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Senate Version of Bailout Bill has PHEV Credits

2 October 2008

The revised bailout legislation passed by the US Senate on Wednesday (H.R. 1424)—which has ballooned from an original 3-page plan from Treasury Secretary Paulson to the 451-paqe bill approved by the Senate—contains among its many other new provisions a tax-credit for plug-in hybrid electric vehicles.

The credit is a base $2,500 plus $417 for each kWh of battery pack capacity in excess of 4 kWh, to a maximum of $7,500 for light-duty vehicles; $10,000 for vehicles with gross vehicle weights of more than 10,000 but less than 14,000 pounds; $12,500 for vehicles with a GVW of more than 14,000 but less than 26,000 pounds; and $15,000 for any vehicle with a GVW of more than 26,000 pounds.

Phaseout of the credit is to begin after the total number of qualified PHEVs in the US sold after 31 December 2008 is at least 250,000.

Qualifying vehicles must have a battery pack with at least 4 kWh of capacity—a provision that will preclude the inclusion of the first generation of Toyota PHEVs as well, potentially, as other lower all-electric range plug-ins.

(H.R. 1424 was originally proposed in 2007 to require equity in the provision of mental health and substance-related disorder benefits under group health plans, to prohibit discrimination on the basis of genetic information with respect to health insurance and employment, and for other purposes. It was entitled the “Paul Wellstone Mental Health and Addiction Equity Act of 2007.” On 1 October 2008, the Senate decided to use it as the vehicle for the economic rescue legislation.)

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This is a dream bill for GM’s Volt ambitions and any other producers of electric or range extended EVs. This bill also contains an extinction of the subsidy programs for wind and solar energy as far as I understand.

It is not a fix for the current bad-debt crisis but it should be able to slow it down to some degree. The interbank credit market needs to get going again and this bill could be what it takes to do that. Otherwise this crisis will become a major recession very quickly were even ordinary people with healthy finances are unable to obtain loans for car purchases or a house purchase simply because the banks themselves can’t get the credit they need.

The biggest risk about this plan is that it has been made so quickly it is almost certain to be full of issues that are not well considered. The markets would be better off in the long-term if this plan was not made in a hurry but if they took a few weeks to get it right. I am not sure it will pass this time either or that it is very clever to do so but it should be passed within a few weeks.

Correction: The post above said >extinction< but the intention was of cause to say >extension<.

Sorry.

I say Ignorance and freedom is incompatible let wall street take it on the chin I would have too, wouldn’t u?

Will this include BEVs like the Aptera? I hope so. I know it will include the Typ-1h -- if the battery pack is 4 kWh (forgot how big its battery is supposed to be).

Sneaky these Senators -- putting the minimum battery size just above that of the new Prius... It really is a giveaway to the Volt.

There is also a clause in H.R. 1424 that says:

"AN EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS INTENDED FOR USE BY CHILDREN"

Its section 504 on page 300. Link below to download the bill from the Senate's website. The bill goes on to say that the arrow cannot be more than 5/16" in diameter and that they cannot be "finished or laminated." That's right people, its all going to be ok. We're not taxing the arrows anymore...

http://banking.senate.gov/public/_files/latestversionAYO08C32_xml.pdf

Wow. Just read the details. That really is a phenomenal handout to GM. I'm not even mad. I'm impressed.

The thing that really annoys is that all these tax credits will probably give EVs and PHEVs and low carbon emission vehicles an unfair advantage over good old gasoline vehicles. Our goal is to speed the electrification of transport but can't we do it by giving more money to foreign manufacturers? Why should US tax dollars remain in the US when we could subsidize the competitors as well?

Strikes me as jingoistic pablum that may well make the air cleaner, the roads quieter, wean us off foreign oil, confront global warming, and provide jobs for Americans - but it does nothing to speed our global agenda.

