WHY SHOULD CONGRESS AND THE ADMINISTRATION SUPPORT A STATIONARY FUEL CELL TAX CREDIT?
The $1000 per kilowatt credit will be applicable for
purchasers of all types and sizes of
permanently installed stationary
fuel cell systems. It will be available
for five years, January 1, 2002-December 31, 2006, at which point fuel cell
manufacturers should be able to produce a product at market entry cost. The credit does not specify input fuels,
applications or system sizes so a diverse group of customers can take
short-term advantage of the credit to deploy a wide range of fuel cell
Why is a fuel cell tax credit necessary?
· A credit will allow access to fuel cells by more customers NOW when there is a grave need for reliable power in many parts of the country.
· A credit will speed market introduction of fuel cell systems.
· A credit will create an incentive for prospective customers, thus increasing volume and reducing manufacturing costs. As with any new technology, price per unit decreases as volume of production increases.
· A credit will speed the development of a manufacturing base of component and sub-system suppliers.
· Because fuel cell systems operate without combustion, they are one of the cleanest means of generating electricity.
· While energy efficiency varies among the different fuel cell technologies, fuel cells are one of the most energy efficient means of converting fossil and renewable fuels into electricity developed to date.
· Fuel cell systems can provide very reliable, uninterruptible power. For example, fuel cells in an integrated power supply system can deliver “six nines” or 99.9999% reliability. Thus fuel cells are very attractive for applications that are highly sensitive to power grid transmission problems such as distortions or power interruptions.
· As a distributed generation technology, fuel cells address the immediate need for secure and adequate energy supplies, while reducing grid demand and increasing grid flexibility.
· Installation of fuel cell systems provides consumer choice in fuel selection and permits siting in remote locations that are “off grid.”
· Fuel cell systems can be used by electric utilities to fill load pockets when and where new large-scale power plants are impractical or cannot be sited.
· Fuel cell systems, as a distributed generation resource, avoid costly and environmentally problematic installation of transmission and distribution systems.
The five-year budgetary impact of the credit is less than $500 million.
H:Final Tax Credit
KEY ELEMENTS OF A FUEL CELL TAX CREDIT FOR
The goal of the stationary fuel cell tax credit is to create an incentive for the purchase of fuel cells for residential and commercial use. The prompt deployment of such equipment will generate environmental benefits, provide a reliable source of power for homeowners and businesses, reduce our nation’s dependence on foreign oil supplies, help commercialize clean technology, enhance US technology leadership and create economic benefits for the nation.
Fuel cell tax credit proposals should be designed to benefit a wide range of potential fuel cell customers and manufacturers. They should therefore be all-inclusive without discriminating between different kilowatt sized units, type of technology, application, fuel source or other criteria. Efforts should be made to keep the proposals as simple as possible to aid in effective implementation. In addition, the proposals should strike a balance between ensuring the level of tax credit provided represents a meaningful incentive that will stimulate purchase and deployment of the technology while minimizing the budgetary impact.
The following are specific elements suggested for consideration and inclusion:
US business and residential taxpayers that purchase fuel cell systems for stationary commercial and residential applications should be eligible for the credit.
The credit should be based on a “per kilowatt” approach with no distinction made for the size of unit.
No allocation of credit should be made to specific categories of fuel cells on an annual or total basis.
No premium or penalty should be imposed based on the fuel source.
The term `fuel cell power plant' should be defined as “an integrated system comprised of a fuel cell stack assembly, and associated balance of plant components that converts a fuel into electricity using electrochemical means.”
No co-generation requirement should be imposed since not all fuel cell technologies offer an effective option for co-generation.
No efficiency criteria should be imposed. Fuel cell systems in the early stages of development, such as residential sized units, cannot predict the efficiency level at this time. Establishing arbitrary efficiency criteria could exclude early models for this important application, which are exactly the units that require incentives. Efficiency levels will vary based on whether proton exchange membrane, phosphoric acid, solid oxide or molten carbonate fuel cell technology is used. Designing fuel cell systems to maximize efficiency may require tradeoffs resulting in more complicated, higher cost, less fuel flexible and less durable units.
No minimum or maximum kilowatt size criteria should be imposed.
$1,000 per kW for all qualifying fuel cell power plants. A five-year program with a $500 million budgetary impact is proposed.
Contact Judith Bayer at 202-336-7436 or Bayerj@corpdc.utc.com if you have questions.