Energy Policy Act of 2005: Details and Updates for ASHRAE NCC Members

1
Energy Policy Act of 2005 Details and Updates
for ASHRAE NCC Members

• February 7, 2007
• ASHRAE NCC Meeting
• Steve Rosenstock, P.E.

2
Overview

• It happened! Really! No kidding!
• National equipment efficiency standards
• Business Tax Incentives
• Strategies for Building Owners
• Updates from December 2006 legislation
• 2007 Preview

3
Finally!!!!

• Its 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

4
Finally!!!!

• We got a new panda cub at the National Zoo!

5
Finally!!!!

• Are you ready for some baseball in DC????
• The 1,724 page Energy Bill was signed into law in
  August 2005.

6
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

7
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

8
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)
• CFLs must meet Energy Star v2 specifications
• Pre rinse spray valves Maximum 1.6
  gallons/minute
• Torchieres 190 Watts maximum per fixture

9
Equipment Efficiency Timeline (contd)

• January 1, 2007
• Commercial Clothes Washers
• MEF gt 1.26
• Water Factor lt 9.5
• Dry-Type Transformers
• Meet levels as shown in NEMA TP-1 2002
  publication
• Ceiling Fan Light Kits
• Energy Star v2 screw-in CFLs or Energy Star
  Residential Fixture v4 spec.

10
Equipment Efficiency Timeline (contd)

• October 1, 2007
• Dehumidifiers
• Energy Star v1 specification

11
Equipment Efficiency Timeline (contd)

• 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.

12
Equipment Efficiency Timeline (contd)

• 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.

13
Equipment Efficiency Timeline (contd)

• 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.

14
Equipment Efficiency Timeline (contd)

• 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)

15
Equipment Efficiency Timeline (contd)

• 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

16
Equipment Efficiency Timeline (contd)

• 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)

17
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.

18
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)

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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.

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Business Tax Incentives (contd)

• 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.

21
Business Tax Incentives (contd)

• 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).

22
Business Tax Incentives (contd)

• 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 9.3.1.1 (building area
  method) and 9.3.1.2 (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)

23
ASHRAE Update

• Source Building Operating Management May 2005
  for building area method

24
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.

25

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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.

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Commercial DG Tax Incentives (contd)

• 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.c
  fm?CurrentPageID7

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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)

29
Commercial DG Tax Incentives (contd)

• 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.

30
Commercial DG Tax Incentives (contd)

• 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.

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For More Information

• DOE web site http//www.eere.energy.gov/buildings
  /info/tax_credit_2006.html
• Commercial Buildings Tax Deduction Coalition
  www.efficientbuildings.org
• The Tax Incentives Assistance Project
• www.energytaxincentives.org

32
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.

33
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.

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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/ret
  ail_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_energymanage.cfm
• Another good source http//www.dsireusa.org/summa
  rytables/FinEE.cfm?CurrentPageID7EE1RE1
• Best areas Pacific NW (WA, OR, ID, MT),
  Northeast (NY, NJ, NE states), Upper Midwest (MN,
  WI, IL, IA), CA, NV, and Florida.

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Top Ten States for Incentive Programs

• California (gt600 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!!

36
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 cant 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/2007/01/20
  070124-2.html

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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.

38
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!

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Q A

• The floor is open!