Annual Energy Outlook 2010: With Projections to 2035 Page: 19 of 231
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Legislation and Regulations
because EIA assumes that those technologies will not
be in significant commercial use by 2035. ARRA also
extends funding for Clean Renewable Energy Bonds
(CREBs) used to fund renewable energy projects at
publicly owned utilities that do not pay taxes and can-
not take advantage of tax credits. Because AEO2010
assumes that all new renewable capacity is developed
and owned by taxable entities, CREBs are not in-
cluded in NEMS.
Loan guarantees for renewables and
transmission projects
ARRA Title IV, "Energy and Water Development,"
Section 406, provides $6 billion to pay the cost of
guarantees for loans authorized by the Energy Policy
Act of 2005 (EPACT2005). The purpose of the loan
guarantees is to stimulate the deployment of
conventional renewable technologies, conventional
transmission technologies, and innovative biofuels
technologies. To qualify, eligible projects must be
under construction by September 30, 2011, meaning
that projects with a long-term construction horizon
are unlikely to qualify. The face value of the loans
that may be guaranteed by the appropriation will
depend on the subsidy costs assigned to the projects
eventually selected. For example, if the average sub-
sidy cost were 10 percent of the face value of the loans,
the $6 billion appropriated would support loan guar-
antees on $60 billion of debt financing. The Section
406 provision is represented in AEO2010 by a lower
cost of financing (by 2 percentage points) for all
eligible renewable projects brought on line by 2015.
The 2015 date, 4 years after the September 30, 2011,
cutoff date for start of construction, was chosen to
allow for the construction period associated with
most renewable generating technologies.
Smart grid expenditures
ARRA Title IV, "Energy and Water Development,"
Section 405, provides $4.5 billion to modernize, se-
cure, and improve the reliability of electric energy
and storage infrastructure and to develop a Smart
Grid. While somewhat difficult to define, smart grid
technologies generally include a wide array of stor-
age, measurement, communications, and control
equipment employed throughout the generation,
transmission, and distribution system to enable
real-time monitoring of the production, flow, and use
of power from generator to consumer. Among other
things, smart grid technologies, once deployed, are
expected to enable more efficient use of the transmis-
sion and distribution grid and lower line losses,facilitate greater use of renewables, and provide
information to utilities and their customers that will
lead to greater investment in energy efficiency and re-
duction of peak load demands. The funds provided
will not cover the cost of widespread implementation
of smart grid technologies but could stimulate more
rapid investment than otherwise would occur.
Several changes were made throughout NEMS to
represent the impacts of the smart grid funding
provided in ARRA. For the electricity module, it was
assumed that line losses would decrease slightly, peak
loads would fall as customers shifted their usage
patterns, and customers would be more responsive to
price signals. Historically, line losses (expressed as
the percentage of electricity lost in transmission)
have fallen as utilities have made investments to ex-
pand the grid or replace aging or failing equipment.
That trend was incorporated in previous AEO Refer-
ence cases. After passage of ARRA, the time period for
improvements was extended, allowing for greater
declines in line losses. AEO2010 assumes that line
losses will be reduced from roughly 6.9 percent in
2008 to 5.3 percent in 2025.
Smart grid technologies also have the potential to
reduce peak demand through the increased deploy-
ment of demand response programs. AEO2010
assumes that efforts stimulated by Federal expendi-
tures on smart grid technologies will reduce peak
demands in 2035 by 3 percent from what they other-
wise would be. Because the load shifted to off-peak
hours is not eliminated, net energy consumed
remains largely constant.
It is also assumed that increased investment in smart
grid technologies-particularly, smart meters on
buildings and homes-will make consumers more re-
sponsive to changes in electricity prices. Accordingly,
the price elasticity of demand for residential and com-
mercial electricity is increased for certain uses.
Coal
ARRA Title IV, "Energy and Water Development,"
provides $3.4 billion for additional research and
development of fossil energy technologies, including
$800 million to fund projects under the Clean Coal
Power Initiative program focusing on capture and
sequestration of GHGs [8]. In July 2009, a total of
$408 million was allocated to two projects-the Basin
Electric Power Cooperative's Antelope Valley Station
in North Dakota and the Hydrogen Energy Pro-
ject in California-to demonstrate the capability toU.S. Energy Information Administration / Annual Energy Outlook 2010
10
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United States. Energy Information Administration. Annual Energy Outlook 2010: With Projections to 2035, report, April 2010; [Washington D.C.]. (https://digital.library.unt.edu/ark:/67531/metadc949175/m1/19/?q=%22energy%22: accessed June 4, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.