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Thursday, February 19, 2009

Economic Stimulus, Clean Energy and the Scale of Our Challenge: Grading the Stimulus Energy Investments

By Professor Gregory Bothun and Jesse Jenkins

Earlier this week, President Barack Obama signed into law the $787 billion economic stimulus package. The stimulus directs more than $80 billion to start the construction of a new, national clean energy infrastructure. Many are hailing this clean energy investment as unprecedented, which in the context of the last thirty years of neglected energy priorities is undoubtedly true. But with all those billions thrown about, it's hard to get a grasp on the scale of this investment. What does $80 billion really mean in the context of the 21st century United States energy system? Is this a significant investment or merely the first step on the long road to a green economy? In order to answer those questions, we’d better brush up on our energy literacy and get familiar with the scale of our energy system.

Welcome to Energy Literacy 101.

We start with a bit of historical context, noting that the energy infrastructure projects initiated in the 1930's under FDR culminated with 45% of the nation's electricity coming from renewable energy (hydropower) and employed approximately 100,000 workers over the decade or so it took to build that infrastructure.

With that bit of history in the back of our minds, we now turn to four big numbers: 100 million; 1 trillion; 400 million; and 1 billion.

  • 100 million. That’s about how many households there are in the United States, each consuming an average of over one thousand watts (one kilowatt) of electricity to run our plasma TVs, charge our iPods, and keep our fridge humming away. Put another way, the total energy-related spending in this stimulus bill amounts to just about $800 per household.

  • 1 trillion watts, or 1 terawatt (TW), is total maximum electrical output of the more than 17,000 power plants operating in the United States. About half of that, or roughly 450 billion watts (450 gigawatts) of electrical power is continuously produced by these power plants. That’s roughly 1.5 thousand watts (1.5 kilowatts) of electrical power for every person in the country, enough to constantly power fifteen standard light bulbs for every man, women and child. However, plenty of the electricity we generate is lost as we transport and distribute electricity across our aging electrical transmission infrastructure, much of which was built more than fifty years ago. In fact, our inefficient and antiquated electrical grid wastes 60 million kilowatts of power, equivalent to the output of thirty giant dams the size of the Columbia River’s Bonneville Dam. That’s enough wasted electricity to meet the combined electrical needs of California, Oregon, and Washington state combined.

  • 400 million gallons of gasoline are consumed daily in the United States. Daily! That’s more than a gallon for every man, women and child in the United States.

  • And here’s where we get to 1 billion: at $2.50 per gallon, that also means Americans are spending $1 billion dollars every single day on gasoline. No other retail product comes anywhere near this daily exchange rate of 1 billion dollars a day. A billion dollars, burnt up in gas tanks across America every day. $80 billion is therefore only enough to buy less than a three month’s supply of gasoline for American consumers. Let that sink in for a second, as we turn back to consider what $80 billion in clean energy investments can do for our country.
In a nation that burns up a billion dollars every day in gas tanks and continually produces one trillion watts of electrical power, its easy to see that the $80 billion, two-year investment in the stimulus package is only a first step. A critical first step, no doubt, but a relatively small step all the same. A significantly larger and sustained effort is required to transition the nation’s massive energy system to a new, clean energy economy – a fact President Obama and the American public cannot afford to forget.

With this sense of scale as our backdrop, we can now turn our eye to some of the individual components of the $80-plus-billion in energy sector stimulus investments and assign grades to each investment, as after all, this is a class in energy literacy.

We begin with the good grades:

A+: The act provides a much-needed, long-term extension of the critical Production Tax Credit that has spurred the booming wind industry, and makes tax credits for wind, solar and other renewable energy sources fully refundable for the next two years. In the past, these incentives have been implemented one year at a time, and allowed to lapse for up to a year or more at the end of each period, throwing these industries into crippling boom-bust cycles. Extending the PTC through the end of 2012 and credits for other renewables even longer is a smart move that provides longer-term certainty for businesses to plan their investments. Making these credits fully refundable during the economic crisis is also critical. Clean energy projects typically rely on banks and other financial institutions to absorb their tax credits in exchange for a payment, since the clean energy companies receive far more tax credits than they can absorb in their own profits. Now days, with banks everywhere in the red, financial institutions have stopped snapping up these tax credits, drying up funding for clean energy projects and rendering the tax credits almost useless. Finally, the bill also includes $6 billion to support loan guarantees expected to cover more than $60 billion in private loans to clean energy projects and helping thaw out frozen credit markets for these capital-intensive projects. With this kind of critical support in place, we can expect wind, solar and other renewable energy sources to experience robust growth over the next two years, bringing much-needed jobs and new supplies of clean, domestic energy.

