolio standard mandates that require most utilities to offer a 

certain percentage of renewable energy. Coupled with the need to avoid carbon 

emissions when possible, the need to for utilities to develop all available renewable 

resources is urgent. Currently, renewable energy makes up almost 11 percent of the 

electricity provided by electric cooperatives. The majority of that 11 percent is from 

large scale federal hydropower, although more than 500,000 megawatts come from 

non-hydroelectric renewable capacity. 

More than 750 coops (80% of the cooperative industry) offer ‘‘green power’’ programs that enable consumers to buy renewable output from the marketplace. Almost all of this power is currently purchased from federal hydropower facilities, the 

market or through contracts with developers. Yet, electric cooperatives are ideally 

situated to develop renewable projects in their back yards. Those projects have not 

yet been fully realized because of a historic market barrier: given their not-for-profit 

business model, electric cooperatives have not been able to directly utilize traditional tax incentives like the Production Tax Credit. The capital costs for renewable 

generation remain much higher—two to ten times more expensive—than conventional resources. Such incentives remain necessary, therefore, to bring renewable 

generation on line at a cost that is affordable for consumers and to push technology 

to make the resources more efficient and effective. 

Incentives enable utilities to bring alternative generation resources on line despite 

their higher capital costs. Small in size with few consumers per mile, electric cooperatives can’t hide high prices for generation or push costs off onto shareholders. 

Electric cooperatives return revenues in excess of what is needed for generation and 

electricity delivery back to their consumers. By the same token, electric cooperatives 

must flow the costs of any generation to consumers through rates, and every member bears those costs. Keeping rates affordable and the delivery of energy reliable 

is our key mission, and locally-elected boards of consumer directors hold electric cooperatives accountable to that mission. 

The Energy Policy Act of 2005 recognized that incentives, particularly tax incentives, take center stage among federal polices that foster technology development. 

For example, EPACT extended the Production Tax Credit (PTC) that provides up 

to a 1.9 cent per kWh incentive for development of wind, geothermal, hydropower, 

biomass and other renewable resources. Electric cooperative consumers indirectly 

benefit from the PTC by purchasing renewable power from IOUs and developers to 

the extent that they can negotiate with the producers to pass along some of the PTC 

benefits in lower power costs. The PTC does not, however, provide electric cooperatives with an incentive or subsidy needed to develop resources in their back yard. 


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To address this concern, Congressmen Pomeroy and Lewis sponsored legislation 

in 2005 that was attached to EPACT and created an equally important new program, the Clean Renewable Energy Bond. The bill had 80 bipartisan cosponsors in 

the House, and the program was also strongly supported by then-Finance Committee Chairman Charles Grassley and Ranking Member Max Baucus. The program 

recognizes that not-for-profit electric cooperatives, generally exempt from tax at the 

federal level, should receive an incentive similar to those available to investorowned utilities and for-profit developers. 

I would note that EPACT also provided an investment tax credit for advanced pulverized and IGCC coal, and a Production Tax Credit for advanced nuclear resources. 

Unfortunately, federally tax-exempt electric cooperatives do not have an opportunity 

to put those incentives to use. At the same time, because their significant generating capacity is sized to keep pace with our growing communities, applying advanced coal technologies and nuclear generation resources stands to make the biggest impact on reducing carbon emissions. Today, electric cooperatives do not have 

the opportunity that other sectors do to invest in these technologies. We would like 

your help to ensure that any future energy tax bill will include financing mechanisms that electric cooperatives can use for advanced clean coal and nuclear generation in addition to renewable energy. 

The Clean Renewable Energy Bond Program 

I want to now focus my testimony on our experience with the Clean Renewable 

Energy Bond (CREB) program. Although the program is in its infancy, it has proven 

to be a highly effective way to bring new renewable projects on line. The CREB program is as successful as the PTC in getting new renewable resources in the ground, 

as electric cooperatives alone flooded Treasury with more than $550 million in applications for 83 projects in 22 states. In addition, electric cooperatives have proven 

that given the necessary incentives, they will tap available renewable resources. 

The program in its first year funded 78 electric cooperative projects and was well 

balanced across many technologies, including wind, biomass, landfill gas, hydropower and solar. The award size of cooperative projects ranged from $120,548 to $31 

million. 

The attached map shows the distribution of these projects across the country 

(chart 4), and the bar charts show the numbers of applications by technology (chart 

5) The electric cooperative set aside worked well to ensure that cooperatives could 

build utility scale projects and the program would be balanced between electric cooperatives and government applications. 

The only significant ‘‘complaint’’ co-ops have with the program is that the volume 

cap is not sufficient to fully fund all of the worthy applications. 800 million was provided to last for two years, with 300 million set aside for electric cooperatives. Yet 

Treasury received 2.5 billion in applications in the first year overall. Electric cooperatives submitted more than $550 million of those applications, but received only 

$300 in bond allocations due to a program size that was too small overall. An additional $400 million, with $150 million set aside for electric cooperatives, was provided under the Tax Relief and Health Care Act of 2006, but this still does not fully 

fund the program. In contrast, there is no volume cap for the PTC. 

In order to address this problem, Congressmen Lewis (R–KY) and Pomeroy (D– 

ND) have introduced a bill, H.R. 1965, to make the program annual and provide 

an increase to 1 billion in funding each year. The same proportionate set aside, $375 

million, is available for electric cooperatives. While applications may still exceed this 

mark, annual certainty about funding at a $1 billion level will help to ensure that 

more projects, including larger utility scale projects, can be financed. The bill makes 

a few additional technical improvements to the existing program. 

I urge this committee to include the Pomeroy-Lewis bill in any energy tax bill. 

The provision fits hand in hand with the Production Tax Credit, ensuring that electric co-ops, which are ideally situated to develop renewable generation, can also help 

tap this nation’s renewable potential for electricity production. I also urge the committee to extend the Production Tax Credit as it provides the option for our members to purchase renewable energy affordably from other providers, wherever it is 

necessary. 

CREBs are an Important Part of Cleaner Generation in the Future 

In conclusion, I commend this Committee for its past and current support of the 

Clean Renewable Energy Bond and Production Tax Credit programs. Incentives are 

the key to cooperatives realizing their goal to provide clean, affordable generation 

to their member-owners. Tax policy, including incentives available to all utility sectors, will play a central role in ensuring that all available renewable resources are 

developed and all consumers can access advanced coal and nuclear technologies. 


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Ultimately, tax policy can help to make feasible new technologies that address carbon emission but are not currently commercially accessible. We are pleased that the 

Committee has recognize the important role that not-for-profit electric cooperatives 

and their consumers will play in our energy future with the CREB program, and 

look forward to working with you on future proposals that will shape the nation’s 

energy policy. 

CHART 1 

U.S. Generation Mix 

CHART 2 


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CCS—Carbon Capture and Sequestration 

PHEV—Plug-in Hybrid Electric Vehicles 

DER—Distributed Energy Resources 

CHART 3 

Note that grey icons are applications not awarded. 

CHART 4 

Number of Projects Approved, By Technology 

Government Projects Co-op Projects 


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f 


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National Venture Capital Association 

April 19, 2007 

The Honorable Charles B. Rangel, Chairman 

House Committee on Ways and Means 

1102 Longworth House Office Building 

Washington, DC 20515 

The Honorable Jim McCrery,Ranking Member 

House Committee on Ways and Means 

1102 Longworth House Office Building 

Washington, DC 20515 

Dear Chairman Rangel and Ranking Member McCrery, 

On behalf of the National Venture Capital Association I am writing in support 

of the proposal to extend and enhance the Investment Tax Credit (ITC) for clean 

energy technologies. We believe that the Federal Government should dramatically 

expand financial incentives to drive the market adoption of green energy sources, 

with mechanisms including tax credits, subsidies, loan guarantees and other programs. In addition, Congress should consider creating incentives for the U.S. 

greentech companies to manufacture their products in this country. 

NVCA recommends that Congress adopt a technology neutral approach that allows the marketplace, not the federal tax code, to pick technology winners and losers. To the greatest extent possible, federal policy should establish a level playing 

field that enables all promising energy technologies to compete. A long term extension of the Investment Tax Credit that eliminates the caps that currently apply exclusively to fuel cells would render the ITC more effective in the drive to innovate 

a robust and diverse set of energy technology solutions. 

Venture capital investing in ‘‘Clean Tech’’ has more than tripled between 2005 

and 2006 and we believe our industry has an important role to play in the energy 

arena. However, considering the global nature of the energy crisis, we believe that 

by partnering with the private sector the Federal Government partner can drive 

U.S. clean energy development. 

