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Energy Innovation has some bad news for House Republicans.
House Republicans are racing to overcome intraparty disagreements and deliver their “one big, beautiful” budget bill to the Senate before the Memorial Day weekend. As currently written, the bill would render the nation’s clean energy tax credits largely inaccessible, severely impairing clean energy development.
We now have a more detailed picture of what’s at stake if this bill or something like it makes it all the way to the president’s desk. The research firm Energy Innovation modeled all of the energy and environment provisions in the version of the bill that passed the House Budget Committee on Sunday night. It found that the proposed changes to oil and gas leasing, greenhouse gas emissions standards, and tax credits, could cost the United States more than $1 trillion in GDP over the next decade compared to a world where these policies remain untouched.
That number is a reflection of the narrow subset of policies the group modeled and does not take into account Trump’s tax cuts. In theory, those could have a positive effect on GDP that offsets some of the loss. But the effects on energy costs and jobs on their own tell a grim story.
By 2030, the average American would spend $120 more per year on transportation and home energy costs than they otherwise would. By 2035, the increase would climb to more than $230. Lower demand for clean technologies like electric vehicles and solar panels would kill more than 700,000 potential jobs across the economy in 2035.
Energy Innovation isn’t the only group warning of dire consequences. The bill “represents a crisis for America’s ability to build the energy infrastructure we need to meet surging demand,” Abigail Ross Hopper, the CEO and president of the Solar Energy Industries Association said in a statement yesterday. The group estimates that the bill would put 287 factories that serve the solar industry at risk of closing or never opening in the first place. Most of those are in red states.
The forecasts stem from key changes the GOP is proposing to make to tax credits that incentivize wind and solar development, domestic manufacturing, and consumer adoption of electric vehicles and energy efficiency upgrades. The bill would end these subsidies earlier than currently planned (though how much earlier is currently in flux), and impose stricter materials sourcing requirements, tighter development timelines, and more rigid project finance rules for the years they remain in effect, making it nearly impossible to use them.
As a result, fewer wind, solar, and energy storage projects would get built. Those that did get built would cost more, meaning that natural gas would set the price in energy markets more frequently. Natural gas would also be more expensive because of higher demand. The Energy Information Administration already expects natural gas costs to rise this year and next, even without changes to tax incentives. Altogether, generating electricity would cost about 50% more in 2035 than it otherwise would, according to Energy Innovation, which would translate to roughly 17% higher bills for consumers.
Budget hawks in the House are now pushing for an even more aggressive phase-out of the green tax credits before they agree to send their legislation to the Senate, and the Republican leadership can afford to lose just three votes on the floor, giving them a narrow window to please everyone. But the earlier phase-out would have little impact on Energy Innovation’s findings, Robbie Orvis, the senior director for modeling and analysis for the group, told me. The existing provisions in the bill that prevent companies from sourcing materials from China would be so difficult to meet that the model assumes the affected credits would be unclaimable beginning next year.
The modeling shows a similar effect in transportation costs. Terminating the tax credit for electric vehicles would lower demand for EVs and increase demand for gasoline, causing prices at the pump to go up. Less demand for EVs would also mean fewer domestic jobs producing them, and fewer jobs producing the components that go into them. Then there’s the overall tightening of purse strings that would come as a result of higher energy costs, which could reduce hiring still further.
Orvis said the estimates for job loss are likely conservative, as the model looks at changes in demand for EVs and other clean technologies but doesn’t do a good job accounting for the changes in supply that would result from early repeal of 45X, the clean manufacturing tax credit.
Notably, energy costs go up in the model despite provisions in the bill that are designed to lower the cost of oil and gas. Those include more frequent lease sales and lower royalty rates for companies that pay to drill on federal lands and waters. But Energy Innovation found that demand-driven price increases more than offset any price declines resulting from these measures.
The tax credit termination also isn’t the only factor here. Energy Innovation included the House’s proposed repeal of the Environmental Protection Agency’s emissions standards for cars and trucks, which amplified the effects. This provision may not make it into the final text, however, as the special rules governing the budget reconciliation process in the Senate prohibit policies that aren’t budgetary in nature. As the nonprofit Environmental Defense Fund put it in a memo to reporters, the regulations were issued to protect public health, and while they do result in costs and benefits for Americans and companies, they do not change the federal budget. “Even if Republican leadership tries to claim any budgetary impacts here, they would be clearly incidental to the main purpose of the proposed legislation,” the group said.