A: Approximately $5B has been set aside for energy-efficiency retrofits for low-income housing, enough to significantly augment the existing Federal Weatherization Assistance Program for efficiency in low-income households. Saving poor households money during a recession while cutting back our national energy consumption is equitable and wise, and this investment is sufficiently large to retrofit a sizable one million low-income homes each year for the next two years. Still, with 20-30 million households in America eligible for weatherization assistance, this is just the beginning of this smart investment. If this level of support can be sustained for a decade, we’ll have a truly scalable solution on our hands, and we will upgrade this project to A+ status.

A: Approximately $11B has been set aside to improve the energy efficiency of federal buildings and to provide local governments with block grants for efficiency retrofits. Relatively simple upgrades like changing out lighting, installing proper insulation and windows, and putting in programmable thermostats, can generally achieve an energy savings of 20-30 percent per building. Even at a retrofit cost of $100,000 per building (high in many cases) these funds would produce 110,000 more energy efficient government buildings. If the money is spent wisely, we estimate that approximately 250,000 buildings could reduce their energy footprint by about 20 percent – saving energy and taxpayer money. Of course we have millions of government buildings that need such energy retrofits so commitment to this course must be sustained beyond the next two years.

A-: Another $4.5B is dedicated to modernizing the electrical grid with up to $11B more devoted to implementing “Smart Grid” demonstrations throughout the US (like the one already initiated in Boulder, CO). Upgrading and expanding our transmission system and installing new, Smart Grid technologies, including “smart appliances” in homes and business, would increase the efficiency of the grid and enable grid operators to make smart, real-time decisions about how to generate, store and consume electricity – an essential step if we are to a) modernize our failing electrical grid and b) incorporate the widespread generation of renewable energy into the grid (wind, solar, wave, and more). After many decades of neglect, this $15.5B is the first serious public investment in our electrical grid in recent memory. Of course, the effort to upgrade and modernize our national electrical system will take many years, and the cost of building a nation-wide smart grid may well cost hundreds of billions when all is said and done. (Are you detecting a pattern here?)

Unfortunately, we have now handed out all the A grades that we can, and the remaining investments begin to fall progressively shorter of the A mark.

B: $2B for the Advanced Battery Manufacturing grant program to support the manufacture of advanced vehicles for hybrids, plug-in hybrids and electric vehicles. Currently, batteries store less than 1/60th as much energy as an equivalent amount of gasoline by mass and 1/30th by volume. While electric vehicles are more energy efficient than their internal combustion engine cousins, cramming enough batteries onto an electric vehicle to provide the 200 miles of range Americans expect (gotta be able to drive to the nearest factory outlet store and back after all) is still a major technical challenge. No wonder Obama’s new Energy Secretary Steven Chu recently called for “a battery that's ten times better and cheaper than what we've got today.” The widespread electrification of transportation could truly end our oil addiction once and for all by letting Americans plug our cars and trucks into a diverse portfolio of clean, domestic electricity sources. Switching to electric vehicles or plug-in hybrids would also dramatically lower our greenhouse gas emissions. Electrifying transportation is a lofty but critical objective, perhaps our highest collective energy and climate policy priority. It’s worth – and will require – far more than $2 billion.

B-: About $8.5B has been committed for further R&D in both renewable energy and fossil energy (predominantly carbon capture and storage techniques for coal and gas plants). While this is a substantial increase from today’s anemic federal energy R&D budget, energy innovation will take a sustained investment over the coming decades, and this is merely a critical first step. Federal investments in energy R&D should ultimately increase to the scale of the National Institutes of Health, which receive nearly $30 billion annually. Curing our oil addiction and stopping the climate crisis is surely worth as much as curing cancer and other disease. Furthermore, the bulk of these new funds are directed to the Department of Energy. On the surface this sounds sensible, but alas, the DOE is not really in the clean energy innovation business. Indeed only 17% of DOE's budget focuses on energy, with the bulk of DOE’s funding (and operational competence) focused on managing (and cleaning up after) our nation’s sprawling and antiquated nuclear weapons production system, as well as supporting high energy physics research. That’s why many are questioning whether DOE is really equipped, as currently structured, to drive energy sector transformation on the massive scale we need. That’s one of the main reasons the Brookings Institution has proposed creating a network of new Energy Discovery-Innovation Institutes, regionally-focused, university-based research consortia that would bring together the best thinkers from across disciplines and from wherever they are in the academic, public or private sectors to tackle translational energy research and improve and expand our portfolio of clean energy technologies and fuels. In summary: when it comes to energy innovation, we don’t just need to spend more money, we also need to spend our money differently, and that's a challenge that Obama and the Congress have yet to take up.

