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Energy Policy Act of 2005: Details and Updates for ASHRAE NCC Members February 7, 2007 ASHRAE NCC Meeting Steve Rosenstock, P.E. Overview It happened! Really! No kidding! National equipment efficiency standards Business Tax Incentives Strategies for Building Owners Updates from December 2006 legislation 2007 Preview Finally!!!! It’s a done deal! After years of trying (first bill in 1999, first House bill in 2001, bill conference in 2002, conference report in 2003, etc ……..) After years of negotiations……. After years of trials and tribulations…… Something worthwhile came out of DC in 2005… Finally!!!! We got a new panda cub at the National Zoo! Finally!!!! Are you ready for some baseball in DC???? The 1,724 page Energy Bill was signed into law in August 2005. National Equipment Efficiency Standards The Energy Policy Act of 2005 mandated national efficiency standards (or rulemaking deadlines) for: – Lighting (exit signs, fluorescent & mercury vapor ballasts) – Commercial Refrigerators and Freezers – Rooftop Packaged Air Conditioners and Heat Pumps – Dry-Type Transformers – Commercial Ice Makers – Refrigerated Beverage Vending Machines – Commercial Clothes Washers – Unit Heaters National Equipment Efficiency Standards The Energy Policy Act of 2005 also mandated national efficiency standards (or rulemaking deadlines) for: – Commercial Pre-Rinse Spray Valves (for dishwashers) – Compact Fluorescent Lamps – Torchiere lighting fixtures – Ceiling Fans – Ceiling Fan Light Kits – Dehumidifiers – Battery Chargers and External Power Supplies (“wall packs”) – Traffic Signals and Pedestrian Modules Equipment Efficiency Standards Timeline January 1, 2006 – Compact Fluorescent Lamps – Exit Signs – Commercial Pre-Rinse Spray Valves (in dishwashers) – Torchieres and Traffic Signals Exit signs must meet Energy Star Version 2.0 standards (5 Watts or less per face) CFL’s must meet Energy Star v2 specifications Pre rinse spray valves – Maximum 1.6 gallons/minute Torchieres – 190 Watts maximum per fixture Equipment Efficiency Timeline (cont’d) January 1, 2007 – Commercial Clothes Washers • MEF > 1.26 • Water Factor < 9.5 – Dry-Type Transformers • Meet levels as shown in NEMA TP-1 2002 publication – Ceiling Fan Light Kits • Energy Star v2 screw-in CFL’s or Energy Star Residential Fixture v4 spec. Equipment Efficiency Timeline (cont’d) October 1, 2007 – Dehumidifiers • Energy Star v1 specification Equipment Efficiency Timeline (cont’d) 2008 – Unit heaters (August 2008) – Mercury Vapor lamp ballasts (Jan. 1, 2008) Unit heaters must have an intermittent ignition device, along with power venting or an automatic flue damper. Mercury vapor ballasts are BANNED (import or manufacture). DOE efficiency standard rulemakings for Battery Chargers and External Power Supplies (“wall packs”) must be completed by August, 2008. Equipment Efficiency Timeline (cont’d) 2009 – Fluorescent lamp ballasts standard – Refrigerated Can / Bottle Vending Machines Rule – Commercial Refrigeration Equipment Rule Fluorescent lamp ballast power factor and ballast efficiency factor increase for F34T12, F96T12/ES, and F96T12HO/ES lamps. – Note: New national standards for fluorescent lamp ballasts used with F40T12, F96T12, and F96T12HO took effect in April, 2005. Equipment Efficiency Timeline (cont’d) 2009 (continued) DOE must finalize an efficiency standard for: – Refrigerated Can Vending Machines – Refrigerated Bottle Vending Machines DOE must also finalize standards for: – Ice Cream Freezers – Self-Contained Commercial Refrigerators, Freezers, and Refrigerator/Freezers without doors – Remote Condensing Commercial Refrigerators, Freezers, and Refrigerator/Freezers DOE must revise the 2007 standard for dehumidifiers. Equipment Efficiency Timeline (cont’d) 2010 Standards – Commercial Ice Makers Efficiency Standards (head water, head air, remote condensing air, self contained water & air) – Commercial Refrigerators, Freezers, and Combination Refrigerator/Freezers Efficiency Standards – Small, Large, and Very Large Commercial Packaged Air Conditioners Efficiency Standards (increased EER for units sized from 65,000 Btu/hr to 760,000 Btu/hr) – Small, Large, and Very Large Commercial Packaged Heat Pumps Efficiency Standards (increased EER and COP for 65,000 – 760,000 Btu/hr units) Equipment Efficiency Timeline (cont’d) 2010 (continued) Standards set for Commercial Refrigerators, Freezers, and Refrigerator/Freezers that have: – Self contained condensing units designed for “holding temperatures” – Self contained condensing units designed