Sincerely, 

Mark Heesen 

f 

President 

Statement of J. Patrick Boyle, American Meat Institute 

Mr. Chairman, Ranking Member, and Members of the Committee thank you for 

allowing us the opportunity to submit testimony before this Subcommittee. My 

name is Patrick Boyle and I am president of the American Meat Institute (AMI). 

AMI has provided service to the nation’s meat and poultry industry—an industry 

that employs more than 500,000 individuals and contributes more than 100 billion 

in sales to the nation’s economy—for more than 100 years. 

AMI members include 250 of the nation’s most well-known meat and poultry food 

manufacturers. Collectively, they produce 90 percent of the beef, pork, veal and 

lamb food products and 75 percent of the turkey food products in the U.S. Among 

AMI’s member companies, 60 percent are small, family-owned businesses employing 

fewer than 100 individuals and some are publicly trade and employ tens of thousands. These companies operate, compete, sometimes struggle and mostly thrive in 

what has become one of the toughest, most competitive and certainly the most scrutinized sectors of our economy: meat and poultry packing and processing. 

AMI member companies have been carefully observing recent developments in the 

renewable energy sector, specifically the impacts from the increase in demand for 

corn from the ethanol industry and the opportunities to contribute to American energy security by producing energy from animal fats, methane conversion, and other 

means. Of greatest significance in this debate is the rise in demand for corn has 

pressed market forces to demand higher corn prices. Consequently and among other 

impacts, the change in price and availability has led animal agriculture producers 

to consider alternatives to their feeding, nutrition, and dietary regimen. These 

changes can and do impact meat and poultry quality, consumer offerings, livestock 

and poultry farm efficiency, and the management of livestock and poultry operations. 

It is for these reasons articulated in the following testimony that AMI is asking 

Congress and the Administration through tax and other legislative vehicles to conVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00108 Fmt 6633 Sfmt 6621 E:\HR\OC\48112.XXX 48112

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sider policies to support energy-based opportunities for animal agriculture, minimize 

adverse impacts on livestock and poultry producers and processors, and ultimately 

place the United States in a more competitive position in terms of energy security, 

diversity, and availability. Specifically, AMI supports 1) research in ethanol byproduct safety, quality, and usability and renewable energy technologies, 2) equity of incentives for all renewable energy including renewable diesel, biodiesel, and methane 

conversion, 3) a working lands conservation program to encourage environmentally 

friendly feed stuffs production, and 4) supports exposing consumers to more renewable fuels by allowing the ethanol tariff to expire. 

Feed Impact on Meat and Poultry Production and Consumption 

Corn is one of the largest components in the diets of livestock and poultry. Swine 

rations often contain about 60–85 percent corn, poultry rations contain about 65– 

75 percent, and beef animals often have diets averaging 35 to 65 percent shell 

corn—although some producers will feed 100 percent corn to beef animals as either 

shell corn, flaked, or silage. As a result of a significant increase in ethanol production, animal nutritionists are being confronted with a new challenge in attempting 

to incorporate a significant amount of ethanol’s byproduct or distillers grains into 

existing feed rations and maintain meat and poultry quality and the economic wellbeing of livestock and poultry producers. 

As background, the process of corn milling for ethanol creates a byproduct called 

‘distillers grain’ with nutrient profiles that are very different than corn. For example, corn dry matter is approximately 60—70% starch. When starch is harvested to 

produce ethanol it concentrates protein and fiber, and fundamentally alters the level 

and dietary availability of key minerals and essential amino acids in the remaining 

distillers grain. If livestock and poultry producers want to incorporate distillers 

grain in their nutrition plan, they need to account for these differences in nutrition 

to keep the ration in balance with animal requirements and avoid overfeeding specific minerals. However, there are some drawbacks to supplementing feed with distillers grains. Initial research has demonstrated that animal performance measured 

by weight-gained/day, meat yield, leanness, environmental impact (manure production), and other factors have provided initial indicators that livestock and poultry 

on distiller grain rations have underperformed their corn-rationed peers. 

Livestock and poultry producers manage their animal nutrition programs to maximize the daily conversion of feed into muscle protein and ultimately quality meat 

and poultry products. Animals fed an optimal ration will produce the highest quality 

meat and poultry in a limited period of time—all carefully balancing, protein, fat, 

tenderness, weight, muscle density, and other quality considerations in the final 

product. However, feed that converts slowly into protein requires livestock and poultry producers to market fewer animals, handle more waste, and reduce the overall 

productivity and efficiency of the farm. Thus, if the nutrient content of the feed is 

unbalanced, the livestock and poultry marketed may also yield less lean meat, contain more fat, or produce a lighter animal—all very negative impacts for livestock 

and poultry producers, processors, and consumers. 

The very high fiber content, nutrient variability, limited digestibility, and different mineral profile of distiller grains are the key limiting factors of its ability to 

be used as a substitute for corn. Swine and poultry in particular have difficulty digesting high fiber feed. By comparison, corn contains on average 1.95 percent crude 

fiber, whereas distillers grain contain between 4 and 12 percent crude fiber. For this 

reason and others, rations for poultry are limited to as little as 10 percent distillers 

grain. Swine, in some cases, can feed up to 20 percent distillers grain, and cattle 

can be fed up to 45 percent the normal corn ration. Higher levels of incorporation 

with current animal nutrition supplementation can occur, but will risk lowering 

meat and poultry quality, animal health, or adversely impacting farm management. 

Therefore, federal research investment in applied meat and poultry nutrition 

could provide livestock and poultry producers with tools and supplements to help 

adjust their feeding regimen to incorporate distillers grains and other byproducts 

more easily. A number of very reputable studies on distillers grain impacts have 

been done. However, animal agriculture producers are in need of dietary solutions 

that they can employ on their farming and production operations. Research can also 

offset other challenges of distillers grains include the high degree of nutritional variability from plant to plant and its storage and transport problems. 

Policy Recommendations 

Given the nutrition and handling limitations with distiller grains and the challenge of corn demand and its availability, AMI asks that Congress consider providing federal research funding on broad-based applied research initiatives into renewable energy technologies, economics, and byproduct safety, quality, and usability 


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(i.e. storage and transportation). Directing research on these topics will ideally provide animal agriculture producers with needed animal nutrition guidance for producing safe and high quality meat and poultry products. 

The meat and poultry industry has been investing for years in farm level nutrition and management research to improve the safety and quality of meat and poultry. Livestock diets have been shown to impact microflora in the gut. It is encouraging that USDA monitoring data and the Centers for Disease Control (CDC) illness 

data indicate that the meat and poultry industry has made measurable and significant food safety improvements. 

With the broad based introduction of distillers grains into the diets of livestock 

and poultry, it is critical for us to understand its impact on microflora and, in turn, 

on meat safety. Similarly, consumers have been continuing to add new meat and 

poultry products to their diets and shopping carts. Many of these new products are 

leaner or provide other benefits to our customers. The continued competitiveness of 

meat and poultry producers is closely tied to producer’s ability to provide consistent, 

high quality animals to our member companies. Congressionally directed research 

can aid this development. 

Broader Energy Considerations 

AMI recognizes that this dietary change is largely being driven by an energy policy that has selected certain technologies to advance. It is AMI’s perspective that 

the U.S. and the world need a policy that supports a broad diversity of energy options and renewable energy sources to supply the energy and transportation needs 

of today and the future. AMI supports alternative fuels and new sources, such as 

those from renewable diesel, methane conversion, and biogas. Consumers and businesses can benefit from many new energy sources from such raw materials as animal fats, tallow, and animal waste products as their feed stocks as long as the law 

does not prejudge or unduly favor one feed stock over another. 

AMI also supports a working lands environmental approach, which would remove 

the regulatory and/or legislative restrictions on producers that elect to grow crops 

on land currently locked in the Conservation Reserve Program (CRP), but still maintain environmental benefits to the land. The benefits under such a system would 

continue to accrue to the soil, air, and water and provide an abundant base to grow 

crops for food and energy. 

Lastly, AMI views the renewable energy segment as a new and rapidly growing 

market. There remains a broad need for renewable energy infrastructure and consumer buy-in into this development. To aid consumer confidence in renewable energy and expand the market, it would be in Congressional interest to allow the ethanol tariff on imported product to expire in 2008. This would potentially expose consumers to more renewable energy and broaden the diversity of our energy sources. 

