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Type: Law Bulletins
Date: 01/22/2021

Consolidated Appropriations Act, 2021: Modernizing US Energy Policy

The Consolidated Appropriations Act, 2021 (Appropriations Act) was signed into law on Dec. 27, 2020. Division Z of the Appropriations Act contains the Energy Act of 2020 (Energy Act) – the first major, comprehensive modernization to U.S. energy policy in over ten years. The Energy Act includes over $35 billion for energy initiatives and covers a broad array of topics, including energy storage; carbon capture, utilization, and storage; carbon removal; grid modernization; incentives to spur investment and new initiatives to promote research and development; and emissions from a wide range of sources from industry to federal buildings. The Energy Act also includes a range of measures that will improve energy efficiency and brings administrative reforms to improve the U.S. Department of Energy (DOE). Underlying the Energy Act is a desire to address greenhouse gas emissions through a combination of energy efficiency and renewable and clean technology measures while keeping energy affordable.

In addition to the Energy Act of 2020, the Appropriations Act also includes the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (2020 Taxpayer Act) under Division EE, which extends certain renewable energy and alternative fuels tax credits that were on the verge of expiring, and incorporates other changes to energy tax-related provisions. 

The Appropriations Act also reauthorizes funding for federal pipeline safety programs through the Fiscal Year 2023 through the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2020 (PIPES Act of 2020) under Division R.

Below are a number of key provisions related to the energy industry included in the Appropriations Act.

Energy Act of 2020

The directives of the Energy Act are divided into the following eleven separate titles:

Energy Efficiency

  • Creates programs that encourage the use of energy and water efficiency measures in schools, federal buildings, and data centers, including the use of smart meters.
  • Directs the secretary of energy to establish a rebate program to replace electric motors and transformers that are inefficient.
  • Reauthorizes the Weatherization Assistance Program through 2025 for eligible low-income households.

Nuclear

  • Reauthorizes the DOE’s nuclear research and development activities, including for advanced fuel, advanced reactors, used fuel technologies, and the integration of nuclear energy systems.
  • Authorizes an advanced reactor demonstration program.

Renewable Energy and Storage

  • Supports research and development for water power technologies including marine energy, conduit power, and pumped storage technologies; advanced geothermal energy systems; wind energy including onshore, offshore, and distributed technologies; and solar energy including photovoltaic, heating and cooling, and concentrating solar energy technologies to further grid integration.
  • Requires the creation of a program to improve interagency cooperation for solar, wind, and geothermal permits on federal land and requires the implementation of national goals for wind, solar, and geothermal energy production on federal lands.
  • Focuses on the development of energy storage technology and a national energy storage strategic plan.
  • Establishes an energy storage and microgrid grant program for rural electric cooperatives and public utilities to assist with identifying, evaluating, designing, and demonstrating energy storage technology and microgrid projects that use energy from renewable sources.

Carbon Management

  • Supports the reduction of carbon emissions from fossil fuels, including the development of carbon removal and utilization technologies, products, and methods to create net reductions in greenhouse gas emissions through a carbon capture technology program.
  • Establishes a research, development, and demonstration program for carbon storage validation and testing.
  • Supports a research, development, and demonstration program to improve the efficiency of gas turbines used in power generation systems and aviation, and reduce the environmental impacts of produced water used in oil and gas development sites.
  • Requires a study on the benefits of blue hydrogen technology and how that technology can further enhance the impacts of carbon capture and storage.

Carbon Removal

  • Establishes a research, development, and demonstration program to examine large-scale carbon capture technologies.
  • Authorizes a Carbon Dioxide Removal Task Force and report identifying how the federal government can advance the implementation of carbon dioxide removal projects.

Industrial and Manufacturing Technologies

  • Encourages the development of new technologies that increase U.S. industry and manufacturing competitiveness, while decreasing the emissions of non-power industrial sectors.
  • Establishes the Industrial Technology Innovation Advisory Committee to develop a strategic plan for reducing industrial emissions.
  • Authorizes the creation of a program to provide technical assistance to promote the commercial application of emission reduction technologies.
  • Requires the development of a national plan for smart manufacturing technology development and deployment.

