A🧡439-word💛under💚2.5-minute💙read
Some advice to the climate community: optimism isn’t a strategy.
Who benefits from the IRA and what occurred during Trump 1.0 is irrelevant. This isn’t your parent’s Trump administration, and pleasing the president takes precedent over almost all else.
President Trump reentered the White House with a plan, and with far less resistance. The president is fond of claiming “best ever” type achievements.  That’s true in one respect: he’s done the best ever job of surrounding himself with “yes people.”
Thus, the dynamics of Trump 2.0 are completely different.
Yesterday we outlined how the proposed changes impact average citizens. Today, we’ll quickly review the impact to the clean tech industry.
In short, every aspect of clean tech will take a hit with two exceptions: carbon sequestration and the clean fuel production credit. There’s no mystery why: they benefit the oil and gas industry.
If the proposed legislation remains unaltered, solar, wind, battery storage, nuclear, and geothermal will see the tax credits decline and sunset much earlier than anticipated. The proposal starts stepping down credits in 2028, with full repeal occurring in 2031. It’s even worse for hydrogen. All support evaporates at the end of the year.
Optimists may believe that at least the industry has a few years to scramble. Except there is a small “language” change being proposed: projects would have to be “placed in service” versus just start construction.
The “start of construction” requirement was somewhat nebulous and allowed developers to execute minor development tasks to qualify. Now its black and white: the switch needs to be on by a date certain.
With a large and growing number of projects sitting in interconnection queues, that’s a problem, particularly for larger utility-scale projects. The current waiting time for interconnection is about five years.
Hmmm… that’s coincidentally about when the ITC may go bye-bye.
Rubbing salt in the wound is the proposed two-year sunset for transferring the tax credits. This hits smaller developers harder since selling the credits is often their only means to monetize them.
Despite the time buffer before the tax credits begin to disappear, the language changes throw a major monkey wrench into the planning and financing process.
What percentage credit does a developer pencil in?
That depends on the project completion target.
But there’s no way to determine that because developers are at the mercy of the interconnection queue. And FERC isn’t likely to assist.
You see the problem. I’m sure the authors of the proposed changes did as well.
Tomorrow we’ll wrap by briefly commenting on the “material assistance from a prohibited foreign entity” language. Hint: it’s equally devious.
#inflationreductionact #renewables #cleanpower #cleantech