Annual Energy Outlook 2006 with Projections to 2030 - Usinfo.org

Legislation and Regulations2005, to qualify for the new recovery period. Section1309 expands amortization of pollution control equipmenton coal-fired plants from 5 years to 7 years. Onlyplants that came online after January 1, 1976, wouldqualify for the new amortization period. These taxchanges are represented in AEO2006. Tax credits fornuclear and renewable energy production and for coalproduction and investment are discussed below.Nuclear Energy ProvisionsTitle VI of EPACT2005 includes several provisionsdesigned to ensure that nuclear energy will remain amajor component of the Nation’s energy supply. Sections601 through 610 update the Price-Anderson ActAmendment to the Atomic Energy Act of 1954, whichensures that adequate funds are available to the publicto satisfy liability claims in the event of a nuclearaccident, while limiting the liability of any individualreactor owner. EPACT2005 extends the coverage toall nuclear units brought on line through 2025,adjusts the maximum assessment and liability limit,and addresses incidents that might occur outside theUnited States. Section 608 allows small, modularreactors to be combined and treated as a single unitfor liability purposes. These provisions are notexplicitly modeled in NEMS, but AEO2006 implicitlyassumes that Price-Anderson coverage will beextended to any new nuclear units built in the UnitedStates.Under Title XIII, Section 1306 provides a PTC fornew nuclear reactors brought online through 2020.The PTC is worth 1.8 cents per kilowatthour for thefirst 8 years of operation, subject to an annual limit of$125 million per gigawatt of capacity. It is restrictedto a total of 6 gigawatts of new nuclear capacity. Thisprovision is included in AEO2006. Section 1310 modifiesthe rules for qualified decommissioning fundsand requires that a new ruling on the amounts fundedbe made whenever a plant receives a license renewal.Coal ProvisionsEPACT2005 includes numerous provisions thatauthorize funding for coal-related activities. Becausethey depend on future appropriations, they are notincluded in AEO2006.Sections 431 through 438, referred to as the CoalLeasing Act, ease or remove certain requirements forcoal leases on Federal lands. These provisions are notincluded in AEO2006, because specific lease requirementscannot be modeled directly in NEMS.Title XIII includes several provisions that alter thetax treatment of certain coal-related activities. Forexample, Section 1301 sets qualifications for receiptof a PTC of $1.50 per ton between 2006 and 2009 and$2.00 per ton through 2013 for coal produced onIndian lands. This provision is not included inAEO2006, because only limited data are available oncoal resources and production on Indian lands. (In2000, coal was mined from Indian lands in Arizona,New Mexico, and Montana.) One possible outcome ofthis provision would be to accelerate production ofcoal from Indian lands while the credit is available;however, given the relatively short time horizon ofthe provision (qualifying mines must be in servicebefore 2009) and the small share of total coal productionmade up by coal from Indian lands (3.6 percent in2004), the impact on national average minemouthprices for coal is likely to be small.Section 1307, Subsection 48A, establishes a $1.3 billioninvestment tax credit for the construction of newor repowered coal-fired generation projects, including$800 million for coal gasification projects and $500million for other projects that achieve certain targets,such as 99 percent SO 2 removal and 90 percent mercuryremoval from plant emissions. For integratedgasification combined-cycle (IGCC) technologies a20-percent investment tax credit may be applied toqualifying investments, and for other qualifyingadvanced technologies a 15-percent investment taxcredit is applicable. Repowering projects mustimprove the thermal design efficiency of coal-firedplants by 4 to 7 percent. This provision is modeled inNEMS by allowing up to 3 gigawatts of IGCC andanother 3 gigawatts of advanced coal-fired capacity totake advantage of the tax credit.Renewable Energy ProvisionsEPACT2005 contains several provisions intended toencourage or facilitate the use of renewable energyresources for electricity production. Most areincluded in Title II, “Renewable Energy.” Others arein the R&D, electricity, and tax titles. In addition, theact contains provisions to encourage the use of renewableenergy for transportation and in end-use applications,as described above.Section 203 requires the Federal Government, to theextent that it is “economically feasible and technicallypractical,” to purchase a minimum amount of electricitygenerated from renewable resources. The Federalpurchase requirement starts at 3 percent of thetotal amount of electricity consumed by the FederalGovernment in 2007 and increases stepwise to 7.5percent of the total in 2013 and thereafter. Renewableenergy used at a Federal facility that is producedon-site at the facility, on Federal lands, or on Indian20 Energy Information Administration / Annual Energy Outlook 2006