C+: About $16B has been set aside for new mass transit systems, with about half going to intercity rail lines, including new high speed rail lines, and half going to urban areas for better public transit systems. Expanding access to efficient and reliable mass transit will give people more transportation freedom and cut both oil consumption and global warming pollution, making it a critical investment. And the United States is getting way behind in the high-speed rail arena compared to nations like China, Japan and the EU. So it’s about time we put some money on the table to build modern high-speed rail lines linking our major cities and providing comfortable, convenient alternatives to air travel for medium-distance trips. However, keep in mind again the scale of our transportation system and our oil addiction ($1 billion a day on gasoline alone, remember?). The ultimate price tag for the construction of new large-scale mass transit systems is enormous. For perspective, simply extending the existing DC metro system to Dulles Airport (and its about damn time) is projected to cost around $2.5B-$3B… for just 11 new miles of track!

All right, we’re now out of the middling but passable grades and right on to the outright failures. And yes, there’s a couple.

F: Just $0.3B for the Energy Star appliance rebate program. That's a nice gesture, but remember those 100 million households referred to above? This amounts to $3.00 per household, unlikely to do much to move the needle of national energy consumption, and a failing grade in our book.

F: Another $0.3B has been allocated for the purchase of more alternative-fuel and hybrid vehicles for the federal fleet (including plug-in hybrids if they are available soon). This is symbolic only, enough to convert just ten percent of the federal fleet (less if more expensive plug-in hybrids are purchased). Why not allocate $3B (remember you’ve got hundreds of billions being doled out here) and completely convert the federal fleet to efficient, advance vehicles? Ten percent is less than half-ass, and in the academic world, less than half-ass gets a failing grade.

OK class, you’re almost dismissed, but first your must endure some concluding remarks (in typical Academic Windbag style):

We applaud President Obama for prioritizing clean energy investments in the stimulus and Congress for having the good sense to begin laying the foundation for a new energy economy. The bill focuses on all the right areas – clean energy innovation and deployment, a more efficient built environment, a smarter, more robust electrical grid, the electrification of transportation, and new mass transit options.

But the scale of our energy transition is simply enormous, and the $80 billion invested in clean energy by the stimulus takes us only the first steps towards an ultimate goal of energy independence and a zero carbon energy system. Luckily though, history teaches us that incremental progress, when sustained, can produce great achievements; but only if we respond, with sustained dedication and commitment to our energy challenges.

The American response to the launch of Sputnik began with innocuous baby steps. Yet soon, the United States had dedicated itself to the Space Race in full, and in a mere 12 years after the shock of Sputnik, American astronauts were walking on the moon. Today, we can again embark on the large-scale programs and muster the sustained commitment needed to reach our energy goals. While the American ideals of commitment, dedication and leadership have taken a long hiatus from the political stage over the past decades, they are not yet extinct. We can once again summon these ideals, rise to this challenge, and build a new, clean energy economy. Yes we can - not in 2 years, probably not in 10 years, but this journey must begin now. In that respect, $80 billion is a solid first step.

Dr. Gregory Bothun is a professor at the Department of Physics at the University of Oregon, where he teaches several courses on energy and climate change, dispensing grades on fearful undergrads. Jesse Jenkins is the Director of Energy and Climate Policy at the Breakthrough Institute and is a survivor of Professor Bothun’s grading and former teaching assistant in his energy and climate courses.

1 comment:

Anonymous said...

Knowledge creators must work on developing metrics and models that can be applied by market participants to leverage Stimulus Energy Investments.

I accept your grades for each policy component. I challenge you to develop metrics and identify research projects that can help market participants leverage outcomes for actions taken as this money is spent.

My blog centers on encouraging knowledge creators to develop metrics that can help market participants create breakthroughs by leveraging stimulus energy investments.

I offer free Green Market Intelligence at to help third parties move forward on their paths to offer or develop green goods and services. A gap in most information pieces is that they do not offer meaningful metrics that market participants can apply to their projects. Knowledge creators need to work on developing metrics.

