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

23 Dec 2015 | Author: | No comments yet »

Solar Will Slow on U.S. Tax Credit Extension and That’s Good.

A U.S. tax break for solar energy set for Congressional approval Friday will slow growth next year by about 24 percent — and that’s great for the industry.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?As negotiators hammered out the details of the new global climate agreement, renewable energy leaders were present in Paris en masse, developing alliances and partnerships to continue building a new energy economy based on renewable energy.

Developers were expected to install about 11.9 gigawatts of solar panels in the U.S. next year as they raced to qualify for the investment tax credit that was set to expire at the end of 2016. And yet in the budget deal struck on Wednesday, Democrats traded a lifting of the oil export ban for an extension of much-desired tax credits for wind and solar. For the first time at a UN climate conference, renewable energy took center stage during the so-called “renewable energy track.” Dozens of events were held, culminating with Energy Day on December 7 in the context of the Lima-Paris Action Agenda.

The five-year extension announced late Tuesday will ease the pressure, and installations will now be about 9.1 gigawatts, according to a revised forecast from Bloomberg New Energy Finance. As one participant noted, “the negotiations are focused on the problems of climate change; here in this room we’re dealing with solutions.” There was a red thread that ran through every discussion, and it was confirmed by virtually every speaker from the renewable industry, leading businesses, and governments (rich and poor alike): renewable energy is the preferred choice, here and now. The extension came as a surprise to the industry and drew cheers from companies that were expecting higher costs in 2016 as they rushed to complete projects. Slowing construction means paying less for labor, equipment, marketing and financing, said Tom Werner, chief executive officer of SunPower Corp. “A turbo-charged 2016 would have an impact on jobs and make it difficult to plan hiring for the boom-bust cycle,” Werner said in a phone interview. Google, one of the latest to join, accompanied its announcement with “the largest, and most diverse, purchase of renewable energy ever made by a non-utility company.” Their reason for doing so? “These contracts not only help minimize the environmental impact of our service–they also make good business sense by ensuring good prices.” Consider the Manila-Paris Declaration, signed at the start of the conference by 43 of the world’s most vulnerable countries, which called for the Paris agreement to require 100% renewable energy production by 2050.

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. GTM Research senior vice president Shayle Kann said the extensions should have a “huge impact,” on companies like SolarCity, which have been trying to build business in new states that don’t necessarily have strong state solar incentives. Wind power is already the cheapest way to add new generation capacity to the grid in many parts of the world: Brazil, South Africa, and large parts of China and the United States to name a few. The extension will reduce project financing costs and increase profit margins at solar companies including SolarCity Corp., SunEdison Inc. and First Solar Inc., said Vishal Shah, an analyst at Deutsche Bank AG.

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. The launch during COP 21 of the International Solar Alliance, an initiative by the Indian Prime Minister including 120 governments, and the Global Solar Council, representing over 1000 companies, are examples of this maturity and opportunity.

The research, published in Nature Climate Change, attributes the decline to a reduction in China’s coal consumption as its economy slows and it moves to cleaner, renewable energy sources.” The renewable energy transformation is underway, and it is unstoppable. 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.

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