TL/DR –
The US House has approved an energy policy draft law that phases out renewable subsidies between 2029 and 2032, according to the article. However, critics argue the proposal is filled with rules meant to stifle clean energy, including the elimination of incentives for companies to invest in clean energy and vague provisions regarding “foreign entities of concern.” While this could slow America’s progress towards decarbonization, tax credits are only one factor affecting clean energy growth, with state-level regulations and price competition from unsubsidized renewables also playing significant roles.
Renewable Energy Policy in US: Uncertainty and Implications
The House is progressing with a draft law that could substantially impact the Investment Tax Credit (IRA). With the Senate set to refine its proposal, the final agreement is anticipated around August. The question now is whether this spells the end for the IRA and its potential effects on clean energy in the US.
The House proposal plans to phase out renewable subsidies between 2029 and 2032, consistent with the IRA’s original timeline. It also includes rules on tax credit eligibility and restrictions on Chinese involvement in the energy supply chain. The law was designed to boost domestic manufacturing of solar panels, wind turbines, and other clean energy components.
Estimates suggest the bill could reduce up to 60% of the IRA’s tax credits, saving $515bn by 2034, according to the American Action Forum. However, industry insiders argue that the many rules of the proposal could severely hamper clean energy. Abigail Ross Hopper, head of the Solar Energy Industries Association, calls it a “sledgehammer masquerading as a scalpel”.
Three provisions are particularly notable. Firstly, the bill eliminates the IRA’s “transferability” that encouraged companies to invest in clean energy. Secondly, it introduces vague regulations about “foreign entities of concern”. Lastly, the timing of tax credit payments has been altered, disadvantaging new projects.
Rich Powell, head of the Clean Energy Buyers’ Association, warns that these changes will make it harder to establish US manufacturing in clean energy. An analysis by the Rhodium Group indicates that with the IRA, America could reduce greenhouse gases by 40% from their 2005 level by 2035. Without it, reductions may slow to nearly 30%.
Kevin Book of ClearView Energy Partners explains that tax credits are just one aspect. State-level regulations like “renewable portfolio standards” also play a vital role. The International Energy Agency estimates that unsubsidised renewables are already competing with new fossil-fuel plants in many parts of the US.
John Ketchum, CEO of NextEra Energy, recently echoed this sentiment, reinforcing the practicality and speed of renewable projects in comparison to gas turbines. As of last year, 90% of new power capacity in America came from carbon-free sources, suggesting a bright future for green energy despite potential setbacks.
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