Ending Tax Credit Subsidies for Solar Energy, Electric Vehicles, and Energy Storage is a Bad Idea

Ending Tax Credit Subsidies for Solar Energy, Electric Vehicles, and Energy Storage is a Bad Idea


Congressional Democrats just agreed to Trump’s new budget that ends federal tax credit subsidies to solar installations and to buyers of electric vehicles. Aside from the obvious detriments to the energy transition to lower carbon sources of energy there are several other detriments. These include detriments to solar companies from component manufacturers to installers and all the automakers building electric vehicle and those supplying parts. Ford just announced plans to build new facilities and hire many in Dearborn, Michigan, in part to build EVs. The new rule might affect the EV plans.


A clear and strong majority of climate scientists say an energy transition to lower carbon sources is necessary and most call for an accelerated transition to stay within precited emissions limits. This combined action of Congress and the Trump administration could only be considered a deceleration. It may even erode emissions commitments around the world and unravel the COP29 Paris Accords, if other countries follow suit. One might argue that the accord is already unraveling (perhaps partially due to the U.S. pull-out) as many countries have so far failed to adhere to their stated planned reductions. 


Statistics show, quite obviously, that when subsidies go down market share goes down for these industries and installations goes down. The subsidies are still needed to ensure profitability and keep industries healthy and innovative, industries that will very likely be needed far into the future.

According to research firm Rhodium Group the rollback of the tax credits is predicted to result in 125 million tons of added greenhouse gas emissions by 2025. There was a one-year extension of the wind energy tax credit that was set to expire at the first of the year.


With talk earlier in the year of a Green New Deal, a super-massive governmental financial commitment to clean energy development it seemed as if a continuation of the solar and EV subsidies would be relatively assured but apparently that is not the case. So instead of adding to clean energy development the government is taking away from it. It appears we went from one extreme to the other. The Trump administration has already modestly cut renewable energy research. 


Will the cutting of these subsidies affect state, city, and regional plans for greenhouse gas reductions and clean energy mandates? No doubt. Several states have made pledges and laws to transition to 100% clean energy in certain time periods. Such transitioning will be slowed by the pulling of federal tax credits. 


For the consumer interested in purchasing an EV, whether full or hybrid, or a solar energy system, the non-extension of the subsidies is a deal-breaker, although for solar it is a 3-year phase out so the slow-down will be more gradual. EVs and solar are questionably economic with subsidies and clearly uneconomic without them. Although, it is true that at the consumer level such subsidies predominantly end up benefitting those that can afford them, the upper and middle classes, they are still useful. If they were to be expanded the benefits could reach further to help the poorer consumers. 


Accelerated ice loss in the Arctic, historic heat and catastrophic fires in Australia, a warm winter so far in the U.S. Midwest, and other indicators suggest global warming’s influence, despite the detractor’s claims about the pause or hiatus in warming as indicated by satellite data. Some climate scientists are saying the satellite data is incorrect and needs adjusted to match abundant surface data that clearly shows warming. I have yet to read the arguments but if that is true then the evidence for global warming just got a huge boost. Significant warming in the Arctic is indisputable. Of course, the Trump administration is banking on global warming not actually occurring and so by that logic there would be no need to advantage clean energy sources.


Environmentalists applauded the guidance in the budget that suggests that federal loan guarantees for fracking related plastics production and ethane storage in Appalachia may not be provided. However, eventually they may be. Plastic made from cheap available ethane is both cheaper and better for the environment than plastic made from petroleum. 


The budget also included money to shore up pensions for coal miners in a strongly contracting industry beset by bankruptcies. While that is good, other means to shore up a clearly dying industry are sure to end up being wasted money, especially those that mainly help the upper management of the industry. The coal industry will continue to be beset with costs such as helping black lung victims (whose federal benefits have been extended for a mere one year) and decommissioning and clean-up of mining sites. Efforts by former Energy Secretary Rick Perry to help the coal industry from the federal level have largely failed due to inadequate arguments or demonstration of the benefits of such action. However, some states have managed to help coal. Here in Ohio, the state mandated subsidizing two coal plants which will be paid for by electricity rate-payers, ie. us. Cheap natural gas continues to limit coal burning. The recent FERC decision to counteract renewables integration into the PJM regional power system by subsidizing coal and natural gas bids in the capacity market is also a way to favor fossil fuels over renewables, especially where states have mandated renewables ramping. Advocates say it makes competition fairer, but detractors say it denies the need for an energy transition. It is debatable but a middle ground would be to favor natural gas a little but not coal. There has been no demonstrable need for coal stocking except for very cold periods where natural gas infrastructure is inadequate to supply certain areas. 


References:


Clean Energy Loses Out in Congress’s Last-Minute Budget Deal – by James Bruggers and Marianne Lavelle, in Inside Climate News, Dec. 20, 2019


Energy Regulator’s Order Could Boost Coal Over Renewables, Raising Costs for Consumers – by Dan Gearino, in Inside Climate News, Dec. 20, 2019