500 attorneys 23 offices © 2008 cozen o’connor. all rights reserved. presented by: the business...

500 Attorneys • 23 Offices

www.cozen.com © 2008 Cozen O’Connor. All Rights Reserved.

Presented by:

The Business of Climate Change

Peter J. Fontaine, EsquireClimate Change PracticeCozen O’Connor

© 2008 Cozen O’Connor. All Rights Reserved. 500 Attorneys • 23 Offices • www.cozen.com

Overview

• Obama Energy/Climate Plan

• Recent Energy Tax Credit Legislation

• New Jersey Energy/Climate Plan • Regional Greenhouse Gas Initiative


A Few Slides About the “Science”

Source: UN IPCC 2007


Greenhouse Effect


Global Temperature Trend

Source: Pew Center


Sea-Level Rise

Source: Pew Center


Storm Frequency

Source: Pew Center


Greenhouse Gases

Source: Pew Center


Sources

Source: Pew Center


Transportation

Source: Pew Center


Obama Climate Plan

• Cap & Trade Program to reduce greenhouse gas emissions 80 percent by 2050

• Auction all allowances and reinvest proceeds in clean energy and transition relief.

• Re-engage with the U.N. Framework Convention on Climate Change (UNFCC).


Transportation

• Increase CAFE Standards 4% per year

• 1 Million Plug-In Hybrid Cars by 2015

• National Low Carbon Fuel Standard—10% by 2020

• 60 billion gallons advanced biofuels by 2030


Renewable Energy

• 10 % Renewable Electricity by 2012 and 25 percent by 2025.

• Invest in energy efficiency and reduce demand 15 percent from projected levels by 2020.

• Weatherize one million homes annually for 10 years.

• Clean Coal Technology (Carbon Capture and Sequestration (CCS))


Renewable Mix

Source: EIA, 2007 Data


Emergency Economic Stabilization Act of 2008 (H.R. 1424)• $700 billion “bail-out” package passed October 3,

2008

• Extended and enhanced critical tax credits for financing renewable energy projects (Energy Improvement and Extension Act of 2008 attached to package)

• Production Tax Credit (IRC 45) extended – wind extended through 2009– geothermal, solar, biomass, trash-to-energy

extended through 2010– new PTC for marine and hydrokinetic

renewable energy systems (also called advanced water power systems)


Solar Energy Big Winner

• Solar energy 30% Investment Tax Credit (ITC) extended 8-years (through 2016) for residential and commercial solar installations

• Elimination of the $2,000 tax credit cap for residential solar electric installations

• Projected to produce – 440,000 jobs – $325 billion in private investment – 28 gigawatts of solar power

• Electric utilities can now take advantage of ITC


Other Winners

• Small wind (100 kw or less) gets a 30% ITC capped at $4,000, good through 2016

• Fuel cells and microturbine ITC extended through 2016

• Fuel cell ITC tripled to $1,500 for each 0.5 kw of capacity

• Combined heat and power systems and geothermal heat pumps get new 10% ITC capped at $2,000

• Smart meters and smart grid system utility investments get accelerated depreciation


Energy Efficiency

• Energy efficiency tax deductions for commercial buildings through 2013

• Similar deductions for home improvements installed in 2009; new $300 tax credit for energy-efficient biomass fuel stoves

• ITC for builders of new energy-efficient homes extended through 2009

• Manufacturers of energy-efficient appliances extended through 2010


Electric Vehicles• New tax credit of up to $7,500 for plug-in hybrid vehicles

– $2,500 base credit, $417 for each kWh of battery capacity above 4 kWh

• Electricity included for first time in existing 30% ITC for alternative fuel vehicle refueling equipment

• EV charging stations get credit

• Fast-charge technology can recharge EVs in 10 minutes

• EVs to penetrate rapidly and transform transportation as we know it

• Drastic reduction in CO2 emissions– Even if charged with coal-based electricity emit EVs reduce CO2

emissions by 61% over gasoline vehicles (175 g/CO2/mile vs. 450 g/CO2/mile)

– PHEV-20's charged with coal-based electricity still emit 28% less CO2, well-to-wheels, than IC vehicles (325 g/CO2/mile vs. 450 g/CO2/mile), plus a variety of conventional pollutants

• Need to include them in cap & trade through “lifetime bonus allowance set-aside”


Other Tax Benefits• Alternative Minimum Tax income limits increased to

enable individuals to take advantage of all the tax credits

• Unused energy tax credits can now be carried over to the next tax year

• $800 million in Qualified Energy Conservation Bonds authorized for state and local governments to help finance energy efficiency improvements

• Bonds can be applied to a wide range of energy efficiency projects, research and demonstration projects, and even renewable energy projects

• Qualified green building and sustainable design projects qualify for bonds through 2012


Carbon Sequestration Credits

• $1.5 billion in new tax credits for advanced coal electricity projects (Section 48A) and certain coal gasification projects (Section 48B) that demonstrate CCS

• $1.25 billion for advanced coal electricity

projects and $250 million for coal gasification • Tax credits will be awarded by Treasury

through an application process

• Once credits awarded, recipients failing to meet these minimum levels of carbon capture and sequestration would forfeit the credits.