Applying common sense through a process of developing basic research projects can create meaningful breakthroughs. For example, an article in today’s China Daily reports this item “Buses with 300-km battery range to debute in June” > Knowledge creators need to organize a project for a viable U.S. based group to acquire one of these buses and fully research its potential to be used in the government’s alternative energy fleet. Analytic distinctions about the government acquiring one Chevrolet volt for $40,000 which carries 1-government employee versus buying one Chinese electric bus for $74,000 that carries 24-people can dramatically change the leveraging factors for this one line item of energy stimulus expenditure.

Another research project encompasses thinking through how knowledge creators can help market participants develop actionable projects to save a Kwh.

Jeff Wacker, authored “SmartGrids – Planning the Intelligent Utilities of the Future” >
His article identifies a few drivers that are worth noting.

• “For most utilities, the average cost of generating a new kilowatt hour of electricity is 10 cents, while the cost of saving a kWh is just 1.7 cents.
• Actually shaping the electricity demand curve, without overly impacting the Western lifestyle, will require utilities to employ more intelligent equipment, operations, transmission and utilization solutions. That in turn will force utilities to migrate from the electromechanical to the digital age and encourage them to consider megabytes as well as megawatts and to distribute information bits as well as atoms
• By combining the power of information technology with the emerging science of environmental technology, utilities can create a more intelligent and sustainable business model.”

Wacker’s article also presents a concept for creating “Smart Grid Collaboratories”. Developing a plan to actualize this model may generate initiatives to help improve grades that you have given some of the items in your article. As knowledge creators you can help market participants produce beneficial results by articulating a plan to mobilize resources to organize a nationwide network of Smart Grid Collaboratories. I believe this plan should be designed with a unique mission that helps smaller companies work on projects to offer or develop goods and services that save a KWh or use it more efficiently.

Knowledge creators are more likely to leverage outcomes from these policies and funding programs by defining success as helping the greatest number of smaller companies offer and develop goods and services. Near term, these projects are more likely to achieve measures of success by working in the 100% electricity generating market space where “1.7 cents cost of saving a kWh” goods and services will be accepted by the greatest number of stakeholders versus working on developing projects and technologies that cost substantially more than today’s average 10 cents cost to generate one kWh. However the fact that technology breakthroughs continue to lower the kWh cost for Solar, Wind and other alternatives indicates that these initiatives have merit and knowledge creation models must be developed to help market participants apply viable metrics to these projects as well.

My blog centers on encouraging knowledge workers work on a project development opportunity that has been created by the energy part of stimulus bill.

Earlier this week, I attended the Texas Energy Future: Clean Power and Clean Jobs conference at the Texas State Capitol. A research report was overviewed that offers information which be extrapolated to other areas. The report is: Growing the New Energy Economy in Texas: Renewable Energy Industry and Workforce Development Assessment >

Several conference speakers commented about the importance of focusing on energy efficiency projects and especially about funding to support it in the American Recovery and Reinvestment Act of 2009 that has been allocated to weatherization and energy efficiency. Their presentations caused me to think about gaps that exist between workers who can weatherize, insulate, install energy efficiency appliances and do other things to make a home or building more efficient and the knowledge base that is required to apply for funding grants to set up these programs in a community.

The energy efficiency component of the American Recovery and Reinvestment Act of 2009 offers great potential to create immediate jobs for workers but from my perspective some level of knowledge about incubating new projects and seeking grant money must be infused into this component to make it work. This knowledge gap comports with findings in the research report that I mentioned above.

The scope of a project to work on this knowledge gap might be viewed as creating a virtual energy efficiency incubator that focuses on working with utility companies to create a knowledge base that leverages organizing and developing small teams of people to work on weatherization and energy efficiency projects in specific areas. One example of a potential model was presented during the conference. It is the Carrier or Trane air conditioning system distribution model where each town or area has a local distributor who also employees a few air conditioner service repairmen. Larger entities are attempting to execute scaled up models but there are doubts about this being the best way to work on energy efficiency at the home and building level. On the surface it appears that a town or area based company supervising local people to work on weatherization and energy efficiency projects will be more accountable to customers than a large remote entity that is managing hundreds of small work projects from a distance.

Conceptually a modest level of strategic thinking by knowledge creators may make a big difference in the success or failure of spending government grant money for workers to make homes and buildings more energy efficient.

