Minnesota and South Carolina Promote Plug-in Hybrids, Alt Fuels

June 14, 2006

Plug-in hybrid vehicles have received a lot of attention in recent months, and now two states are prepared to pursue the vehicles, once they become readily available. Minnesota Governor Tim Pawlenty signed a law on May 31st that requires the state to buy plug-in hybrids on a preferred basis when they become available. The law, House File 3718, also encourages Minnesota State University - Mankato to develop flex-fuel plug-in hybrid vehicles, and creates a task force consisting of business, government, and utility representatives to develop a strategy for using and producing such vehicles in Minnesota. As the name implies, plug-in hybrids feature an external power plug and a battery pack large enough to allow the vehicle to travel 20 to 60 miles on battery charge alone. Such vehicles could eliminate the use of gasoline for many commuters, while still allowing the use of fuel on longer trips. See the text of the bill and the press release from the Institute on Local Self-Reliance, a nonprofit organization that promotes sustainable communities.

South Carolina is even more optimistic about the vehicles, as the latest budget includes a $300 sales tax rebate for the purchase of plug-in hybrid vehicles. Since the vehicles won't be commercially available for some time, a more realistic rebate goes to the mechanically inclined, who can earn a $500 sales tax rebate for the purchase of equipment to convert a standard hybrid to a plug-in hybrid. The budget also includes a $300 sales tax rebate for buyers of fuel cell vehicles and an equal, but more pragmatic, sales tax rebate for buyers of flexible-fuel vehicles, which are readily available today. To encourage alternative fuels, the budget also includes incentives of 5 cents per gallon for the sale of E85 (a blend of 85 percent ethanol and 15 percent gasoline) and B20 (a diesel blend containing 20 percent biodiesel). Finally, individuals and businesses producing biodiesel for their own use can earn tax credits of 20 cents per gallon if they produce it from soybeans and tax credits of 30 cents per gallon if they produce it from feedstocks other than soybeans. To see the budget item, scroll down to section 72.113 in the South Carolina general appropriations bill.

South Carolina also passed a bill last week that includes tax credits for new ethanol or biodiesel production facilities. Facilities placed in service between 2007 and 2009 will earn a tax credit of 20 cents per gallon for the first 5 years of fuel production. In 2014, the tax credit drops to 7.5 cents per gallon. In addition, the legislation includes a tax credit of 25 percent of the cost of equipment for production, distribution, or dispensing of ethanol or biodiesel. Also included in the legislation are tax credits for solar heating and cooling systems and landfill gas systems. See sections 36, 37, and 38 of the bill, S. 1245.