Congress is considering $ 235 billion in clean energy subsidies. Here they are
Congress has a longstanding aversion to climate policy. Cap and trade died dramatically in 2010. A plan to pay utilities to sell more clean electricity was scrapped this month. And proposals to tax carbon dioxide emissions have never had a chance.
But there is one major exception to the reluctance of lawmakers to tackle greenhouse gases: clean energy subsidies.
Congress passed the first wind power production tax credit in 1992. The PTC has been extended 13 times since then. Solar power and carbon capture also have long-standing incentives.
Now lawmakers seem poised to double down. The reconciliation package contains around $ 235 billion in incentives for everything from wind and solar to emerging technologies like green hydrogen and sustainable aviation fuels. In contrast, the economic stimulus plan adopted in 2009 offered $ 90 billion in clean energy spending.
President Biden’s climate agenda now hinges on passing tax incentives, especially after the Clean Electricity Performance Program was pulled from the bill in the face of opposition from Sen. Joe Manchin (DW.Va.).
For longtime climate watchers, it’s a familiar scene.
“Basically our country has tax incentives and regulations in place,” said Julio Friedmann, senior researcher at the Center on Global Energy Policy at Columbia University. “It may take a while for the regulations to be put in place, but we can start with the tax credits. “
Tax incentives do not replace an economy-wide carbon price or a clean electricity standard, he continued. “But it is a proven way to accelerate the elimination and reduction of CO2. “
The details of the package remain fluid, but here’s a breakdown based on the bill that was annotated by the House Ways and Means Committee in September.
The old guard: wind and solar
These are not traditional wind and solar subsidies.
The reconciliation program would make direct payments for the TPC and the investment tax credit. Instead of finding a bank to help fund a project, renewable energy developers would get a check from the government. It would be a boon for wind and solar developers.
But that’s not the only change. Solar has long qualified for an investment tax credit but not for the production tax credit available for wind power. Now he would qualify for both.
The legislation would also restore PTC and ITC to their original values, but with a twist. The PTC offers a base amount of 0.5 cents per kilowatt hour until 2031. Still, that figure could rise to 2.5 cents per kWh (the original value) if developers pay the going wage and employ a certain amount. percentage of apprentices on their projects.
The updated ITC envisions a similar system, with a base payout of 6 percent and a bonus of 30 percent with current salary and apprenticeship requirements. Energy storage and microgrid controllers, among other technologies, would also be eligible for ITC.
The combined price of the revamped PTC and ITC is $ 107 billion between 2022 and 2031. By comparison, the United States spent about $ 20 billion on PTC between 2005 and 2019, according to the Congressional Research Service.
The old is the new: nuclear and hydrogen
One of the most notable things about the reconciliation package is how it would extend subsidies that were once available only for wind and solar to other zero-emission technologies. This includes nuclear facilities.
Nuclear power generated nearly a fifth of America’s electricity last year. But persistently low prices for natural gas and renewables have eroded the economic competitiveness of nuclear facilities and led to a series of plant shutdowns. The reconciliation plan aims to avoid further shutdowns with a nuclear generation tax credit worth 3 cents per kWh until 2026. The credit is expected to cost $ 15 billion.
While the nuclear production credit aims to keep existing installations open, a hydrogen credit aims to change the way industrial installations operate. Today, most of the hydrogen used in industrial facilities like chemical plants is produced by combining natural gas with steam.
But electricity can also be used to split a water molecule into hydrogen. When the process uses renewable energies, it produces so-called green hydrogen. But it tends to be expensive.
The reconciliation bill would provide a tax credit of $ 3 per kilogram for the production of hydrogen using renewable energy. A reduced credit would be available for other technologies using natural gas with carbon capture and nuclear facilities. In total, clean hydrogen credits are worth $ 9 billion over a decade.
“It really shows the commitment to decarbonization,” said Dan Klein, energy modeler at S&P Global Platts. “It goes beyond the lowest fruit, beyond the electricity and electric vehicle sector.”
Run your electric motor
Speaking of electric vehicles, the bill would provide $ 42 billion in tax credits over the next decade for electric transportation. In addition to $ 15 billion for new electric vehicles and $ 11 billion for commercial electric vehicles, there is an item of $ 7 billion for electric bikes.
Tax credits for electric vehicles are particularly important from a climate perspective, as transportation is the main source of carbon pollution in the United States, accounting for almost a third of emissions. Light vehicles account for nearly 60 percent of transportation emissions in the United States, according to the EPA.
“Electric vehicles are now like wind and solar ten years ago,” said Rob Jackson, a professor at Stanford University who studies energy systems and climate change. “They are not cost competitive on a level basis, but they are getting there.
“Cars are not that different from power plants,” he added. “Instead of lasting 40 years, they last 15 years. We don’t really have the luxury of waiting for electric vehicles to hit net zero. “
EV incentives for new vehicles are structured much like the incentives for wind and solar. A new car buyer would get a base incentive of $ 4,000. An additional $ 3,500 is available if the vehicle is purchased before 2027. Another $ 4,500 may be collected if the car is assembled in the United States at factories subject to collective agreements. And, finally, $ 500 is available if more than 55% of the parts are made in the United States. The result is a maximum credit of $ 12,500.
Put it in the ground
The reconciliation package would also expand the 45Q tax incentives for carbon capture and direct air capture (DAC).
Today, a facility that captures carbon dioxide and stores it in the ground would qualify for a tax credit of $ 50 per tonne. A facility that captures carbon dioxide and pumps it underground to stimulate oil production would qualify for a credit of $ 35 per tonne.
A big change in the framework of the legislation is the expansion of credits for DAC installations, which would extract CO2 from the atmosphere and store it underground. A DAC installation that meets the salary and apprenticeship requirements in effect in the bill would be eligible for a credit of $ 180 per tonne.
Small and large installations could be eligible, with a minimum catch threshold of 1000 tonnes per year. A traditional CCS operation could receive up to $ 60 per tonne.
All of the tax credits come with $ 3.5 billion in the bipartite infrastructure agreement to help plan DAC centers. It’s music to the ears of DAC supporters like Erin Burns, executive director of Carbon180, a nonprofit that campaigns for direct air capture. Help from the Department of Energy and the EPA is needed to help plan and authorize new facilities, she said.
“When you think of 45Q, it’s really important to strengthen the carbon management policy. But in itself, that’s not enough to bring us to the scale we see in climate models, ”she said. “You see this in coordination with this administration and Congress.”