The American Recovery and Reinvestment Act of 2009 > offers funding for people to work on weatherization and installing energy efficiency products. A few sections are listed below.

As knowledge creators I encourage you to organize and develop a virtual project that centers on developing metrics and models to make the weatherization and energy efficiency piece of the American Recovery and Reinvestment Act of 2009 more successful. I believe that this opportunity can be acted on in collaborative model and encourage interested parties and especially knowledge creators to join forces and do something meaningful in this area.

Brad Smith
SME Capital Markets

The American Recovery and Reinvestment Act of 2009 >

H. R. 1—24



For an additional amount for ‘‘Energy Efficiency and Renewable Energy’’, $16,800,000,000: Provided,

That $3,200,000,000 shall be available for Energy Efficiency and Conservation Block Grants for implementation of programs authorized under subtitle E of title V of the Energy Independence and Security Act of 2007 (42 U.S.C.17151 et seq.), of which $2,800,000,000 is available through the formula in subtitle E: Provided further, That the Secretary may use the most recent and accurate population data available to satisfy the requirements of section 543(b) of the Energy Independence and Security Act of 2007: Provided further, That the remaining $400,000,000 shall be awarded on a competitive basis: Provided
further, That $5,000,000,000 shall be for the Weatherization Assistance Program under part A of title IV of the Energy Conservation and Production Act (42 U.S.C. 6861 et seq.): Provided further, That $3,100,000,000 shall be for the State Energy Program authorized under part D of title III of the Energy Policy and Conservation Act (42 U.S.C. 6321): Provided further, That $2,000,000,000 shall be available for grants for the manufacturing of advanced batteries and components and the Secretary shall provide facility funding awards under this section to manufacturers of advanced battery systems and vehicle batteries that are produced in the United States, including advanced lithium ion batteries, hybrid electrical
systems, component manufacturers, and software designers: Provided further, That notwithstanding section 3304 of title 5, United States Code, and without regard to the provisions of sections 3309 through 3318 of such title 5, the Secretary of Energy, upon a determination that there is a severe shortage of candidates or a critical hiring need for particular positions, may from within the funds provided, recruit and directly appoint highly qualified individuals into the competitive service: Provided further, That such authority shall not apply to positions in the Excepted Service or the Senior Executive Service: Provided further, That any action authorized herein shall be consistent with the merit principles of section 2301 of such title 5, and the Department shall comply with the public notice requirements of section 3327 of such title 5.

H. R. 1—32

(b) ASSISTANCE LEVEL PER DWELLING UNIT.—Section 415(c)(1) of the Energy Conservation and Production Act (42 U.S.C. 6865(c)(1)) is amended by striking ‘‘$2,500’’ and inserting ‘‘$6,500’’.

(c) EFFECTIVE USE OF FUNDS.—In providing funds made available by this Act for the Weatherization Assistance Program, the Secretary may encourage States to give priority to using such funds for the most cost-effective efficiency activities, which may include insulation of attics, if, in the Secretary’s view, such use of funds would increase the effectiveness of the program.

(d) TRAINING AND TECHNICAL ASSISTANCE.—Section 416 of the Energy Conservation and Production Act (42 U.S.C. 6866) is amended by striking ‘‘10 percent’’ and inserting ‘‘up to 20 percent’’.

(e) ASSISTANCE FOR PREVIOUSLY WEATHERIZED DWELLING UNITS.—Section 415(c)(2) of the Energy Conservation and Production Act (42 U.S.C. 6865(c)(2)) is amended by striking ‘‘September 30, 1979’’ and inserting ‘‘September 30, 1994’’. SEC.408. TECHNICAL CORRECTIONS TO PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978. (a) Section 111(d) of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2621(d)) is amended by redesignating paragraph (16) relating to consideration of smart grid investments (added by section 1307(a) of Public Law 110–140) as paragraph (18) and by redesignating paragraph (17) relating to smart grid information (added by section 1308(a) of Public Law 110–140) as paragraph (19). (b) Subsections (b) and (d) of section 112 of the Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2622) are each amended by striking ‘‘(17) through (18)’’ in each place it appears and inserting ‘‘(16) through (19)’’.

H. R. 1—33authorization provided in section 365(f) of such Act only if the governor of the recipient State notifies the Secretary of Energy in writing that the governor has obtained necessary assurances
that each of the following will occur:

(1) The applicable State regulatory authority will seek to implement, in appropriate proceedings for each electric and gas utility, with respect to which the State regulatory authority has ratemaking authority, a general policy that ensures that utility financial incentives are aligned with helping their customers use energy more efficiently and that provide timely cost recovery and a timely earnings opportunity for utilities associated with cost-effective measurable and verifiable efficiency savings, in a way that sustains or enhances utility customers’ incentives to use energy more efficiently.

