Boom Times Ahead For US Clean Power, Thanks To Oil Lobby
The Intertubes have been buzzing with news of the new US federal budget deal, which basically gave away the store to the domestic clean power industry by including a 5-year extension of key tax credits for wind and solar electricity production. This guarantee of a predictable federal policy comes at a perfect time to propel strong growth in the renewable energy sector. It follows right on the heels of the COP21 global climate agreement and it backs up the US Clean Power Plan, which President Obama launched last summer.
As a compromise position, this big deal comes with a big tradeoff: Congress finally agreed to lift a forty-year ban on the exportation of US crude oil, dating back to the 1970s oil crisis. The oil lobby had, well, lobbied hard to get the ban lifted, but circumstances today are far different from 40 years ago, and we’re thinking that the victory could be a hollow one.
A Big Deal For Clean Power
The clean power deal was touch-and-go all last week until Friday evening, when President Obama signed the production tax credit (PTC) extensions into law as part of the 2016 Consolidated Appropriations Act. Here’s how the White House sums it up (link added):
Protecting the Environment. Critical to continuing the momentum of the historic climate agreement in Paris, the agreement protects EPA funding, providing the support needed to effectively implement the Clean Power Plan, a historic step in reducing carbon pollution. It also secures the biggest investment in the deployment of renewable energy in our nation’s history, specifically for solar and wind energy – extending tax credits for five years and bringing much-needed certainty to the industry.
Without getting into all the details about whether or not the federal government should be in the business of subsidizing clean power, as a matter of public policy intended to secure a reliable energy supply both for economic growth and national defense, the federal government has a significant interest in supporting key energy production sectors against the vagaries of the global marketplace.
The fossil fuel industry has long benefited from such support, including technology improvements based on federal research. Clean power isn’t getting its turn just because it happens to be a thing, but because it is has become a critical factor in future domestic energy production, providing an ample, reliable source with little or none of the significant public health baggage that accompanies fossil fuels.
Big Win For Solar Energy
Our friends over at the US Solar Energy Industries Association have produced a fact sheet detailing all the good things expected from the new budget deal. Here’s a taste:
The proposed extension of the Solar Investment Tax Credits (ITC) for homeowners and businesses will lead to sustained growth in the U.S. solar industry. By 2020, the industry will deploy more than 20 GW [gigawatts] of solar electricity annually and employ more than 420,000 workers. The additional solar generation will more than offset carbon emissions from the lift of the oil export ban on an annual basis by 2019.
Concentrating solar has had its share of doubters, but SEIA is not among them. While the organization expects much smaller growth in that sector, it does peg concentrating solar at 2 GW of solar electricity capacity by 2020.
Overall, SEIA expects 100 GW of solar capacity by 2020, accounting for more than 3.5% of US electricity generation. That doesn’t sound like much, but considering that the figure was 0.1% in 2010, that’s a growth spurt of 3,000% in 10 years.
A Bigger Win For Wind Energy
In terms of the clean power share of US electricity generation, wind is running far ahead of solar. Here’s the American Wind Energy Association reacting to the budget deal while providing a shoutout to federal R&D support for wind energy technology as well as tax policy support:
The performance-based PTC has helped more than quadruple wind power in the U.S. since 2008 – up from 16,702 megawatts (MW) installed at the start of 2008 to 69,470 MW by the third quarter of 2015. This is enough power to supply over 18 million American homes.
It has encouraged research and development, construction of factories in the U.S. and maximum productivity, helping reduce the cost of American wind power by 66 percent in six years. Iowa, South Dakota, and Kansas all now rely on wind for more than 20 percent of their electricity; nine other states are over 10 percent. The recent “Wind Vision” report by the U.S. Department of Energy says America as a whole is on track to get 20 percent of its electricity from wind by 2030.
Today’s 73,000 jobs in wind energy can grow to 380,000 jobs by then, DOE projected.
Those state-based numbers are even more impressive when you consider that the US has yet to tap its massive offshore wind energy resources, which are finally on the verge of development.
About That Oil Ban…
As SEIA notes, growth in the US clean power sector could arguably offset emissions related to lifting the US crude oil export ban. Bloomberg offers another interesting twist on the oil export issue, given that the US still imports large quantities of oil despite the domestic boom. Rather than contributing to a significant increase in oil on the global market, US exports could shift places with imports:
By allowing American oil to compete globally, the price for U.S. benchmark West Texas Intermediate [WTI] crude is inching closer to the international marker Brent, which has traded at a premium for most of the past five years. As the two prices converge, U.S. refiners may seek overseas cargoes priced off Brent if they can buy them cheaper than oil linked to WTI, according to JBC.
Our friends over at PACE (Producers for American Crude Oil Exports) offer some additional insights on the import market:
…While accurate that the United States does currently import oil, what’s missing is the fact that we will continue to import these barrels given our domestic refining configuration, which is geared towards processing heavy and medium grades of crude. These heavy and medium grades are not produced in abundance in the United States and therefore have to be imported.
So far so good, but the devil is in the details. US oil and gas production is beginning to bump up against increased public opposition, as the shale boom has spread into more populated areas over the past 10 years and tension grows with entrenched agricultural, recreation, and tourist industries. It’s not obvious that the industry has much more room to grow in the US.
Oil and gas transportation is also becoming a lightning rod for public action, as existing pipelines age and break, new pipelines encroach on more communities, and concerns over rail safety have grown.
With the lifting of the export ban, US oil producers are gearing up for another growth spurt, but they may find that all they have accomplished is the easy part.
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Photo via US Department of Energy.
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