‘Landmark’ climate law turns up the power on Pa. solar, wind, hydropower energy projects
Green energy is bracing for growth.
The climate law signed by President Joe Biden in August is poised to drive a surge of investment in renewable energy as it extends and expands tax credits that have proven crucial to establishing clean energy on the grid.
Solar, wind, hydropower and energy storage industries are major beneficiaries of the Inflation Reduction Act, which analysts expect will cut U.S. greenhouse gas emissions 40% by 2030 from 2005 levels.
Advocates for an array of renewable energy industries in Pennsylvania agree that a key benefit of the climate law is the certainty it provides to project developers by broadening clean energy tax credits, increasing their maximum rates and extending them for a decade or more.
That’s a change from the past, when short-term extensions and phase-outs created booms and lulls.
Paul Jacob, CEO of Rye Development, which has a pipeline of 10 hydropower projects scheduled to be built on existing locks and dams on the Allegheny, Ohio and Monongahela rivers, said one of the most important aspects of the bill is its far horizon.
That will give developers more certainty for planning projects, financing them and partnering with large energy users that want to purchase their power. It also allows time for the supply chain, inflation and labor market issues that are bedeviling all corners of the economy to be alleviated, he said.
“This is a more realistic approach and that’s, frankly, rare,” he said. “That’s going to get a lot of things built, not just our thing.”
Tax credit bonuses in the law reward project developers for paying prevailing wages, operating apprenticeship programs and using domestic materials — all signals that the transition to a clean energy economy will require making more of its components in the U.S. with workers that are paid livable wages.
Pennsylvania is poised to benefit from provisions in the law that give tax credit bonuses to companies that site clean energy projects
in communities that are economically tied to fossil fuel extraction or have seen factories, power plants and mines close.
The rules for implementing those “energy community” provisions haven’t been written yet, but Mr. Jacob and others said they are likely to stimulate the development of renewable energy projects in and around southwestern Pennsylvania. It could be a factor as the hydropower developer looks for “new opportunities in the region,” beyond the 10 projects it has in the works here, Mr. Jacob said.
The Princeton University-led Repeat Project forecasts that the climate law “could spur record-setting growth in wind and solar capacity,” more than doubling the 2020 pace of wind installations and quintupling annual additions of utility-scale solar by 2025. Several factors, including obstacles to permitting and siting the facilities and power lines, could limit that growth.
The law also is expected to boost solar installations at homes and small businesses over the next decade.
The White House is projecting 610,000 additional Pennsylvania households will install rooftop solar as a result of a tax credit covering 30% of the installation costs that was increased and extended by the law. That’s a massive leap from the fewer than 40,000 homes and businesses that have solar systemsin Pennsylvania today.
Still, Pennsylvania can do more by upgrading its policies and courting solarrelated investment, Matt Mahoney, director of government affairs for the Pennsylvania Solar Center, said. Otherwise, it will continue to be at a disadvantage compared to neighboring states that have committed to decarbonizing their electric grids more aggressively.
Some provisions of the Inflation Reduction Act could be “huge” for Pennsylvania, he said, especially the bonus credits for locating clean energy projects in low-income communities or near shuttered industrial sites and abandoned mines.
“Pennsylvania needs to hear that endorsement that solar on brownfields and abandoned mine land is a viable option,” he said. The state should catalogue those sites, promote them to solar developers and layer incentives for building there, he suggested.
Pennsylvania could also do more to facilitate manufacturing of components in the solar supply chain, he said. Existing manufacturers that build related parts could be encouraged to retool to take advantage of the bill’s boost for domestically made components.
“If we want to compete on the world stage for solar, we need to analyze where those manufacturing opportunities exist,” he said.
Some solar manufacturing already is rooted in Pennsylvania and ready to take advantage of the new law.
Nextracker LLC, a Californiabased company, is making metal mounts for movable solar panels that can follow the sun in a former Bethlehem Steel mill in Leetsdale through a partnership with BCI Steel. The law provides credits for making those and other clean energy components in America.
In a statement after the Senate passed the Inflation Reduction Act last month, Nextracker CEO Dan Shugar said the law “will immediately increase hiring at our U.S. factories.”
The clean energy manufacturing tax credits in the law will likewise be a boon to the energy storage industry, which will also see new incentives for deploying grid-scale batteries.
For the first time, stand-alone energy storage systems will be covered by tax credits that previously applied to wind, solar and battery projects paired with solar. It’s a recognition that a clean grid powered increasingly by solar and wind will need significant storage capacity to compensate for when it is dark or windless.
Tax credit bonuses for using domestic materials are likely to drive demand for batteries manufactured in the U.S. with locally sourced components — like the zinc grid-scale batteries being built by Eos Energy Enterprises in Turtle Creek.
“This is landmark for us,” Eos CEO Joe Mastrangelo said.
“This gives companies like Eos the opportunity to compete and scale in the marketplace. When you look at what goes into our product, 80% of that is sourced in the U.S. and it should grow to 90% as we get towards the end of 2022.”
Eos’s plan has always been to expand as demand grows, Mr. Mastrangelo said. The company already is in the midst of an expansion that will ramp up its manufacturing capacity by the end of the year.
That has meant new hiring. The company now counts more than 200 employees at its Turtle Creek plant, a former Westinghouse facility, up from 50 in January 2021. And the Turtle Creek facility has space for more growth.
“As we scale the manufacturing, we’re going to need to continue to probably double the employment there,” Mr. Mastrangelo said. “So we’re actively recruiting.”