By Mike Hall, CEO; and Ilan Gutherz, VP of policy and strategy, Borrego Solar
The election results are in, and Joe Biden will become the 46th U.S. president. Like many in our industry, we expect the incoming Biden-Harris administration to adopt a strong clean energy and climate agenda that will stand in stark contrast to the harmful policies and actions of the outgoing administration. The new momentum for clean energy and climate action is already leading to thousands of pages of speculation and advice for the new administration about what issues it might tackle first, and how it might make up for the time lost over the past four years.
In our view, three potential areas for action stand out as the most important for accelerating progress on clean energy in the Biden presidency: trade policy, wholesale market reforms, and Environmental Protection Agency (EPA) emission rules for generators and vehicles. Unlike extensions to the federal Investment Tax Credit or a federal tax on carbon, progress in these areas does not require congressional action. Given the expected makeup of the next Congress, the industry is significantly more likely to see the benefit of changes in these areas as the Biden team takes the reins in Washington.
Perhaps the quickest and least controversial step that the new administration could take would be to de-escalate the trade wars the Trump administration started, with an eye toward lessening the pain these policies have caused for solar and clean energy.
The first to go should be the unprecedented tariffs the Trump administration imposed on imported solar cells and modules. These tariffs have levied a hidden, de facto tax on the entire industry, raising prices for solar power, slowing the industry’s growth, and turning U.S. allies and solar manufacturing hubs like Taiwan, South Korea and Canada (whose imports are also taxed) into collateral damage because of the outgoing administration’s obsession with punishing China. The module tariffs have benefitted a small number of U.S. module manufacturers (many of which are owned by multinational corporations), while hurting the American manufacturers that supply racking, inverters and other components, as well as tens of thousands of local electricians and laborers whose installation jobs have been put on hold because of this policy.
In addition to unwinding tariffs on modules, the administration could also reverse trade barriers that were recently imposed on other Chinese clean energy components, such as inverters and lithium-ion batteries. Although we certainly would not suggest the administration “unilaterally disarm” in the ongoing trade dispute with China, the Biden team should do its best to target any continuing trade sanctions to avoid increasing the cost of components that are driving decarbonization.
Wholesale market reforms
The second step President Biden could take to undo the damage from the previous administration would be to name a strong, pro-competition Federal Energy Regulatory Commission (FERC) commissioner to replace Neil Chatterjee, whose term ends in June 2021. Over the last four years, FERC has taken a protectionist, heavy-handed approach to states and regional markets, rejecting consensus-based proposals and attempting to shelter legacy fossil-fueled generators from competition by erecting new barriers to keep clean energy and storage out of the wholesale markets. FERC’s rules are slowing the deployment of renewables and energy storage and increasing costs for consumers, who end up paying higher prices because clean energy is excluded from the markets.
Biden is expected to quickly relieve FERC’s current chair, James Danly, of his responsibilities. This would be a good start. But the commission could make even more progress unwinding current anti-renewables policies with a clear pro-free-market majority. (Commissioner Chatterjee, who will likely be a “swing vote” on the five-member commission, has in some instances moved to open doors to new technologies, but in others has voted to increase market barriers for clean energy.) With a new chair and a less conservative commission, FERC could reverse its controversial minimum offer price rule (MOPR) policy; open new dockets to revise outdated interconnection rules delaying gigawatts of clean energy from coming online; and expand access to wholesale markets for distributed clean energy resources.
FERC could also adopt a favorable stance toward regional energy markets that decide to incorporate carbon pricing. By forcing fossil generators to internalize the negative costs of carbon emissions, regional carbon pricing implemented through the energy markets could boost clean energy and correct one of the biggest hidden subsidies propping up the fossil fuel industry around the country.
Finally, the commission could also increase its scrutiny of new natural gas pipelines and delay or derail their construction. If built, these pipelines will feed the country’s current addiction to fossil fuels and would likely become stranded assets that cost customers billions of dollars. Slowing or stopping these new pipelines will encourage utilities to look more seriously at readily available clean energy and storage solutions to address their needs for new generation.
Finally, the Biden administration’s EPA could take two important actions to tilt the balance away from fossil fuels and toward clean energy.
First, EPA could revisit emission rules for power plants and oil and gas operations, with an eye toward finally forcing these industries to adopt best practices for reducing carbon emissions. Although the Obama administration’s approach to regulating power plant emissions was ultimately thwarted by a conservative U.S. Supreme Court, the Biden EPA could take a fresh look at the issue and set the most polluting generators on a firmer path toward decarbonization or retirement.
Second, EPA could ramp up fuel economy standards for cars and trucks, providing new incentives to electrify transportation. While increasing the ramp rate on EV adoption would not directly affect the competitiveness of renewables or energy storage, electrifying transportation and heating could more than double the demand for electricity, cutting carbon while growing the available pie for our industry. In addition, preparing for widespread EV deployment will necessitate significant grid upgrades and modernization, which could help to unlock many of the current interconnection bottlenecks keeping distributed clean energy from reaching its full potential.
Each of these areas has the potential to significantly brighten the outlook for the solar industry, while making good on the Biden campaign’s bold promises to accelerate clean energy and tackle the generational challenge of climate change. We are hopeful that the incoming administration’s bold statements on climate and clean energy will quickly turn into tangible results, with benefits for our industry and for future generations.
Mike Hall was one of the original founders of Borrego and has led the company as CEO since 2009. He is based out of Borrego’s Oakland office. Ilan Gutherz has been with Borrego since 2016, and currently leads Borrego’s policy and business development efforts across the U.S. He is based in Boston.