Of course, at least seven Senate Republicans have been vocal about their disapproval of the House’s treatment of the tax credits, so the whole thing may still be subject to change.
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A conversation with Mary King, a vice president handling venture strategy at Aligned Capital
Today’s conversation is with Mary King, a vice president handling venture strategy at Aligned Capital, which has invested in developers like Summit Ridge and Brightnight. I reached out to Mary as a part of the broader range of conversations I’ve had with industry professionals since it has become clear Republicans in Congress will be taking a chainsaw to the Inflation Reduction Act. I wanted to ask her about investment philosophies in this trying time and how the landscape for putting capital into renewable energy has shifted. But Mary’s quite open with her view: these technologies aren’t going anywhere.
The following conversation has been lightly edited and abridged for clarity.
How do you approach working in this field given all the macro uncertainties?
It’s a really fair question. One, macro uncertainties aside, when you look at the levelized cost of energy report Lazard releases it is clear that there are forms of clean energy that are by far the cheapest to deploy. There are all kinds of reasons to do decarbonizing projects that aren’t clean energy generation: storage, resiliency, energy efficiency – this is massively cost saving. Like, a lot of the methane industry [exists] because there’s value in not leaking methane. There’s all sorts of stuff you can do that you don’t need policy incentives for.
That said, the policy questions are unavoidable. You can’t really ignore them and I don’t want to say they don’t matter to the industry – they do. It’s just, my belief in this being an investable asset class and incredibly important from a humanity perspective is unwavering. That’s the perspective I’ve been taking. This maybe isn’t going to be the most fun market, investing in decarbonizing things, but the sense of purpose and the belief in the underlying drivers of the industry outweigh that.
With respect to clean energy development, and the investment class working in development, how have things changed since January and the introduction of these bills that would pare back the IRA?
Both investors and companies are worried. There’s a lot more political and policy engagement. We’re seeing a lot of firms and organizations getting involved. I think companies are really trying to find ways to structure around the incentives. Companies and developers, I think everybody is trying to – for lack of a better term – future-proof themselves against the worst eventuality.
One of the things I’ve been personally thinking about is that the way developers generally make money is, you have a financier that’s going to buy a project from them, and the financier is going to have a certain investment rate of return, or IRR. So ITC [investment tax credit] or no ITC, that IRR is going to be the same. And the developer captures the difference.
My guess – and I’m not incredibly confident yet – but I think the industry just focuses on being less ITC dependent. Finding the projects that are juicier regardless of the ITC.
The other thing is that as drafts come out for what we’re expecting to see, it’s gone from bad to terrible to a little bit better. We’ll see what else happens as we see other iterations.
How are you evaluating companies and projects differently today, compared to how you were maybe before it was clear the IRA would be targeted?
Let’s say that we’re looking at a project developer and they have a series of projects. Right now we’re thinking about a few things. First, what assets are these? It’s not all ITC and PTC. A lot of it is other credits. Going through and asking, how at risk are these credits? And then, once we know how at risk those credits are we apply it at a project level.
This also raises a question of whether you’re going to be able to find as many projects. Is there going to be as much demand if you’re not able to get to an IRR? Is the industry going to pay that?
What gives you optimism in this moment?
I’ll just look at the levelized cost of energy and looking at the unsubsidized tables say these are the projects that make sense and will still get built. Utility-scale solar? Really attractive. Some of these next-gen geothermal projects, I think those are going to be cost effective.
The other thing is that the cost of battery storage is just declining so rapidly and it’s continuing to decline. We are as a country expected to compare the current price of these technologies in perpetuity to the current price of oil and gas, which is challenging and where the technologies have not changed materially. So we’re not going to see the cost decline we’re going to see in renewables.
And more news around renewable energy conflicts.
1. Nantucket County, Massachusetts – The SouthCoast offshore wind project will be forced to abandon its existing power purchase agreements with Massachusetts and Rhode Island if the Trump administration’s wind permitting freeze continues, according to court filings submitted last week.
2. Tippacanoe County, Indiana – This county has now passed a full solar moratorium but is looking at grandfathering one large utility-scale project: RWE and Geenex’s Rainbow Trout solar farm.
3. Columbia County, Wisconsin – An Alliant wind farm named after this county is facing its own pushback as the developer begins the state permitting process and is seeking community buy-in through public info hearings.
4. Washington County, Arkansas – It turns out even mere exploration for a wind project out in this stretch of northwest Arkansas can get you in trouble with locals.
5. Wagoner County, Oklahoma – A large NextEra solar project has been blocked by county officials despite support from some Republican politicians in the Sooner state.
