August 21, 2017 - The Trump Administration has been clear about its intentions to revive the domestic fossil fuel industry. Across the campaign trail and into the Oval Office, Donald J. Trump has vowed to end the “war on coal” and promised to restore the employment levels once enjoyed at the height of the coal industry’s dominance.[1] The President’s cabinet has been equally vocal in its support of fossil fuel energy generation: Department of Energy (DOE) Secretary Rick Perry has stated that President Obama “led a war on coal that we’re working to unravel,”[2] and Secretary of the Interior Ryan Zinke considers coal mining on publics lands “a boon and a missed opportunity.”[3]

The same rhetoric that mobilized coal country voters has worried renewable energy advocates. Will Trump’s focus on coal and oil halt or reverse the tremendous progress that solar and wind energy have experienced over the past decade,[4] or has the renewables industry achieved escape velocity? Will the Administration’s energy policies favor fossil fuels to the detriment of renewable energy, or might it be that what is good for fossil fuels is sometimes good for renewables as well?

This article explores four areas where the Trump Administration’s policies could have a lasting effect on renewable energy development: (1) the U.S. Department of the Interior’s (DOI) broad land use reforms; (2) the potential effect of tax reform on renewable energy tax credits; (3) solar panel tariff petitions pending before the International Trade Commission; and (4) a much anticipated grid-reliability study commissioned by the U.S. Department of Energy (DOE).

Department of Interior Land Use Reform

The Obama Administration enacted policies that ushered in a new age of large-scale renewable energy development on federal lands. Those lands are now home to some of the largest solar facilities in the world.[5] However, the same Administration also significantly constrained renewable development in several important ways.

For example, the mitigation policies of Interior Secretary Sally Jewell’s October 2013 Secretarial Order 3330 and the Bureau of Land Management (BLM) Planning 2.0 regulations that flowed from it sought to manage federal lands at the “landscape scale” through the implementation of top-down, large-scale land use plans that zone public lands for conservation and development.[6]

Some of these plans constrained renewables directly. The Desert Renewable Energy Conservation Plan (DRECP) adopted in September 2016, for example, prohibits renewable energy development on almost 10 million acres of BLM-administered lands within the State of California.[7] The plan does designate 400,000 acres of BLM lands as “development focus areas” (DFAs) that allow energy development, but even the DFAs are only available to solar projects if they comply with an assortment of more than 300 restrictive performance standards that are difficult to satisfy in the best locations.[8] Wind energy fares even worse under the plan, as almost all of the viable wind resources within the DRECP boundary are off limits to development.[9]

Other examples of the Obama Administration’s constraints on renewable energy development include BLM’s competitive leasing program for wind and solar energy (which provides for the designation of specific leasing areas on BLM-administered lands)[10] and DOI’s binding Solicitor’s memorandum interpreting the Migratory Bird Treaty Act (MBTA) to prohibit all forms of industry – including renewable projects – from inadvertently killing just about any species of bird that migrates through the country, regardless of those species’ ecological statuses and notwithstanding a significant circuit split over the issue.[11]

Enter President Trump and his promises to roll back Obama-era energy regulations. Although the Trump Administration’s agenda focuses primarily on promoting domestic fossil fuel development through deregulation, renewable energy projects also serve to benefit from some of these broad-brush policy shifts. For example, the day after the President issued his Energy Independence Executive Order,[12] the Secretary of the Interior issued his own implementing Secretarial Order reevaluating DOI’s “landscape-scale” planning policies.[13] Secretary Zinke’s Order initiated DOI’s re-examination of controversial landscape-scale planning efforts such as the 11-state Greater Sage Grouse plan adopted by BLM during the Obama administration.[14] The DRECP’s similar landscape-scale approach and restrictive mitigation requirements could also be subject to review under the Secretarial Order. This could re-open more of California’s public lands to renewable energy development and other multiple-uses to the degree they were formerly accessible under the George W. Bush administration.

Similarly, the new Administration has withdrawn and indefinitely suspended the DOI Solicitor’s memorandum broadly interpreting the MBTA to prohibit incidental take of migratory birds.[15] If the U.S. Fish and Wildlife Service (USFWS) stops enforcing that interpretation, it could significantly lower the risk profile of wind projects in addition to benefitting other industries like oil and gas.

Finally, in March 2017, Congress issued, and President Trump signed, a resolution under the Congressional Review act repealing BLM’s Planning 2.0 rule for the implementation landscape-scale planning policies.[16]

In sum, while the Trump Administration’s DOI policies do not specifically focus on or favor the renewable energy industry, the shift toward resource deregulation may open up opportunities for renewable energy that were previously constrained under Obama-era regulations.

