The solar sector got eclipsed in last-minute tax packages that passed the House this afternoon.
Even as lawmakers in late-night dealmaking increased and extended a crucial tax credit for the wind sector, they abruptly nixed a provision that would have similarly maintained the investment tax credit for solar projects.
While the wind sector's production tax credit jumps from 40 to 60 percent through next year, then is set to expire, the investment tax credit for new solar projects will step down from 30 to 26 percent.
The middle-of-the-night moves on Capitol Hill blindsided the solar sector. The industry had launched an ambitious lobbying effort this summer to extend the industry's tax credit and until last night had believed that an extension would be included in the tax packages.
While rumors swirled late Tuesday morning over who was responsible for pushing solar out of the tax deal, many insiders pointed the finger at the Trump administration, which has broadly opposed federal support of renewable energy projects and, on Monday, called a late-night meeting at the White House to push for changes to the tax plan being hammered out by lawmakers.
"We were thinking, on the Democratic side, they were getting a year of wind, a year of solar, maybe something else – that sounds like that was maybe not satisfying the White House," said Liam Donovan, a lobbyist at Bracewell representing clients in the biodiesel industry. "At a certain point, there was a record-scratch. The price just wasn't right – the right trade just didn't come together."
The bill passed the House, and it is similarly expected to pass the Senate without significant modification, heading to President Donald Trump's desk before the end of the year.
The results deliver a major blow to a variety of green industries – from battery storage to offshore wind to electric vehicles – that had hoped for an ambitious tax package that would include a range of incentives for clean energy projects. Other high-priority measures to address PFAS contamination – such as from nonstick cookware coatings and firefighting foams – and permanent funding for the Land and Water Conservation Fund were also left out.
"This is a major disappointment. This is a swing-and-a-miss. I was hoping for a half-loaf, and this is burnt toast," said Matthew Davis, legislative director for the League of Conservation Voters, an advocacy group. "If this [appropriations] bill were on its own in a vacuum, we'd say, 'Oh, there's pretty good stuff here.' But given the need for these other environmental policy actions and that this was the only game in town to get something signed into law, it's a big disappointment."
The tax packages mark a particularly stunning turnabout for the solar industry: Its decision this summer to start lobbying for an extension of its investment tax credit came as a shock to its frequent ally on Capitol Hill, the wind sector, threatening to strain relations between the two groups.
Wind and solar had worked together in 2015 to achieve a five-year extension to their respective tax incentives, which Republican lawmakers supported in exchange for an agreement by Democrats to end a federal ban on oil exports and to support certain biofuel initiatives that are particularly important to Midwestern lawmakers, especially Sen. Chuck Grassley (R-Iowa), who now heads the Senate Finance Committee.
The wind sector, in response to solar's lobbying push, initially indicated that it would adhere to the terms of the 2015 deal and allow its production tax credit to expire. In October, though, it abruptly launched a belated campaign to renew the production tax credit – and ultimately came away with a 20-point increase in the industry's tax credit, even as solar got left out.
"This is the only thing that you could see as a Dem victory out of this," Bracewell's Donovan said, referring to the extended tax credit for wind.
One key difference between the two tax credit programs is that wind's production tax credit had already decreased as scheduled under the terms of the deal reached in 2015, and was set to expire entirely at the end of this year. By contrast, the tax credit for the solar sector merely steps down several percentage points. Lobbyists and other insiders involved in the negotiations said that decreased the urgency to include the tax credits for solar.
"The fact that wind was already three years into their phase-down and solar's just starting it, they were fundamentally on different ends of the deal," Donovan said.
However, other clean-energy initiatives were also left out, including ambitious provisions for battery storage, offshore wind, and a provision supported by major automakers like General Motors, Ford, and Tesla that would have raised a cap on tax credits for electric vehicles.
The automakers – along with clean-energy stakeholders and environmental advocates – had expected far more from the tax deal: Grassley had long expressed his eagerness to provide incentives for biodiesel, Senate Majority Leader Mitch McConnell (R-Ky.) was interested in funding for a coal miners pension program, and GOP legislators, in general, were hoping to fix so-called "technical" errors arising from mistakes in the 2017 tax deal – together providing potential bargaining chips for Democratic lawmakers.
Instead, green industries and green groups called the package a lost opportunity – and left many insiders openly wondering how exactly Democratic lawmakers had used their leverage.
"The additional year at 60 percent for wind will be helpful, but none of this is really on par with what should have been achievable in this context, and it's disappointing not to see a package that really does more to bring us the 21st-century grid that we know we're going to need and need rapidly," said Greg Wetstone, president of the American Council on Renewable Energy.
The American Wind Energy Association, the sector's main trade group, offered measured support for the tax package.
"We appreciate our nation's leaders' recognition of the role land-based wind power plays in moving toward a clean energy economy. Wind plays a vital role in creating more U.S. jobs and opportunities for American manufacturers," Aaron Severn, senior director of federal affairs at AWEA, said in a statement. "A comprehensive clean energy and carbon package that values offshore wind will bring even more of these economic benefits to American families and businesses, and there's still work to do on this front."