Thank you for the opportunity to provide these perspectives today. 

f 

Statement of Soap and Detergent Association 

The Soap and Detergent Association (SDA) appreciates the opportunity to submit 

comments on the destructive consequences of biofuel tax incentives on the United 

States oleochemical industry. SDA is a 110 member national trade association representing the formulators of soaps, detergents, general household and institutional 

cleaning products as well as the suppliers of ingredients and finished packaging for 

those products. Among these suppliers are the manufacturers of oleochemicals made 

from animal fats and oils. 

The primary raw material of the United States oleochemical industry is tallow, 

an animal fat. The industry’s economic viability is, in fact, based on the competitive 

price advantage of tallow vis a vis foreign palm oil. However, because of the substitutability of palm oil for tallow, if tallow’s advantageous price differential is lost, 

the future of a United States based oleochemical industry, and its customers, becomes tenuous. 

Unlike corn and soybeans for which plantings can be expanded to accommodate 

new biofuel applications, tallow production is relatively fixed, usually fluctuating 

less than 2% from year to year. There is no real elasticity in the tallow supply. Cattle herds are not expanded to produce tallow. It is a by-product, not a crop. 

Biofuel subsidies for animal fats undermine the oleochemical industry in two 

ways. First, they create upward price pressures on the non-expandable, finite tallow 

raw material pool. Second, particularly as a result of the recent IRS decision expanding the ‘‘renewable diesel’’ tax credit to so-called ‘‘coproduction,’’ they now pose 

the issue of supply availability per se, not just price. This is an untenable and 

undeserved position for the oleochemical industry and is wholly caused by biofuel 

subsidies. 


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Existing biofuel subsidies, including those for ethanol, have created a series of 

damaging economic incentives favoring the diversion of tallow from long standing 

traditional uses to fuels. The cascade of incentives began with the tax credits for 

tallow-based biodiesel in the VEETEC provisions of the American Jobs Creation Act 

of 2004. These were followed by a subsidy for the direct burning of tallow as a fuel 

and finally the ‘‘renewable diesel’’ incentives found in Section 1346 of the ‘‘Energy 

Policy Act of 2005.’’ 

The inherent impact of the renewable diesel provision was compounded in guidance issued earlier this month wherein the Internal Revenue Service held that socalled ‘‘coproduced fuel,’’ where animal and other fats are mixed directly with crude 

oil going to a cracking tower, was considered to be ‘‘renewable diesel’’ produced by 

the thermal depolymerization (TDP) process and therefore eligible for the $1.00/gal 

subsidy. 

Tyson Foods, Inc. and ConocoPhillips have already announced a joint venture to 

produce such a ‘‘renewable diesel’’ via a ‘‘coproduction’’ process. This type of operation now poses the greatest threat to the continued viability of the tallow raw material pool and, in turn, the domestic oleochemical industry, its customers and the 

companies which depend on their products. 

The renewable diesel subsidies that will be paid to the Tyson/ConocoPhillips enterprise serve to highlight the unthinking, irrational nature of the current biofuel 

subsidization policy. There is no process for calibrating the subsidy to process costs, 

no apparent limits on the amount of the subsidy that can be collected by a producer, 

and no consideration of the impact on other industries. Coproduction renewable diesel is nothing more than a subsidy to large oil companies. 

Based on our understanding of the renewable diesel ‘‘coproduction process,’’ it involves little more than commingling the animal fats with the crude oil being fed to 

a cracking tower. 

Taken together, these three subsidy credits create a manifold of incentives capable 

of diverting tallow away from oleochemical production. For its part, the oleochemical 

industry receives no subsidies. It has historically purchased its tallow in a classic 

free market, supply and demand environment. Those traditional conditions have, 

however, been destroyed by the government’s economic intervention. 

The situation is further complicated by the fact that ethanol incentives are diverting corn from traditional livestock feeding operations. This has caused an additional 

draw down of the tallow pool since tallow, in part, is substituted for the diverted 

corn in animal feed. Currently, tallow prices are in the $0.25–0.26 range. Traditionally, tallow prices have been in the low to mid teens. This represents a nearly 60% 

increase and has every indication of being a sustainable price given the current subsidy structure. 

The conditions in the corn market which have led to this new tallow price level 

are generally viewed as attributable to the confluence of the long standing ethanol 

subsidy combined with an enhanced renewable fuels standard. This was the perfect 

biofuels storm, the effects of which have been widely felt and publicized. We must 

learn from this. 

In Illinois, SDA estimates the loss of the oleochemical industry would result in 

the loss of 1,000 jobs. Illinois is estimated to produce 45—50% of U.S. oleochemicals. 

Consequently, on a national basis we estimate that 2,000 jobs are at stake. 

Oleochemicals are, by their very nature bio-based, and always have been. 

The true irony of the current situation is that a quiet, traditional, economically 

sound, Middle American, bio-based industry which never asked government for a 

thing, stands to be destroyed by a rush to subsidize the economically challenged and 

technologically unsettled biofuels industry. In SDA’s view, there is no doubt that 

they can coexist, but not under the current economic conditions created by the 

biofuels incentives currently in place where by oleochemicals lose. 

SDA recognizes that the potential benefit of biofuels to the nation is significant. 

However, that benefit should not be purchased at the cost of driving a well established, traditional industry out of business. 

There must be a balance and the impacts on related industries must be considered before current programs are extended unthinkingly. Biofuel tax subsidies have 

their victims as well as their beneficiaries. It is essential that the current biofuels 

tax policy be redesigned to consider its destructive and deleterious impacts on related industries. 

Respectfully submitted, 

Dennis Griesing 

f 

Vice President, Government Affairs 


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Statement of Jerry Whitfield, PhD. 

Mr. Chairman and Members of the Committee, the Biomass Investment Group 

(BIG) of Gulf Breeze, Florida, appreciates the opportunity to submit this statement 

for the record on the potential role of the ‘‘closed-loop’’ biomass tax credit in helping 

to achieve our nation’s energy security and environmental policy objectives. We at 

BIG are very excited about the possibilities associated with this technology, and 

urge the committee to extend the placed-in-service date window for the ‘‘closed-loop 

biomass’’ production tax credit for at least five years. 

The term ‘‘closed-loop biomass’’ was coined to describe the production of energy 

from a dedicated biomass crop. The ‘‘loop’’ refers to the balanced and sustainable 

planting, growing, and harvesting of the biomass crop, its transformation into electrical energy, and finally, the redistribution of remaining ash over the plantation 

as a fertilizer for further plant growth. As described below, the use of a dedicated 

crop potentially provides a number of energy and environmental benefits, including 

displacement of fossil fuels for production of electricity by renewable biomass derived fuels, and absorption of atmospheric carbon via photosynthesis and carbon sequestration in the roots of the plants. In addition, there are energy and environmental benefits from the increases in facility efficiency due to the ability of the operation to control the type and condition of the feedstock. In the context of this testimony, ‘‘closed-loop’’ refers specifically to the Internal Revenue Code Section 45(c)(2) 

definition ‘‘any organic material from a plant which is planted exclusively for purposes of being used at a qualified facility to produce electricity.’’ 

As you know, the closed-loop biomass production tax credit was enacted as part 

of the Energy Policy Act of 1992. At that time, electricity production from a closedloop biomass process was not economic, and no closed-loop facilities existed. Since 

the early 1990’s, to the best of our knowledge, no production tax credits for electricity from closed-loop Section 45 biomass electricity production tax credits have 

ever been claimed (there may be some current activity associated with the co-firing 

of biomass with coal, which has a separate definition in the tax code). 

Until recently, one of the most significant technological hurdles facing prospective 

closed-loop developers involved finding a way to efficiently convert the feedstock into 

an intermediate liquid biofuel that could subsequently be transformed into energy. 

Another hurdle that vexed entrepreneurs involved the search for a feedstock that 

would grow rapidly enough to keep a baseload power facility stocked with fuel from 

an economically sized farm. As I will describe, we at BIG believe that we have developed solutions for these two challenges that will allow our facility to be very efficient in transforming the feedstock into electricity, thereby making it more economical, and we also have identified an energy crop that can generate the tons of raw 

biomass necessary to keep our turbine in operation 24 hours a day, 7 days a week, 

year round. 

Although we have made great strides in bringing the cost of our green, renewable 

electricity closer to being competitive in the market, we will not be able to further 

narrow that gap until we have gotten a first commercial facility up and running. 

After the flagship plant is placed in service, and after the period wherein the plants 

grow mature root systems, we will doubtless spend several years perfecting the 

process to allow us to obtain the maximum amount of energy from each ton of biomass fuel. 

