The positive political momentum enjoyed by the U.S. renewable energy industry is being replaced by pessimism and frustration, as the composition of the country's bodies of elected officials has become noticeably less renewables-friendly. Following the national midterm elections held earlier this week, Republicans now have control of the House of Representatives, and Democrats do not hold enough seats in the Senate to move legislation forward without cooperation from Republicans.
What can we expect from the 112th U.S. Congress, which will begin work next year following a lame-duck session this month? Is all hope lost for a national renewable electricity standard (RES) and other policies that are seen as crucial for moving the industry forward?
Ultimately, the situation may not be as dire as many renewable energy players initially feared, agreed the panelists who spoke during a recent webinar sponsored by Chadbourne & Parke. Certain provisions and policies that have helped bolster the renewable energy market in recent months and years have enjoyed bipartisan endorsement that is likely to continue.
‘Looking at just the tax issues, both Republicans and Democrats have been supportive of the renewable energy community through incentives,’ noted Joseph Mikrut, a partner at Capitol Tax Partners. Nevertheless, he cautioned that House Speaker-elect John Boehner and other Republicans may not prioritize such provisions as strongly as did many Democrats in power.
‘Republicans will support renewable energy, but it's certainly not lost on any of us that we now have a Speaker of the House from a major coal state,’ agreed John Shelk, president and CEO of the Electric Power Supply Association.
In addition, the wave of nationwide campaign rhetoric that focused heavily on reducing both spending and the federal government's role in the private sector may translate into increased difficulty in extending such programs as the U.S. Treasury's cash grants.
Panelists pointed out that even President Obama and members of his administration have privately begun debating the logic behind continuing these programs the during the current era of close budget scrutiny.
Prospects for the much-sought national RES are similarly dubious. The panelists predicted that such legislation is unlikely to be passed during the upcoming lame-duck session, when Republicans are likely to be unwilling to compromise, and the scope of the session could turn out to be quite limited.
If the national RES is brought up during the 112th Congress, it may fare well – with some substantial differences from the versions introduced during earlier legislative sessions.
‘The major impact of the election is going to be turning the RES into a clean energy standard (CES) that would include nuclear and carbon capture and sequestration,’ said Jonathan Weisgall, vice president of legislative and regulatory affairs at MidAmerican Energy Holdings. The CES would also likely feature a requirement for clean energy – perhaps 25%-30% – that is higher than what has been proposed for an RES.
The inclusion of nuclear and ‘clean coal’ in an energy standard may irk some renewable energy players, but the CES would be beneficial to all technologies, including renewables like wind and solar, according to Richard Glick, vice president of government affairs at Iberdrola Renewable Energies USA. ‘We need to broaden our minds in the renewable energy community,’ he said.
Carbon cap-and-trade, meanwhile, faces a tough uphill battle, as evidenced by President Obama's recent acknowledgement that legislation to impose cap-and-trade measures is effectively dead. Moreover, Congress may also block the Environmental Protection Agency (EPA) from working on cap-and-trade on its own.
‘If a vote is taken in the House and Senate, the votes will impose a moratorium on EPA regulations on carbon,’ Glick said. If Obama were to veto this decision, he would create ‘difficult politics’ for his 2012 re-election campaign, he added. Instead, the president is likely to pull back on EPA regulations for a couple of years – until after the re-election cycle – in exchange for seeing other measures through to the finish line.
Transmission issues for renewable energy, which have historically been fraught with political and regional disagreement, are unlikely to enjoy much legislative success under the new Congress.
‘It really is a tough era for transmission,’ Weisgall remarked, noting that transmission projects do not have access to the same tax incentives available for other aspects of renewable energy development. ‘There are a number of renewable energy projects that are being held up because of a lack of transmission right now.’ Permitting, planning and pricing have caused much of the stalling.
As a result of Congress' prior failures to move transmission legislation forward, the Federal Energy Regulatory Commission has largely taken control of transmission decisions. ‘We've given up on the notion that Congress can effectively address this issue,’ said Glick.
Finally, subsidies for energy storage – long touted as a major key to broadening the implementation of renewable energy projects – retain a chance of gaining enough support from lawmakers.
‘These issues have been popular for quite a while, but I think it will take a comprehensive energy bill with several components – one with a tax title,’ said Mikrut.
‘Energy storage could be a game-changer,’ added Weisgall. ‘We must find a way to pay for it somehow, but it is a high priority.’