Strategies for the Use of Sustainable and Renewable Energy (SURE) Track 7 State and Federal Policies and Incentives.

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1 Strategies for the Use of Sustainable and Renewable Energy (SURE) Track 7 State and Federal Policies and Incentives October 27, 2006 ultra-clean power delivered to customers around the world

2 State and Federal policies and incentive programs Goals of this track: Provide a summary of New Federal Tax Incentives Outline Current State Incentive Programs and NY s Renewable Portfolio Standard Describe some trends in Policies and Programs Information Resource

3 Federal Energy Act of 2005 The 2005 Energy Tax Act adds to the definition of energy property qualified fuel cell property (defined below). (Code Sec. 48(a)(3)(A)(iii) as amended by 2005 Energy Tax Act 1336(a)) A fuel cell power plant is an integrated system comprised of a fuel cell stack assembly and associated balance of plant components which converts a fuel into electricity using electrochemical means. (Code Sec. 48(c)(1)(C))

4 Federal Energy Act of 2005 Federal investment tax credit (ITC) of 30% up to $1 million per MW Applies to new stationary fuel cell power plants placed in service between January 1, 2006 and December 31, 2007 Fuel cells must have electrical efficiency of more than 30% Minimum 0.5kW of capacity with no maximum 5 year MACRS Depreciation

5 Growth Areas In Renewable Energy

6 Connecticut Programs Project 100 Project 100 is the program name adopted by the Connecticut Clean Energy Fund (CCEF) to implement Connecticut legislation enacted to enable a minimum of 100 MW of Class I renewable energy projects under contract by Legislation was enacted to create a contract path (long term contracts with utilities) to stimulate development of a clean technology industry in Connecticut. Pricing under these contracts is determined competitively with CCEF managing an RFP process. The legislation defined pricing options to foster generating capacity from a diversity of technologies including: Solar energy, Wind, Ocean thermal energy, Wave or tidal energy,fuel cells, Landfill and biogas technologies, Low emission advanced biomass conversion technologies. Fuel Cell Contracts at 50% of average wholesale plus 5.5 Cents, plus fuel costs 1000 KW Minimum project size, 10 year minimum contract term

7 Connecticut Programs Clean Energy Fund - On Site Renewable DG $27 Million for Clean Technology $15 Million for Fuel Cells $4700/KW up to a $4Million per project total Program initiated in December of 2005 DPUC - DG Incentives $ /kW Rebate for qualified DG (based o location) Elimination of Utility Standby Charges Elimination of LDC gas distribution charges

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9 New York RPS Programs New Incentive programs conform to Customer Sited Tier of RPS The total projected installed MW in the Customer Sited Tier (through 2013) is 50 MW, 20 MW from solar and 30 MW from fuel cells, with a few hundred kw for small wind Program will differ from prior SBC based PONs Funding expected to be in form of upfront grant plus performance incentives.

10 New York RPS Programs Planned Format Upfront incentive (up to a percentage of the initial cost, e.g., $2500/kW). Performance payment (based on actual performance, e.g., 5 /kwh). Total dollars yet to be determined but historically on the order of $12 Million per year. Expectation of a June RFP.

11 New Jersey CHP Program 2006 Program closed in August 2006 Offered customers, contractors, and energy service companies incentives to purchase and install various types of CHP units. Fuel Cells included 2006 Awards pending announcement Expected continuation of Program in 2007.

12 New Jersey CHP Program Equipment Eligibility Sized to meet all or a portion of on-site load. Only new commercially available equipment qualifies. Systems installed must be covered by a warranty of 5 years or 5 years service contract The System must achieve an average annual fuel efficiency of at least 60%. System should have the ability to island/ disconnect from the utility in the event of substantial grid congestion or failure.

13 New Jersey CHP Program Fuel Cell Incentives $4000/KW Maximum of 60% of Project cost and not to exceed $1 Million per applicant

14 New Jersey CHP Program Eligible Project Costs 1. Combined Heat & Power equipment capital cost 2. Engineering and design costs 3. Construction and installation costs, including commissioning costs 4. Engineering feasibility study costs 5. Interconnection costs 6. Permitting costs 7. Up to 5 years warranty or service contract costs

15 Connecticut Programs Project 100 Project 100 is the program name adopted by the Connecticut Clean Energy Fund (CCEF) to implement Connecticut legislation enacted to enable a minimum of 100 MW of Class I renewable energy projects under contract by Legislation was enacted to create a contract path (long term contracts with utilities) to stimulate development of a clean technology industry in Connecticut. Pricing under these contracts is determined competitively with CCEF managing an RFP process. The legislation defined pricing options to foster generating capacity from a diversity of technologies including: Solar energy, Wind, Ocean thermal energy, Wave or tidal energy,fuel cells, Landfill and biogas technologies, Low emission advanced biomass conversion technologies. Fuel Cell Contracts at 50% of average wholesale plus 5.5 Cents, plus fuel costs 1000 KW Minimum project size, 10 year minimum contract term

16 Connecticut Programs Clean Energy Fund - On Site Renewable DG $27 Million for Clean Technology $15 Million for Fuel Cells $4700/KW up to a $4Million per project total Program initiated in December of 2005 DPUC - DG Incentives $ /kW Rebate for qualified DG (based o location) Elimination of Utility Standby Charges Elimination of LDC gas distribution charges

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18 California Self Generation Incentive Program (SGIP) Eligible Renewable/Other Technologies: Photovoltaics, Wind, Fuel Cells, CHP/Cogeneration, Other Distributed Generation Technologies Applicable Sectors:Commercial, Industrial, Residential Amount $1.00/W to $4.50/W for renewables, depending on technology Maximum Incentive Incentive payment is capped at 1 MW 2006 Program Budget: Solar technologies: $340 million; Other renewable fuel projects: $42.5 million; Non-renewable projects: $42.5 million

19 California Programs (SGIP) Eligible System Size: Systems must be sized according to customer's electricity demand; maximum system size of 5 MW; minimum of 30 kw per site for level 1 technologies Equipment Requirements: Systems must be new, UL listed, and in compliance with all applicable performance and safety standards. Level 1 and 2 systems must be covered by a minimum five year warranty. Level 3 systems must be covered at least three years. Installation Requirements: Installation must comply with all federal, state, and local codes; Must be grid-connected and installed by a Californialicensed contractor.

20 National And Regional Trends Renewable Energy Programs are advancing, not declining (Key 2006 example - California Renewal of DG, Solar Energy initiative and Greenhouse gas initiative) Advanced Energy Technologies of all kinds are being supported (esp at the R&D level) for their efficiency and technology stimulus Activity Freedom Tower and WTC to incorporate Fuel Cells as part of LEED design Economic development is a driver in State policies 2006 advancements in South Carolina and Pennsylvania Hydrogen initiatives among States are beginning to take form as did Renewable Programs a few years ago.

21 Market Expectations Requirements for Alternative Energy Applications will Expand Rapidly within Next 3-5 Years Realization that Energy cost, availability and cleanliness are real issues. State/University - Strategies moving from R&D to Economic Development Continuation of roadmapping as a planning model Acknowledgement of Renewables in Utility systems and ISO Capacity Planning The Fuel Cell Community continues efforts to: Define New Products and Raw Materials Sustain Technology and Performance Advances Help Reduce Overall Fuel Cell Costs