I'm just fine with the US's money staying in the US. It's the big 3 who need to be incentivized to build PHEV's, and hopefully now they are. Plus I live here and given our current situation, we need to hold on to our money.

Usually I find earmarks and what not as annoying as everyone else, but this time it looks like they've got Bush by the balls, and they're getting in some good stuff that he'd never usually allow. I really hope this works for the economy, and for PHEVs.

Elliot,

NRG Nut was obviously using sarcasm "tongue in cheek" to spout the same type of garbage many posters here at Green car congress do.

BTW - EVs/PHEVs do nothing to make highways quieter and if there is just the slightest amount of rain the city streets won't be any quieter either.

While people obsess about wooden arrow taxes, our economy goes down the tubes. Get a grip people, pass this thing and let's get on with all the other things we have to do in the coming months to prevent complete collapse.

This all sounds wonderful for GM, but the truth is that it is another case of the gov't picking the winning design.
There may be other ways of making a car more efficient than using bigger batteries. Is coal (producing the electricity today) really that much cleaner, or any cleaner, than petroleum?

What if the vehicles are using Bio-Diesel from Algae which is American, home grown, carbon neutral, etc etc.

Where do you think these batteries will come from? They are currently coming from Asia. They have terrible recycling issues.

I'm ok with batteries being subsidized if the money also goes to other things, in particular bio-diesel which could also be a solution...possibly a better solution given that it has no need for new infrastructure.

@Jack D,
I have to agree with you. I'm starting to feel that bio-fuels may be something we're overlooking.
Not that silly ethanol, but bio-diesel and in particular butanol which actually can be used instead of ethanol, has no side effects with current infrastructure, can be created from the same feedstocks OR algae and can replace gasoline 1-1 instead of the pathetic 60% energy density of ethanol.

It can also be created from the same sources as ethanol so why even bother with that stuff?

Anyway, I do disagree with you that it is still good to do some kind of program to promote batteries. Of course, this bill is strictly targeted at GM's Volt. It looks like this is a GM bailout plan in disguise.

Why am I being forced to buy a car that only GM can build? I have friends and family that work for Nissan, right here in the US! They are going to produce hybrids right here in the US and this bill precludes the design they are doing because it ONLY matches up with GM's current Volt design.
Their are parallel designs coming from Ford as well that will be excluded because they did a design that happens to not have over 4kWh...but at least they are affordable! I can't spend $40,000 to buy a Volt just to get a tax credit to bring it back to $33,000. Come on guys, stop picking winners in Washington.

It's GREAT to give incentives to more efficient cars, but why let one companies lobby efforts dictate what all of us have to buy???

Other Dave,
I happen to think that GM has the best design with their "strong hybrid" design, at least in the long run. There is nothing stopping these other companies from building the same kind of design.

Of course, now I'm doing the same thing that the gov't is doing and "choosing a winner" without waiting to see what other companies will come up with. LOL

Yes, this is clearly the lobbying efforts of GM setting a standard for all of us, but hopefully it will be the right direction since they already have Congress ramming it down all of our throats.

Two years ago - the whining centered on the non-appearance of a mass produced EV/BEV/PHEV. Now there is (more than) one - the greens hammer on Congress to pass tax incentives to adopt new technology and they do. Remember the previous HEV tax incentive of $3,500.00 went (almost) entirely to Toyota Prius - made overseas. So now the incentive favors a U.S. product and suddenly green wisdom thinks it not so good. Huh? Get real people. Either you want effective PHEVs with good AER or you want to tank GM. Can't have it both ways.

@NRG Nut,
You're right, we should be happy they did anything at all. I have come across a couple of other designs that now are at a disadvantage because they targeted one type of design and specified "kWh" as the measure. What if I want to use a flywheel and it might turn out to be cheaper and more efficient than batteries?

The point is why not give the tax credits based on a car using the "least energy possible"? If you want to promote electricity over petroleum, then fine....weight it that way. But don't tell me how I have to do it. Your technology decision may not be the right one.