Carbon Capture Credits for Industrial Facilities

• $10 credit per ton for the first 75 million metric tons of CO2 captured and transported from an industrial source for use in enhanced oil recovery

• $20 credit per ton for CO2 captured and transported from an industrial source for permanent storage in a geologic formation.

• Qualifying facilities must capture at least 500,000 metric tons of CO2 per year.


New Jersey Energy Master Plan


Energy Efficiency Goals

• Energy efficiency central tool of plan

• Reduce energy consumption at least 20% by 2020

• Amend statewide building code to increase efficiency of new construction by 30%

• Improve energy performance of 300,000 buildings each year between now and 2020


Renewable Energy Goals• Increase Renewable Portfolio Standard to 30% by

2020 (current RPS requires 22.5% renewables by 2020)

• Solar energy goals to increase from a percentage of 2.12% to a goal of 2,120 GWh by 2020, ensuring that reductions in energy consumption do not suppress solar energy development

• Will increase solar installations by 1300 MW

• Wind energy to include at least 1000 MW of offshore wind by 2012, 3000 MW of offshore wind and at least 200 MW of onshore wind by 2020

• 900 MW of new biofuels and biomass (not incineration) as part of the State’s 2020 RPS

• Carve-out of 50 MW of other new and emerging renewable energy technologies


Reduce Peak Demand

• Expand incentives for participation in regional demand response programs

• Involve electric utilities in developing and implementing demand response programs

• Target all commercial and industrial customers with a peak demand of 500 kW or greater for reduction in peak demand and continue to develop incentives


Infrastructure Investment

• 1500 MW of combined heat and power cogeneration facilities by 2020

• Electric and gas utilities to develop master plans through 2020 to implement smart grid technologies and modernize the electricity grid


Pennsylvania Energy Plan• HB 1: Pennsylvania to invest $665.9 million into renewable energy sources

– $650 million Alternative Energy Investment Loan Fund • $237.5 million targeted to electricity conservation• $428.4 million targeted to alternative energy resources

– $100 million to provide loans, grants and rebates that cover up to 35 percent of the costs residential consumers and small businesses incur for installing for solar energy technology;

– $80 million in grants and loans for economic development projects in the solar sector;

– $40 million to the Ben Franklin Technology Development Authority to support early stage activities, such as incubator support services, translational and early stage research in startup businesses that develop and implement energy efficiency technologies;

– $25 million for wind energy and geothermal projects; – $25 million for green buildings to help build energy efficient structures and renovate existing buildings to improve

its energy efficiency; – $40 million ($10 million annually for four years) to support low-income customers manage higher energy prices,

severe weather conditions, or disasters; and – $25 million for pollution control technology to help energy generators meet state and federal standards.– $150 million allocated over eight years, with $20 million annually through 2014-15 and another $10 million in

2015-16 that will include: • $92.5 million so homeowners and small business owners can cover 25 percent of the cost of purchasing and installing

energy conservation tools and weatherize their buildings; • $50 million in tax credits of up to $1 million a year per project for developing and building alternative energy projects,

which will help Pennsylvania companies invest and grow here; and. • $5 million to support an Energy Efficiency Loan Fund through the Pennsylvania Housing Finance Agency.


Demand Management• HB 2200: Mitigates $4 billion impact of rate caps

expiring in 2011 in five utility service territories, PPL, Allegheny Power, MetEd and Penelec

• Utilities required to work with customers to cut electricity use 1% by 2011 and 3% by 2013.

• By 2013, utilities must cut energy use 4.5% during peak demand periods or face steep penalties

• Utilities directed to offer customers new pricing plans that reward customers who shift heavy use to off-peak hours

• “Smart meters” installed in all homes and business within 15 years.


Smart Grid Investment

• require that every home and business in the state to be equipped with “smart meters” within 15 years. A smart meter gives consumers the information they need to better control their energy consumption, such as the current cost of power or whether they are in a peak rate period. Armed with this information, consumers can choose to use energy when it is cheapest and cut back at times when it is most expensive.


Northeast Regional Greenhouse Gas Initiative (RGGI)

• 10 state regional cap & trade program to reduce CO2 emissions from 758 power plants >25 MW

• DE, NJ, NY, CT, MA, RI, NH, VT, ME, MD

• Implemented through interstate MOU

• RGGI states significant sources of greenhouse gases in global context

• Combined CO2 emissions of 527 MMTCE-- roughly same as U.K.


Offsets

• Reductions in CO2 by sources outside the “cap”

• Covered sources can purchase “offsets” generated by greenhouse gas emission reduction projects

• Use of offsets expands RGGI participation beyond Covered Sources, and provides an incentive for the most efficient reductions


RGGI: Five Offset Types

• Landfill Methane Capture and Destruction

• Reduction in Emissions of Sulfur Hexafluoride (SF6)

• Carbon Sequestration from Afforestation

• CO2 Reductions from Increased End-Use Energy Efficiency

• Avoided Methane Emissions from Agricultural Manure Management Operations


End-Use Energy Efficiency Projects

• Energy efficiency improvements to buildings, water heating systems, and other systems

• Projects must meet minimum performance standards

• Market penetration requirements must also be met—”additionality” requirement


For more information, please contact:

Peter J. Fontaine(856) 910-5043

[email protected]://www.cozen.com

500 attorneys 23 offices © 2008 cozen o’connor. all rights reserved. presented by: the business...

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