Historic climate bill faces state schism on clean energy

The suite of tax incentives in the $369 billion "Inflation Reduction Act" could spur record-setting growth in wind and solar capacity if prices for those zero-carbon generation sources remain low, according to several computer models.

But the sweeping congressional package — which passed the Senate yesterday as part of the budget reconciliation process — is raising several critical energy questions for the nation’s climate future: Where would the new turbines and panels go? And would a surge in renewable energy bridge a sharp red-state, blue-state political divide that has defined the climate issue for the past decade?

According to a new report from Princeton University, the pace of yearly wind power installations could double and solar generation could increase fivefold by 2025-2026 from 2020 levels, fueled by decadelong tax incentives in the act. The measure would have the greatest impact on investment in wind and solar power, which nearly doubles to $321 billion in 2030 versus $177 billion without the legislation, the analysis released last week from the Princeton ZERO Lab’s REPEAT project said.

“This is going to drive a lot of investment [in] all of the country, particularly in wind- and solar-rich areas,” if the bill is enacted, said Jesse Jenkins, who leads the ZERO Lab.

“We’ve never seen this much opportunity out there,” said George Hershman, chief executive of San Diego-based SOLV Energy, which is the largest installer of utility-scale solar farms in the U.S. “The demand will be there,” said Hershman, who is also chairman of the Solar Energy Industries Association.

Tax incentives fueled the dramatic expansion in the past decade for wind and solar generation so they became the fastest-growing source of new electric power in the U.S., but their total share of U.S. power plant output, at 12 percent last year, is one-fifth of what gas- and coal-fired plants produce.

The legislation would extend the investment tax credit for solar installations and the production tax credit for wind by 10 years, lowering the cost of projects for developers and, critically, locking in the benefits for a decade, Hershman said. “When you get out 10 years, you will have effectively changed the energy portfolio of the U.S.,” he added.

The greatest share of new wind and solar power investment will continue to tend to flow to regions where those resources are strongest, although the tax incentives lower the costs and risks for projects across the country, Jenkins said.

He singled out Texas and the Great Plains states, where wind power is already heavily concentrated, and areas offshore of several Atlantic states. For solar, the prime region is a band of Sun Belt states spreading from Florida to California, plus clusters of good solar resources in other states.

The new analysis follows an earlier one led by Jenkins and Princeton colleagues assessing where new wind, solar and other zero-carbon resources would likely grow under a scenario tracking the Biden climate goals. That “Net-Zero America” report in 2020 projected that the states with the greatest new wind farm expansion by 2050 would be led by Texas, Iowa, Missouri, Nebraska and Montana. California, Texas, Florida and Georgia came as the biggest winners in solar energy growth.

States' partisan divide

Yet the passage of the climate bill in the Senate also is putting new attention on states that have been sharply divided along partisan lines for years. For wind and solar to grow exponentially, projects may need backing from state and local officials on infrastructure such as transmission, as well as utilities.

The cleavage in state views on clean energy was apparent when the U.S. Supreme Court sharply restricted EPA’s authority to regulate greenhouse gas emissions in June. Then, leaders of a group of 23 governors called the U.S. Climate Alliance vowed to continue the climate policy fight on their own. The governors are Democrats except for Govs. Larry Hogan in Maryland, Charlie Baker in Massachusetts and Phil Scott in Vermont — three ticket-splitting states.

The decision “only hardens our resolve to act with the boldness and urgency the climate crisis demands,” said alliance co-chairs Govs. Kathy Hochul (N.Y.), Jay Inslee (Wash.) and Gavin Newsom (Calif.) in a statement in June.

“This [Supreme Court] ruling makes clear that the actions of governors and state legislatures are more important than ever before,” they said.

A coalition of 22 Republican governors, meanwhile, lined up against the energy and climate bill last week.

“With sky-high prices at the pump, the last thing Americans need is for Democrats to punish energy producers, which will ultimately hurt working families struggling to pay for gas, goods, food, and utilities,” a statement by Republican governors declared, shifting the focus of the debate from the long-term climate threat to the immediate pain of high fuel prices.

