The impact: $73 billion in new investment in the U.S.
The clean-energy boom is about to be transformed. In a surprise move, U.S. lawmakersÂ agreed toÂ extend tax credits for solar and wind for another five years. This will give an unprecedented boost to the industry and change the course of deployment inÂ the U.S.
The extension will add an extraÂ 20 gigawattsÂ of solar powerâ€”more thanÂ every panel ever installed in the U.S. prior to 2015, according to Bloomberg New Energy Finance (BNEF).Â The U.S. was already one of the world’s biggest clean-energy investors. This deal is like adding another America of solar power into the mix.
The wind credit will contributeÂ another 19 gigawatts over five years. Combined, the extensions will spur more than $73 billion of investment and supply enough electricity to power 8 million U.S. homes,Â according to BNEF.
“This is massive,” said Ethan Zindler, head of U.S. policy analysis at BNEF. In the short term, the deal willÂ speed up the shift from fossil fuels moreÂ than theÂ global climate deal struck this month in Paris and more than Barack Obama’s Clean Power Plan that regulates coalÂ plants, Zindler said.
This is exactly the sort of bridge the industry needed. The costs of installing wind and solar power have dropped precipitouslyâ€”by more than 90 percent since the original tax credits took effectâ€”but in most places coal and natural gas are still cheaper than unsubsidized renewables. By the time the new tax credit expires, solar and wind will be the cheapest forms of new electricity in many states across the U.S.
The tax credits, valued at about $25 billion over five years, will drive $38 billion of investment in solar and $35 billion in wind through 2021, according to BNEF.Â The scale of the new projects will help pushÂ costs down further and will stimulate new investment that lasts beyond the extensionÂ of the credits.
Few people in the industry expected a five-year extension.Â Stocks soared.Â SolarCity, the biggest rooftop installer, surged 34 percent yesterday. SunEdison, the largest renewable-energy developer, climbed 25 percent, and panelmaker SunPower increased 14 percent.
Congress is expectedÂ to vote by the end of this week on the taxÂ creditsÂ as part of a broader budget deal that also liftsÂ the 40-year-old ban on U.S. oil exports. Oil producers have lobbied for years to lift the ban, but it isn’t likely to significantly affect either consumption of oil or deployment of renewables. Leaders from both parties reached an agreement on the bill late Tuesday.
The 30 percent solar tax credit was set to expire next year and willÂ now extendÂ through 2019 before tapering to 10 percent in 2022. The wind credit had expired at the end of 2014, and the extension will be retroactively applied from the start of 2015 throughÂ 2019, declining in valueÂ each year.
Wind power has had an especially tumultuous relationship withÂ U.S. lawmakers, who have kept the industry’s credits alive through a disruptive ping-pong game of short-term extensions every year or two.Â “You open manufacturing plants and then you close them. And then you open them and you close them,” BNEF’s ZindlerÂ said. “It’s economically inefficient. This will give them a good five-year line of sight on what the market will look like, and that’s really important.”
by Tom Randal via bloomberg.com