Why Hillary Clinton could be the solar industry’s new best friend
Presidential hopeful Hillary Clinton released an ambitious plan to boost U.S. clean energy and fight climate change. The vision, which also lacked details, called for more than a half billion solar panels, or about 140 gigawatts of solar, to be installed in the U.S. by 2020, and enough clean energy to power all homes by 2027.
But to deliver on her big goals, a federal government under her watch would have to maintain and implement a variety of clean power initiatives that are far from certain. She’d have to extend an important solar tax incentive that is set to shrink the year she would take office, and she’d have to aggressively fight for Obama’s highly controversial Clean Power Plan that would cut carbon emissions from power plants.
If she accomplishes these goals she could end up being a massive ally to the solar industry in the U.S. Without these federal policies, the solar sector faces closer growth because the government incentives that have helped to fuel a portion of its rapid growth in recent years are starting to be phased out.
Let’s look at the numbers behind Clinton’s clean energy plan.
Clinton calls for 140 gigawatts worth of solar panels in the U.S. by 2020, which is a seven-fold increase from the current 21.12 gigawatts, according to data from GTM Research. A gigawatt is about the equivalent energy of a large natural gas plant.
GTM Research analysts predict that with current U.S. policies, there would be just over a three-fold increase to 70 gigawatts of solar panels installed by 2020. That’s about half of what Clinton is calling for.
What makes up the difference? One of the main ones is uncertainty around what will happen with the investment tax credit, or the ITC, which delivers a 30% federal tax credit to solar project developers. Bloomberg analyst Jacqueline Lilinshtein describes federal policies like solar tax credits as “the single most important drivers of growth over the past few years.”
But the problem is that the federal tax credit is set to decline at the end of 2016, and Clinton would take office at the beginning of 2017. At that point the tax credit is supposed to ramp down to a 10% tax credit.
Many in the solar industry assume that the tax credit will not be renewed, although it has been in the past. The industry’s increasing maturity makes congress less likely to intervene with a gradual reduction that has been planned for years.
Will Clinton make it a priority to extend the solar tax break? Well, because she would only take office after it’s already expired, she would have to rally congress to re-instate it. In her release she says part of her clean energy plan includes:
“Tax Incentives: Fight to extend federal clean energy incentives and make them more cost effective both for taxpayers and clean energy producers.”
The CEO of big home solar installer SolarCity, Lyndon Rive, said in an interview that Hillary Clinton is “a leader that understands we have to change.” While he’s operating his business on the assumption that the tax break will not be extended, he said “it’ll be a shame,” and “bad policy” if it’s phased out.
Rive argued that the fossil fuel industry should be taxed rather than getting a number of breaks, as is the current reality. Polluters should be taxed, he said, while industries that aren’t should get benefits.
Beyond the solar tax incentives, there’s the Clean Power Plan, the Obama administration’s proposal to use the Environmental Protection Agency to regulate greenhouse gas emissions from the power industry under the Clean Air Act. In essence the EPA, which will be finalizing the rules for the plan later this summer, would regulate carbon emissions the way it does air pollution.
Electric power generation from coal and natural gas plants is responsible for 40% of U.S. carbon emissions. Under the Clean Power Plan, states would have flexibility in how they meet carbon reduction goals. States with large coal industries might want to focus on capturing carbon emissions from the plants. Meanwhile, states with ample sunshine might want to encourage solar industries to set up shop and grow.
But the Clean Power Plan is highly controversial. Critics say it unfairly targets coal industry states and will mean higher energy bills for consumers.
Clinton says in a release that she will make it “a top priority” to fight the efforts to roll back the Clean Power Plan. She calls it a “crucial tool” in the nation’s strategy to curb carbon emissions.
While the federal government is a primary driver of clean energy in the U.S., solar is a highly regional industry. California and the U.S. Southwest are the biggest markets in part because of strong state and local incentives.
To help state and local clean energy plans, Clinton says she will establish a “Clean Energy Challenge,” which will create better partnerships between the federal governments and states and cities.
Beyond any policies, the U.S. solar industry has grown rapidly in recent years thanks to the dropping costs of solar panels and installation. Bloomberg’s Lilinshtein describes solar as having “moved from a niche product to the mainstream” and says that federal subsidies won’t necessarily be required in the industry to maintain strong growth.
But delivering the huge growth that Clinton is calling for will likely need these federal subsidies.
Analysts and solar industry execs agree, though, Clinton’s numbers aren’t all that crazy if helped by strong federal support. SolarCity’s Rive says that the plan is “is absolutely achievable.” Lilinshtein describes it as “an aggressive target but certainly in the realm of possibility.” GTM Research analyst Shayle Kann explains it as “a perfect target: ambitious but possible.”