By David Heyman, CEO, Safari Energy
As businesses strive to build back from the challenges of 2020, several political developments are promising to put solar and renewable energy center stage.
Having secured the Presidency and a 51-to-50 majority in the Senate, Democrats are poised to control the legislative agenda for the coming years. This means that climate change and renewable incentives are likely to be in focus, with President-Elect Joe Biden’s Climate Energy Revolution initiative as the guiding concept. However, much of the Democrat agenda is not immune to the filibuster, which can only be avoided with a 60-vote or greater majority in the Senate.
Here, we explore just how realistic these initiatives are and how businesses should react.
Preparing for a new administration
Energy and climate policy are one of the four top priorities that President-elect Joe Biden has laid out – along with tackling the pandemic, rebuilding the economy and immigration reform. His campaign pledged to entirely decarbonize the U.S. power sector by 2035 and will be reportedly seeking to re-join the Paris Climate Accord.
Biden and his team have two broad paths toward achieving their energy policy goals. First are executive actions that can be accomplished unilaterally by the president, but they are also weaker and more temporary because they can be challenged or reversed. Second is legislative action, which is far more permanent, but more difficult to pass because of the 60-vote majority vote required in the Senate to avoid a filibuster.
However, there are some legislative options that do not require 60 votes. For example, Democrats could seek legislation to support Biden’s stimulus plan through the budget reconciliation process. This would be similar to the recent extension of the Federal Investment Tax Credit (ITC) for solar projects that was included in the $1.4 trillion federal spending and tax extension package signed into law in December 2020.
Nevertheless, the Biden administration will likely seek to enact legislation supporting the “Clean Energy Revolution” initiative, which aims to:
- Decarbonize power generation by 2035 nationally
- Invest $2 trillion in the clean energy transition in the next four years
- Focus on innovation (carbon capture, green hydrogen) and clean energy research
- Overhaul the nation’s energy infrastructure
- Increase building and appliance efficiencies
- Make an “historic investment” in grid energy storage
- Promote electric vehicles
Several policy objectives will likely be sought through executive action, including rejoining the Paris Accord, increasing HUD’s building efficiency standards, increasing appliance efficiency standards, promoting renewable energy projects on federal property, requiring solar on federal agency buildings and requiring SEC corporate climate disclosure for public companies. The Biden administration will create a White House role dedicated to overseeing climate policy (within the White House Office of Climate Mobilization), their cabinet secretaries will prioritize climate change and clean energy, and in general, they will fill the executive branch with clean energy supporters. With control of the Senate, these positions are likely to be confirmed relatively easily.
Certain clean energy initiatives might receive bipartisan support and could be prioritized for legislative action through a stimulus bill. They could include infrastructure investment (including energy), building efficiency requirements, funding for transportation electrifications, grid investment and carbon capture.
What should businesses do?
Whether through legislative or executive actions, it’s not hard to imagine how businesses can benefit from these legislation and policy changes, particularly as the costs of solar projects fall to historically low levels.
As the new administration takes office, here are the top three things to watch:
- Establishing a national RPS: Creating a national Renewable Portfolio Standard (RPS) would accelerate the nation’s adoption of renewable energy beyond RPS goals currently set by individual states. Roughly half of all growth in renewable energy since 2000 has been driven by state RPS goals, and a national RPS would promote even greater renewable investment.
- Return of 1603 grants: In President Obama’s American Recovery and Reinvestment Act, the Section 1603 Program provided grants for clean energy investments. This was particularly beneficial for businesses that were unable to take advantage of the available tax credits. The program disbursed over $26 billion to help fund more than 100,000 clean energy projects and provided a wider range of organizations with access to solar incentives.
- Further ITC extension: In December’s tax package, the ITC was extended for commercial solar projects to remain at 26% for the coming years, rather than continuing a planned decline from 30% that began in 2019. Analysts predict that the extended ITC could boost U.S. solar output one-third by 2030, and it is possible that a further extension or even increase of the credit could be proposed.
Capitalizing on renewable energy investments
In the shifting political climate, businesses should expect that green investments will not only become more attractive due to favorable policies, but also because consumer preferences and corporate cultures are shifting to further support green energy.
Over the coming years, companies can also anticipate an increased focus on compliance and reporting for emissions. Investors and stakeholders continue to demand Environmental, Sustainability and Governance (ESG) initiatives, as corporations without ESG initiatives are experiencing lower stock-market valuations.
This has a ripple effect through the economy. As investors demand greater focus on sustainability, corporations look to their supply chains, where emissions can be more than five times greater than from the company itself. Accounting for this impact will likely become increasingly sophisticated and will be encouraged by a Biden administration.
The bottom line
While all signs point to the Biden administration’s commitment to environmental protection and renewable energy, it’s not just about the environment. There is already a compelling investment case to go solar that thousands of companies have already realized. With solar technology becoming even more efficient and costs declining, investing in a solar will become even more attractive.