President Obama’s 3 August announcement of the final Clean Power Plan in conjunction with the Environmental Protection Agency (EPA) conveys an optimistic tone for the future of the US solar industry. In what President Obama considers the “single most important step that America has ever made in the fight against global climate change”, the plan requires states to decrease carbon dioxide emissions by 32% from 2005 levels by 2030.
According to the EPA, dramatically increasing the use of clean energy is the most effective way to reverse the exponentially increasing global warming trend. As outlined in August, Barack Obama warned that 14 of the 15 warmest years on record have occurred in the first 15 years of the 2000s; last year was the warmest year ever.
There is no doubt that the Clean Power Plan will increase the United States’ solar capacity. States are required to implement plans that will ensure power plants in their state achieve the interim CO2 emissions performance rates over the period of 2022 to 2029 and the final CO2 emission performance rates by 2030. This means states will need about 28% of their energy to come from renewable energy. Solar power is growing the most rapidly of all the renewable energy sources in the United States. There is enough solar energy in the country to power over 4.3 million homes. The Clean Power Plan’s new requirements should create thousands of megawatts of additional solar deployment, in addition to the 50,000 MW that have already been expected by 2020.
The impact that will be felt by the solar industry is wide ranging:
Extending the solar investment tax credit (ITC)
The Clean Power Plan has set ambitious solar portfolio goals for 2030, but a major factor that could inhibit this target goal is the solar ITC expiring at the end of 2016. Most solar solution providers rely on the solar ITC to make their projects economically feasible; therefore, the expiration of the ITC in 2016 may mean either the end of low solar prices or a drop off of solar installations. The White House’s dedication to clean energy is a promising sign that the solar ITC will be renewed before 31 December 2016.
For the ITC to be extended, businesses will need to take action to develop support for the credit in their state at both the House and Senate. The Solar Industries Association (SEIA) urged the US Senate to include the solar ITC into a tax extenders bill, which was backed by thousands of Americans. Ultimately, the bill did not include the ITC, but SEIA continues to fight for an extension. The current annual congressional recess is the perfect time for your company to visit members of congress at their district offices or meet with their district staff. While the ITC is an imperfect and indirect policy to address climate change, extending it would be the simplest measure at this point to achieve the administration’s goals.
State-required solar compliance and incentives
While Obama’s proposal indicates that states must individually draft solar incentive plans by 2016 and comply by 2022, a minority of states are currently against the plan. Sixteen states have banded together to fight the Clean Energy Plan, arguing that the plan will halt all coal-generated power, and thus, their states’ economy. In an interview with NPR, Governor Matt Meade of Wyoming argued that the plan is only beneficial for states that currently have a solar infrastructure and no coal power stations. As of 2013, Wyoming holds 1MW of solar capacity yet is the largest coal energy provider in the United States.
Although Meade is not alone in this belief, the Clean Power Plan’s early solar investment incentives take substantial measures to induce states such as Wyoming to increase their solar capacity and diversify their energy portfolio at a much more affordable price, especially if coupled with the federal solar ITC. The EPA has provided states with a variety of proven market-based compliance strategies to incorporate in their plans. If a state has not invested in solar before, the Clean Power Plan has designated this period as an optimal time to begin.
A commitment to low-income households
Time magazine reported in a January 2014 issue that approximately 41% of Americans consider themselves to be living in a lower-class household. Several states have been hesitant to accept the new plan because of the false belief that carbon pollution standards will hit low-income communities the hardest. Some special interest groups have also been spreading the myth that utility bills are going to spike with the new carbon pollution standards.
The Clean Power Plan will actually make energy more affordable. Low-income energy consumers need to understand that payments for solar systems will not disproportionately fall on them. The Clean Power Plan has established a Clean Energy Incentive Program that will drive investment in energy efficiency in low-income communities. By 2030, the Clean Power Plan is expected to prevent 90,000 asthma attacks in children, stop 1,700 heart attacks and prevent 300,000 sick days. According to the White House, for average households, electricity bills will decrease by about US$85 each year – saving consumers a total of US$155 billion from 2020-2030. Obama’s 24 August announcement of new initiatives to unlock property-assessed clean energy (PACE) financing for single family housing will lower the cost of solar for residential owners even more. Housing Urban Development (HUD) announced that properties with subordinated PACE loans can be purchased and refinanced using a Federal Housing Authority (FHA) insured mortgage.
The plan will also support the creation of new jobs in the renewable energy fields. The solar industry already employs 175,000 Americans with more than 100,000 jobs created in the past decade. It is clear that solar energy is here to stay. In the absence of a single market-based federal policy to address global warming, the Clean Power Plan goes a long way towards ensuring a cleaner, healthier environment, while providing affordable power and increased employment opportunities.
Barack Obama's Clean Energy Plan should open up opportunities for US solar. Image: The White House.