for “pull down temperatures” – Transparent doors – Solid doors Equipment Efficiency Timeline (cont’d) 2012 National efficiency standards take effect for: – Refrigerated Can Vending Machines – Refrigerated Bottle Vending Machines – Ice Cream Freezers – Self-Contained Commercial Refrigerators, Freezers, and Refrigerator/Freezers without doors – Remote Condensing Commercial Refrigerators, Freezers, and Refrigerator/Freezers – Revised Dehumidifier Standard (based on EPACT 2005 or 2009 rule) Business Tax Incentives Summary: – Tax deduction of $1.80 per square foot for commercial buildings that exceed the energy efficiency of a “baseline” building in ASHRAE 90.1-2001 Building Code by 50%. – Tax deductions are also available for “sub systems” that increase efficiency by 50%, up to $0.60 per square foot. – Tax credits are available for on-site distributed generation systems meeting certain efficiency requirements. NOTE: Under EPACT 2005, the window of opportunity for these tax credits / deductions opened on Jan. 1, 2006 and closes on Dec. 31, 2007. Business Tax Incentives - Update Under new federal legislation signed in December, 2006, the window of opportunity for the Commercial Building Tax Deduction now closes on December 31, 2008 (instead of 2007) Business Tax Incentive Details The $1.80 per square foot tax deduction can be obtained with a 50% overall energy use reduction in 3 “sub systems”: – Interior Lighting – Heating, Cooling, Ventilation, and Hot Water Systems – Building Envelope If the whole building does not reduce energy use by 50%, it can qualify for a tax deduction of $0.60 per square foot per “sub system” that exceeds the energy efficiency of a “baseline” subsystem in ASHRAE 90.1-2001 Building Code. The IRS published guidelines in June, 2006. Business Tax Incentives (cont’d) The bad news: – DOE only approved a small number (6) of “qualified computer software” programs to use for the calculations. They are whole building programs. – There is a certification process that was defined by DOE and includes “inspection and testing by qualified individuals.” – They must be licensed in the jurisdiction where the building is located. – Inspection guidelines (which must be followed to get the tax deduction) have not been published as of 2/5/07. – Corporate income taxes are due in March, 2007. Business Tax Incentives (cont’d) More bad news: – In the Energy Policy Act of 2005, tax deduction can be transferred from “public entities” to the “building designer of record” – As of February 5, 2007, the IRS has not published guidelines on how to perform this tax deduction transfer. – DOE has not approved any “qualified computer software” that are designed solely for sub-systems (e.g., lighting). Business Tax Incentives (cont’d) The OK news: The Energy Bill designated “interim rules” for lighting systems. Systems that are at least 40% more efficient (except in warehouses) than the requirements of ASHRAE 90.1- 2001 Tables 184.108.40.206 (building area method) and 220.127.116.11 (space by space) get the full $0.60/ sf deduction. Systems that are 25% more efficient get $0.30 / square foot deduction (except warehouses with 50% min rule). Interpolate in between (30% = $0.40/sf, 35% = $0.50/sf) ASHRAE Update Source: Building Operating Management May 2005 for building area method Business Tax Incentives Strategy The better news: ASHRAE has published new commercial building codes: 90.1-2004 Standards. The International Code Council updated its Energy Conservation Code in 2003. (IECC 2003). At least 27 states have adopted ASHRAE 90.1-2004 or IECC 2003. Both are more stringent than 90.1-2001. Strategy 1: Try to obtain tax deductions in states that have already adopted the 2003 or 2004 codes. In those states, the building are already more efficient. Commercial DG Tax Incentives The following on-site distributed generation systems can receive new or expanded federal tax credits: – Solar Energy – Fuel Cells – Microturbines There are certain “qualifiers” for each type. As with other commercial tax credits, the “window of opportunity” opened on January 1, 2006 and closes on December 31, 2007. Commercial DG Tax Incentives (cont’d) Solar Energy tax credits have increased from 10% to 30%. There is no dollar / cost cap on the tax credit. The following solar systems qualify: – Photovoltaic (PV) systems – Solar Thermal (flat plate collectors) – Hybrid Solar Lighting (“light pipes”) Exception: Systems that are used for swimming pool water heating do not receive the tax credit. Web site to check for state / utility incentives: http://www.dsireusa.org/summarytables/financial.cfm?