As you might guess from the above discussion of our infant technology, the availability of the production tax credit is an absolutely essential ingredient in our plans. 

One of the impediments to convincing the financial community to partner with us 

in building this first facility is the recent trend wherein Congress provides one— 

or two—year extensions of tax credits. These extensions are not sufficiently long to 

allow taxpayers to design, finance, and build a groundbreaking commercial facility. 

Five years is a more realistic timeline. Therefore there has never been a period of 

certainty within which an investment decision on this type of plant can be made 

knowing that PTCs will be available when the plant comes on-line. As you can see, 

these short extensions, relative to the timeline for building such renewable energy 

facilities, appear to be counterproductive to the original intention of these production tax credits, namely promoting the development of renewable biomass energy. 

Since this is all new technology, I will provide some details of our plans. BIG is 

developing the first commercial scale, farm based, closed-loop biomass-to-electricity 

plant in the U.S., using a dedicated farm energy crop as fuel. The facility will be 

located in South Florida, where the climate is suitable for year round growing and 

harvesting, enabling continuous base load electricity production. Without a longterm extension of the Section 45 closed-loop biomass production tax credit, I can asVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00112 Fmt 6633 Sfmt 6621 E:\HR\OC\48112.XXX 48112

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sure you, we will not be able to obtain the financing necessary to get this first facility built. 

Our facility is designed to produce 130 MW of electricity from a high yielding energy crop known as E–GrassTM requiring 18,000 acres of cultivation and providing 

electricity for over 80,000 homes. This crop is a perennial plant and after initial 

planting and grow-out, only requires harvesting and hauling to the centrally located 

fuel processing and power plant facility. The fuel conversion utilizes a fast pyrolysis 

process to produce a combustion turbine grade liquid bio-oil from the E–GrassTM

feedstock. Electricity is produced from an integrated combined cycle power plant for 

optimum power generating efficiency. 

We believe that this type of facility could play a critical role in reducing the nation’s dependence on fossil fuels, eliminating atmospheric carbon emissions from 

electricity production, and helping to create jobs and boost the economy of our farmers. Importantly, this biomass-to-electricity power plant model has significant environmental attributes. It will save 930,000 tons of CO2 emissions per year compared 

to the same size coal-fired power plant, or 440,000 tons of CO2 from a natural gasfired plant. Indeed, the integrated farm and power plant process will be CO2 negative since although the crop will absorb the same amount of CO2 as released by the 

power plant, the below-ground biomass (rootstock) will sequester additional CO2

over the 20+ year life of the crop. Air emissions will meet all air quality standards 

for this type of facility. Mineral matter (ash) absorbed by the crop during growth 

will be recovered during the fuel conversion process and returned to the farm as 

a soil amendment, thus completing the ‘‘loop.’’ 

BIG has successfully secured a Power Purchase Agreement with Progress Energy 

of Florida to purchase 100% of the power produced for a term of 35 years (including 

extensions). The project is planned to be placed in service in 2010. Design and development of this facility is well underway, but it will not be built unless investors are 

certain that the facility will be eligible to receive the PTCs under the placed-in-service date window. 

I urge this committee to extend the qualifying period for the Section 45 closedloop biomass energy production tax credit by at least five years to enable developers 

of this type of technology to make investment decisions with the knowledge that 

these important incentives will be in place when such a facility comes on-line. 

Again, we appreciate the opportunity to provide this information. If Members, or 

staff, have any questions regarding the technology, we would be pleased to serve 

as a resource to the Committee on closed-loop biomass issues. 

f 

Statement of Plug Power Inc., Latham, New York 

My name is Dr. Roger Saillant, President and CEO of Plug Power Inc., a Latham, 

NY-based company that is a leader in the development of on-site energy systems 

utilizing proton exchange membrane (‘‘PEM’’) fuel cells for stationary power, emergency backup power and material handling applications. Plug Power espouses the 

values of sustainability and is developing and commercializing fuel cell systems that 

contribute to the United States’ energy independence. 

Plug Power would like to thank the Members of the Committee for the opportunity to submit testimony in favor of including commercial and residential fuel cell 

credit extensions in the energy legislation being advocated by Congressional Leadership. Also, let me thank you for your initiation of these credits in the Energy Policy 

Act of 2005 and for providing a one-year extension of the credits last year. 

We have been advocating tax credits for fuel cells in both residential and commercial use since 1999 and have been working closely with our Congressman, Michael 

McNulty, who has introduced legislation in each Congress since that time. Thanks 

in large part to Rep. McNulty’s steadfast leadership, and to the support in this Committee, today we have the credit in existing tax code. 

Fuel cell tax credits currently in existence are critical for our fledgling industry. 

This credit targets stationary and portable fuel cell technologies and it has been our 

intention that the credits apply to all non-mobile applications that meet the credit 

criteria of efficiency and size. These applications are the precursors to the fuel cell 

vehicle and a low or no-carbon transportation and energy generation future. In fact, 

at Plug Power, our vision is one of a sustainable and renewable future, and we believe that such a future cannot occur without fuel cell conversion devices. Renewable 

energy sources are, unfortunately, not readily adaptable to the transportation market, but through fuel cells, can supply that motive power. In addition, some renewVerDate Nov 24 2008 03:55 Apr 25, 2009 Jkt 048112 PO 00000 Frm 00113 Fmt 6633 Sfmt 6621 E:\HR\OC\48112.XXX 48112

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able energy sources are intermittent, and fuel cells allow for the storage and use 

of that energy power at all times. 

Plug Power support H.R. 550 and its companion bill S. 590, the Securing America’s Future Act. This bill extends both the fuel cell and solar tax credits and provides those credits though 2016. The long term nature of the fuel cell credit is critical. First, it recognizes the evolution of the range of fuel cell technologies and products. This is not akin to providing a credit for a ‘‘highly efficient motor’’. It is more 

like a credit for highly efficient motors, power generators, battery replacements, 

forklifts, back up power units, critical load providers, loaders, and so on. You get 

the idea: fuel cells need a long term credit because we are talking about a VERY 

wide variety of products. 

The long term nature of the credit is also important because it allows us to: reduce our manufacturing costs, invest in our manufacturing facilities with confidence, give security to our manufacturing base, build confidence in our supply 

base, and importantly, provide time for the long term planning that is often involved 

in building and siting fuel cell technologies. Like solar, we have some large scale 

systems and/or some aggregations of systems that takes a long time to gain approvals and otherwise be ready for installation. 

H.R. 550 also calls for relief from the Alternative Minimum Tax, which some of 

our commercial credit customers have requested. Ours is a fledgling industry but 

one in which there are at least 30 products now available. We must find ways to 

get our fuel cell systems into customer hands, and the tax credit is proving to be 

a very valuable tool. We believe that, once customers have enough experience with 

fuel cell systems, they will want to use them to replace existing, and in many cases, 

inferior technologies. We cannot rely on the credit as a tool for gaining experience 

with fuel cells if our customers cannot even take advantage of that credit. 

For the fuel cell portion of H.R. 550, it continues to allow telecommunications customers to take advantage of the credit. We support the continuation of this provision. 

We are very encouraged by the support of H.R. 550 to date and urge its passage 

as part of any comprehensive energy legislation. The credit of 30% capped at $500 

per half kilowatt is just enough to encourage cost reductions and leverage early 

sales, yet not so much that we are installing technologies that are not yet ready 

for commercial introduction. 

Again, Plug Power thanks you for the opportunity to provide testimony and for 

your support to date of fuel cell tax credits. 

FUEL CELL DESCRIPTION 

A fuel cell is an on-site power generation system that electrochemically combines 

hydrogen with oxygen in the air to form electricity. Hydrogen fuel can be generated 

by electrolyzing water with low-cost off-peak electricity, or with electricity obtained 

from renewable sources such as solar, wind, or biomass. This makes such fuel cell 

systems highly efficient as well as environmentally friendly. The heart of stationary 

or portable PEM fuel cell system is the stack, which is comprised of the same technology as is used in most fuel cell vehicle applications. 

STATIONARY, BACKUP AND PORTABLE F UEL CELL BENEFITS 

• In backup applications, fuel cells can provide power for critical infrastructure 

such as communication systems and water utilities. 

• Fuel cells used in materials handling applications offer a clean and highly efficient alternative to the current battery solutions. 

