December Cleantech Policy

December has been a huge month for public policy in the cleantech sector, from Paris to PTCs to planning for the Clean Power Plan. We’ve assembled a brief recap on what these events mean for the cleantech sector below.

International: Earlier this month, world leaders gathered in Paris at COP21, the 2015 United Nations Climate Change Conference. An agreement was reached which provides a framework for countries to submit emissions reductions plans for the future and revise them every five years. While this deal has been criticized by some as lacking enforcement mechanisms and not doing enough to keep global warming under two degrees Celsius, the agreement is an important step forward, as countries around the world recognize the magnitude of our challenges and are coordinating to move in the right direction to solve them.

Indeed, twenty governments also formed an initiative called Mission Innovation. These countries pledged to double their research and development budgets for clean energy over the next five years. This coalition includes a wide swath of major global economies, from the United States, Germany, to China and India, as well as Saudi Arabia and the United Arab Emirates.

In conjunction with these efforts, Bill Gates and more than two dozen other billionaires and influential investors from around the world formed the Breakthrough Energy Coalition. The group intends to make significant investments by providing patient, early stage capital that will help commercialize innovative technologies.

Together, these announcements coming out of Paris are a clear marker of both the public and private sector’s recognition of our climate challenges and that innovation and investment in the cleantech sector is fundamental to solving this Challenge.

National: Perhaps the biggest news is at the national level, with Congress’ approval of tax credit extensions for the wind and solar sectors as part of the omnibus spending bill’s passage. As reported by Greentech Media,

“Under the legislation, the 30 percent Investment Tax Credit (ITC) for solar will be extended for another three years. It will then ramp down incrementally through 2021, and remain at 10 percent permanently beginning in 2022.

The 2.3-cent Production Tax Credit (PTC) for wind will also be extended through next year. Projects that begin construction in 2017 will see a 20 percent reduction in the incentive. The PTC will then drop 20 percent each year through 2020.”

It’s fair to say this deal is big for wind, and huge for solar. While these tax credits will still eventually expire even as other energy sectors retain permanent tax treatments, this extension will help the sectors continue to grow. Perhaps as important is the policy certainty that will exist with the inclusion of a ramp-down of the tax credits. Historically, the wind PTC has expired and then subsequently been renewed, causing huge volatility in deployments and stresses on the supply chain. This policy will provide more certainty for these industries than they’ve had in a decade.

The US market for wind and solar will continue to exhibit significant growth in the coming years; this tax credit extension should also pave the way to unlock new residential solar markets by the end of the decade, including Ohio and Illinois.

As these sectors continue to grow, they will both continue to reduce the cost of wind and solar, but also inject billions in new investment into the cleantech space as these companies acquire other businesses and purchase products and services. While both policies are important, the solar ITC extension exceeded the expectations of even many solar industry leaders, and should accelerate the sector’s trajectory to becoming cost-competitive with other energy sources.

Illinois: 2016 should be a valuable time for states to engage with stakeholders and develop a state compliance framework for the Clean Power Plan (CPP), since implementation plan outlines must be submitted to EPA in September 2016. In light of this, CET worked with the AEE Institute to develop and publish an open source tool to model compliance options for the state. This user-friendly tool can provide insight on policy proposals in seconds rather than waiting for complicated modeling results, in order to aid in designing a plan that works well for Illinois.

Analysis conducting the model also identified paths to reduce emissions while saving consumers money, mainly through increased utilization of energy efficiency. For example, the pathway based on the goals of the Illinois Clean Jobs Coalition significantly reduced emissions through increased energy efficiency and increased renewables, while projecting savings for consumers.

Recommended Reading

Building on the developments from Paris, Ben Gaddy, CET’s Director of Technology Development, has a great post on the deployment vs. innovation debate that exists within the cleantech community.

The post also helped inspire a recent episode of the Interchange, Greentech Media’s cleantech industry podcast (subscription required).

Teryn Norris outlines ways the government can execute on increasing investment in the clean energy sector and drive innovation.

Michael Levi at the Council on Foreign Relations provides a smart analysis of the Paris deal.

By Ian Adams | January 4, 2016