Tax Reform

President Trump’s proposed tax reforms could have a lasting effect on the renewable energy tax credits that have driven a significant proportion of investment in renewable energy projects over the past decade.

The federal government first offered renewable energy tax credits in response to the 1970’s oil crisis.[17] In 2005 Congress expanded the tax credit incentives.[18] Although the Business Energy Investment Tax Credit (BITC) and Production Tax Credit (PTC) programs were scheduled to expire in 2014 and 2016 respectively, Congress renewed both in December 2015 subject to a phase-down regime.[19] Under the new schedule, the Solar BITC (based on size of investment) will be gradually phased down to 10 percent for large-scale projects that commence construction after 2021. The PTC (based on amount of energy produced) will be gradually phased out entirely, ending with projects that commence construction after 2019.[20] Development of utility-scale wind and solar are expected to slow down once the credits phase out, although continued cost reductions could mitigate the impact of the phase-out.

Although there were initial signals that the Trump Administration and Congress might immediately extinguish the wind and solar tax credit program, it appears as though the program will stay on schedule, largely because the phase-out period is clearly defined, relatively short, and has induced substantial investment-backed expectations. However, tax reform in other areas still may significantly impact the value of renewable tax credits.

For example, reducing the current federal corporate marginal tax rate from 35% percent – the third highest in the world as of 2016[21] – to 15%[22] or 20%[23] would correspondingly reduce the value of renewable energy tax credits because the overall corporate tax burden would be lower. This could decrease renewable energy investment overall.[24] However, some contend that the effect would be relatively short-lived, as renewable energy companies would enjoy the benefits of a reduced marginal tax rate as well.[25] Proposals to permit full deduction of capital investments in their first year, rather than over time under the current accelerated depreciation model, could further erode the value of investment tax credits by reducing corporate tax burdens.[26]

Congressman Paul Ryan’s proposed border tax adjustment – to tax imports but not exports[27] – could significantly impact a solar industry whose price of power is driven by low-cost solar panels manufactured overseas. However, Mr. Ryan’s sweeping proposal has been met with resistance from all sides of the economy, including the Administration itself.[28]

In short, while the current renewable energy tax credit phase-out schedule will likely remain in effect, broader tax reforms in other areas could erode the credits’ value.

Solar Panel Tariffs

The price of domestic solar energy is highly dependent on the cost of solar panels. Foreign manufacture of inexpensive solar panels – particularly those manufactured in China – have allowed the price of solar power to drop roughly 70 percent since 2010, making solar increasingly competitive with natural gas and spurring the solar PV boom of the past several years.[29] But the same inexpensive imports have resulted in the market exit or bankruptcy of many domestic solar panel manufacturers who cannot compete.[30]

In response, the domestic solar producer Suniva filed a petition to the U.S. International Trade Commission (ITC) in April 2017 to impose tariffs on foreign solar panels over the next four years.[31] The company claimed that inexpensive foreign panels have crippled the domestic panel manufacturing industry. Suniva filed for bankruptcy shortly thereafter. The following month, another domestic solar panel manufacturer, SolarWorld Americas, declared insolvency and joined Suniva’s petition.[32]

Briefs from both sides were due to the ITC on August 8, 2017, and the preliminary hearing on injury caused to the manufacturing industry took place on August 15, 2017.[33] The ITC is scheduled to make an injury determination on September 22, 2017. If it finds substantial injury, it will recommend remedies to the President by November 13, 2017, with a decision from the President by January 12, 2018.[34]

A decision to impose a tariff on imported solar panels would be disastrous for the domestic solar industry at large. Only a small fraction of the domestic solar industry is comprised of panel manufacturers; the rest are installers, project developers, and distributors that rely on low PV prices to drive the market.[35] The most recent industry reports estimate the requested tariff could increase foreign panel costs by 100% to 150%, resulting in a 25% increase in the price of power.[36] This in turn would erase up to two-thirds of the utility-scale solar installations proposed over the next four years, most of which are planned in jurisdictions without renewable portfolio mandates that are price insensitive. In these jurisdictions solar competitiveness relies on the price competitiveness of solar compared to natural gas.[37] According to one estimate by the Solar Energy Industries Association (SEIA), a solar panel tariff would eliminate 88,000 U.S. jobs.[38] By contrast, only 2-4 thousand Americans are employed in the domestic manufacture of photovoltaic cells and modules, the specific corner of the market that the petition seeks to protect.[39]

Groups from across the political spectrum oppose the tariff.[40] SEIA has launched a social media campaign and is working closely with members of Congress – both Democrat and Republican – to draft letters asking ITC to reject the case.[41] At the same time, traditionally conservative policy organizations such as The Heritage Foundation and the American Legislative Exchange Council have joined SEIA to form the Energy Trade Action Coalition, a group whose sole purpose is to fight the petition.[42]

It is still far from certain how the current Administration will respond if the ITC recommends taking action. Facially, the tariff aligns well with the Administration’s emphasis on protecting domestic jobs, but it would almost certainly result in a substantial net employment loss. In the meantime, the solar industry will continue to protest the petition and uncertainty will remain.