• Fuel cell systems are designed to stringent standards developed by the telecommunications industry that qualify equipment under extreme environmental 

conditions and requires specific levels of technological resiliency including temperature extremes, wind-driven rain, altitude, earthquake and ballistics tolerance. 

• Fuel cell technology operates with very low audible noise, 60dba@1m, in stark 

contrast to traditional combustion systems, which typically operate at 70db@7m. 

• Our traditional central generation model for supply of power in the U.S. is failing to meet the needs of a growing economy with increasing demand for highquality power. There are weaknesses in both power generation and transmission and distribution infrastructure that can best be met with the new paradigm of distributed generation: placing the generating assets on site, where the 

energy is needed. Fuel cells will be an important technology component of our 

nation’s distributed generation portfolio as issues of energy security become 

more critical. 


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• When fueled by hydrogen from a renewable energy source such as solar, wind, 

or hydropower, or if the fuel source is bio-fuel like ethanol from plant wastes, 

CO2 emissions are net zero. 

• Fuel cells can provide highly reliable electricity. Some studies estimate that 

power quality and reliability issues cost our economy alone as much as 150 billion per year in lost materials and productivity, while others have reported estimates as high as 400 billion per year. 

• Unlike traditional combustion technologies, fuel cell systems are designed to require only one preventive maintenance call per year to ensure full capability 

and performance. 

• Because fuel cells provide electricity at the site of consumption, they reduce the 

load on the existing transmission and distribution system. Siting the fuel cells 

at the point of consumption also avoids the line losses (up to 15%) inherent in 

moving electricity and provides an alternative to costly and unattractive traditional power lines. Provides critical backup when grid power is unavailable due 

to weather related outages and can carry the load at the site of consumption 

until grid power is restored. 

A HYDROGEN ECONOMY 

Both stationary and mobile fuel cell systems are the ideal technologies to transition to a fully sustainable energy future based on hydrogen. Vehicular and stationary fuel cells, taken together, provide the impetus for development of a hydrogen 

infrastructure in the United States and move us to natural capitalism. This technology, like other innovative transportation options, is cursed with the ‘‘chicken or 

the egg’’ question. That is: what comes first, the infrastructure or the fuel cells? By 

developing both stationary and transportation applications with the ability to refuel 

on a small scale, demand can be generated by multiple product applications and 

provide a stronger incentive to develop a full-scale hydrogen infrastructure. By way 

of example, our company is exploring a home refueling station that would fuel, via 

hydrogen, the family automobile as well as provide the electricity and heat for the 

home. One can imagine the early adopters buying a fuel cell car and a home refueling station at the same time. 

f 

Statement of Technology Network 

Chairman Neal, Ranking Member English, and Members of the Subcommittee, on 

behalf of The Technology Network (TechNet), I am privileged to provide testimony 

on the important issue of energy and tax policy and specific issues related to the 

current framework of tax incentives encouraging the development of alternative 

sources of energy. 

TechNet was created in 1997 to shape public policy impacting U.S. innovation and 

technology leadership and today is the preeminent organization representing chief 

executive officers of the nation’s leading high technology companies. Chaired by 

John Chambers of Cisco Systems and John Doerr of Kleiner Perkins Caufield & 

Byers, TechNet’s CEO and senior executive members are the nation’s leading 

innovators in the fields of information technology, Internet and e-commerce, biotechnology, venture capital and investment banking. TechNet’s top priority is to foster public policies and private sector initiatives that maintain U.S. competitiveness 

and economic growth through innovation. 

Recognizing the nation’s energy and environmental challenges and the enormous 

potential of innovation as the solution to these challenges, TechNet established a 

Green Technologies Task Force comprising senior executives of leading innovation 

companies to identify key public policies and industry initiatives that will spur the 

development and adoption of new technologies to enhance energy efficiency, encourage use of renewable energy and protect the environment. 

The TechNet Green Technologies Initiative represents TechNet’s longstanding 

commitment to policies that strengthen the nation’s innovation-driven global competitiveness. 

Among the key recommendations of the TechNet Green Technologies Task Force 

is the need to adopt fundamental reform of federal tax policy with the goal of encouraging the development, commercialization and adoption of new energy technologies. 

We appreciate the Subcommittee’s leadership in exploring how tax policy can 

more effectively drive innovative green technologies and alternative sources of energy. Indeed, we believe this should be among Congress’s leading priorities because 


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of the tremendous potential that such policy changes hold for U.S. economic competitiveness, national security and the global environment. 

Several provisions of the current tax code provide incentives for investment in 

anddeployment of renewable energy sources or alternative fuels. These include: 

• Production Tax Credit, providing a 1.5-cent/kWh credit for wind, solar, geothermal, and ‘‘closed-loop’’ bioenergy facilities (adjusted for inflation, the 1.5 

cent/kWh tax credit is currently valued at 1.9 cents/kWh). • Investment Tax Credit, providing a federal income tax credit worth 10% of initial investment cost for certain solar, geothermal, or qualifying biomass facility 

and a 30% credit for some solar or fuel cell investments and residential projects, 

with various caps applying to different applications. • Volumetric Ethanol Excise Tax Credit (VEETC), providing ethanol blenders and 

retailers with .0051 per percentage point of ethanol in the blend on a volumetric 

basis (E10 is eligible for $.051/gal). VEETC also provides a credit of $.01 per 

percentage point to blenders of two types of biomass-derived diesel fuels fattyacid methyl esters derived from virgin oils/fat and diesel derived from biomass 

via a thermal depolymerization process), and $0.005 per percentage point to 

blenders of fatty-acid methyl esters derived from recycled oils/fats. 

We applaud the leadership of this Subcommittee in advancing these incentives. 

They are an important first step in securing our nation’s energy future. However, 

more remains to be done. 

Federal incentives including tax credits, loan guarantees and other programs are 

critical to the early success of energy technology projects which in many cases incur 

substantial up-front costs to generate electricity in lieu of high ongoing fuel costs. 

Investors or consumers face significant capital investments to develop or install 

such technologies, creating a need for creative financing solutions particularly for 

larger-scale commercial installations. 

The convergence of computing, communications and data; digital technologies and 

broadband-enabled networking that has revolutionized industries from communications to e-commerce to manufacturing to finance is beginning to transform the energy sectors in the United States and abroad. Technologies that were unimaginable 

ten years ago are widely available today. 

The federal tax code’s existing incentive programs, however, have not kept pace 

with the dramatic rate of technological advances. The current tax code is not optimally designed to spur the development of new technologies. We believe that they 

comprise a level of incentives that is not strong enough to drive substantial new investment or significantly change consumer behavior. As a result, their impact on 

cutting edge innovations has been limited by constraints including the timeframe 

and structure of these incentives. 

As a fundamental matter the current federal tax code has historically favored conventional fossil fuels, which have received billions of dollars in federal subsidies 

each year. According to General Accountability Office data, the U.S. petroleum industry received between $134.9 and $149.6 billion in tax incentives between 1968 

and 2000, as a result of various programs including expensing of exploration and 

development costs, alternative fuel production credits and other incentives. Predicted benefits to the oil and gas industries resulting from just the incentives included in the Energy Policy Act of 2005 totaled $6 billion. 

Because current tax incentives are structured in a manner that continues to advantage traditional energy sources, we believe that federal tax policy will not significantly change patterns of energy production or consumption unless we commit to 

a fundamentally new approach. 

To be truly effective in addressing our nation’s critical energy challenges, our tax 

system must be modernized so that it accelerates the rate of change for bringing 

energy technology solutions to market. Significant reform is necessary even to 

achieve parity in terms of the support for new technologies relative to incumbent 

energy sources, but we should do more. 

Similar efforts by other nations have yielded substantial results. Comprehensive 

and strategic policies to create sustainable markets for renewable energy technologies have had far-reaching success in Germany, Spain, Japan and other nations 

that now benefit from robust alternative energy industries. In each case, an unwavering high-level commitment to a fundamental shift in strategy has led to sustained 

investment in and adoption of new energy technologies. 

Achieving fundamental reform of our current tax system will be a complex undertaking that demands thoughtful and detailed policy change. We believe, however, 

that we can and must do more to expand markets for innovative technologies and 

to accelerate the development of new innovations through technology-neutral tax 

policies. 


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Piecemeal programs and incentives will not drive fundamental changes in behavior necessary to change patterns of energy supply and demand. Above all, we need 

a comprehensive, strategic and sustained approach to tax policy that drives supply 

and demand for new energy technologies so that they are developed and utilized at 

a scale that can make a significant impact. 

