Democratic leaders have pledged to restore wind and solar tax credits if they regain control of Congress and the White House, but some renewable energy developers say the industry may no longer need — or even want — the subsidies.
Republicans last year accelerated the phase-out of investment and production credits that Democrats supercharged in their 2022 climate law within the Inflation Reduction Act. The credits’ return is now central to the Democrats’ comeback plan.
Senate Minority Leader Chuck Schumer (D-N.Y.) said reinstating the incentives will be “one of the very first things I will do when we retake the majority.” House Minority Leader Hakeem Jeffries (D-N.Y.) has made a similar vow. Even some moderate Republicans have expressed support.
But as the wind and solar credits begin to go away, some developers wonder whether continuing to pursue the incentives is necessary or politically wise.
“We’re at a point now where the tax credits have done a great job of launching the industry, but they do need to be phased out, because we’re a mature industry now,” said Ty Daul, CEO of Primergy Solar, a major U.S. utility-scale developer.
Daul said a “large percentage” of industry players agree, arguing that renewables are now mature and cost-competitive. He and others also point to the complexity of managing the credits as a reason from moving away.
“I don’t know if there’s another country that uses tax credits instead of other sorts of feed-in tariffs, but I’d love to see this country move off of tax credits,” said Frank Burkhartsmeyer, CEO of battery company GridStor, during a forum hosted by the American Council on Renewable Energy. “I don’t find it a particularly convenient way to finance industrial policy.”
Not all renewable energy developers are on the same page. Kevin Smith, CEO of Cypress Creek Energy, which focuses on solar and storage projects, sees credits as an affordability policy.
“Do we need the tax credits to stay competitive? No, we don’t,” said Smith. “Do [lawmakers] want to take away tax credits and raise everybody’s electricity bills? Doesn’t seem like a great idea to me. So it’s really an affordability issue on tax credits.”
The debate is beginning to spill onto Capitol Hill, where some Democrats are questioning whether restoring wind and solar tax benefits should be a top policy priority.
When asked whether Democrats would fight to bring back the incentives, Senate Energy and Natural Resources ranking member Martin Heinrich (D-N.M.) said “stay tuned.”
He said political capital could be better spent on harder-to-decarbonize sectors that have low clean energy penetration, like transportation and heavy industry, instead of wind and solar projects that are already being added at record levels to the grid.
“I think something like 94 percent of all power additions were wind, solar and batteries,” Heinrich said. “We need to decarbonize transportation and the industry, and so it may be that incentives or tax credits or something else [for those sectors] might be a better use of those dollars.”
‘Good for them’
Despite Heinrich’s comments, it appears Democratic leadership — at least for now — is dead-set on putting a revival of the wind and solar tax credits on the legislative agenda.
When asked about industry leaders who say tax credits are no longer necessary, Sen. Brian Schatz (D-Hawaii) — set to become Democrat’s whip in the next Congress — was dismissive.
“Good for them,” Schatz said. “As long as I’ve been around, [renewable developers] have been negotiating against themselves, and so I’m not going to let them do that,” he added.
Rep. Sean Casten (D-Ill.), who helped introduce legislation earlier this year to revive the credits, said he has not heard outright hostility toward the incentives from the renewable industry. But he said developers are wary of pursuing a policy that could be repealed again a few years later.
“I haven’t heard from any developer who was saying, ‘I don’t want to have the [Inflation Reduction Act] tax credits come back,’ but there definitely is a sense of, ‘If we’re just going to push to bring this back and then go away again, that’s not particularly useful,’” Casten said.
Colorado Rep. Joe Neguse, who is a member of the Democratic leadership in the House, said he supports bringing the credits back. But Neguse also said Democrats will engage with the industry about “what may be most appropriate in terms of again incentivizing” renewable energy, adding he’s “open to hearing suggestions and ideas on that front.”
Sen. Gary Peters (D-Mich.), who is retiring after this Congress, said he’s aware of the split within developers over the tax credits. Whether Democrats should push to bring the incentives back is a “broader question,” he added.
“The one thing that I hear from business over and over again is whatever the rules are, you just need to be consistent,” Peters said. “You’ve got to be able to plan. You can’t make business decisions if things are changing constantly. That’s actually the worst thing you can do to business.”
Daul said, “I think policy, long-term policy stability is just key, and we don’t need this policy pendulum that that we’ve been on for, for many years.”
For developers or ratepayers?
The American Clean Power Association and the Solar Energy Industries Association have not explicitly said whether they will push for a revival of the investment and production tax credits.
“We repeatedly have heard from particular Democratic offices, ‘Where is ACP and where is SEIA on the tax credits and extending them?’” a clean energy company executive, granted anonymity to speak candidly, told POLITICO.
“Maybe they just don’t see it as a near-term political reality, but it is surprising” that the groups have not yet taken a public position, the executive added. “It’s been a core part of the renewable energy industry for two decades.”
Sean Gallagher, SEIA’s senior vice president of policy, said in a statement that the association will “take seriously any policy proposal that impacts our industry” and will work with lawmakers “to shape the future of the solar and storage industry.” He did not address the tax incentives specifically.
Jason Grumet, ACP’s CEO, appeared supportive of tax benefits in a statement, although it was unclear exactly where he stood on a revival of investment and production credits.
“We are working with our members to build on [renewable energy’s] success, and to develop ideas that will drive the next decade of clean technology with durable public policies — including tax incentives — like those afforded to other sectors in the energy industry,” Grumet said.
Sabah Bayatli, CEO of San Antonio-based OCI Energy, said he’d support future pushes to restore the incentives, arguing that the phaseout of the tax credits will lead power pricing to “jump immediately.”
Matt Beasley, chief commercial officer at solar company Silicon Ranch, agreed that developers aren’t the main benefactors of the tax credits.
“The benefit of the [investment tax credit] does not inure to Silicon Ranch or any other renewable developer,” Beasley said. “The benefit really goes to the energy buyers and the ratepayers in the form of lower energy costs.”
Adrian Deveny, founder of advisory firm Climate Vision and a former Schumer staffer who helped negotiate the Inflation Reduction Act, said Democrats may ultimately decide to restore the credits regardless of whether developers view them as necessary.
“You can still make a lot of money without the tax credits. It avoids a lot of headache, and there’s a long-term political benefit in not fighting Congress,” Deveny said. “But I don’t think about it from the world of how these companies are going to make money. I think about it as how we make cheap energy.”
Kelsey Tamborrino contributed to this report.