DOE Grid Study

On April 14, 2017, Secretary of Energy Rick Perry sent a memorandum to DOE instructing the agency to prepare a study reviewing “concerns about the erosion of critical baseload resources” and potentially related effects on grid reliability.[43] Although the memorandum makes no mention of renewable energy, it appears to have been a thinly veiled request to determine whether wind and solar (“intermittent” sources of energy that vary throughout the day as wind and sunlight come and go) threaten the stability of the grid compared to fossil fuel sources (“baseload resources”) that remain constant over time. Some have speculated that the political endgame of the memorandum could be to justify more favorable fossil fuel regulations or to support attempts to preempt state renewable energy portfolio standards in the alleged interests of grid stability and national security.[44]

If these were Secretary Perry’s objectives, the study may not support them. A draft version of the DOE report was leaked to Bloomberg on July 14.[45] Instead of demonstrating that renewable energy development threatens to destabilize the grid, the report found just the opposite: "The power system is more reliable today due to better planning, market discipline, and better operating rules and standards.”[46] The study concluded that “significantly higher levels of renewable energy can be integrated without any compromise of system reliability.”[47]

While these conclusions may reassure the renewable energy industry, there are indications that the leaked language may be removed from the final report, which is expected to be published soon.[48] Although the study’s director, Travis Fisher, is from the fossil-fuel focused Institute for Energy Research, the lead author of the study has confirmed that the research has so far remained untainted by political pressure.[49] This may be because the team behind the study is comprised of respected scientists and bi-partisan researchers from seven different laboratories around the country.[50] Nevertheless, DOE is facing a lawsuit over the alleged secrecy it has maintained in preparing the study.[51]

Regardless of the final DOE report, the intermittent nature of renewable energy undoubtedly adds complexity to maintaining grid constancy. The California Independent System Operator’s well-known “duck curve” chart illustrates that baseload sources have had to ramp down at increasingly deeper levels to accommodate solar generation during the middle of the day. Because energy demand tends to peak in the early morning and the early evening when renewable energy generation slows down, which in turn requires baseload generation to ramp up again at increasingly faster (and difficult) rates during the early morning and evening to meet peak demand when the sun does not shine.[52]

The primary solution to this problem is energy storage. As batteries become cheaper and more powerful, it will become increasingly possible to dispatch wind- and solar-generated power during peak demand hours. Expanding regional grids could help diversify the intermittency risk as well by accessing more baseload resources such as natural gas-fired plants or hydropower on an as-needed basis.

Conclusion

Overall, even though the Trump Administration may not intend to do renewable energy any favors, far-ranging regulatory reform, particularly within the Department of Interior, still could benefit the industry. This may be partially mitigated by broader cross currents such as corporate tax reform. The DOE grid study, on the other hand, may be on track to follow the facts (rather than politics) and conclude that renewable energy sources pose no threat to grid stability. And finally, the more severe threat of a solar PV tariff may be hard for the President to justify in light of the sheer size of the solar industry at over 260,000 jobs and a growth rate 12 times as fast as the rest of the economy.[53] But, if the ITC finds on September 22 that imported panels have caused substantial injury, uncertainty will prevail until the President makes his decision by January 12, 2018.

[1] Valerie Volcovici et al., Trump Declares End to 'War on Coal,' but Utilities Aren't Listening, Reuters (Apr. 4, 2017); Elaine McMillion Sheldon & Priyanka Boghani, Can President Trump Keep his Promises to Coal Country?, PBS Frontline (Feb. 21, 2017).

[2] Katie Fehrenbacher, Rick Perry Talks About Reviving Coal, Exporting Natural Gas and Staying in the Paris Climate Deal, Greentech Media (Apr. 25, 2017).

[3] Press Release, Secretary Zinke Issues Lease for 56 Million Tons of Coal in Central Utah, U.S. Dep’t of the Interior (Mar. 15, 2017), available at https://www.doi.gov/pressreleases/secretary-zinke-issues-lease-56-million-tons-coal-central-utah.