We recommend the following reforms as a starting point for a new approach: 

1. Restructuring incentives to ensure market signals drive new technologies 

Structural issues significantly impact the effectiveness of existing tax programs 

in spurring new technologies. Our current tax code includes various alternative energy incentive programs, each of which applies to certain specified energy technologies but not to others. 

Some of these incentives are subject to caps and other specified limitations. For 

example, federal law currently provides a 30% investment tax credit for solar installations, but residential systems are capped at $2,000 under the credit. As a result, 

even modest residential solar installations receive relatively little incentive under 

the program. 

Similarly, the investment tax credit includes a $1,000 per kilowatt cap for fuel 

cells for both commercial and residential installations. In addition, incentives for 

manufacture of fuel-efficient vehicles impose an annual cap on the number of eligible hybrid vehicles. 

Tax incentives for alternative fuels are similarly structured to encourage specific 

technologies rather than technologies that meet performance goals. Tax incentives 

are available to companies (including oil companies, fuel distributors and others) 

that blend biofuels with conventional fuels for distribution. Existing credits apply 

to alcohols, fatty-acid methyl esters and diesel derived from biomass using a thermal depolymerization process. 

Existing credits for biofuels are based on volumetric blend percentages (i.e. the 

percentage of biofuel in the finished fuel). Using a volumetric basis grants an advantage to relatively low energy content fuels despite the advantages of higher energy 

content fuels that include increased range and lower emissions. As a result, current 

tax incentives favor less energy dense fuels such as ethanol over fuels with higher 

energy content such as butanol and other high-alcohol content fuels. 

In addition, novel biofuels that do not fall within the chemistries or processes 

specified within the tax code are not eligible for the tax credits. These include such 

promising technologies as biomass derived and biochemically produced hydrocarbons. Furthermore, biofuels derived from feedstocks that result in significantly 

lower greenhouse gas emissions are not granted any additional incentive over those 

derived from conventional feedstocks. 

In short, current tax policy picks winners and losers. The structure and value of 

existing incentives is not driven by an overarching strategy to impact energy security or reduce harmful emissions but is primarily a reflection of the political clout 

of various industry sectors or even individual companies. 

Federal tax policy can be significantly more effective in addressing national energy and environmental priorities by driving new technologies if it is restructured 

in a manner that encourages a range of innovative technologies and enables the 

market to drive the growth of these technologies. 

We recommend the establishment of robust, long-term incentives that are available to promising technologies that meet specified performance-based criteria. Such 

criteria may include, but are not limited to, minimum efficiency standards, reduced 

emissions of greenhouse gases or other pollutants, low-emissions or low-fossil fuel 

reliance in production processes, reduction in petroleum usage and similar factors 

consistent with energy and environmental policy goals. 

We believe that certain novel approaches to achieving market-driven incentives 

also merit consideration. Linking federal support for biofuels to changes in the price 

for oil, for example, will cause tax incentives for biofuels production to increase as 

oil prices decrease. This approach will enable alternative fuels to compete more effectively, while preserving federal support when it is not needed (i.e. when oil prices 

rise to a point at which biofuels are competitive). 

2. Long-term, consistent approach 

To drive substantial private sector investment, we need stable, long-term and predictable incentives. We support a minimum 5-year timeframe for clean energy tax 

credits. 

We believe this is the minimum amount of time necessary to enable rational investment decisions and a reasonable period of time given budget constraints that 


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impact tax policy. This minimum timeframe will allow for economies of scale in the 

development, deployment and cost of renewable energy sources. 

The federal regulatory environment’s support for energy technologies can be significantly improved by establishing consistency and predictability. The effectiveness 

of existing incentives is significantly limited in driving development of projects with 

long lead time, particularly given the pace of development and consumer adoption 

of energy technologies. In most cases, existing tax credits or incentives are shortterm, piecemeal programs subject to the uncertainty of the Congressional reauthorization and/or appropriations processes. For example, the production tax credit for 

renewable energy, established in 1992, has been subject to three expirations and 

several short-term extensions (some retroactive), most recently through December 

2008. 

Energy policy and its urgency have fluctuated with changing energy prices. A 

sound national energy strategy must include long-term, stable policies that accelerate development and adoption of new technologies including next-generation technologies. 

3. Consumer incentives that change patterns of demand 

The federal tax code can do more to change consumer behavior consistent with 

the development and commercialization of new technologies. The tax code can significantly change consumer behavior, driving demand in pace with supply, by shortening the payback period for installation or adoption of new technologies. 

Incentives currently exist for manufacturers and consumers of energy efficient appliances, including refrigerators and dishwashers. Industry has partnered successfully with the Federal Government for many years to establish effective marketbased programs and initiatives, such as the Department of Energy-Environmental 

Protection Agency Energy Star program, which have been effective in informing consumers about energy usage and encouraging the development of energy efficient 

products. 

Currently, some states offer generous incentives for consumer purchase and installation of energy technologies while others have no such incentives. Federal policy 

should establish greater consistency in consumer demand for energy technologies. 

4. Technology neutrality and support for a balanced portfolio of technology 

Solutions 

The importance of technology neutrality and the need to develop a portfolio of 

technology solutions that is balanced cannot be overemphasized. In particular, we 

note that more established energy technology solutions continue to make tremendous gains in cost reduction and effectiveness. These technologies, including solar, 

fuel cell and wind technologies, have not yet met their full potential. In the case 

of some established clean technologies, a lack of widespread consumer adoption has 

a counterintuitive effect of fueling consumer skepticism that should be addressed. 

To the greatest extent possible, federal policy should establish a level playing field 

through performance-based criteria that enable all promising energy technologies to 

compete. Ultimately, the marketplace should pick technology winners and losers. 

Conclusion 

There is an unprecedented degree of consensus today that our nation faces energy 

challenges that will impact our economic competitiveness, national security and the 

global environment unless we take significant steps to chart a sound energy future. 

Energy tax policy—and specifically, policies that encourage novel and innovative 

new energy technologies—is among the most important means of driving fundamental change in our energy supply and demand. We deeply appreciate the Subcommittee’s leadership and encourage your continued resolve to make bold changes 

that will enable us to surmount our nation’s critical energy and environmental challenges. TechNet is committed to supporting the Subcommittee in this important effort. 

Thank you for your consideration. 

f 

Statement of United Corrstack, Incorporated 

Introduction 

On behalf of United Corrstack, Incorporated (‘‘UCI’’), I am pleased to provide this 

statement in connection with hearings on energy tax policy conducted by the Select 

Revenue Measures Subcommittee on April 19 and 24, 2007. I wish to comment on 


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two objectives I believe are important for Congress to consider as it continues work 

on tax credits and other incentives for the development of alternative energy technologies. Those two objectives are, first, to ensure that tax credits will be available 

for a sustained period of time and, second, to ensure that a standard tax credit rate 

is available to as broad a spectrum of alternative energy technologies as possible. 

Several bills dealing with tax credits for alternative energy technologies have been 

introduced. H.R. 197, introduced by Rep. Earl Pomeroy, would extend the production 

tax credit for electricity produced by renewables for another five years. While this 

would be helpful, I recommend careful attention to two other bills, H.R. 1924, introduced by Reps. Kendrick Meek and Wally Herger, and H.R. 2001, introduced by 

Reps. Jay Inslee and Lee Terry. These would be particularly beneficial to my company, which is developing a biomass-fired cogeneration plant adjacent to our paper 

mill. However, I recognize that other technologies also deserve support and encourage the Committee to take a broad and equitable approach to encourage alternative 

energy technologies as it confronts the challenges of climate change, energy efficiency, the security of energy independence, and economic growth. 

Background on United Corrstack, LLC 

Before discussing the effect of the production and investment tax credit issues on 

our company, I first would like to describe our operations. United Corrstack (‘‘UCI’’), 

located in Reading, Pa., has been in business since 1993 and is a subsidiary of Interstate Resources, Inc. (‘‘IRI’’), a privately-held corporation based in Arlington, Va. 

that owns and operated several paper mill and package-making facilities throughout 

the eastern United States. UCI is a paper mill that produces recycled corrugating 

medium in a range of weights between 23 and 33 lbs. Our paper product is sold 

on a wholesale basis to many package-making facilities primarily within a 150-mile 

radius of Reading, Pa. Our annual sales are approximately 50 million. We have 75 

direct employees and our activities result in indirect fulltime employment of more 

than 30 other workers. Our direct employees work in a union shop, with union-scale 

wages and benefits. UCI prides itself on producing the highest quality paper, providing superior customer service and maintaining a strong and positive presence in 

the Reading area. 

