Joe Manchin Scuttles Clean Energy Legislation, Again

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By Christian Roselund

Senator Manchin`s use of inflation as a rationale for killing clean energy tax credits contrasts with rising prices for fossil fuesl. Image: Third Way Think Tank, Flickr. Licensed under Creative Commons CC-by-NC-ND 2.0.

On 14 July, U.S. Senator Joe Manchin announced that he would not back clean energy tax credit provisions in the “reconciliation” bill that has been under negotiations for months. This comes after Manchin stopped the Build Back Better bill in December 2021 by withdrawing his support. As Manchin was a key vote in a 50-50 senate, Democrats are now pursuing a bill with only health care provisions, and abandoning wind, solar, electric vehicle, and solar manufacturing tax credits.

Manchin cited inflation in his decision to not support clean energy provisions, saying that he would wait for the release of July inflation numbers in August to revisit the issue. However, the greatest price increases for U.S. consumers by percentage come from fossil fuel products, and Manchin’s action takes away tools to help reduce demand for fossil fuels over the long term.

The most recent monthly Consumer Price Index report, which is used as a barometer of inflation, showed fuel oil (98.5% increase), gasoline (59.9% increase) and utility gas service (38.4%) as by far the largest percentage increases in a “basket” of household goods. The average price of retail electricity, which is in part set by the cost of natural gas, came in a distant fourth at 13.7%
year-over-year.

Progressives responded to Manchin’s statements with fury. Senator Bernie Sanders accused Manchin of sabotaging Biden’s agenda and Senator Martin Heinrich asked why Manchin still has his position as chair of the powerful Senate Energy and Natural Resources Committee. This call to remove Manchin was echoed by climate scientist Michael Mann, who stated on Twitter that once Democrats win more seats in the Senate, they “can and should remove Manchin from all
committee assignments.”

However, there appears to be little interest by Democratic Party leaders in holding Manchin accountable for stopping a key legislative priority for the Democratic Party, and Senate Majority Leader Chuck Schumer has refused to comment on the issue. Meanwhile, President Biden has said that he will move forward with executive action to address what he describes as a climate emergency, but he has not yet made an emergency declaration related to climate change.

Tax Credits vs. Other Drivers of Deployment

It is unclear what tax credits were on the table in the reconciliation bill, but the Build Back Better legislation featured a wide array of clean energy provisions. These included:

  • extensions of the Investment Tax Credit (ITC) for solar and the Production Tax Credit (PTC) for wind
  • a “direct pay” option for the ITC and PTC
  • expanded tax credits for electric vehicles
  • tax credits for solar manufacturing along the value chain from polysilicon to modules

Without this legislation, the existing tax credits remain in place:

  •  ITC for solar:
    • 26% for projects that starting construction in 2022
    • 22% in 2023
    • 10% in 2024 and thereafter
    • expires for residential installations in 2024
  • PTC for wind: (expired at the end of 2021)
  • EV tax credit: $7,500 for new vehicles from individual manufacturers until that manufacturer reaches a threshold of cumulative sales, at which point the credit expires
    • Expired for Tesla and General Motors vehicles (which make up the large majority of the EV market in the United States).

There are at present no dedicated tax credits for U.S. solar manufacturing.

However, it is easy to overstate the significance of this legislative setback on clean energy deployment, particularly for solar. Solar demand remains strong and is driven by a variety of factors. In the United States, states hold a greater degree of authority than in many other nations, and state-level renewable energy mandates and net metering policies have been important drivers of wind and solar deployment.

Additionally, procurement to meet corporate clean energy goals and the cost-competitiveness of solar and wind versus other forms of generation in more and more of the United States are also significant drivers. And the cost advantages of solar, wind, and electric vehicles has only increased as petroleum and natural gas prices have risen sharply over the last year. 

Supply Challenges for Solar

As regards solar deployment, a greater concern is supply. CEA has confirmed that solar products from four different large solar manufacturers have been detained by Customs over the last month; three under the Uyghur Forced Labor Prevention Act (UFLPA) and one in the final days of the Hoshine withhold release order (WRO, an import ban). And while some of these suppliers have expressed confidence in their ability to provide the necessary paperwork and getting their shipments released, one has told developers that it will stop shipping to the U.S. market and will not have UFLPA-compliant product until the fourth quarter of 2022. This supplier is also temporarily shutting down a cell and module factory in Vietnam that served the U.S. market.

As explained in previous editions of the U.S. Energy Transition Report, the U.S. solar market is an import-dependent market and was already supply-constrained starting in the second half of 2021 after Customs began detaining solar shipments under the Hoshine WRO. While many of these detained shipments were later released and imports resumed in the second quarter of 2022, the interim nine months left U.S. developers and independent power producers in a state of shortage and high module prices that has yet to be resolved.

News coverage: Manchin refuses to support new climate spending, likely tanking clean energy package (Utility Dive)

Source: additional CEA Research