Renewable Energy Policy: Tax Credit, Budget, and Regulatory Issues

Publication Date: July 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Energy

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Abstract:

High gasoline and natural gas prices have rekindled interest in the role that renewable energy may play in producing electricity, displacing fossil fuel use, and curbing demand for power transmission equipment. Also, worldwide emphasis on environmental problems of air and water pollution and global climate change, the related development of clean-energy technologies in western Europe and Japan, and technology competitiveness may remain important influences on renewable energy policymaking.

The Bush Administration's FY2007 budget request for the Department of Energy's (DOE's) Renewable Energy Program seeks $359.2 million, which is $84.0 million, or 30.5%, more than the FY2006 appropriation. In support of the President's proposal for an Advanced Energy Initiative (AEI), the request includes major funding increases for solar energy (to support the Solar America initiative) and biomass (to support the Biorefinery Initiative). The main increases are for Solar Photovoltaics ($79.5 million) and Biomass ($59.0 million). Some significant cuts were also proposed, and the request sought to eliminate earmarks.

Appropriations actions by the House and the Senate Appropriations Committee have approved most of the requested FY2007 funding increases for AEI and greatly reduced earmark funding. Compared with House-passed funding, the Senate Appropriations Committee recommendation seeks an increase of $66.1 million (5%). Table 3 shows other differences, most notably those for Biomass & Biorefinery, Geothermal, Hydro, and Weatherization programs.

Important regulatory issues have surfaced for wind energy. A major debate has erupted over the safety and economic and environmental aspects of a proposal by Cape Wind Associates to develop an offshore wind farm near Cape Cod, Massachusetts. The parties to the debate are waiting for the results of a Department of Interior (DOI) environmental impact statement and a Coast Guard study of navigational safety aspects.

Also, concern that large wind turbines may disrupt radar systems led to federal actions to halt several wind farm developments, pending the results of a study by the Department of Defense (DOD) that was due in early May 2006. In late June 2006, the Sierra Club filed suit to compel completion of the DOD radar study. An agency of the United Kingdom has studied modifications to turbines and radar systems that may help solve the problem. Also, high gasoline prices have stimulated a DOE proposal for aggressive development of cellulosic ethanol as an alternative to gasoline and corn-based ethanol. The focus is on using biotechnology to simplify processes and reduce costs.

This report replaces CRS Issue Brief IB10041, Renewable Energy: Tax Credit, Budget, and Electricity Production Issues, by Fred Sissine. It will be updated as events warrant.