Bills would boost credits for kinetic, irrigation, incremental hydro

Senators introduced bills in January that would extend production tax credits to kinetic hydropower, expand the definition of qualified small irrigation hydropower to include more projects, and increase the tax credit amount for irrigation and incremental hydropower.

Kinetic hydropower

Sens. Gordon Smith, R-Ore., and Lisa Murkowski, R-Alaska, sponsored bills that would extend production tax credits to kinetic hydropower, primarily for ocean-based generation, but also to include free-flowing water in rivers and streams.

Amending the renewable energy production tax credits of the Energy Policy Act of 2005, Smith’s bill, S.425, defines kinetic hydropower as: ocean free-flowing water from tidal currents, ocean currents, waves, or estuary currents; ocean thermal energy; and free-flowing water in rivers, lakes, man-made channels, or streams. Eligible facilities could not include impoundment structures.

Murkowski’s bill, S.298, uses the same definition, but calls the category �Wave, current, tidal, and ocean thermal energy,� rather than �kinetic hydropower.�

The bills would make facilities that generate electricity using kinetic hydropower eligible for the production tax credit offered to most renewables under Internal Revenue Code Section 45. The tax credit amount, which was 1.9 cent per kilowatt-hour (kWh) in 2006, is adjusted for inflation and is roughly double the amount offered to incremental conventional hydropower and small irrigation hydropower, which was 0.9 cent per kWh in 2006.

Smith, a member of the Senate Finance Committee, cited the potential for kinetic hydro technology in Oregon, saying the state could install more than 200 MW of wave energy and transmit the electricity with no need for upgrades to the existing transmission system.

Murkowski’s bill offers an additional incentive to ocean energy, directing the secretary of the Department of Energy to make grants to eligible entities, to be determined by the secretary, to develop all forms of ocean energy, including wave, current, tidal, and thermal energy. The bill would authorize appropriations of $100 million for the grants.

Project in-service dates

Concerning project in-service dates, Murkowski’s bill would conform to the current law, which includes projects placed in service after enactment of the bill and before Jan. 1, 2009. Smith’s bill would change the 2009 date to 2011, giving time for additional projects to be developed. The credit would be available for ten years of generation.

In the 2006 Congress, Smith introduced a bill that would have extended the in-service deadline for all projects to Jan. 1, 2011. (HNN 4/10/06) However, at that time, Congress only granted an extension to 2009. (HNN 12/12/06)

Broader definition of small irrigation hydro

Murkowski’s bill also would expand the definition of small irrigation hydropower that currently is eligible for production tax credits, encompassing larger projects on a broader variety of water features.

Current law defines small irrigation hydropower to be a small facility that generates electricity through an irrigation system canal or ditch without a dam or impoundment. Installed capacity is limited to a maximum of 5 MW.

The Murkowski bill would increase the nameplate capacity of eligible small irrigation projects to 15 MW and would expand the eligible water features to include �lake taps, perched alpine lakes, or run-of-river with diversion.�

Incremental hydro, small irrigation credit increase

Smith, who was named the National Hydropower Association’s 2006 Legislator of the Year for his efforts to pass the original tax incentives for hydro, introduced another bill, S.411, that would eliminate the disparity in the amount of production tax credit offered to the various renewables technologies.

The measure would eliminate the provision that allows only half the full rate (currently 1.9 cents/kWh) for incremental hydropower, small irrigation hydropower, open-loop biomass, landfill gas, and trash combustion. Those technologies currently receive only 0.9 cent per kWh.

Incremental hydropower, added to the production tax credit law by the Energy Policy Act of 2005, includes additional generation resulting from efficiency improvements or capacity additions to existing plants or non-hydro dams. (HNN 12/28/05)

In December 2006 a bipartisan group of 42 senators called for President Bush to recommend extending the renewable energy production tax credit another five years, to 2013. The new Democrat-controlled House passed an energy bill Jan. 18 that would create a fund estimated at $14 billion for investments in renewable energy and energy efficiency. Staff said future legislation would determine whether hydropower would be among the renewables that would benefit. (HNN 1/19/07)

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