Partisan differences add to uncertainty about the trajectory of low-carbon energy in many states, as some states are backing targets that are several years out and decisions are yet to be made about many projects. Support for specific energy projects also doesn't always follow strict party lines.

More than 20 states, plus Washington, D.C., and Puerto Rico, enacted more than 100 bills on carbon emissions reductions or other climate change measures last year, according to the National Conference of State Legislatures in a report this April, “2021 Energy Legislative Trends.”

“Rising sea levels, wildfires in the West, hurricanes in the Gulf, extreme weather events in Texas and Kentucky, and severe drought throughout the West” added urgency to the legislative initiatives, the NCSL report said.

“On the one hand, several states with clean energy goals continued to pursue policies to shift away from the use of fossil fuels, particularly the use of coal. On the other, several states with economies tied to fossil fuel production enacted policies aimed at preserving the use of fossil fuels, particularly the use of coal,” the report said.

“Additionally, at least 17 states moved over the past year to preempt municipalities from restricting the use of natural gas or other fuels in new buildings,” it added, highlighting legislators' efforts to block a transition from fossil fuels to electric power for building heating, a high priority on climate policy agendas.

In some red states like Indiana, where wind and solar projects have grown in recent years, governors have welcomed expansion of renewables as sources of jobs and investment. When ground was broken last year for the Mammoth Solar project in Indiana, covering three times the space of New York City‘s Central Park, Republican Gov. Eric Holcomb and other GOP state office holders were there to support the development, for example. At the same time, Holcomb and his colleagues in Nebraska, Alabama and Georgia all signed last week’s GOP governors criticism of the "IRA" legislation.

Last year, Nebraska committed to a goal of net-zero electricity by 2050 — the first Republican-dominated state to do so — following a grassroots campaign to elect climate policy supporters to the boards of public power districts (Climatewire, Dec. 10, 2021).

And governors in Alabama and Georgia are supporting a transition to electric vehicles as the EV industry expands car and battery production in the region (Energywire, Dec. 1, 2021). 

Even so, states with high levels of renewables and aggressive climate targets have sometimes faced grid challenges. California, for example, is examining whether to keep its final nuclear power plant open beyond 2025 to maintain grid reliability (Energywire, July 19).

"Maintaining energy reliability may require the extension or renewal of permits of electric generating facilities currently planned for retirement,” a spokesperson for Newsom said this summer.

Some states in the Climate Alliance also have pushed back on renewables. NCSL notes, for instance, that Maine established a moratorium on offshore wind projects in its territorial waters last year after opposition from commercial lobster and fishing industries.

Regardless, the partisan split on energy was clear in the 51-50 vote in the Senate yesterday, with Republicans saying the package would worsen inflation, not help it. Democrats said the bill is critical to preventing a climate catastrophe.

“By defending America’s energy security and reducing carbon pollution by nearly 40 percent by the end of the decade, it will slash energy costs and help save the planet,” House Speaker Nancy Pelosi said in a statement. The House is expected to vote on the measure this Friday (E&E Daily, Aug. 7).

Senate Minority Leader Mitch McConnell (R-Ky.) called the package “a so-called climate bill that will have no meaningful impact on global temperatures whatsoever.”

House Minority Leader Kevin McCarthy is leading House Republicans’ opposition to the act. Last week, in a political speech to South Carolina Republicans, he linked today’s high gasoline prices to the energy crisis in the 1970s and scoffed at then-President Jimmy Carter for putting solar panels on the White House roof.

The transmission factor

Another wild card for renewables in the wake of the congressional debate is the build-out of transmission needed to move power from projects to population centers.

Energy Secretary Jennifer Granholm and the Federal Energy Regulatory Commission, under Biden appointee Chair Richard Glick, are pursuing separate but parallel strategies to expand the nation’s aged high-voltage transmission system to open access to more wind and solar power resources and strengthen it against extreme weather ravages (Energywire, April 22).

Both initiatives court the support of state-elected leaders and regulators, who have powerful influence about where and when new lines are sited and approved.

The advocacy group Americans for a Clean Energy Grid (ACEG) has identified two dozen proposed long-distance transmission lines that, if built, could add 60,000 megawatts of clean energy to the nation’s supply. Most of the lines would cross over boundaries of states on opposites in the climate debate. Many would deliver power from red-state regions to Democratic-voting cities and suburbs.

