Clean energy tax incentives for new technologies and projects like those included in the U.S. House-approved Build Back Better Act (BBB) could help support and solidify America’s march in the climate movement, say stakeholders, who urge congressional lawmakers to include them in forthcoming legislation.
“As we think about federal climate policy, we should not underestimate how effective the right tax policies can be in driving down carbon emissions,” said Eric Grey, vice president of government relations for the Edison Electric Institute (EEI), which represents the nation’s investor-owned utilities. “A robust clean energy tax package can be a key driver for the deployment of clean energy and carbon-free technologies over the next decade and can help us reach a clean energy future faster.”
U.S. Sen. Jacky Rosen (D-NV) agrees and told Daily Energy Insider on Friday that to successfully transition to a clean energy economy, the United States needs to make renewable technologies more affordable and accessible.
“I’ve been fighting against job-killing solar tariffs that make clean energy more expensive and will continue working to lower clean energy costs through tax incentives,” Rosen said.
While the $550 billion in clean energy tax provisions didn’t make it into the White House fiscal year 2023 budget in detail, there is a clear placeholder for these provisions, according to Alisa Petersen, federal policy manager at the Rocky Mountain Institute (RMI), a non-partisan, nonprofit organization working to transform global energy systems.
“The Biden administration didn’t want to get ahead of congressional negotiations by including those measures in the proposed budget, so the proposed budget includes a ‘deficit neutral reserve fund’ effectively acting as a placeholder for whatever clean energy tax credits make it through reconciliation,” Petersen said.
For the FY 2023 proposed budget, she explained that this is the beginning of the appropriations process, and while it helps inform Congress’s future omnibus bill, this is just a starting point for negotiation.
“For the reconciliation bill, we are hearing negotiations are starting to pick up again and will take place over the next couple months,” said Petersen. “Again, it is unlikely BBB will pass in its full form, but what we’re hearing is the climate tax credits have a good chance of making it into the final reconciliation package if a reconciliation package does move forward.”
And with energy security being front of mind, she said it’s more important than ever to incentivize efficiency and electrification to reduce U.S. dependence on foreign oil and gas.
“In the immediate term,” Petersen said, “this will allow us to increase exports to our allies and avoid economic catastrophe.”
There are several proposed tax credits that Petersen said RMI is most excited about and hopes eventually make it into the FY 2023 budget from the clean energy tax provisions:
Petersen said that utility-scale solar currently only qualifies for the ITC, but declining capital costs of solar projects have made the PTC a more valuable tax credit option. Allowing solar to accept PTC, like wind, would accelerate deployment, she said.
Rhodium Group analysis also projects that allowing for PTC optionality with direct pay would double emission reductions from full-value credit extensions. And significant transmission buildout is needed to meet the Biden administration’s clean electricity goals of 100 percent clean by 2035.
“Without this credit,” said Petersen, “there are very few demand-pull policies driving forward clean hydrogen production; this measure will close the gap. Clean hydrogen is needed as part of a key strategy for industrial decarbonization where straight electrification may not be possible.”
On the same page
Grey said that EEI also is urging Congress to pass a tax package that includes the expansion of all the various EV tax credits; optionality in choosing between the PTC and ITC for solar; alternatives to normalization for regulated electric companies; the 100-percent direct pay for the clean energy credits; a nuclear PTC for existing facilities; and new tax credits for transmission, as well as new tax credits for energy storage and hydrogen to help move these carbon-free technologies through their development lifecycle.
“These policies will provide significant benefits to electricity customers, provide long-term certainty to the entire renewable energy industry, and create a level playing field that recognizes the role of electric companies in deploying more clean energy,” Grey told Daily Energy Insider.
The robust tax package being considered by Congress also would help preserve the existing nuclear fleet, which provides most of the nation’s carbon-free energy, he said.
“This is critical to ensuring that electric companies’ new clean energy deployments lead to additional emission reductions,” Grey said, adding that the inclusion of 100-percent direct pay as an option for all the credits recognizes the importance of delivering these technologies to customers affordably.
“Together, these policies not only support customers, they support workers, and they would mean more union work and more union jobs,” said Grey.
Likewise, the research team at the Solar Energy Industries Association (SEIA) has concluded that U.S. solar panel manufacturing alone would vastly expand at a fast pace if the energy tax incentives pass into law.
“And we have a pretty good record on industry forecasts,” wrote John Smirnow, SEIA’s general counsel and vice president of market strategy, in a March 30 blog.
The immediate growth SEIA expects to see in solar manufacturing from the tax credits would require a lot more American steel to be put in the ground, as well, he wrote. And further up the supply chain, Smirnow noted that SEIA also expects new investments in domestic ingot and wafer and cell manufacturing capacity that, in turn, would lead to business for U.S. silicon metal producers.
“With the right investments, we could truly build a broad domestic solar manufacturing base,” wrote Smirnow, adding that there are many reasons why strengthening U.S. solar manufacturing is important, including climate goals, supply chain resiliency, and national security.
“If we hope to seize the promise of American solar manufacturing, we must invest in the future, and clean energy tax incentives are that investment,” he wrote.
Moving forward
While the Infrastructure Investment and Jobs Act was a down payment on transformational change for America’s infrastructure, Grey said much more is needed to achieve EEI’s vision for a clean energy future.
And with the U.S. Commerce Department’s recent decision to initiate an investigation for circumvention tariffs on imported solar products from Asia, the urgency for Congress to act has increased significantly, he said.
“We remain hopeful that Congress can reach agreement on additional legislation that incorporates forward-thinking actions to address climate change, including a robust clean energy tax package that will deliver significant long-term benefits to customers,” said Grey.
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