Corrstack’s Energy Challenge 

Since we began operating, we have been 100 percent dependent on fossil energy 

purchased from local utilities. We purchase 9 MW per day of electricity from our 

local electric utility. In addition, we purchase approximately 5mm gallons No. 2 fuel 

oil or equivalent natural gas per year to heat the boilers that produce steam for our 

paper processing machines. 

In the first (8) years of our plant’s operation, the cost of electricity, oil and natural 

gas was reasonable enough that our operations were sufficiently profitable. However, during the past five years, our energy costs have nearly doubled. Last year 

alone, we paid more than $11 million for energy. Since our product is priced as a 

commodity traded on an open exchange, we cannot pass these higher energy costs 

onto our customers. These higher costs have cut into our margin, thereby challenging our plant’s profitability. 

We do not blame our local utilities for these higher costs since they are forced 

to pass on their own escalating wholesale costs to retail customers like us. Still, we 

found ourselves having to take action in order to maintain the employment and economic viability of our facility. 

Concurrently with rising utility costs burdening our facility, our region has had 

to deal with another problem, how to dispose of ever-increasing volumes of waste 

that for years has been transported to landfills both local and in other states. With 

these landfills now operating at near capacity, United Corrstack viewed these dual 

problems of higher energy costs and near-capacity landfills as a problem that could 

be turned into an exciting opportunity. 

Creating a New Path Forward 

We plan to break ground soon on a 30 MW biomass-fueled cogeneration plant that 

will allow us to generate our own steam and electric power for use in our paper mill 

in Reading, with excess power being sold to the local utility replacing additional fossil fuel generated electricity. The plant is expected to come on line in the third quarter of 2008. We expect that the successful operation of this plant will save our company approximately 3–4 million per year in natural gas and electricity costs. 

The proposed plant is the first of its kind in the northeast and is an innovative 

approach to clean energy. The facility will use a circulating fluidized bed (CFB) boiler for fuel flexibility, low emissions and high efficiency in a cogeneration process for 

maximum thermal efficiency. It will burn about 800 tons per day of biomass fuel 

from waste sources, including pallets, railroad ties, paper sludge, residual wood and 


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various construction and demolition residue. In addition, about three per cent of the 

waste to be used as fuel will be burlap and other wastes from the local Hershey 

Chocolate facility. Our goal is to reduce the consumption of purchased natural gas 

and No. 2 fuel oil by at least 85 per cent. 

The steam energy produced will be sufficient not only to serve our existing paper 

mill, but a new mill that we expect to construct within a few years. We also will 

have sufficient residual electrical power to sell to our local utility. We are bearing 

the infrastructure expense of constructing a new substation, interconnect equipment, and new transmission lines to accommodate that exchange of electricity. 

The production of power and steam in this new facility will be subject to strict 

environmental guidelines administered by the Pennsylvania Department of Environmental Protection. We expect the DEP to issue our permit in early June. 

Groundbreaking will take place shortly thereafter. The facility is expected to come 

on line in mid 2008. It will maintain 75 jobs and create up to 150 new jobs in the 

Reading area. 

The Value of the Production Tax Credit 

Under current law that expires at the end of 2008, we qualify for a modest production tax credit that would result in about $1.2 million per year. The rate under 

which we qualify is half the rate available to other renewable and energy efficiency 

technologies such as wind and geothermal. Also, current law only applies to half of 

the types of biomass, such as residual wood and pallets. 

The legislation proposed by Reps. Meek and Herger would help us by equalizing 

the production tax rate for open-loop biomass to the level that applies to wind and 

geothermal. However, even though the Meek-Harger bill would give us the full rate 

equivalency, it still would only apply to half the fuel we use since the definition of 

biomass under the current tax code is limited. 

The legislation proposed by Reps. Inslee and Terry takes a different approach. It 

would create a new classification under the tax code for combined heat and power 

sources and make it eligible for a 10 per cent investment tax credit. The InsleeTerry bill may benefit us more since the 10 per cent investment tax credit would 

apply to our entire production process. We understand that if both bills are enacted, 

we would have to choose which one is better for our facility. We would make that 

decision at the appropriate time. However, the Committee may wish to consider 

making both the investment and production tax credit provisions, or at least some 

elements of both provisions, available so that other worthy biomass-fired cogeneration plants can become more attractive to investors. 

We believe the cogeneration process we will use at our site merits equal treatment 

with these other sources. Beyond the help that either bill would provide us, however, there is another reason to encourage more of these facilities nationwide. 

The use of biomass fuel in a clean-burning, advanced technology combined heat 

and power (CHP) system such as the one we are developing at United Corrstack 

should be encouraged in any change to the tax code contemplated by Congress. The 

thermal efficiency rating of CHP systems exceeds 60 per cent while the thermal efficiency rating of conventional coal-fired utility plants rarely exceeds 30 per cent. This 

is because a CHP system utilizes excess steam for industrial process rather than 

let it escape into the atmosphere as is the case with conventional coal-fired plants. 

In addition, biomass has certain benefits that fossil fuels do not. Biomass is as 

dependable and plentiful a resource as the sun, wind and water. Biomass is carbon 

neutral because it creates its carbon by absorbing CO2 and, unlike typical fossil 

fuels, it contains very little sulfur and metals. If there is any drawback to biomass, 

however, it lies in how the biomass fuel is brought to the power plant. While there 

is a substantial interstate transmission pipeline system to ship natural gas and oil, 

there is no comparable long-distance shipping capability for biomass. We are negotiating with trucking companies that can bring us the biomass fuel we need for the 

next two to three years. Beyond that, however, we cannot be certain. Therefore, an 

increase in the production tax credit would provide protection for our capital investment by giving us a financial cushion to offset escalating transportation costs. 

Conclusion 

Our plant is unique in the northeast, not only because we are using biomass from 

local sources that otherwise would go to landfills, but because we are complying 

with the strictest environmental protection standards. We believe our facility will 

be a prototype that can be used elsewhere in the country. I want to emphasize that 

we have made the decision to proceed with construction of our biomass cogeneration 

facility regardless of whether the current tax credit provisions remain unchanged. 

Nevertheless, because of fuel supply and other risks we are taking, we strongly believe Congress should act to provide longer term stability in the provision of tax 


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credits for renewable, combined heat and power and other alternative energy resources. This not only would be good for United Corrstack, it would help the growth 

of alternative energy resources elsewhere. 

Thank you for the opportunity to provide these comments. 

f 

Statement of UTC Power 

UTC Power appreciates this opportunity to submit a statement for the hearing 

record on the impact of energy tax policy on advanced energy technologies. 

Summary 

Our comments regarding energy tax incentives are based on UTC Power’s portfolio of ultra clean, highly efficient, reliable onsite power generation technology solutions. While the technologies employed by our products are diverse, they are similar 

in their ability to address the nation’s need for clean, efficient, reliable, continuously 

available base load power. UTC Power’s onsite power generating equipment such as 

our PureCellTM, PureComfortTM and PureCycle systems compete against the well 

established and heavily subsidized electric grid. Distributed generation technologies 

such as ours offer enhanced energy security and stability. By splitting energy requirements between the electric grid and the natural gas grid, we provide our customers with an effective risk management strategy. 

From a policy perspective, UTC Power as well as our supplier base and customers 

purchasing any of our onsite power generation products would benefit from stable, 

long term government policies that provide meaningful levels of incentives over a 

known timetable for the maximum period possible. There are three specific federal 

energy tax incentives of interest to UTC Power that were included in the Energy 

Policy Act (EPAct) of 2005 and extended until 12/31/08: 

Sec 48 Fuel cell investment tax credit; 

Sec 48 Microturbine investment tax credit; and 

Sec 45 Geothermal production credit. 

In all three cases, the volumes for products associated with these incentives are 

low and potential suppliers and customers are risk adverse. Long term certainty 

and a meaningful level of incentive are absolutely essential. We urge Congress to 

pass legislation this year that provides long term extensions (a minimum of five 

years) for federal incentives that will assist in the commercialization of these products; make several revisions; and clarify key implementation issues. We support HR 

550 and HR 197 that provide more specifics on the extensions and revisions to the 

existing incentives that we endorse. 

