Utah Legislative Update, March 14, 2007

1. Utah Legislative Update, March 14, 2007 Phil Powlick, Manager State Energy Program Utah Geological Survey

2. Utah State Energy Program: Who Are We? • Housed within the Utah Geological Survey • Part of the Utah DNR • Spin-Off of old UT Energy Office • Promotes energy efficiency and renewable energy in UT • Anemometer Loans & Wind Resource Characterization • Public Outreach & Education on Renewables & Efficiency • Funds for Local Government Efficiency Upgrades (pilot) • Energy Information for Public and Policy & Program Development • Certify renewable energy tax credits • New – Revolving Loan Fund for public school efficiency

3. Background:Utah’s pre-2007 Renewable Tax Credits • Income tax credits (personal and corporate) for residential renewable energy systems • Eligible technologies = Wind, Solar PV, Active & Passive Solar Thermal, Hydro • Credit = 25% of cost up to $2,000 per residence (lifetime)

4. Background:Utah’s pre-2007 Renewable Tax Credits, continued • Income tax credits (personal and corporate) for commercial renewable energy systems • Eligible technologies = Wind, Solar PV, Active & Passive Solar Thermal, Hydro, Biomass, Waste Methane • Credit = 10% of cost up to $50,000 per structure • Structure could be a building, a turbine, or a solar water pump

5. Prior Tax Credit Statute Expired on December 31, 2006 • Old statute had 5-year sunset • Efforts to renew credits for another 5 years stalled in 2006 General Session • Wide support in committee but confusion over legislating the “flat tax” • Renewal bill dies in last hours of session

6. Initial Efforts to Revive Tax Credits • HB 30 (Rep. Allen) • Reauthorization of old credit system • Adds credit for direct-use geothermal and geothermal electricity • Expands UGS rulemaking authority • Discussed by Interim Committee • Does not receive committee review during General Session

7. SB 13 (Sen. Stephenson) • Adopts core of HB 30, but expands • Creates two tax credit mechanisms • Investment credits = fixed % of cost of system • Production credits = 0.35 cents / kWh produced for systems > 660 kW capacity • Adds more technologies • Ground source geothermal • Biomass for residential (but not for heating) • Committee amendment deletes 5-year sunset • Makes credits permanent

8. Progress of SB 13 • Senate committee expands and passes, 6-0 • Full Senate passes, 29-0 • House Revenue & Taxation – A Flat Tax Detour • Proposal to eliminate personal income tax credit; replace with sales tax rebate • Two hearings; confusion over operation of rebates • House committee votes 11-0 to keep bill moving; Supporters promise to fix before bringing to floor • SB 13 dies; passed by House with enacting clause struck • Rebirth – Senate-passed version of SB 13 inserted in SB 223 (comprehensive tax amendments bill) with 2008 effect • Senate floor amendment changes effective date to 2007 • SB 223 passes both chambers unanimously on Feb. 28

9. Overview of Final Bill: Renewable Energy Tax Credits • Residential Systems • 25% of reasonable costs of system up to $2,000 • $2,000 cap is lifetime for residence • Eligible technologies (new in red) • Active solar (thermal and PV) • Passive solar • Biomass (but not for heating; fuel or electricity only) • Direct-use geothermal • Geothermal heat-pump system • Wind • Hydro

10. Overview of Final Bill: Renewable Energy Tax Credits • Commercial systems – Investment Credits • 10% of reasonable costs of system up to $50,000 • $50,000 cap is lifetime for a single building, wind turbine, or agricultural water pump • Does not apply for wind, geothermal electricity, or biomass < 660 kW capacity • Eligible technologies (new in red) • Active solar (thermal & PV) • Passive solar • Geothermal electricity • Direct-use geothermal • Geothermal heat-pump • Wind • Hydro • Biomass (including landfill or sewer methane)

11. Overview of Final Bill: Renewable Energy Tax Credits • Commercial Systems - Production Tax Credits • Wind, geothermal electricity and biomass systems producing electricity • Must be > 660 kW capacity • Credit = 0.35 cents / kWh produced • Electricity can be sold or used • Credit may be claimed for four years after beginning operation

12. Overview of Final Bill: Renewable Energy Tax Credits • Production tax credit benefit scenario: Geothermal • Assume 25 MW capacity, 90% capacity factor • 8,760 hrs x .90 x 25,000 x $0.0035 = $689,850 per year • Over four years, $2.76 million

13. Overview of Final Bill: Renewable Energy Tax Credits • Production tax credit benefit scenario: Wind • Assume 200 MW capacity, 30% capacity factor • 8,760 hrs x .30 x 200,000 x $0.0035 = $1,839,600 per year • Over four years, $7.36 million

14. Overview of Final Bill: Renewable Energy Tax Credits • Other final bill features • SEP/UGS to define reasonable cost; may use capacity based definition • All credits permanently authorized • No five year sunset • Tax commission to review and report every five years • No cap on total amount or cost of credits awarded • UGS/SEP certifies credit eligibility

15. Next Steps • SB 223 awaiting Governor’s signature • UGS will write new rules in next few months • Defining reasonable costs for systems • Defining eligibility requirements for technologies not covered by old credits • Rules for claiming production tax credits • Other possible refinements, e.g. installation requirements, defining eligible equipment, etc. • Informed public input sought • Look for e-mails announcing

16. The End Contact Info: Phil Powlick, State Energy Program 801-537-3365 philippowlick@utah.gov