August 2005
Iowa and Washington Pass Progressive New Energy and Efficiency Laws
by Robert Olson  and Maria Reinemann --   Brown, Olson and Wilson, P.C.
(originally published by PMA OnLine Magazine: 2005/10/14)

Iowa and Washington have enacted progressive legislation intended to promote and encourage the development and use of renewable energy sources. The Washington incentive is by far the most progressive legislation passed in the United States thus far.

Washington
On May 6, 2005, the governor of Washington signed Senate Bills 5101 and 5111 into law. Senate Bill 5101 encourages development of small solar, wind, and anaerobic digester energy projects. The bill establishes production incentives of between $0.12 per kWh and $0.36 per kWh depending on technology and whether the equipment used to produce the electricity was manufactured in the State of Washington. Total yearly payments per project are capped at $2,000.00. Persons in the “light and power” or “gas distribution” business are not eligible to receive incentive payments.

The state’s utilities will pay the incentives to their customers and will receive a tax credit equal to the cost of those payments, not to exceed the greater of $25,000.00 or 0.025% of a utility’s taxable power sales. Should the requests for incentive payments exceed a utility’s tax credit, then the incentive amount will be uniformly reduced. Initially, the incentive will apply only to off-grid power sources until the state’s utilities adopt uniform interconnection standards, at which time the incentives will extend to grid-connected power sources. The incentives apply to power generated between July 1, 2005, and June 30, 2014.

Senate Bill 5111 supports the manufacturing of solar energy systems through tax incentives. The bill reduces the business occupation tax rate by 40 % for state manufacturers and wholesale marketers of solar photovoltaic modules or silicon components of those systems. Businesses claiming the tax credit have to file an annual report with the Department of Revenue by March 31 following any year in which the tax credit is claimed. Both bills took effect on July 1, 2005, and expire on June 30, 2014.

Iowa
On June 15, 2005, the governor of Iowa signed Senate File 390, a bill designed to encourage the generation of renewable energy by small energy producers in the state by providing a production tax credit. The bill establishes a tax credit for producers or purchasers of renewable energy by providing a credit of 1.5 cents per kilowatt hour of electric energy, $4.50 per billion Btus of heat used for a commercial purpose, or $1.44 per 1,000 cubic feet of hydrogen fuel. The total eligible name plate capacity is capped at 100 megawatts. Eligible wind energy cannot exceed 90 megawatts of name plate capacity with the remainder coming from any eligible energy source other than wind.

Wind turbine, anaerobic digester, biogas recovery, biomass conversion, and solar energy systems are eligible for the tax credit. Production must be located in Iowa and a majority ownership of the facility producing the power must be by an Iowa resident, farm corporation, limited liability company, trust, small business, electric co-op, or school district. There must be one such owner for each 2.5 megawatts of eligible electricity or its equivalent. The energy must be produced for the power-grid. The credit cannot be claimed for electricity produced and used solely by the producer. To earn the tax credit, a producer must have a signed agreement for the purchase of its energy product which can be in the form of electricity, biogas, hydrogen or heat for commercial purposes.

The bill applies to new facilities that began operating after July 1, 2005, and before January 1, 2011 and such new renewable energy facility can earn tax credits for up to ten years. A purchaser of renewable fuel may receive a tax credit certificate for ten years after the date of purchase but tax credit certificates shall not be issued after December 31, 2020. Renewable energy tax credit certificates may be transferred to any person but may be transferred only once. The tax credit may be applied toward payment of a number of state taxes.

The Iowa Utilities Board is charged with administering the tax credit program. It adopted emergency rules on June 21, 2005 to allow interested parties to apply for renewable tax credits effective immediately.
 

Robert A. Olson is a partner in the law firm of Brown, Olson & Gould P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions. He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301

rolson@bowlaw.com | (603) 225-9716