The R&D Tax Credit Aspects of Clean Energy
The two year extension of the R & D tax
credit came at perfect time for the clean energy sector. As
the clean energy sector continues to grow it confronts
technical barriers that require solutions if it is to continue
on its growth trajectory. This article provides a brief
summary of some of the major technical challenges where the R
& D tax credit can play a major role in supporting these
important initiatives. In many cases there are competing
technology solutions where further development and the
examination of alternatives will eventually lead to the
business winner.
The Research &
Development Tax Credit
Enacted in 1981, the federal Research and Development
(R&D) Tax Credit allows a credit of up to 13 percent of
eligible spending for new and improved products and processes.
Qualified research must meet the following four criteria:
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include employee wages, cost
of supplies, cost of testing, contract research expenses, and
costs associated with developing a patent. On January 2, 2013,
President Obama signed the bill extending the R&D Tax
Credit for the 2012 and 2013 tax years.
Major Clean Energy
R&D Challenges
Photovoltaic
Panels: Yield & Cost
The immense amount of
solar radiation reaching Earth daily is sufficient to satisfy
our global energy demand many times over. As a result,
photovoltaics have become one of the most competitive areas of
renewable energy R&D over the past decade. Traditional
"single crystalline" silicon panels have steadily increased in
their solar harvesting efficiency to around 20% and have also
seen materials decreases in price.
Meanwhile, a large
percentage of solar cell research has been focused on
alternative photovoltaic materials and architectures.
Amorphous silicon, commonly used in newer "thin film" panels,
is highly cost effective. Thin film panels such as
dye-sensitized solar cells, as well as organic and inorganic
thin films have all led to large increases in efficiency while
providing other novel and innovative properties such as
mechanical flexibility and ease of fabrication. Today's
cutting edge solar cells are a result of uniquely engineered
architectures. As the field matures, it comes closer to
approaching the holy grail of grid parity - the point when an
alternative energy source can generate electric that is equal
to the purchasing cost from the grid.
Figure 1: National Renewable Energy Laboratory (NREL)
certified photovoltaic efficiencies
Solar & Wind Energy Storage
Despite the tremendous
improvements in the yield and cost of photovoltaics, large
scale adoption of solar and other renewables face another
fundamental problem: intermittency. Factors that can affect
the regularity and dependability of alternative energy
generation include: location, season, and time of day.
Intermittency poses problems to end users who depend on
reliable access to power, but it also affects communities at
the grid level insofar as it is a detriment to forecasting.
The ideal solution to
this problem is cheap, high-capacity, long lifespan energy
storage. Improvements in grid-level storage not only
facilitate the integration of clean energy technologies, but
also make renewable energy generation more economically
viable. Excess energy generated during off-peak demand periods
can be stored and sold during peak demand periods,
dramatically increasing revenues for solar and wind arrays.
A tremendous amount of
R&D has thereby been focused on traditional,
electrochemical batteries. A recent, innovative example is a
liquid metal battery that can be assembled in parallel with
other like batteries to the size of a shipping container.
However, many other alternative clean energy storage
techniques have begun to be explored and implemented. One of
the most common methods, pumped-storage hydroelectricity, uses
excess or off-peak energy to mechanically pump water from a
low elevation reservoir to a higher elevation. This energy,
now in a potential state, can be reclaimed subsequently
through a standard hydroelectric turbine with an efficiency
over 80%. Unfortunately, this requires high capital costs and
either large volumes of water or elevation differences to
maximize the benefits.
A similar technology,
compressed air storage, utilizes excess energy to compress air
and store it in a cold, high pressure environment, such as an
underground cave or old mine shaft. When the energy is needed,
the gas is slightly heated and an expansion turbine
regenerates the stored energy.
An additional technique
is thermal mass storage. Non-peak energy is used to heat a
substance (water, concrete, clay, etc) in a well insulated
environment. Afterward, the energy is recovered through
spontaneous heat flow and a heat engine, such as a steam
turbine. One major problem is finding materials that are
thermally stable at the extremely high temperatures needed to
maximize efficiency.