6. Skagit County, Washington – If you’re looking for a ray of developer sunshine on a cloudy day, look no further than this Washington State county that’s bucking opposition to a BESS facility.
7. Orange County, California – A progressive Democratic congressman is now opposing a large battery storage project in his district and talking about battery fire risks, the latest sign of a populist revolt in California against BESS facilities.
Permitting delays and missed deadlines are bedeviling solar developers and activist groups alike. What’s going on?
It’s no longer possible to say the Trump administration is moving solar projects along as one of the nation’s largest solar farms is being quietly delayed and even observers fighting the project aren’t sure why.
Months ago, it looked like Trump was going to start greenlighting large-scale solar with an emphasis out West. Agency spokespeople told me Trump’s 60-day pause on permitting solar projects had been lifted and then the Bureau of Land Management formally approved its first utility-scale project under this administration, Leeward Renewable Energy’s Elisabeth solar project in Arizona, and BLM also unveiled other solar projects it “reasonably” expected would be developed in the area surrounding Elisabeth.
But the biggest indicator of Trump’s thinking on solar out west was Esmeralda 7, a compilation of solar project proposals in western Nevada from NextEra, Invenergy, Arevia, ConnectGen, and other developers that would, if constructed, produce at least 6 gigawatts of power. My colleague Matthew Zeitlin was first to report that BLM officials updated the timetable for fully permitting the expansive project to say it would complete its environmental review by late April and be completely finished with the federal bureaucratic process by mid-July. BLM told Matthew that the final environmental impact statement – the official study completing the environmental review – would be published “in the coming days or week or so.”
More than two months later, it’s crickets from BLM on Esmeralda 7. BLM never released the study that its website as of today still says should’ve come out in late April. I asked BLM for comment on this and a spokesperson simply told me the agency “does not have any updates to share on this project at this time.”
This state of quiet stasis is not unique to Esmeralda; for example, Leeward has yet to receive a final environmental impact statement for its 700 mega-watt Copper Rays solar project in Nevada’s Pahrump Valley that BLM records state was to be published in early May. Earlier this month, BLM updated the project timeline for another Nevada solar project – EDF’s Bonanza – to say it would come out imminently, too, but nothing’s been released.
Delays happen in the federal government and timelines aren’t always met. But on its face, it is hard for stakeholders I speak with out in Nevada to take these months-long stutters as simply good faith bureaucratic hold-ups. And it’s even making work fighting solar for activists out in the desert much more confusing.
For Shaaron Netherton, executive director of the conservation group Friends of the Nevada Wilderness, these solar project permitting delays mean an uncertain future. Friends of the Nevada Wilderness is a volunteer group of ecology protection activists that is opposing Esmeralda 7 and filed its first lawsuit against Greenlink West, a transmission project that will connect the massive solar constellation to the energy grid. Netherton told me her group may sue against the approval of Esmeralda 7… but that the next phase of their battle against the project is a hazy unknown.
“It’s just kind of a black hole,” she told me of the Esmeralda 7 permitting process. “We will litigate Esmeralda 7 if we have to, and we were hoping that with this administration there would be a little bit of a pause. There may be. That’s still up in the air.”
I’d like to note that Netherton’s organization has different reasons for opposition than I normally write about in The Fight. Instead of concerns about property values or conspiracies about battery fires, her organization and a multitude of other desert ecosystem advocates are trying to avoid a future where large industries of any type harm or damage one of the nation’s most biodiverse and undeveloped areas.
This concern for nature has historically motivated environmental activism. But it’s also precisely the sort of advocacy that Trump officials have opposed tooth-and-nail, dating back to the president’s previous term, when advocates successfully opposed his rewrite of Endangered Species Act regulations. This reason – a motivation to hippie-punch, so to speak – is a reason why I hardly expect species protection to be enough of a concern to stop solar projects in their tracks under Trump, at least for now. There’s also the whole “energy dominance” thing, though Trump has been wishy-washy on adhering to that goal.
Patrick Donnelly, great basin director at the Center for Biological Diversity, agrees that this is a period of confusion but not necessarily an end to solar permitting on BLM land.
“[Solar] is moving a lot slower than it was six months ago, when it was coming at a breakneck pace,” said Patrick Donnelly of the Center for Biological Diversity. “How much of that is ideological versus 15-20% of the agencies taking early retirement and utter chaos inside the agencies? I’m not sure. But my feeling is it’s less ideological. I really don’t think Trump’s going to just start saying no to these energy projects.”