While a significant amount of the bioindustry policies focus on transportation fuels (i.e., ethanol and biodiesel), federal policies also support the generation of electricity from biomass resources. Policy instruments include tax credits, industry restructuring laws, and renewable portfolio standards.
The principal federal policies supporting biopower are in the form of tax credits. The Energy Policy Act (EPACT) of 2005 maintains the closed loop biomass (material from a plant produced exclusively for the purpose of electricity production) credits of $0.015/kWh for systems put in place between December 31, 1992 and January 1, 2008. The credit lasts for 10 years from the placed-in-service date. Closed-loop systems that co-fire biomass with coal are also eligible for a credit. The systems must be put in place before January 1, 2008 and the credit is valued at $0.015/kWh multiplied by the ratio of the thermal content of the closed-loop biomass to the thermal content of all fuels used in the facility. The credit period is 10 years after the placed-in-service date but beginning no earlier than October 22, 2004.
Open-loop biomass systems (biomass that can be used to produce energy although not grown specifically for energy use) put in place before January 1, 2008 are eligible for a credit of $0.0075/kWh. The credit period is 10 years if placed in service after August 8, 2005. If placed in service earlier, the credit period is 5 years beginning on January 1, 2005. Open-loop systems using agricultural livestock waste are eligible for a credit of $0.0075/kWh for 10 years if placed in service after August 8, 2005. If placed in service before January 1, 2005, the credit period begins on that day.
For poultry waste used to produce electricity, the eligible placed-in-service date is from December 31, 2003 through January 8, 2008. The credit is $0.015/kWh for systems placed in service before January 1, 2005 and $0.0075/kWh for systems with later placed-in-service dates.
The credit period is 10 years if placed in service between October 22, 2004 and January 1, 2005 or after August 8, 2005, and 5 years if placed in service between January 1, 2005 and August 8, 2005.
Electric power generation has shifted significantly to production by non-utilities in response to provisions contained in the Public Utility Regulatory Policies Act of 1978 (PURPA, Public Law 95- 617) and the Energy Policy Act of 1992 (EPACT, Public Law 102-486). Industrial non-utilities consume nearly 58 percent of the biopower in the United States (DOE/EIA, 2007a). Industrial non-utilities also produce over 47 percent of the net generation of electricity from biomass (DOE/EIA, 2007b). Non-utilities are entities that generate or sell electric power, but that do not operate retail distribution franchises. Non-utilities can include wholesale non-utility affiliates of regulated utilities, merchant generators, and PURPA qualifying facilities. PURPA encouraged electricity generation by industrial and commercial combined heat and power producers by requiring electric utilities to interconnect with, and purchase power from, certain cogeneration facilities and small power producers meeting the criteria for a qualifying facility. PURPA provided that the qualifying producers be paid at the utility’s incremental cost of production (defined as the utility’s avoided cost of power).
EPACT contained two provisions that affected industry structure. First, a new class of electric power producers, the exempt wholesale generators (EWG), was created. EWGs are entities that directly or indirectly own or operate facilities dedicated exclusively to producing electric power for sale in wholesale markets. EPACT also expanded the authority of the Federal Energy Regulatory Commission (FERC) to order transmitting utilities to provide transmission service for wholesale power transmission to any electric utility, Federal power marketing agency, or any person generating electric energy in wholesale electricity markets.
The Energy Policy Act of 2005 included a renewable fuel standard for liquid transportation fuels, but did not include a national renewable portfolio standard for biopower. Several states have renewable portfolio standards including Arizona, California, Colorado, Connecticut, Iowa, Maine, Maryland, Massachusetts, Nevada, New Jersey, New Mexico, New York, Pennsylvania, Rhode Island, Texas, and Wisconsin.