Biden throws weight of US government behind clean energy

Source: By Myles McCormick, Financial Times • Posted: Tuesday, April 6, 2021

President’s $2tn spending package represents unprecedented state effort on greener economy

Joe Biden: ‘It’s not a plan to tinker round the edges’ © Brian Snyder/Reuters

When Barack Obama pumped $90bn into wind turbines, solar panels and batteries as part of his efforts to kickstart the US economy after the 2008 crash, his administration boasted of the “largest single investment in clean energy in history”.

Joe Biden, then vice-president, wants to dwarf his former boss’s legacy. The president on Wednesday announced a proposal to inject almost ten times that figure into clean energy, as he uses a $2tn infrastructure drive to make good on his pledge to set America on a path to a greener future.

“The American jobs plan will lead to transformational progress in our efforts to tackle climate change,” Biden said. “It’s not a plan to tinker round the edges.”

The package would provide unprecedented government support for everything from electric vehicles to renewables, as well as set national targets to wean utilities off carbon-emitting power sources. Analysts said it would give investors the long-term confidence needed to draw much more private capital into the sector.

“This now puts the entire clean energy transition into hyperdrive,” said Paul Bledsoe, strategic adviser at the Progressive Policy Institute, and a former climate adviser in the Clinton White House. “The thing it does, I think for the first time truly ever, is provide utter certainty for business investment in clean energy.”

Biden’s plan would see an infusion of more than $350bn directly into clean energy — driving electric-vehicle infrastructure, reinvigorating the grid and boosting research and development — plus an estimated $400bn extending and expanding tax credits for clean energy generation and storage. It would also set a “clean energy standard” mandating utilities to produce power that is carbon-free by 2035.

The Biden plan would see an infusion of more than $350bn directly into clean energy © David Paul Morris/Bloomberg

The tax credit proposals, in particular, have garnered enthusiastic industry support. The package would prolong for 10 years production and investment credits claimed by renewable-energy generators.

Congress has repeatedly extended solar and wind credits over the past two decades, often at the eleventh hour or even after they had already expired. The latest extension came in an end-of-year spending and Covid-19 relief package passed in December.

“Predictability is going to make it a lot easier to get the investment we’re going to need to secure the growth necessary to be in the ballpark of addressing climate change,” said Gregory Wetstone, chief executive of the American Council on Renewable Energy.

New tax credits would be available for energy storage technologies, such as grid-connected batteries, and for at least 20 gigawatts of high-voltage power transmission lines that could connect far-flung solar and wind farms to more populated areas.

Larry Gasteiger, executive director of Wires, a transmission trade group, said that tax credits would trim costs for electricity consumers, though acceptance from utilities — which earn regulated returns on the amount of money they invest in their infrastructure — was less certain. “Each utility is going to make that assessment on its own,” he said.

Biden has singled out climate change as one of the top priorities for his administration and has already issued a number of executive orders, rejoining the Paris agreement, scrapping the Keystone XL oil pipeline and suspending new oil and gas leases on public land.

Green groups say the spending measures are insufficient, while Republicans decry them as overly expensive © Daniel Slim/AFP via Getty Images

With these latest plans he hopes to set in motion election pledges to drive the US towards total decarbonisation of its power sector by 2035 and net-zero emissions across the economy by 2050.

Some analysts have questioned whether rolling key climate proposals into a wider infrastructure plan is the best way to pursue the president’s lofty green goals. But the White House is reluctant to rely too heavily on regulation which could be tied up in the courts, while a standalone climate bill would struggle to muster the ten Republican votes needed to pass the Senate filibuster.

“So if you can’t do it via specific climate legislation and you can’t do it via regulation, then trying to do it through something like an infrastructure bill can make a lot of sense,” said Robert Stavins, a Harvard energy and economics professor.

“The advantage is that infrastructure can be bipartisan partly because there’s broad concern about infrastructure, but also because an infrastructure bill by its very nature is going to be passing out benefits,” he added. “And politicians, whatever their party . . . love giving out benefits.”

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

But many in the progressive wing of the Democratic party feel that the proposals are too small. “This is not nearly enough,” tweeted Alexandria Ocasio-Cortez, a proponent of the Green New Deal, as details of the plan emerged. “Needs to be way bigger.”

Ben Beachy, a director at the Sierra Club, agreed. He advocated a tripling of the proposed Biden spending levels to $1tn a year over the next decade, in line with proposals unveiled by progressive Democrats earlier this week. “It’s a very welcome start but Congress now needs to ramp it up,” he said.

On the other side, Republicans have blasted the Biden proposals as too spendthrift. John Barrasso, the most senior Republican on the Senate energy and natural resources committee, dismissed them as “an out of control socialist spending spree”.

The president has indicated a preference for working with Republicans to achieve bipartisan support for the package. But there is an expectation that Democrats might go it alone using the reconciliation mechanism to force it through the Senate with a simple majority.

“We’ll have those conversations,” said Gina McCarthy, Biden’s climate tsar. “But rest assured, the president put a number out there that he felt was not just defensible, but required to meet this moment in time. We don’t want to just manage to the future, we want to win it.”

Additional reporting by Gregory Meyer in New York