[4] David Friedman, 4 Charts That Show Renewable Energy is on the Rise in America, U.S. Office of Energy Efficiency & Renewable Energy (Nov. 14, 2016).

[5] Scott Streater, BLM Sprints to Cement Obama's Green Legacy, E&E News (Oct. 27, 2016).

[6] Theodora Johnson, BLM Finalizes Planning 2.0 Rule for Land Use, Western Livestock Journal (Dec. 9, 2016).

[7] Desert Renewable Energy Conservation Plan Land Use Plan Amendment, U.S. Bureau of Land Management (Sept. 2016), available at http://www.drecp.org/finaldrecp/lupa/DRECP_BLM_LUPA.pdf.

[8] Id.

[9] See Nancy Rader & Tom Darin, New Federal Rules for Calif. Desert put Too Many Prime Wind Energy Sites Off-limits, Into the Wind (American Wind Energy Association) (Nov. 10, 2015).

[10] Press Release, Interior Department Finalizes Rule Providing a Foundation for the Future of BLM’s Renewable Energy Program, U.S. Dep’t of the Interior (Nov. 10, 2016), available at https://www.doi.gov/pressreleases/i...foundation-future-blms-renewable-energy.

[11] Hilary C. Tompkins, Memorandum M-37041, Incidental Take Prohibited Under the Migratory Bird Treaty Act, Office of the Solicitor of the U.S. Dep’t of the Interior (Jan. 10, 2017), available at https://www.eenews.net/assets/2017/02/21/document_ew_01.pdf; Andrew Bell, A New Approach by USFWS Over Wind Energy Avian Issues, Marten Law (Jan. 21, 2016).

[12] Donald J. Trump, Executive Order No. 13783, Presidential Executive Order on Promoting Energy Independence and Economic Growth, The White House Office of the Press Secretary (Mar. 28, 2017), available at https://www.whitehouse.gov/the-pres...oting-energy-independence-and-economi-1.

[13] Ryan Zinke, Secretarial Order No. 3348, Concerning the Federal Coal Moratorium, U.S. Dep’t of the Interior (Mar. 29, 2017), available at https://www.doi.gov/sites/doi.gov/files/uploads/so_3348_coal_moratorium.pdf.

[14] Courtney Flatt, Interior Head Orders Reconsideration for Sage Grouse Protections, Oregon Public Broadcasting (June 7, 2017).

[15] K. Jack Haugrud, Memorandum, Temporary Suspension of Certain Solicitor M-Opinions Pending Review, U.S. Dep’t of the Interior (Feb. 6, 2017), available at https://www.eenews.net/assets/2017/02/21/document_ew_04.pdf.

[16] Act of Mar. 27, 2017, Pub. L. No. 115-12, 131 Stat. 76.

[17] Matthew Sabas, History of Solar Power, Inst. for Energy Research (Feb. 18, 2016).

[18] Id.

[19] Residential Renewable Energy Tax Credit, U.S. Dep’t of Energy, available at https://energy.gov/savings/residential-renewable-energy-tax-credit.

[20] Business Energy Investment Tax Credit (ITC), U.S. Dep’t of Energy, available at https://energy.gov/savings/business-energy-investment-tax-credit-itc; Renewable Electricity Production Tax Credit (PTC), U.S. Dep’t of Energy, available at https://energy.gov/savings/renewable-electricity-production-tax-credit-ptc.

[21] Kyle Pomerleau & Emily Potosky, Corporate Income Tax Rates around the World, 2016, Tax Foundation (Aug. 18, 2016).

[22] Julie Hirschfeld David & Alan Rappeport, Trump Is Said to Seek Cutting Corporate Tax Rate to 15 Percent, New York Times (Apr. 24, 2017).

[23] Naomi Jagoda, Ryan: 20 Percent Corporate Tax Rate 'Very Realistic', The Hill (July 20, 2017).

[24] See Peter Maloney, How Federal Tax Reform Could Complicate Prospects for Renewable Energy, Utility Dive (Feb. 15, 2017).

[25] Id.

[26] U.S. Federal Corporate Tax Reform – Potential Impact on U.S. Renewable Energy Financing, Marathon Capital (Jan. 2017).

[27] Naomi Jagoda & Scott Wong, Border-adjustment Tax Proposal at Death’s Door, The Hill (May 24, 2017).

[28] Id.

[29] Marc Gunther, Could a Trade Dispute with China Bring an End to U.S. Solar Boom?, Yale Environment 360 (June 27, 2017).

