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Huge virus, funding bill provides $35B for energy, extends renewable tax credits

During the early afternoon of Dec. 21, Congress unveiled its nearly 5,600-page bipartisan stimulus package and government funding bill that includes many energy provisions lawmakers have sought for months, if not years. Both the U.S. House and Senate are expected to vote on the bill late the same day.

The massive bill includes the Energy Act of 2020, legislation containing numerous energy bills that House and Senate negotiators sought to include in a spending package.

Senate Minority Leader Chuck Schumer, D-N.Y., said the proposal seeks to modernize energy innovation programs at the U.S. Department of Energy, authorizing $35 billion in federal research and development funding. He called the bill a "significant step in the right direction" in tackling the climate crisis.

"These wins mark a major victory in this difficult political environment for those of us fighting the climate crisis," Schumer said. "With Joe Biden in the White House, we'll have a leader on climate change and we'll have people that are working around the clock to fight this crisis."

Many of the provisions were included in major energy bills developed by the House and Senate in recent months. Their addition marks a significant milestone for outgoing Senate Energy and Natural Resources Committee Chairman Lisa Murkowski, R-Alaska, who has sought to pass many of the provisions during her time leading the committee.

"The Energy Act represents the first modernization of our nation's energy policies in well over a decade," Murkowski said. "This bipartisan package will foster innovation across the board on a range of technologies that are critical to our energy and national security, our long-term economic competitiveness, and the protection of our environment."

Billions in research funding

The bill includes billions in federal spending for energy research, development and commercialization.

If passed, the DOE would be tasked with creating programs focused on the research, development, demonstration and commercialization of wind and solar energy technologies, and finding ways to boost the energy efficiency, cost-effectiveness and reliability of those resources.

The federal government would also be charged with creating a program to support existing nuclear plants and prioritizing "designs for advanced nuclear reactors that are proliferation resistant and passively safe," according to the bill's text.

Billions would be devoted to carbon capture, storage and utilization.

For instance, the bill would require the establishment of a carbon capture technology program to "significantly improve the efficiency, effectiveness, costs, emissions reductions, and environmental performance of coal and natural gas use." As part of that program, the bill would help fund a research and development program, including large-scale pilot projects and commercial-scale demonstration projects involving two coal-fired power plants, two natural gas-fired power plants and two industrial facilities outside of the power sector.

The bill also calls for the research and development of direct air capture and storage technologies.

In addition, the measure seeks to help rebuild domestic critical mineral supply chains. It calls for a federal report on advanced separation technologies to extract rare earth elements from coal and a program to find alternatives for critical minerals the U.S. lacks. The package directs the government to draft a list of critical minerals to be updated every three years and to assess the nation's critical mineral reserves.

Tax credit extenders

The legislation would extend key tax credits for renewable energy, including a one-year extension of the land-based wind power production tax credits at 60% of its full value and a two-year extension of the solar energy investment tax credit at 26%. The wind tax credit was set to expire after 2020, and the solar credit was scheduled to ramp down to 22% starting in 2021.

The new legislation would also create a new 30% investment tax credit for offshore wind projects that start construction from 2017 through 2025, and a new credit for projects that convert wasted heat to electricity.

"This bipartisan agreement is a major win for American energy consumers, providing more opportunities for them to receive reliable, zero-carbon, and pollution-free electricity in their local communities," said Heather Zichal, CEO of the recently launched American Clean Power Association.

The sprawling package would also extend the Section 45Q tax credit for carbon capture, utilization and sequestration projects, pushing back the deadline for new projects to begin by two years to Jan. 1, 2026. That provision, along with expanded research funding for carbon capture, makes the bill "the most important carbon capture and removal legislation since Congress reformed and expanded the 45Q tax credit in 2018," Carbon Capture Coalition Director Brad Crabtree said.

Agency asks

While the bill avoids emission-reduction mandates, it tasks federal agencies with a range of responsibilities related to the U.S. power sector.

Specifically, the bill would charge the U.S. Environmental Protection Agency with studying the technical feasibility of commercializing carbon dioxide for use in manufactured goods such as chemicals, plastics, fuelsand building materials. Under the legislation, the EPA is also required to "identify and assess" alternative uses for coal that result in net-zero emissions of CO2.

The measure would also set a national goal to site the development of 25 GW of renewable energy, including geothermal generation, on federal land no later than 2025. As part of that effort, the U.S. Department of the Interior would be directed to establish a national Renewable Energy Coordination Office responsible for expediting permitting.

Acknowledging the growth of electric vehicles, the bill provides funding for more research and development on vehicle-to-grid technologies. And the bill appropriates $211.7 million in DOE funding for grid resilience, including technologies capable of incorporating "growing amounts of clean energy," and requires the department to produce a report within two years that establishes performance metrics for electricity infrastructure providers.

Moreover, the bill would require DOE and the National Academies to work together to study the opportunities and challenges associated with the medium- and long-term impacts of net metering.

With cyberattacks on the rise, DOE would also be tasked with assessing the physical and cybersecurity risks associated with increasing levels of distributed energy resources, such as rooftop solar and behind-the-meter batteries.

The measure also would require the DOE to partner with Federal Energy Regulatory Commission and the North American Electric Reliability Corp. in producing a study on electricity access and reliability in tribal communities.

However, the bill does not include provisions sought by rural electric cooperatives to ease the impacts of the coronavirus. The legislation does not contain a proposal to waive prepayment penalties for electric cooperatives to refinance Rural Utilities Service debt at current low-interest rates, a policy change that the National Rural Electric Cooperative Association said could save its members more than $10 billion.

Finally, the package includes long overdue pipeline safety legislation that largely reflects a bipartisan Senate bill passed in August.