Mobile Power
Events both domestic and
international have brought America's need for reliable,
long-lasting mobile power into start relief. The U.S. military
presence in Iraq and Afghanistan has included outposts in some
of the farthest reaching, most inhospitable regions of the
globe. Deliveries of gas among other provisions are
predictable, which makes our military vulnerable to insurgents
who can predict, sometimes with ease, where and when shipments
will take place. Consequently, the Department of Defense has
identified mobile power innovation as a key way by which
American defense can be more nimble and less predictable.
Domestically, Hurricane Sandy is only the most recent example
of how extreme weather can have catastrophic ramifications for
power supply. Beyond mere loss of comfort, power outages can
have deadly consequences as weather victims seek medical
treatment and relief from the elements, among other reasons.
The benefits of mobile
power innovation are exciting. In health care, physicians
using tablets and other devices supported by better mobile
power will have far more tools at their disposal and the
option for many more intervention points during the patient
care cycle. In addition to outposts sustained by better
battery life, the U.S. military is looking into mobile data
centers which can be set up on the fly to provide the military
and first responders with immediate connectivity. The next
generation of mobile power includes miniature fuel cells and
batteries as well as wireless recharging technologies
including solar harvesting. Governments and the private sector
provide mobile power start-ups with meaningful financial
backing in recognition of the industry's value. Firms engaged
in the development of new or existing products also have a
strong factual basis for federal and state R&D tax
credits.
Smart Grid
Historically, the
electrical grid was centralized and unidirectional - power
plants strategically built around fossil fuel sources
transported electricity over large areas, accruing significant
cable losses, but were still cost effective. However, as the
system has grown, it has become a complex, interconnected
network; Wind and solar installments, both commercial and
residential, have led to a much more distributed generation
grid. These enhancements have created a demand for improved
electronic communication, metering, and control.
Utility companies have
begun to implement smart meters with a host of new features
aimed to increase reliably, flexibility of energy sources,
efficiency, and stability. Major R&D efforts have improved
- Fault detection and self-healing
in the case of natural disaster or targeted attacks;
- Demand side management, allowing
buildings to optimize energy use - for example controlling
lighting and HVAC remotely;
- Load balancing, due to
intermittent renewable power generation;
- Market-enabling, allowing
communication between suppliers and consumers to maximize
their operating usage and pricing.
Geothermal electricity
One abundant and
reliable but largely untapped source of renewable energy is
geothermal. Thermal energy is generated and stored in the
earth's crust. Geothermal electric plants tap into deep
pockets of steam or high-pressure superheated water to run a
standard turbine. Afterwards, cooler fluid is pumped back into
the Earth to replenish the aquifers for future use.
Geothermal power
generation offers many benefits over other renewable sources:
next to no emissions, no fluctuations in generation, and no
need to transport fuel. However, because thermal energy is
very disperse near the surface, prime generation sites are
often remote and difficult to identify. Also, considerable
care must be taken to manage the hot reservoir to prevent
overuse and maintain efficiency and sustainability. Today's
geothermal R&D involves better exploration technologies,
drilling methods, energy management, and new technologies that
utilize fluids with lower boiling temperatures in order to
incorporate more diverse heat sources.
Carbon Sequestration & Biofuel
When fossil fuels are
burned, spent carbon can be captured and then reacted with
hydrogen to make useful fuels such as methane or ethanol.
Currently, the primary source of sequestered carbon is power
plant flue-gas emissions. Unfortunately, the sequestration
process can account for up to 25% of power plants' internal
energy usage, greatly reducing the efficiency and capacity.
Therefore, there is a huge incentive to support R&D in
this field. The most important research has been focused on
catalysts, in order to promote carbon sequestration, as well
as higher yield hydrogenation reactions. Some researchers have
also begun to explore alternative emissions sources, such as
automobile, train, and airplane exhaust.
Biofuels represent a
similar concept: carbon dioxide is captured, reacted with
other compounds, and then put to useful purposes such as
photosynthesis. Biofuel such as ethanol has a variety of uses
including as a blend with gasoline to power automobiles. Many
energy providers including major oil companies, have started
research into different feed stocks, for example biofuels made
from general domestic organic wastes or algae grown in areas
that does not displace land for food production.
Conclusion
Rising oil prices, national security and
climate change are some of the major drivers of clean R&D.
The R&D tax credit is a major way by which innovators in
this space can recapture some of the expenses relating to
their innovation. Few areas of innovation are so critical to
our nation's progress.
