After the House and Senate passed bills including an extension of the alternative fuel mixture and biodiesel tax credit program, alternative fuel producers assumed that Congress would act quickly to put the legislation into a form that could be signed by the President.
It has been more than two weeks now, however, and still Congress has not reconciled the two bills.
House Ways and Means Committee Chairman Sander Levin (D-Mich.) is quoted by BNA Daily Tax Reports (March 23) to say that if lawmakers must hold a formal conference committee to settle differences on legislation extending expired and expiring tax cuts, it could be a long time before a compromise is reached.
Levin’s comments came the day after he told the House Rules Committee that it is “uncertain” when the House will consider the $31 billion extenders package (H.R. 4213), telling that panel the Senate-passed legislation has “many other provisions in it we need to consider within the committee and I’m thinking we’re going to have a conference committee and if we do I think the likely result is it will take considerable time to complete it.”
According to Levin, the House and the Senate used different offsets to pay for AFM and biodiesel tax cuts that expired December 31, 2009.
Until the bills are reconciled and signed by the President, the AFM and biodiesel tax credit remain in abeyance and the alternative fuel industry remains in limbo.
Senate Finance Committee Chairman Max Baucus, D-Mont., and Ranking Member Chuck Grassley, R-Iowa, last week released a draft of their Hiring Incentives to Restore Employment (HIRE) Act.
The bill contains a number of provisions intended to spark new hiring, including a social security tax holiday for workers hired during 2010.
Of interest to the renewable energy industry is the bill’s provision to extend the alternative fuel mixture credit for another year. The AFM credit, which expired December 31, 2009, was omitted from other tax extender bills submitted earlier, but under the HIRE Act would be extended through 2010.
The HIRE Act would also revise the definition of “liquid fuel derived from biomass” under 6426(d)(2)(G) to exclude black liquor. This Senate Finance draft version of this jobs bill differs from House legislation. The House Ways and Means extenders bill allowed the 6426(d)(2)(G) “liquid fuel derived from biomass” provision to expire as of 12/31/09. Both versions would also extend the cellulosic biofuel credit under Section 40 of the Internal Revenue Code and would likewise exclude black liquor from its definition.
The lapse of the alternative fuel mixture credit has created substantial problems for the biofuels industry and many plants were shuttered at the end of the year. New financings have come to a halt as project developers are waiting to see whether the tax credit program will be extended. Extending the excise tax credit program should re-start many of those plans.
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Out of Thin Air?
Joule Biotechnologies claims to be able to convert CO2 and sunlight directly into hydrocarbons with its custom engineered microbes, according to reports. According to the company’s press release:
“Joule is advancing a new, photosynthesis-driven approach to producing renewable fuels, avoiding the economic and environmental burden of multi-step, cellulosic or algal biomass-derived methods. The company employs a novel SolarConverter™ system, together with proprietary, product-specific organisms and state-of-the-art process design, to harness the power of sunlight while consuming waste CO2. Its pioneering technology platform has already been proven out with the conversion of CO2 into ethanol at high productivities, a process that enters pilot development in early 2010. With this latest feat of genome engineering, Joule is now capable of directly producing hydrocarbons – setting the stage for delivery of infrastructure-compatible diesel fuel without the need for raw material feedstocks or complex refining.
The breakthrough was made possible by the discovery of unique genes coding for enzymatic mechanisms that enable the direct synthesis of both alkane and olefin molecules – the chemical composition of diesel. Production was achieved at lab scale, with pilot development slated for early 2011.”
It’s an intriguing idea. Hydrocarbons are formed naturally through a combination of photosynthesis, decomposition, time and pressure. Chemically, it ought to be possible for a microbe to produce hydrocarbon molecules directly.
The company’s announcement says that they have demonstrated the process in a lab and plan to have a demonstration project in 2011. What remains to be seen is whether the fast-forwarding of nature’s processes that Joule’s method enables can be done on a profitable basis at scale. If it can, hold onto your horses.
Leaving on a Jet Plane?
Recent statements from representatives of the U.S. Air Force and the Department of Energy suggest that government leaders are focusing on the role of biofuels for aviation. The Air Force has announced a $2.5 million biofuel research facility at Wright-Patterson Air Force Base in Ohio. Biofuels Digest lists the players involved in developing biofuels for aviation applications.
Glut of Solar Panels Ending?
A research group that forecast a glut of solar panels through 2010 now believes that a surge in demand from German has taken up the slack and that demand is now catching up with supply. Prices for solar panels had dropped through much of 2009 as supplies exceeded sales but German and European purchases have picked up in late 2009 and prices seem to be stabilizing, according to reports.
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The U.S. Occupational Safety & Health Administration (“OSHA”) today released a report claiming that renewable energy is safer than ‘conventional’ power generation and that switching to renewable power generation could save up to 1,300 lives each year.
The OSHA report said that renewable energies should improve the health of the 700,000 U.S. workers in the energy sector, citing researchers from the Medical College of Wisconsin. Their research is published in the August 19 issue of JAMA, the journal of the American Medical Association. Steven Sumner, M.D. and Peter Layde, M.D., professor of population health and co-director of the Injury Research Center at the college, examined occupational health risks to workers in renewable energy industries compared to those in fossil fuel industries.
They pointed out the risk of workplace injury and death among energy workers is a hidden cost (or “externality”) of energy production. Externalities of energy production include problems ranging from damage to the general environment to adverse health effects caused by pollution, injuries, and fatalties. Sumner and Layde concluded that wind and solar energy appear to lessen injury risks because the energy extraction phase is minimized or eliminated in wind or solar energy production. Biomass, comprised of biofuels, organic waste, and wood derived fuels, currently accounts for more than half of U.S. energy renewable consumption and does not appear to offer a significant safety benefit to U.S. workers relative to fossil fuels, they found.
“The energy sector remains one of the most dangerous industries for U.S. workers. A transition to renewable energy generation utilizing sources such as wind and solar could potentially eliminate 1,300 worker deaths over the coming decade,” Sumner said.
The Miami Herald trumpeted in a headline yesterday, “Despite federal aid, new energy jobs slow to bloom.” The article claims that the recession has hit the renewable energy space just like the rest of the economy, so renewable companies are slow to hire.
That’s true, of course, but it’s not the whole story. Despite the unprecedented level of support given for renewables through the 2009 Recovery Act, including the Section 48 Investment Tax Credit and the extension of the biofuel excise tax credits, this kind of support is not enough for projects to get off the ground. Any developer looking to break ground on a new project still needs cash to bring the project online.
The expanded role of the Department of Energy and the Department of Agriculture in issuing guarantees for qualified renewable energy projects was supposed to be the catalyst that would bring renewable projects into fruition faster, but these programs have been painfully slow in coming. While DoE and DoA grants and guarantees are helpful, a project developer still needs to raise a substantial amount of cash equity to take advantage of them, only to then proceed through the guarantee application process.
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