Energy law offers two-year window for facility incentives

By BOM Editorial Staff  

In October 2001, Congress started debating legislation aimed at changing the way the country produces, acquires and uses energy.

The goals were lofty. President Bush and other politicians vowed that any legislation worthy of becoming law would have to reduce the nation’s dependence on foreign oil, help usher in the hydrogen economy and establish a national energy policy, which many said had been absent for decades.

The Energy Policy Act of 2005, while marking the end of a protracted political debate, gives facility executives fewer opportunities to save money through energy efficiency improvements than was possible through earlier versions of the bill.

Gone is a $2.25-per-square-foot deduction for new construction and retrofit projects that result in total building energy use that is less than the amount prescribed in ASHRAE energy efficiency standards. In its place is a $1.80-per-square-foot deduction that, as a practical matter, will only apply to new buildings and those that undergo gut renovations.

The deduction is available to buildings placed in service between Jan. 1, 2006 and Dec. 31, 2007. That means most buildings that will qualify for the deduction are either already under construction or are far enough along in the planning process that significant design changes would have to occur to earn the deduction.

“You have to be on your starting blocks, or pretty close to them, to qualify,” says Ed Gray, director of energy infrastructure for the National Electrical Manufacturers Association.

To qualify for the deduction, organizations will have to show that a building’s total building energy use is 50 percent less than what’s set in ASHRAE 90.1-2001, as in effect as of April 2003.

Lindsay Audin, president of the energy consulting firm EnergyWiz, says computer modeling that shows a building beats the ASHRAE standard could cost as much as 10 cents per square foot.

A second provision allows organizations to take a deduction of 60 cents per square foot if a specific building system uses 50 percent less energy than is set forth in the ASHRAE standard.

Lighting renovations are likely be among the first projects to qualify for the deduction, Gray says, because rules on what qualifies for favorable treatment are already written. In addition to exceeding the ASHRAE standard, lighting systems will have to incorporate bi-level switching controls to qualify for the deduction.

Getting a lighting system to perform better than the ASHRAE standard will take more than just switching lamps, such as changing T-12s to T-8s, Gray says, but won’t necessarily require the use of daylight. Manufacturers of lighting components have indicated the use of luminaires, controls and other products that improve the efficiency of lighting systems can be enough to push performance beyond what’s required.

Other provisions in the law that directly affect facilities include tax credits for the purchase of certain on-site power systems. Organizations can qualify for a 30 percent tax credit, not to exceed $500 for each .5 kilowatt of capacity, for fuel cells that are more than 30 percent efficient. A similar provision exists for the purchase of solar energy systems.

For microturbines, the law provides a 10 percent credit, not to exceed $200 for each kilowatt of capacity.

Both credits expire on Dec. 31, 2007.

The law also contains measures that indirectly affect facilities. Those include new efficiency standards for compact fluorescent lamps and for T-12 and mercury vapor ballasts. Similarly, the efficiency standards for package commercial air conditioners and heat pumps have been improved as have standards for commercial refrigeration equipment.

Annual Energy Savings

Here’s a look at the projected energy savings that will result from three initiatives in the Energy Policy Act of 2005. Total energy savings resulting from the act are expected to be 2.6 quads, roughly the equivalent of removing 65 million cars from the road.

Initiative Area
Total Energy Savings (quads)
Electric (MW)
Natural Gas (BCF)
Appliance efficiency standards
Tax incentives
Building energy codes

Source: American Council for an Energy-Efficient Economy

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  posted on 9/1/2005   Article Use Policy

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