Clean energy industries got their biggest legislative win in a long time this week, thanks to provisions tucked into the $900 billion Covid-19 stimulus relief bill passed by Congress on Monday.
The legislation is not a done deal until President Donald Trump signs it, and he is making noises that he wants to see larger direct payments to Americans as part of the Covid relief. So this review of the bill comes with the caveat that it’s not yet law and the situation is unusually volatile.
Deep in the 5,000-plus page bill, lawmakers included extensions of tax credits for solar power and onshore wind, plus five years of a new tax credit for offshore wind.
But not everybody walked away with what they wanted. The energy storage industry, for example, has pushed for years to get its own tax credit, but hasn’t gotten it yet.
The bill contains some big steps toward reducing emissions. Among them is a 15-year phase-down of hydrofluorocarbons, which an analysis by the Rhodium Group says will cut emissions equivalent to 900 million metric tons of carbon dioxide, more than the total annual emissions in Germany.
Clean energy advocates were optimistic ahead of the bill’s passage that they would get much of what they wanted. I was skeptical because there’s this kind of talk before many of these big spending bills and a lot of things don’t make it into the final version, as happened last year when the solar industry hoped for tax credit extensions but didn’t get them.
But this time, Santa arrived. Some of the highlights:
- The solar investment tax credit got a two-year extension. This up-front credit will continue at its 2020 level in 2021 and 2022, and then phase down after that.
- The wind production tax credit will get an extra year, meaning it will now be available for new projects that qualify before the end of 2021. This credit is based on the amount of electricity a project produces in its first 10 years.
- Offshore wind gets its own investment tax credit, which will last for five years before a phasedown, and is retroactive to 2017. Under current law, offshore wind can qualify for an investment tax credit, but it is phasing out right as the offshore wind industry is on the cusp of a building boom.
The tax credits give breathing room to projects that may have been delayed because of the pandemic and were at risk of failing to qualify, or, in the case of the solar credits, were going to get a lower credit. Renewable energy business groups say this will translate to jobs, and help at a time when the renewable energy sector has had a net loss of 71,700 jobs, or 12 percent, since March.
The main purpose of the bill is to provide relief to people and businesses struggling because of the coronavirus, combined with funding for the government. Just about everything else is an add-on.
“It’s nice that other bipartisan priorities were able to ride on that, but we were under no illusions,” said Rob Cowin, director of government affairs for climate and energy at the Union of Concerned Scientists. “First and foremost, this was about getting relief to the American people and keeping the government open.”
While the energy provisions were nowhere close to the centerpiece of the bill, they had broad support from House Speaker Nancy Pelosi, Senate Minority Leader Chuck Schumer and Republicans like Sen. Lisa Murkowski of Alaska.
Murkowski was one of the people who helped to make sure that the bill included provisions from other House and Senate energy bills that otherwise would not have become law. The result is the Energy Act of 2020, passed as part of the larger bill, which authorizes spending on research and development for a wide variety of energy technologies.
The research includes energy storage, nuclear energy, carbon capture and carbon removal, among other technologies. It also reauthorizes programs like the Energy Department’s Advanced Research Projects Agency, or ARPA-E, and the Weatherization Assistance Program, which helps people reduce heating and cooling costs.
“The Energy Act represents the first modernization of our nation’s energy policies in well over a decade,” Murkowski said in a statement.
She highlighted the bipartisan nature of the bill, which touches on something I’ve heard more often lately from clean energy business groups: Support for clean energy is becoming less partisan, with more Republicans seeing the economic benefits of projects in their states or districts.
The bill, including the Energy Act and everything else, sets the table for the administration of President-elect Joe Biden, with tax credits that will help to stimulate renewable energy development.
But it’s important to mention that the tax credits were not designed to be a permanent policy, even though they have been extended several times.
Clean energy advocates say the long-term solution is a climate policy that takes into account the social costs of fossil fuel power plants, and the benefits of carbon-free resources. That’s a bigger debate, and one that is unlikely to happen in a closely divided Congress.
