Nuclear, Carbon Capture, and Energy Storage Advocates Happy; Co-ops Disappointed by Stimulus Package
Although provisions in the $900 billion stimulus package agreed to by Congress on Dec. 21 that will extend the solar investment tax credit (ITC) and the wind production tax credit (PTC) received the greatest publicity, lawmakers also authorized about $35 billion for clean energy research and development (R&D) programs focused on solar technology, advanced nuclear technology, geothermal, wind, energy storage, grid modernization, and carbon capture technology, including a large-scale carbon sequestration demonstration program. However, a key provision sought by the National Rural Electric Cooperative Association (NRECA) was not included in the package.
Support for Nuclear Power Initiatives
The bill specifically allots $1.5 billion for nuclear energy programs. Maria Korsnick, president and CEO of the Nuclear Energy Institute, said the funding shows the strong bipartisan support nuclear power has in the U.S. “This legislation demonstrates growing confidence in our nation’s largest source of carbon-free energy, while building on efforts to ensure nuclear energy is properly valued alongside wind and solar in the United States’ carbon-free energy future,” she said.
“By including key elements of the Nuclear Energy Leadership Act in this legislation, Congress has signaled its commitment to accelerating the deployment of next-generation nuclear reactor technologies. Funding for advanced reactor demonstrations, including small modular reactors and microreactors, will keep America competitive in this strategic sector,” Korsnick added.
Carbon Capture a Priority
The omnibus spending bill also includes a two-year extension of the 45Q tax credit. Section 45Q provides a tax credit on a per-ton basis for CO2 that is sequestered. From 2008 to 2018, an incentive of $20 per metric ton for CO2 geologic storage and $10 per metric ton for CO2 used for enhanced oil recovery (EOR) or enhanced natural gas recovery was available.
In February 2018, with the passage of the Bipartisan Budget Act of 2018, the tax credit was updated, increasing it to $35 per metric ton for EOR and $50 per metric ton for geologic storage by 2026. The $35 tax credit is also available for non-EOR CO2 utilization and direct air capture projects.
Brad Crabtree, director of the Carbon Capture Coalition, a nonpartisan collaboration of more than 80 businesses and organizations that work to promote carbon capture, removal, transport, use, and storage, issued a statement saying: “This omnibus legislation features a sweeping update and expansion of federal research, development and demonstration programs for carbon capture, removal, use and storage through inclusion of the bipartisan Energy Act of 2020, along with enactment of a 2-year extension of the 45Q tax credit, which are among the Carbon Capture Coalition’s top priorities in this Congress. While the Coalition’s other top priority of a direct pay option for 45Q did not make it into the final package, the measures included in the omnibus make this year-end legislation the most important accomplishment for carbon capture and removal since passage of the 2018 FUTURE Act that reformed and expanded the 45Q tax credit.”
Energy Storage Backed
The Better Energy Storage Technology (BEST) Act, which authorizes $1 billion over five years for federal innovation investments in energy storage technology research, development, and demonstration, was also incorporated into the year-end spending and relief package. Kelly Speakes-Backman, CEO of the Energy Storage Association, said inclusion of the BEST Act provides further proof of the bipartisan, bicameral support for energy storage to improve grid reliability and flexibility.
“Congress has recognized the critical role of energy storage in building a clean energy future,” she said in a statement. “In addition to elevating energy storage as a top, cross-functional R&D priority of U.S. Department of Energy, the BEST Act establishes a new competitive grant program for states, utilities, and private companies to deploy energy storage in a variety of applications. This demonstration program advances storage technology innovation and grid operations and sets the foundation for future storage deployments to protect our electric infrastructure against disruption as it enables a zero-carbon energy supply mix.”
Debt Refinancing Changes Not Part of Package
Not all groups were completely happy with the bill, however. While NRECA CEO Jim Matheson was thankful that support for electric co-op members and their communities was included in the year-end spending package, he expressed disappointment that lawmakers failed to waive pre-payment penalties for co-ops looking to refinance debt.
NRECA had been working since at least this summer to get a provision into a COVID-19 stimulus package that would allow electric cooperatives to reprice loans from the Rural Utilities Service (RUS) at current low interest rates without penalties. The change could have saved co-ops more than $10 billion, according to the NRECA.
During a media conference call that POWER participated in on July 20, Matheson said there was more than $40 billion of debt held by co-ops across the country. He said the RUS runs a “tremendously successful program” that makes money for the federal government because of a “remarkably low default rate on the part of electric cooperatives.” However, current rules charge co-ops a hefty prepayment penalty if they want to refinance debt.
“Other businesses across America, in the current environment of exceptionally low interest rates, have the opportunity to refinance their debt and take advantage of that cost of capital. But in the case of debt held by electric cooperatives with the Rural Utilities Service, the opportunity to realize the benefit of those lower interest rates is really precluded by the economic penalty associated with this prepayment penalty provision of the loan,” Matheson told POWER in July.
Still, the NRECA was happy with some of the actions Congress took on Monday. Among other things, the group specifically lauded the inclusion of $25 billion in rental assistance, including payments for utility bills, and the extension and simplification of the Paycheck Protection Program (PPP), allowing utility bills paid with PPP funds to be forgiven.
“There are many other elements of the bill that will support co-op members and their communities, and we are deeply appreciative that Congress has met these needs,” Matheson said.
—Aaron Larson is POWER’s executive editor (@AaronL_Power, @POWERmagazine).