(2) The State, or the applicable units of local government that have authority to adopt building codes, will implement the following:

(A) A building energy code (or codes) for residential buildings that meets or exceeds the most recently published International Energy Conservation Code, or achieves equivalent or greater energy savings.

(B) A building energy code (or codes) for commercial buildings throughout the State that meets or exceeds the ANSI/ASHRAE/IESNA Standard 90.1–2007, or achieves equivalent or greater energy savings.

(C) A plan for the jurisdiction achieving compliance with the building energy code or codes described in subparagraphs (A) and (B) within 8 years of the date of enactment of this Act in at least 90 percent of new and renovated residential and commercial building space. Such plan shall include active training and enforcement programs and measurement of the rate of compliance each year.

(3) The State will to the extent practicable prioritize the grants toward funding energy efficiency and renewable energy programs, including—

(A) the expansion of existing energy efficiency programs approved by the State or the appropriate regulatory authority, including energy efficiency retrofits of buildings and industrial facilities, that are funded—

(i) by the State; or

(ii) through rates under the oversight of the applicable regulatory authority, to the extent applicable;

(B) the expansion of existing programs, approved by the State or the appropriate regulatory authority, to support renewable energy projects and deployment activities, including programs operated by entities which have the authority and capability to manage and distribute grants, loans, performance incentives, and other forms of financial assistance; and

(C) cooperation and joint activities between States to advance more efficient and effective use of this funding to support the priorities described in this paragraph.

(b) STATE MATCH.—The State cost share requirement under the item relating to ‘‘Department of Energy; Energy Conservation’’ in title II of the Department of the Interior and Related Agencies

H. R. 1—34
Appropriations Act, 1985 (42 U.S.C. 6323a; 98 Stat. 1861) shall not apply to assistance provided under this section. (c) EQUIPMENT AND MATERIALS FOR ENERGY EFFICIENCY MEASURES AND RENEWABLE ENERGY MEASURES.—No limitation on the percentage of funding that may be used for the purchase and installation of equipment and materials for energy efficiency measures and renewable energy measures under grants provided under part D of title III of the Energy Policy and Conservation Act (42 U.S.C. 6321 et seq.) shall apply to assistance provided under this section.

H. R. 1—208



Subsection (c) of section 54C is amended by adding at the end the following new paragraph: ‘‘(4) ADDITIONAL LIMITATION.—The national new clean renewable energy bond limitation shall be increased by $1,600,000,000. Such increase shall be allocated by the Secretary consistent with the rules of paragraphs (2) and (3).’’.


(a) IN GENERAL.—Section 54D(d) is amended by striking ‘‘$800,000,000’’ and inserting ‘‘$3,200,000,000’’.


(1) IN GENERAL.—Clause (ii) of section 54D(f)(1)(A) is amended by inserting ‘‘(including the use of loans, grants, or other repayment mechanisms to implement such programs)’’ after ‘‘green community programs’’.

(2) SPECIAL RULES FOR BONDS FOR IMPLEMENTING GREEN COMMUNITY PROGRAMS.—Subsection (e) of section 54D is amended by adding at the end the following new paragraph:‘‘(4) SPECIAL RULES FOR BONDS TO IMPLEMENT GREEN COMMUNITY PROGRAMS.—In the case of any bond issued for the purpose of providing loans, grants, or other repayment mechanisms for capital expenditures to implement green community programs, such bond shall not be treated as a private activity bond for purposes of paragraph (3).’’.



(a) IN GENERAL.—Section 25C is amended by striking subsections

(a) and (b) and inserting the following new subsections: ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 30 percent of the sum of— ‘‘(1) the amount paid or incurred by the taxpayer during such taxable year for qualified energy efficiency improvements, and ‘‘(2) the amount of the residential energy property expenditures paid or incurred by the taxpayer during such taxable year.

‘‘(b) LIMITATION.—The aggregate amount of the credits allowed under this section for taxable years beginning in 2009 and 2010 with respect to any taxpayer shall not exceed $1,500.’’. (b) MODIFICATIONS OF STANDARDS FOR ENERGY-EFFICIENT BUILDING PROPERTY.—