Offshore Wind Tax Credit Helps the Long-Awaited Vineyard Wind 1 Project
This is the last Inside Clean Energy of 2020, and I can’t finish the year without saying something more about the Vineyard Wind 1 project, whose delays and struggles have been a frequent subject of this newsletter.
The creation of a new investment tax credit for offshore wind would help to solve one of the problems caused by the federal government’s delay in approving Vineyard Wind 1, which is that the delay in construction was going to lead to lower levels of tax government aid because the credit was phasing down.
As Greentech Media wrote last month, Vineyard Wind’s owners were asking the Internal Revenue Service to allow the project to get a credit through 2022 at the level that was otherwise only available through 2021.
The new legislation says all offshore wind projects would get a 30 percent credit that would be available through 2025, which is higher than the level Vineyard Wind would have gotten, with or without the granting of its request from the IRS.
Vineyard Wind 1 is an 800-megawatt project that is planned for installation off the shore of Massachusetts. It would be, by far, the largest offshore wind farm in the United States, and the first of many projects that are in various stages of planning.
The project might have been under construction right now except that the federal Bureau of Ocean Energy Management said in 2019 that it was ordering an additional review of environmental impacts before issuing a permit.
The review dragged through most of 2020, with the federal office saying this fall that its final decision was likely to happen in January 2021. There has been a flurry of activity in recent weeks, but none of it was about expediting the project.
Vineyard Wind’s developers said on Dec. 1 that they were temporarily withdrawing from the approval process because they switched to a different turbine supplier. The new turbines would be larger, so the project would need fewer of them to get to 800 megawatts. The developers said the pause would last only a few weeks, and I wrote about the timing and whether this might be an attempt to wait out the Trump administration.
The Bureau of Ocean Energy Management said a few days later that it did not agree the delay would be short, and said Vineyard Wind would need to restart aspects of the approval process when it submits its new plan. We’ll see if the incoming Biden administration has a different view when it is in charge of the office.
So we end 2020 with the project still waiting for approval, and long past the original target for beginning construction, but with some clarity about tax credits if the legislation gets signed.
I asked Vineyard Wind how the new tax credit affects the project. The company referred me to the American Wind Energy Association.
The association issued a statement praising Congress “for recognizing the enormous potential of offshore wind, America’s largest untapped electricity source, as a brand-new provider of jobs for American workers and clean power for American families.”
Google Gets Creative With Battery Storage to Serve Itself and the Grid
Corporations almost seemed to trip over each other in 2020 to issue ambitious and ambitious-sounding plans to cut emissions.
Among them, Google stood out for its plan to get all of its energy from carbon-free sources on a 24/7 basis by 2030. By aiming for carbon-free energy around the clock, Google is going much further than other companies that are still using grid power that may include fossil fuels.
Last week the company made an announcement about shifting from diesel to batteries for backup power, which could be an important part of reaching its 24/7 goal.
Google said it will begin with a pilot project using battery storage systems as backup power for a large data center in Saint-Ghislain, Belgium, as opposed to the standard practice of using diesel generators.
The project would have a double benefit because Google would only need emergency backup power on rare occasions, but the batteries would be there all the time and could provide electricity to the local grid.
“Our project in Belgium is a first step that we hope will lay the groundwork for a big vision: a world in which backup systems at data centers go from climate change problems to critical components in carbon-free energy systems,” said Joe Kava, Google’s vice president for global data centers.
The project would go online by fall of 2021. Initially, it will have a 2-megawatt battery system that will be capable of running for up to two hours before recharging.
Kava said there are more than 20 gigawatts of backup capacity provided by diesel generators across the global data center industry, which means the switch to battery systems is a substantial opportunity to reduce use of fossil fuels.
And, by being available to the local grid, battery systems could improve reliability and reduce the need for local utilities, during times of high demand, to use “peaker” power plants that run on fossil fuels and are heavy polluters.
Google said it’s testing the battery system in Belgium because that country already has a track record of trying new approaches to managing the grid.
The project in Belgium touches on what gets me so excited about Google’s 24/7 plan, which is that the company’s implementation will provide lessons for governments, utilities and everyone else.
Inside Clean Energy is ICN’s weekly bulletin of news and analysis about the energy transition. Send news tips and questions to email@example.com.