Company Background 

UTC Power, a business unit of United Technologies Corporation (UTC) is a world 

leader in commercial stationary fuel cell development and deployment. UTC Power 

also develops innovative combined cooling, heating and power applications for the 

distributed energy market. Since 1991, UTC Power has installed more than 260 fuel 

cell systems in 19 countries around the world. UTC Power’s PureCellTM 200 system 

provides base-load power and can operate connected to or independent from the grid 

and also switch between modes automatically or on command. The PureCellTM 200 

system operates seamlessly during grid outages. Additionally, it is one of the cleanest power sources available today. 

UTC Power also develops innovative combined cooling, heating and power applications for the distributed energy market. One example is the PureComfortTM power 

solution, an ultra-efficient natural gas driven combined cooling, heating and power 

solution capable of satisfying energy needs with or without the grid. It is flexible, 

environmentally benign and can reach efficiencies in excess of 80 percent. 

PureComfortTM power solutions consist of microturbines and a double-effect absorption chiller/heater from our sister UTC division the Carrier Corporation. When a 

UTC Power system is integrated with a facility’s central heating or cooling system, 

the efficiencies can exceed 80 percent, resulting in substantial energy cost savings. 

In addition, UTC Power is developing an organic Rankine cycle product known as 

the PureCycle system for geothermal and other energy resources. This technology 

is in the development stage. We are partnered with Chena Hot Springs Resort outside of Fairbanks Alaska, the Department of Energy and Alaskan authorities in 

validating this exciting new geothermal technology. Operating with geothermal 

water at 165° F, this project has featured the use of the lowest temperature geothermal energy resource in the world. On April 12, 2007 we announced a series of 


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agreements with Raser Technologies of Provo, Utah to provide up to 135 

PureCycle systems for three Raser power plants. In total, these systems will generate approximately 30 megawatts of renewable electrical power. 

Energy Efficiency and Renewable Energy are Key to Meeting Increasing Energy Demands, But U.S. Policies are Not Adequate to Meet the Challenge 

A December 2006 Government Accountability Office (GAO) study entitled ‘‘Key 

Challenges Remain for Developing and Deploying Advanced Energy Technologies to 

Meet Future Needs’’ indicates: ‘‘U.S. electricity generation will grow from 3,900 billion kilowatt hours in 2005 to 5,500 billion kilowatt hours in 2030.’’ 

How will our nation meet this demand with minimal environmental impact? 

A recent report by the American Council on Renewable Energy ‘‘The Outlook on 

Renewable Energy in America’’ states that 500 to 700 gigawatts of new renewable 

energy supplies could come from U.S. renewable sources by 2025. The American 

Solar Energy Society also did a study ‘‘Tackling Climate Change in the U.S.: Potential Carbon Emission Reductions from Energy Efficiency and Renewable Energy by 

2030’’ and found U.S. greenhouse gas (GHG) emissions could be reduced between 

60–80% by 2050 if appropriate incentives were provided. 

Advanced energy technologies such as UTC Power’s PureCellTM, PureComfortTM

and PureCycle systems face significant hurdles in gaining acceptance including a 

risk adverse market and initial high costs driven by low volumes. We welcome the 

recent actions by Congress to provide incentives for fuel cells, microturbines and 

geothermal energy production in the 2005 Energy Policy Act (EPAct) and last year’s 

action to extend these three credits until 12/31/08. However, these efforts are not 

sufficient to address the challenges we face as a company, industry or nation. 

The GAO report concluded: ‘‘It is unlikely that DOE’s current level of R&D funding or the nation’s current energy policies will be sufficient to deploy alternative energy sources in the next 25 years that will reverse our growing dependence on imported oil or the adverse environmental effects of using conventional fossil energy. 

The report added: ‘‘In addition, the duration of certain federal tax incentive has 

been insufficient to stimulate investment decisions to deploy advanced energy technologies. . . . The credit’s duration is key to encouraging companies and their lenders to undertake the substantial investments and build an industry over time.’’ UTC 

Power’s experience in the marketplace confirms these conclusions. 

Fuel Cell Investment Tax Credit 

A fuel cell investment tax credit was established in EPAct 2005 for business and 

non-business property owners. It provides a credit of $1,000 per kilowatt installed 

cost or 30 percent of project cost, whichever is less. The original sunset was 12/31/ 

07, but this was extended until 12/31/08 in the Tax Relief and Health Care Act of 

2006. 

UTC Power is investing more than $100M total in a 5 kW fuel cell system for 

the critical back up power market and a new 400 kW stationary fuel cell product 

that will have twice the life and double the output at half the cost of our current 

PureCellTM 200 kW system. The PureCellTM Model 5 power system is currently 

available as a pre-production product with commercial availability in the 2008 timeframe. The PureCellTM 400 system is scheduled for market launch in early 2009. 

The fuel cell tax credit is set to expire just as these products will be entering the 

market which generates considerable uncertainty for us, our suppliers and potential 

customers. Extension of the credit this year is therefore critical to the commercial 

success of these products. 

In addition, there are a number of issues related to implementation of this new 

credit that require clarification including: the use of the federal credit in connection 

with state incentives; applicability to certain markets; transference of credits so non 

tax paying entities can access the incentives; and eligibility for customers located 

in U. S. territories. 

Microturbine Investment Tax Credit 

The microturbine investment tax credit was created at the same time as the fuel 

cell provision noted above for business property owners. It provides $200 per kW 

installed cost or 10 percent of total project cost, whichever is less. 

Our microturbine based systems provide cooling, heating and power. These products face the same risk adverse, low volume, high cost dynamics as fuel cells. Given 

the low emissions, plus high efficiencies of these systems and their ability to provide 

assured power, there is significant customer and public benefit in their deployment. 

Both fuel cells and microturbines share the same need for certainty and longevity 

with regard to federal financial incentives. 

In addition to the clarification issues associated with fuel cells, we also would seek 

a technical correction to the statute explicitly stating that the microturbine credit 


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applies to the entire combined cooling, heating and power system and not just the 

microturbine component. 

Geothermal Production Tax Credit 

The EPAct also made geothermal energy production eligible for the Sec. 45 federal 

Renewable Electricity Production Tax Credit (PTC). This incentive is adjusted for 

inflation and currently provides 2.0 cents per kWh for energy produced from geothermal resources. A taxpayer may claim credit for the 10-year period commencing 

with the date the qualified facility is placed in service. 

Many geothermal projects take years to develop. The PTC timeframe is too short 

for most geothermal projects to be completed by the current placed in service deadline. We support the Geothermal Energy Association’s position that ‘‘To achieve sustained geothermal development, Congress should immediately amend the law to 

allow facilities under construction by the placed in service date of the law to qualify, 

and extend the placed in service deadline by at least 5 years, to January 1, 2014, 

before its expiration.’’ 

Longer Term Tax Credit Extension is Important Due to Length of Sales Cycles and Need for Certainty by Suppliers, Technology Developers, Investors and Customers 

Our experience in the onsite power generation marketplace indicates that sales 

cycle for these advanced technologies is typically 18–24 months. Tax credits of only 

two years duration therefore have limited value in supporting the commercialization 

of these technologies. 

Volumes for our onsite power generation solutions are low in these early years 

of the commercialization process. This translates into initial costs that are higher 

than conventional technology since overhead is spread over a smaller base. Low volumes also make it difficult to attract the needed supplier investment in capacity expansion, tooling and equipment since they face the risk of never returning a profit. 

These risks can be mitigated somewhat by the knowledge that federal incentives 

will be available to help defray the costs of initial product deployment and help promote market penetration. 

Our parent company, United Technologies Corporation (UTC) is one of the nation’s largest investors in R&D (3.2B in 2006) for products such as aircraft engines, 

helicopters, air conditioners, elevators and escalators that operate for decades. We 

need as much certainty as possible regarding government policies, regulations and 

incentives so we can deploy our assets for maximum public benefit and shareholder 

value. 

Smaller companies including many of our suppliers don’t have these advantages 

and therefore are even more vulnerable than we to market changes. Our suppliers 

have an even greater need for certainty if they are to make investments in tooling, 

facilities and equipment that will support our products. 

Conclusion 

Water never boils if the heat is turned on and off. Many have highlighted the 

problems associated with the uncertainties of tax credits of short duration and the 

‘‘on again off again’’ nature of the production tax credit. Testimony presented in a 

recent Senate Finance Committee hearing pointed out that five two-year tax credit 

extensions are not equal to one ten-year extension. There is a compelling need for 

assurances that government policies with regard to support for advanced energy 

technologies will be stable and consistent with a long term perspective. We urge 

Congress to enact the most robust and longest term extensions possible for these 

important advanced energy technologies so their benefits can be realized by mainstream America. 

Æ 


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