How do I know this won't be the same as the mess we're stuck in promoting ethanol and giving them tax credits for something that has turned out to be an impractical disaster. And you can NEVER take these credits away once you start because they use that money to strengthen their lobbying efforts and you'll NEVER get it stopped again even if something else proves better.

So I say again, what is the goal? To produce a car that is cleaner or declare batteries the winner? You get exactly what people are incented to do. This is a battery bill, not a clean energy bill. If batteries are that great, then make the tax credit for more efficient cars and they'll win IN THE MARKET!!!

Even if coal is used to generate the electricity the polution is less. Car engines are always less efficient than even the oldest coal power plant. One chimney is easier to control than 100,000. At least 123 gallons of crude oil go into making 100 gallons of refined liquid fuel. This does not include pumping from the well or shipping through piplines etc. Coal is carried from the mine on efficient railways mostly. Crude oil is much dirtier than coal and has damaged far more animals and beaches.

The laws of physics require that much heat is lost in the engine or at the power plant but the efficiency of power plants is well controlled. The efficiency of a gasoline engine can be destroyed by a bad driver.

Perhaps now someone will put a ZEBRA battery into a Prius to show that it can go 80 to 120 miles.

Homes should have natural gas powered electricity generating heating systems to charge their cars %40 of CO2 can be saved this way. ..HG..

Henry,
I agree, and despite what anyone will tell us electricity is always cleaner than petroleum based fuels. There are way too many "statistics" floating around where people try to show otherwise, but that is simply not true. I've always been one of the greens screaming for more EVs of any form so I'm not really complaining. In the interest of full disclosure, I'm working on an car company itself which actually benefits from this bill...big time.

The question I have is whether or not algae based bio-fuels might not be an even better solution. They seem to actually be greener than coal, at least from all my reading. Carbon neutral with much lower emissions across the board. A friend of mine has just taken over as the CEO of a bio-diesel company just outside of Atlanta and they are going to produce 24million gallons a year from their first plant. A drop in the bucket, but a good little start. Knowing him and what he's trying to do made me realize that I was being short sighted to try and get battery credits.

This bill is going to be about $1Billion worth of tax credits. Why is it all going to batteries? It completely changes the design of our car which is ok for ME because it gives us the tax credits. But perhaps we should instead be designing the car as a range extended hybrid using bio-diesel or butanol? Perhaps that is cleaner than the coal based electricity in our area???

My only suggestion is that we should have a system that rewards and incents the cleanest system as measured by total carbon footprint and the best effect on energy security here in the US. This bill declares batteries the winner. What if the best and most cost effective is a combo of bio-fuels and fly wheels for energy recapture?

The batteries would STILL qualify and it would not hurt anyone who could build and sell EV/BEV/HEV/etc (or the people who want to buy one). HOWEVER, it would also allow for people who find other ways to clean up the environment or increase our energy security.

Dave

when someone demonstrates a biofuel & flywheel production vehicle - it too will be eligible for a new round of tax credits. Until car makers step up and put these new designs into production - why should we worry? Good ideas can be developed without the promise of subsidies - Tesla and Prius did it.

NRG

Good points about Tesla and Prius.

But the cars we're talking about that will qualify for this don't go into production until 2010, for the most part. There are companies producing bio-diesel now and quite a few announcements for production next year...so why were they not even considered for this package? A Billion Dollars worth of tax credits would go along way towards making bio-diesel affordable right now.

We have a huge number of cars and trucks on the road that could use it today. Bio-diesel is about 60% better at CO2 than petro-diesel, "net lifecycle", and lower in every other emission but NOx where it's about even:
http://www.biodiesel.org/pdf_files/fuelfactsheets/emissions.pdf AND
http://schools-wikipedia.org/wp/b/Biodiesel.htm

Seems like that would have a larger, more immediate impact on GHG and energy security???

My company will get a credit either way.

