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How Can These 15 States Comply with EPA’s Clean Power Plan? (Hint: Modernizing Their Renewable-Energy Programs Might Help)

September 24, 2015
Lisa Hamilton

States that seem most staunchly opposed to the EPA’s Clean Power Plan tend to be the same ones that underachieve on renewable-energy initiatives.

The 15 attorneys general formally opposing the new pollution-control rules come from states that have some of the country’s least ambitious renewable portfolio standards and the weakest renewable-energy goals in America. Which states are they? Alabama, Arkansas, Florida, Indiana, Kansas, Kentucky, Louisiana, Michigan, Nebraska, Ohio, Oklahoma, South Dakota, West Virginia, Wisconsin and Wyoming.

The correlation between a state’s anti-EPA stance and its laggard behavior on renewables comes as no surprise, perhaps. Energy-policy attitudes aren’t always easy to change. It’s a parallel that reveals an ultimately counterproductive agenda, however. States that resist the Clean Power Plan would find it far easier to comply—and would be doing themselves a big economic favor—if they were simply to embrace renewable energy.

Part of that embrace would include openly recognizing how the federal Solar Investment Tax Credit has helped drive down renewable energy prices, created tens of thousands of jobs and attracted billions of new investment dollars. Such an embrace would not only put these states in a better position to comply with clean-air rules (by shifting electric generation to cleaner sources) it would help spark significant economic activity that these states for the most part have missed out on so far.

Under the Energy Policy Act of 2005, Congress created a 30 percent investment tax credit for commercial and residential solar energy systems that applied from Jan. 1, 2006 through Dec. 31, 2007. Congress has extended the tax credit several times and now—10 years on—it has clearly helped generate a solar boom.

The benefits have been numerous. The tax credit has helped support 32 percent of all new electric-generating capacity in the U.S, second only to new generation from natural gas. Since 2006, the number of solar installations nationally has increased by 1,600 percent, and as rooftop solar installations caught on, the rate of installation jumped from about one every 80 minutes in 2006 to about one every 2.5 minutes in 2014. As installations have increased, installation costs have decreased, dropping by 73 percent since 2006.

The solar surge has contributed to substantial job creation, and according to the Bureau of Labor Statistics, the solar industry now employees 174,000 people in the U.S. The bureau sees that number reaching 210,000 by the end of this year. The coal industry, by contrast, employs about 80,000 people, according to federal labor statistics, and is shedding jobs fast.

THE SOLAR INVESTMENT TAX CREDIT IS DUE TO EXPIRE AT THE END OF NEXT YEAR, AND IS RAISING QUESTIONS ABOUT THE ECONOMIC HAVOC ITS EXPIRATION WOULD CAUSE. While the Senate’s energy bill released earlier this week would provide temporary extensions, as it still stands now, the tax credit for commercial uses will drop to 10 percent of costs (from 30 percent) and the residential credit will drop to zero.

That’s unless Congress votes to extend it, which it might do—especially if states like those that are dragging their feet on renewable-energy programs get on the bandwagon and help make some noise about it.

The wind industry offers an instructive example of how energy tax policy—which has a long history of being manipulated to the advantage of coal producers—can shape the economy. When Congress let a similar tax credit on wind energy expire in 2013, construction of new wind farms dropped by 92 percent and the industry lost 30,000 jobs, according to the American Wind Energy Association. When that tax credit was revived a year later, 23,000 jobs reappeared.

Fears that Congress won’t extend the solar credit have spurred a record surge in installations, and this year the industry surpassed 20 gigawatts of total capacity, according to GTM Research and the Solar Energy Industries Association.

Supporters of the tax credit note that it won’t be the end of solar if it goes away. But it will be an opportunity lost, especially to those states that have few or no renewable-energy initiatives in place yet.

Lisa Anne Hamilton is an IEEFA regulatory consultant.


Lisa Hamilton

Regulatory Consultant Lisa Anne Hamilton has provided legal support to Skadden Arps Meagher Slate & Flom and the Financial Institutions Group of Davis Polk & Wardwell.

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