& CurrentPageID=7 Commercial DG Tax Incentives - Update Under new federal legislation signed in December, 2006, the window of opportunity for the Commercial Solar Energy System Tax Credit now closes on December 31, 2008 (instead of 2007) Commercial DG Tax Incentives (cont’d) Microturbines receive a 10% tax credit that is capped at $200 / kW of generation capacity. To qualify, the microturbine must: – Have a capacity of less than 2,000 kW – Have an electric only efficiency of at least 26% at ISO conditions (about 60 F ambient). Infrastructure connections (for fuel supply and electric connections) associated with the microturbines also qualify for the tax credit. Heat recovery is not a qualifier, but may help the economics of the system. Commercial DG Tax Incentives (cont’d) Fuel Cells receive a 30% tax credit that is capped at $1,000 / kW of generation capacity. To qualify, the fuel cell must: – Have a generation capacity of at least 0.5 kW – Have an electric only efficiency of at least 30% (a heat rate of 11,377 Btu / kWh or less) Heat recovery is not a qualifier, but may help the economics of the system. For More Information: DOE web site: http://www.eere.energy.gov/buildings/info/tax_cr edit_2006.html Commercial Buildings Tax Deduction Coalition: www.efficientbuildings.org The Tax Incentives Assistance Project: www.energytaxincentives.org EPACT 2005 Results According to ACEEE, the final bill saves about 2.5 Quads in 2020 – about 2% of total US consumption. Electric Savings – 206 TWh, about 4% of the 2020 forecasted use Natural Gas – 1.4 TCF, about 5% of the 2020 forecast Oil – Negligible, due to phaseout of tax credits, and no efficiency standards or rulemakings for products using gasoline, heating oil, diesel fuel, fuel oil, etc. Small Business Tax Strategy for 2007 and 2008 For small facilities, combine the new tax deduction with the existing Federal 100% First Year expensing until 12/31/08 (strategy 1b) For qualified business property, for tax years 2007 – 2008, up to $112,000 in 2007 (Section 179 deduction). For 2006, the phase out starts at $450,000 and ends at $550,000 (started at $400,000 in 2003). Building / structural improvements, A/C, and Heating units do not qualify (but they qualify for the new $1.80/sf tax deduction). Computers, commercial refrigerators/freezers, vending machines, cooking equipment, ice makers, and other business / process machines or equipment qualify. Tax Incentive Strategy # 2 Combine Tax Credits with State / Utility Incentives EEI has updated its list of IOU programs as of Sept. 2006: http://www.eei.org/industry_issues/retail_services_and_delivery/ wise_energy_use/programs_and_incentives/progs.pdf Another good web site, which also shows state programs: http://www.eere.energy.gov/femp/program/utility/utilityman_energ ymanage.cfm Another good source: http://www.dsireusa.org/summarytables/FinEE.cfm?&CurrentPag eID=7&EE=1&RE=1 Best areas: Pacific NW (WA, OR, ID, MT), Northeast (NY, NJ, NE states), Upper Midwest (MN, WI, IL, IA), CA, NV, and Florida. Top Ten States for Incentive Programs California (>$600 Million in 2006, ~$2 Billion by 2008) New York (about $280 Million in 2006) Florida (greater than $200 Million in 2006) New Jersey (about $160 Million in 2006) Massachusetts (greater than $100 Million in 2006) Texas Minnesota Iowa Connecticut Nevada Strategy: Apply Early in the Year!! 2007 Updates DOE Interim Final Rule on new Federal commercial and residential buildings. They must be 30% more energy efficient than ASHRAE 90.1-2004 or IECC 2004 standards (if technically feasible and cost-effective). If they can’t get to 30%, then they have to be 25%, then 20%, then 15%, etc. In January 2007, President Bush signed Executive Order 13423 “Strengthening Federal Environmental, Energy, and Transportation Management” http://www.whitehouse.gov/news/releases/2007/01/200 70124-2.html 2007 Energy Bill H.R. 539 – “Buildings for the 21st Century Act” Increases total incentive from $1.80 to $2.25 per square foot. Increases the “subsystem” incentives from $0.60 to $0.75 per square foot Extends the end date for the credits from 2008 to 2013. It was introduced on January 17, 2007, and has 66 co- sponsors. 2007 Energy Bill (continued) S. 6 - The Senate will be looking at legislation, where efficiency will play a key role, in terms of : Climate Change Power Plant Emissions Transportation Issues Renewable Portfolio Standards May have a “series of energy bills” rather than one comprehensive bill. Stay Tuned! Q&A The floor is open!
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