So the reason I bring this up is because it has now changed our design. Before, we were actually considering putting effort into a smaller battery pack and trying to focus more on some breakthroughs we've come across on the diesel side as a range extender and trying to partner with a bio-diesel company to launch and promote them. It cost us money to test these new technologies and put them into production.

We thought that bio-diesel may have a better environmental impact, would allow us to produce a more affordable car that people could buy and perhaps we should be going in that direction. Because of this bill, we will focus on the bigger battery and higher all electric range because we can't afford to do both.

Is that better for the environment? I don't know. But we can't afford to do development and testing for more than one direction and the gov't just made the decision for us with the stroke of the pen. I hope they picked right.

So I could possibly be whining about nothing. But it seems to me that both of these directions are on about even footing today as far as your test about "being in production". Actually, bio-diesel is a little ahead as far as the number of vehicles that could use it now and it's impact in the near term. Hence my question as to what the goal of all this was. To help with GHG and energy security, etc...or to promote batteries???

Why not try to get this amended to include any technology that is put into production that drops CO2 footprint by X% and reduces the use of petroleum by Y%??? This is a Billion dollars here folks.

I'm asking this to the green community. I don't know the answer, but we're the folks who make the most noise to policy makers...outside of the lobbyist of course.

Should we be pushing a broader agenda for actual RESULTS DELIVERED vs a particular technology? It seems to me that nobody loses with that measure???

As for the Tesla, I'm still not sure about it being a good thing to do to give a tax break of any kind to a $100,000 car. Like most of these companies, we're considering a high end sports car too. But I'm a little embarrassed to ask for a tax break on a sports car for rich people.

Seems to me, those folks who can afford that type of vehicle don't need to be getting tax breaks that could help people afford a mass production car.

One other thought: I am really, really happy to see ANYTHING being done for once. It is great to do anything that is forward progress so I don't mean to bring everyone down or be negative.

I'm just asking an honest question and would like some feedback about whether it might be more effective to go for an "end result" based system with specific goals against GHG and energy security.

I do agree with David,all grants ,incentives,and rules should be based on results, not on the technoligies used to acomplish those results.

@DaveD

The answer to your question is location. For the US, biofuels are already a clear winner based on LCA for reducing ghg. Biofuels are primarily about reducing dependence of foreign oil while creating a market for American farmers and engineers. If my job required me to drive more than 25k miles a year I would go biodiesel.

Presently, different forms of BEV have little chance of reducing ghg or energy dependence. I work in the electricity generating industry. All BEV advocates have no clue where the energy to charge the batteries come. Being clueless is a statutory requirement in California for CARB, CPUC, & CEPA.

Some time around 2025, the US might have enough nuke and renewable energy capability to supply BEV to reduce ghg without importing LNG.

@Dave:

Not so worried about the tax break for Tesla owners because at the early stage each EV on the road is a banner for electrification. The $7500 the IRS will not collect will probably be better spent by early adopters of green technology anyway.

You are right about equitable treatment for biofuels. They should have a separate incentive package both for producers, distributors and consumers. I'd like to see a large expansion in biodiesel production. And tax credits for gas station owners who put in biofuel pumps (based on volume sold) make sense. Likewise the consumer should be encouraged to go flex fuel and buy E85, butanol or biodiesel through lower sales/fuel taxes.

While the current incentive will help launch the EV industry in the US, new legislation supporting the transition to biofuels is needed. Both political parties know this and both know they'll have to face down big oil which is doing all it can to prevent biofuels from succeeding.

Finally the only real "crisis" is in energy independence. Moving to sustainable fuels and resources will incidentally lower a fraction of the 10% atmospheric GHG that CO2 represents. Unfortunately that will not change the Earth's climate cycles.

I assume this credit also goes toward EVs, not only PHEVs. I haven't seen this explicitly said in any news accounts. Does anyone know? Also, has anyone looked through the bill and can indicate on which page number this credit is discussed?

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