[30] See, e.g., Peter Maloney, In the Throes of Bankruptcy, Suniva Wants Solar Panel Tariffs to Shield Manufacturing Business, Utility Dive (May 11, 2017); Julia Pyper, SolarWorld Files for Insolvency, Citing ‘Ongoing Price Erosion’, Greentech Media (May 10, 2017).

[31] Diane Cardwell, Solar Trade Case, with Trump as Arbiter, Could Upend Market, New York Times (June 30, 2017).

[32] Frank Andorka, SolarWorld Americas Joins Suniva’s Trade Petition, PV Magazine (May 25, 2017).

[33] Abigail Ross Hopper, Dear SEIA Members, Solar Energy Industries Association (July 2017), available at http://www2.seia.org/webmail/139231...dd358119dd60c24901b8df8aed04fe3ca5acef5.

[34] Diane Cardwell, Solar Trade Case, with Trump as Arbiter, Could Upend Market, New York Times (June 30, 2017).

[35] Kirsten Korosec, U.S. Solar Jobs Jumped Almost 25% In the Past Year, Fortune (Feb. 6, 2017).

[36] Christa Marshall, Tariffs Would Hurt Demand 'Significantly' — Goldman Sachs, E&E News (May 5, 2017).

[37] Cory Honeyman, Suniva and SolarWorld Trade Dispute Could Halt Two-Thirds of US Solar Installations Through 2022, Greentech Media (June 26, 2017).

[38] Suniva’s Solar Trade Case, The U.S. International Trade Commission, and the Solar Industry’s View, Solar Energy Industries Association (June 2017), available at http://www.seia.org/sites/default/files/Suniva-Trade-Case-Factsheet_SEIA_6-8-2017-final.pdf.

[39] David Ferris, Suniva Trade Case Throws Industry into Doubt, E&E News (May 8, 2017).

[40] Julia Pyper, Conservative Groups Come Out Against the Suniva, SolarWorld Trade Case, Greentech Media (July 25, 2017).

[41] Abigail Ross Hopper, Dear SEIA Members, Solar Energy Industries Association (July 2017), available at http://www2.seia.org/webmail/139231...dd358119dd60c24901b8df8aed04fe3ca5acef5.

[42] Julia Pyper, Conservative Groups Come Out Against the Suniva, SolarWorld Trade Case, Greentech Media (July 25, 2017).

[43] Rick Perry, Memorandum to Chief of Staff, Study Examining Electricity Markets and Reliability, U.S. Dep’t of Energy (Apr. 14, 2017), available at https://www.eenews.net/assets/2017/04/20/document_ew_01.pdf.

[44] See Jennifer A. Dlouhy & Jennifer Jacobs, Electric Grid Study Ordered by U.S. Energy Chief to Boost Coal, Bloomberg (Apr. 15, 2017); Julia Pyper, How the Trump Administration Could Pre-Empt State Policies to Shore Up Baseload Power, Greentech Media (May 4, 2017).

[45] Catherine Traywick et al., Renewable Energy Not a Threat to Grid, Draft of U.S. Study Finds, Bloomberg (July 14, 2017).

[46] Electric Power System, Markets, and Reliability Study Interim Draft Report, U.S. Dep’t of Energy (July 2017), available at http://fingfx.thomsonreuters.com/gfx/reuterscom/1/32/32/GRID%20Study.pdf.

[47] Id.

[48] Catherine Traywick et al., Renewable Energy Not a Threat to Grid, Draft of U.S. Study Finds, Bloomberg (July 14, 2017).

[49] Hannah Northey, 'No Political Interference,' DOE Study Author Says, E&E News (July 21, 2017).

[50] Hannah Northey, Official on Grid Study: 'We Haven't Prejudged Anything', E&E News (May 30, 2017).

[51] Hannah Northey, Sierra Club Sues Agency over Grid Study 'Secrecy', E&E News (Aug. 14, 2017).

[52] What the Duck Curve Tells Us about Managing a Green Grid, California Independent System Operator (2016), available at https://www.caiso.com/Documents/FlexibleResourcesHelpRenewables_FastFacts.pdf.

[53] Kate Samuelson, Renewable Energy is Creating Jobs 12 Times Faster than the Rest of the Economy, Fortune (Jan. 27, 2017); 2015 National Solar Jobs Census, The Solar Foundation (2016), available at http://www.thesolarfoundation.org/national/; U.S. Energy and Employment Report, U.S. Dep’t of Energy (Jan. 2017), available at https://energy.gov/downloads/2017-us-energy-and-employment-report.

Source: Marten Law


John Stewart
Editor, OutdoorWire.com
Resources Consultant, California Four Wheel Drive Association
Board of Directors, BlueRibbon Coalition