The Midcontinent Independent System Operator (MISO) is the grid operator across a 15-state region extending from the Canadian border to the Gulf Mexico, with the nation’s best onshore wind regions.

Last month MISO approved 18 high-voltage line projects that would channel $10.3 billion into the states where the lines pass. Completing them could add up to 53,000 MW of renewable energy (Energywire, July 26).

Another example is the partially completed 2,000-mile Energy Gateway transmission project, led by Portland, Ore.-based PacifiCorp. When completed it could deliver 4,000 MW of wind power from red state Wyoming into blue states Oregon and California.

Rob Gramlich, president of the Grid Strategies LLC consulting firm and an ACEG co-founder, said the new lines would open the door to zero-carbon power, if built.

“Anywhere you can build transmission to good renewable resources, I expect that generation will come online as soon as the transmission is there,” he said.

However, transmission lines have faced pushback in many communities for a variety of reasons, including concerns about disrupting local landscapes and communities.

The expansion of clean energy in both red and blue states also may get a decisive push from utilities that have set goals to shrink or eliminate greenhouse gas emissions from their power supplies, Gramlich said.

According to the Edison Electric Institute, 39 electric power companies in its membership — including most of the nation’s largest — have goals to achieve carbon-free electricity by 2050 or before.

Some utility watchdog organizations remain skeptical that the utilities will move fast enough to hit their goals, though.

But Gramlich said: “Forget about what is driving them. The targets are the targets. Utilities have significant targets they want to meet. Some of that is more driven by state policies, and in other cases utilities are acting where there are no meaningful policies."

Eyeing MISO, Gramlich said, “That is a very diverse region. Its states’ views on climate are all over the map." If other regions' grid planners do what MISO’s leadership did, aligning transmission projects with utilities’ targets, the transition will go ahead regardless of what state political leaders say about climate, he predicted.

Supply squeeze and EVs

The projections of increases in wind and solar development from the bill come with some caveats.

For example, the impact of the package’s clean energy incentives will shrink if wind and solar prices are pushed up by shortages of critical materials, restrictions on essential imported components or shortages of skilled labor, researchers at the Rhodium Group and Princeton’s REPEAT team warn.

“Several constraints that are difficult to model may limit these growth rates in practice,” the new Princeton analysis said, listing objections to new power lines and pipelines, and supply chain and labor shortages.

Battery storage also is not technologically at a level yet to allow 100 percent renewables, researchers say.

An updated analysis last week of the Senate climate package from the Rhodium Group calculated that if clean technologies grow increasingly cheaper, following the past decade’s trend, and natural gas and oil prices remain expensive, the energy and climate legislation would push greenhouse gas emissions in the economy approximately 44 percent below 2005 levels by 2030, close to the Biden administration’s 50 percent goal.

But if the outcome is reversed, and clean energy becomes more expensive and fossil fuels cheap, carbon emissions would be only 31 percent below the 2005 mark, the group’s modeling found.

A separate analysis from ICF International Inc. earlier this year found that if the future of wind and solar is challenged economically, the leadership of states with strong clean energy goals could be vital. 

ICF looked at the District of Columbia and 15 states that have pledged to accelerate sales of zero-carbon vehicles. If those states’ goals were reached for all on-road vehicles in the 15 states but not the remaining states, carbon emissions from transportation would fall by 39 percent in 2050 from 2020 levels, leaving the U.S. far off a path to achieving zero-carbon emissions by midcentury, ICF found.

However, if all states hit the targets set by the 15, carbon emission reductions would rise to 67 percent by 2050, the ICF report said. “The same level of EV adoption could reduce emissions by up to 82 percent if those EVs were charged from an electric grid powered primarily by clean energy,” the researchers concluded.

A national climate policy ultimately needs a nation behind it, said John Larsen, a Rhodium Group partner who leads the firm's U.S. energy system and climate policy research. “If the U.S. is going to have a sustained and holistic approach to solving climate change, you’re going to need everybody on board.”

A version of this report first ran in E&E News’ Energywire. Get access to more comprehensive and in-depth reporting on the energy transition, natural resources, climate change and more in E&E News.