Rhodium Study finds that clean energy tax credits, which may be phased out if congress does not vote to extend them, are the most effective means the US currently has to fight climate change.
As we prepare to participate in another Amicus lobby day to ask congress to extend the 30% solar tax credit, we thought we’d learn more about how the Investment Tax Credit for solar (ITC) and other clean energy tax breaks specifically fight climate change. To get our answers, we spoke with John Larsen, Director at Rhodium Group, an independent research firm producing data used by policymakers, philanthropic leaders, businesses and investors worldwide to inform their decisions.
Amicus Solar Cooperative members gearing up for a day of lobbying for the solar ITC extension
Larsen is co-author of the Rhodium report Can Tax Credits Tackle Climate? In the report, Larsen found that extending the ITC for solar and wind has the potential to increase renewable energy powering the electric sector up to 31% by 2030. Considering that we are currently at 8%, this improvement is significant. Of course the goal is to get to as much clean energy as possible by 2030, so other technologies are also needed. Larsen explained that this is why the proposed clean energy tax extenders package is so important.
“The entire package of tax credit extensions is important because not only does it support technologies that are currently deployed and growing, like wind, solar and EVs, but it also helps fund new technologies like carbon capture, battery storage and biofuels,” he said. “No one technology is going to fix this problem, we need them all right now to get us to the goal of eliminating carbon emissions by 2050 at the latest.”
The numbers for wind and solar are compelling. Larsen said that if the ITC is extended through 2025, we could bring an additional 21 to 35 gigawatts of renewable energy online beyond what is predicted to be added under current policy. Even more interesting are the numbers for an extension of the ITC through 2030. “If we could extend the tax credit through 2030, allowing time for projects to be fully planned and built out, we could add an additional 31 to 97 GW over current policy deployment,” he said.
Larsen added that another benefit of this addition of wind and solar is that it would help drive down the use of natural gas. “This additional renewable energy would eliminate the need for extra peaking plants, further reducing emissions. By 2030, this would bring emissions reduction to 23 to 187 million metric tons below current policy,” he said. Putting these factors together, Larsen explained that the ITC extension for solar and wind could push electric power sector emissions down 42% to 48% below 2005 levels by 2030.
Larsen stressed that all of the tax credits are important, explaining that some technologies will help right away and some will make more of a difference as they build toward 2030. “For example, I think it’s important to prop up nuclear in the short term because nuclear eats natural gas for lunch. It’s less expensive and cleaner. If we can keep nuclear going long enough to kill the natural gas market and let renewables build to fill that spot, then that’s the best scenario.”
Carbon capture utilization and storage (CCUS) is another technology that Larsen feels is essential to the picture of decarbonization by 2050. “We need to zero out fossil fuel use and even then, we still need carbon capture to mitigate what’s remaining. It’s not a hall pass, it’s a backstop that gets us to that last mile. It’s actually a pretty simple technology. The question is how big and how cheap can we scale it. Once industry gets to scale there is a lot of potential to get costs down quickly and the tax credit can help with that.”
Overall, Larsen made it clear that the clean energy tax credits are the only true piece of climate policy that the federal government has that’s working. This is why it’s so essential that the tax extenders package be passed.
“In the absence of a well thought out, comprehensive plan for dealing with climate change, tax credits are a policy which gives us the potential to keep the ball rolling,” Larsen concluded. “All the credits are important for different reasons. CCUS and biofuels tax breaks are important for getting those industries started, ITC is important for continuing the momentum and growth of technologies that are currently working, like wind and solar.”
So as we hit the hallways of the House and Senate office buildings on Wednesday, we’ll keep these numbers top of mind and share them with our lawmakers. The chance of seeing the tax extenders package passed is looking good as long as we keep the pressure on. With all the dire climate news of the past week, and no other viable federal climate policy to look toward, we have no choice but to push them as hard as we can.
You can join in the effort to get the clean energy tax extension package passed. There are many ways to reach out to your legislators, but we think the best way is to give them a call. It’s easy. Call the U.S. Capitol switchboard at (202) 224-3121. Tell them your zipcode and they’ll connect you with your legislators’ offices. You can let the staffer who answers the phone know that you support the clean energy tax extender package. Grassroots support works, so please reach out today!
If you have questions about the Investment Tax Credit or any other solar incentives, just give us a call at (866) 484-7786. We’re happy to answer any questions!