The budget bill will unleash wind and solar. Here’s what that means for the climate

Source: By Chris Mooney, Washington Post • Posted: Monday, January 4, 2016

Speaker of the House Paul Ryan (R). EPA/MICHAEL REYNOLDS

Who would have imagined that the U.S. would be moving, in a bipartisan way, to advance its climate policy and clean energy goals less than a week after the Paris agreement?

And yet in the budget deal , Democrats traded a lifting of the oil export ban for an extension of much-desired tax credits for wind and solar. The legislation isn’t law yet, but it is currently expected to pass.

The solar tax credit is a 30 percent investment tax credit previously set to expire at the end of 2016 that would now be extended through the end of 2021, though it will begin to phase down at the end of 2019 and would end at only 10 percent. The wind credit is a production tax credit that previously expired at the end of 2014 but now would be extended through the close of 2019, but would also begin a phaseout at the end of 2016.

There’s little doubt that these policies, if enacted, will lead to a world in which the U.S. installs more wind and solar by 2020 than it would have otherwise. And given that the U.S. just went to Paris and signed a global deal to bring climate change under tough controls, that’s precisely the kind of policy you would expect to see.

“With solar prices [having] fallen 80% in the last decade, gaining another six years of subsidies will provide investors a significantly long period of certainty regarding costs of investment,” said Paul Bledsoe, a former Clinton administration staffer on climate policy. “Whether adequate to the climate challenge or not, this should be seen as the first new policy attempt to meet the US emissions target pledged in Paris.”

“This has been a breakthrough year for solar,” added Tom Werner, the CEO of SunPower, one of the U.S’s biggest solar companies. “We have seen increased global, national, and state support for solar through COP 21, the Clean Power Plan and local net metering efforts in California. The ITC extension will end the year on a high note, and it sets the scenes for continued growth in 2016.”

And yet at the same time, it seems likely that that growth will still remain incremental, and that wind and solar still remain the minority when it comes to the sources of our power for some time.

Wind energy in the U.S. stands at about 66 gigawatts of installed capacity (a gigawatt is a billion watts) and provides about 5 percent of our electricity. Solar, meanwhile, stands at about 25 gigawatts and generated less than half of a percent of U.S. power last year — though it may be close to 1 percent by the end of this year, said Shayle Kann, senior vice president with GTM Research.

According to analysis by GTM and the Solar Energy Industries Association, the extension of the solar credit will have a big impact — they estimate it would “increase solar installations 54 % through 2020.” By that year, the analysis finds, about 20 gigawatts a year of solar would be installed — a little less than the total amount in existence right now.

By the end of 2020, suggests Kann, solar might have 98 total gigawatts installed and hit “around 3% of total generation.” (He called this a “rough estimate.”) A spokesperson for SEIA suggested the number could be even a little higher.

However, a Bloomberg New Energy Finance analysis of the impact of the extensions has a somewhat less rosy projection, finding that from 2016 through 2021 under the proposed policy, solar would see 59 gigawatts of capacity installed, versus 41 without the extension. Wind, meanwhile, would see 44 gigawatts installed over the same time period, versus 25 gigawatts without the extension, in BNEF’s analysis.

Add it all up and you can imagine a world in which wind and solar provide a little more than 10 percent of America’s electricity as the decade of the 2020s begins — and if growth is faster than expected, perhaps several percentage points more. When the Clean Power Plan then commences in 2022, these sectors will be favored further; indeed, the tax credit extensions provide a kind of bridge into that era.

Still, coal provided 39 percent of U.S. electricity in 2014, and natural gas 27 percent. Continual growth in wind and solar would slowly eat away at these percentages, may not unseat fossil fuel dominance any time soon.

The Clean Power Plan itself projects that these fossil fuels, in 2030, will remain the “leading sources of electricity generation in the U.S., with coal providing about 27 percent of the projected generation and natural gas providing about 33 percent of the projected generation.” With the tax extensions taken into account, perhaps these percentages would shift downward somewhat.

The picture, then, is one of steady — but not radical — growth in renewable energy, and thus a steady — but not radical — decline in U.S. greenhouse gas emissions.

The only question is whether this rate of change is compatible with a sense of climate urgency — or with a recently embraced global goal of striving to limit the planet’s warming to just 1.5 degrees Celsius.