The U.S. Congress is poised to pass a last-minute deal to fund the government and provide some economic stimulus. Tucked into the $900 billion federal Covid-19 relief package, which was pared with an omnibus spending bill, are an array of energy provisions. In fact, the bill arguably amounts to one of the most significant energy-related pieces of legislation in years.
The bill arguably amounts to one of the most significant energy-related pieces of legislation in years.
Renewable energy gets a boost
While energy is definitely a sideshow in the massive deal, the contents are still substantial. The package includes $35 billion for solar, wind and other renewables over the next five years. However, the money is not from new appropriations, but existing funding. Still, the provision would authorize $1 billion for energy storage, $1.5 billion for new solar technologies, $2.1 billion for advanced nuclear technology, and $450 million for carbon capture. There will also be $625 million for materials and design research, manufacturing and deployment for wind, along with $850 million in research for geothermal. Another $2.36 billion would go to grid modernization to allow for deeper integration of renewables, electric vehicles and energy storage.
In addition, the legislation would extend the federal solar investment tax credit for two more years at its current level – 26 percent – rather than stepping down to 22 percent in 2021 and 10 percent in 2022. Tax credits for wind would also be extended for one year, while credits for offshore wind would be offered through 2025.
The U.S. has seen a record year for renewable energy installations, and while there are plenty of structural reasons – mainly the rapid decline in cost – customers have also rushed to take advantage of what they believed to be expiring tax credits. That has allowed renewables to weather the pandemic much better than oil, gas and coal. Utility-scale solar accounted for 43 percent of total electricity capacity additions in 2020, and solar is on track to install more than 19 gigawatts this year, according to Wood Mackenzie.
The bill directs the Department of Interior to target 25 GW of solar, wind and geothermal on federal lands by 2025. President-elect Biden’s selection of Rep. Deb Haaland (D-NM) also suggests he intends to prioritize renewable energy and climate change on the nation’s public lands.
The legislation would also open up the investment tax credit to waste heat energy recovery projects for the first time. Temporary credits provided for energy efficiency upgrades also will become permanent.
The new law would extend the period in which carbon capture projects qualify for tax credits from 2023 to 2025. Tax credits for second generation biofuels, scheduled to expire at the end of this year, will be extended through the end of 2021.
Also, the bill includes a rather significant provision on climate change. The bill would require chemical manufacturers to phase down the production of hydrofluorocarbons (HFCs), a highly potent greenhouse gas. The measure stems from a 2016 international deal targeting HFCs, which, if successful, could prevent a full 1-degree Fahrenheit in global warming. While the deal was reached at the international level, the U.S. did not ratify the treaty. The pending legislation would effectively codify the phase down. It is rare that Congress takes action to directly target greenhouse gas emissions so the HFC agreement is not trivial.
Just a start
The Chamber of Commerce calls the package the first significant energy bill since 2007 and the “biggest action Congress has ever taken to address climate change.”
However, the measures are a far cry from the proposed $2 trillion energy proposal to accelerate a clean energy transition from President-elect Biden. They are also very far from where the science says we need to go. The United Nations Production Gap Report estimates that the world needs to phase down the production of fossil fuels at a rate of 6 percent per year through 2030, but instead, governments are on track to increase production by 2 percent per year. Needless to say, the world, including the U.S., is far off that track.
Without control of the Senate, the new administration will be forced to rein in the ambition.
Without control of the Senate, the new administration will be forced to rein in the ambition. But the Biden administration will not be without power. The president-elect has said that he would take a number of measures immediately after taking office. He said he would rejoin the Paris Climate Agreement, impose methane limits on oil and gas operations, use federal government procurement on renewable energy and electric vehicles. He would also initiate new fuel economy standards for cars and trucks, new appliance standards, and require federal permitting decisions to account for greenhouse gas emissions. Those are just a few of the potential measures the administration could pursue.
While the pending legislation set to pass Congress is a drop in the bucket of what is needed, the provisions are still the most substantial energy-related initiatives coming out of Washington in years.