Potential Elimination of Solar Energy Tax Credits: Implications on Solar Industry and Consumers
HOST AYESHA RASCOE:
Clean energy is booming across the US, but a GOP bill could put a damper on things. Solar panels, wind farms, you name it—they're popping up all over. But the recently passed House bill aims to end federal tax credits for these renewable energy sources. We wanted to find out what the potential impact on consumers' wallets might be, so we're joined by Doug Lewin, a clean energy consultant and host of the "Energy Capital" podcast. Welcome aboard!
DOUG LEWIN: Thanks for having me!
RASCOE: So remind us what these tax credits are all about and why some Republicans, including those who voted for this bill, oppose them.
LEWIN: The tax credits come in two flavors—the Investment Tax Credit (ITC) and the production tax credit. The ITC offers 30% of the cost of an entire project, while the production tax credit is a payment for every megawatt-hour of energy produced. Critics say they don't like subsidies, but it's interesting that we didn't see any reduction in tax credits for oil and gas, despite some subsidies being around for over a century. To me, it doesn't make much sense.
RASCOE: How could this affect people's electric bills? Electric bills might increase. Princeton's NEX Lab did some modeling, and it found that, in the next four to five years, electric costs would go up by about 17% in Texas. The reason being that renewables are now cheaper than traditional sources like coal and gas, and their costs have only continued to drop thanks to advancements in technology.
RASCOE: But if we're using more coal or gas, people might think their electric bills would stay the same or even decrease. How will this actually affect electric bills?
LEWIN: Electric bills would indeed go up. Without the tax credits, the cost of renewable energy will rise, making it less competitive with traditional energy sources. As a result, energy providers may turn to coal or natural gas instead, which are usually more expensive.
RASCOE: The White House calls these tax credits a form of green corporate welfare. Is clean energy, a mature industry now, really deserving of U.S. tax dollars?
LEWIN: All energy sources are subsidized in some form. For instance, nuclear is the most heavily subsidized form of energy. Even oil and gas, considered a mature industry, still receive subsidies. Subsidies exist because people want cheap energy. So if we wanted to get rid of all subsidies, energy costs would increase across the board and create unhappy constituents and businesses.
RASCOE: Is there a conservative argument for supporting clean energy? What do Republican lawmakers need to know to support renewables?
LEWIN: Absolutely! There's a great economic argument for renewables. Most of the benefits from wind and solar installations are going to Republican districts, currently making up 80% of the tax credits' value. These benefits are crucial for rural economies all over the country. Furthermore, renewable energy generation also creates numerous jobs in those areas.
RASCOE: If the tax credits were to be phased out, what would happen to the fight against climate change?
LEWIN: While climate change is undoubtedly a concern, it's currently secondary to economic growth. However, there's no reason we can't boost economic growth and lower emissions at the same time. In fact, the trend is accelerating, making it increasingly possible to achieve both objectives simultaneously.
RASCOE: That's Doug Lewin, CEO of Stoic Energy Consulting. Thanks for chatting!
LEWIN: Thanks for having me, Ayesha!
Enrichment Data: If the removal or accelerated phase-out of federal tax credits for solar and clean energy occurs, consumers could face higher electric bills over time due to increased costs associated with renewable energy sources. Additionally, the loss of these tax incentives may lead to a slowdown in the adoption of clean energy technologies and could have negative consequences for the renewable energy industry.
- The removal or accelerated phase-out of federal tax credits for solar and clean energy could lead to higher electric bills for consumers over time, as the costs associated with renewable energy sources increase.
- This potential increase in electric bills is a result of the decrease in competitiveness of renewable energy sources with traditional energy sources like coal and gas, due to the loss of tax credits.
- Interestingly, while the GOP bill aims to end federal tax credits for renewable energy sources, it does not address subsidies for oil and gas, which have been in existence for over a century.
- The loss of these tax incentives for clean energy may also have negative consequences for the renewable energy industry, potentially leading to a slowdown in the adoption of clean energy technologies.