Critical Minerals

  • Promotes access to critical minerals that are important to the development of energy technology.
  • Establishes a secure and robust critical mineral supply chain.
  • Requires the study of and a report on the investment in critical minerals by China under China’s Belt and Road Initiative.

Grid Modernization

  • Emphasizes grid modernization through research and development of emerging technologies that promote security and reliability of the grid; technologies to improve sensing, monitoring, and visualization of the grid; interoperability of emerging technologies with existing grid infrastructure; operation and controls of the grid; underground transmission and distribution lines; integrating renewable energy and electric vehicles onto the electric grid; and developing cost-effective integrated energy systems.
  • Establishes a grant program for projects related to grid modernization, including distribution system technologies.
  • Provides for the establishment of microgrid and integrated microgrid development programs to increase the resilience of critical infrastructure.
  • Directs the assessment of access to and reliability of electric service available on Indian land.
  • Requires the study of current challenges associated with net metering and a report on how net metering can be improved.

Department of Energy Innovation

  • Creates an Office of Technology Transition to improve the commercial impact of the DOE’s research investments and to advance technologies that reduce greenhouse gas emissions and other pollutants.
  • Establishes a Lab Partnering Service Pilot Program to provide services that encourage and support partnerships between the national laboratories and the public and private sector.
  • Reauthorizes the Technology Commercialization Fund.
  • Appropriates over $2.6 billion for research, development, demonstration, and commercial application activities within the Offices of Hydrogen and Fuel Cell Technologies, Vehicle Technologies, and Bioenergy Technologies.

ARPA-E Amendments

  • Reauthorizes Advanced Research Projects Agency – Energy (ARPA-E) to support projects addressing nuclear waste clean up and management and to improve the security and reliability of energy infrastructure, in addition to its existing missions, through amendments to the America COMPETES Act (42 U.S.C. 16538(b)).

Other Matters

  • Includes a number of initiatives, including a research program on the effects of low dose radiation, and authorizes FERC to modify compensation for individuals with specialized skillsets.

2020 Taxpayer Act

  • Extends the Production Tax Credit (PTC) by one year (from Jan. 1, 2021, to Dec. 31, 2021). The PTC will remain at 60% for wind projects that begin construction by the end of 2021. The 2020 Taxpayer Act further extends the PTC for other renewable energy facilities including geothermal, biomass, landfill gas, certain hydropower, and marine and hydrokinetic facilities so long as those facilities also begin construction before the end of 2021.
  • Extends the current Solar Investment Tax Credit (ITC) at the 26% rate for two more years (from Jan. 1, 2021, to Dec. 31, 2022). The rate will be reduced to 22% for projects that begin construction by the end of 2023, and then fall to 10% in 2024.
  • Provides a tax incentive in the form of a five-year, 30% ITC for offshore wind facilities placed in service in inland navigable waters and U.S. coastal waters. The offshore wind ITC is not subject to a sunset period.
  • Establishes a 30% ITC for waste-heat-to-energy facilities that begin construction before 2024. This is different from the historically-available cogeneration tax credit and will be available only for 50 MW or smaller facilities producing electricity from waste heat generated by buildings and equipment not primarily used to produce electricity. 
  • Extends the carbon capture ITC for two years.
  • Provides a one-year extension of the income tax and excise tax incentives related to alternative fuel refueling stations and alternative fuels, qualified fuel cell motor vehicles, two-wheeled plug-in electric vehicles, and certain energy-related non-business tax credits.
  • Makes the energy-efficient commercial buildings deduction permanent, but with heightened standards to qualify.

PIPES Act of 2020

  • Aims to reduce methane emissions through leak detection and repair programs as part of the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) pipeline safety program.
  • Requires PHMSA to issue regulations addressing operations and maintenance standards for large-scale liquefied natural gas facilities.
  • Authorizes PHMSA to establish pipeline safety enhancement pilot programs for technologies and operational practices for either natural gas or hazardous liquid facilities.
  • Updates PHMSA’s methane leak detection and repair regulatory management by promulgating minimum performance standards, using advanced leak detection technologies, and including rules for construction that limit extensions of timelines for leak repair or remediation.
  • Includes the Leonel Rondon Pipeline Safety Act, which is directed at addressing gas distribution pipeline safety.

For additional information, please contact a member of Taft’s Energy and Utilities Group.

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