FEDERAL CLEAN ENERGY BILL MOVES FORWARD IN THE SENATE

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UPDATE: On Sunday, 7 August, the U.S. Senate passed the Democrats’ $740 billion bill, including $369 billion for clean energy and climate and an additional $60 billion dedicated to environmental justice. Analysts calculate that the legislation’s measures will cut 24 tons of greenhouse gas emissions for every 1 ton the bill’s fossil-friendly sections permit.

By Christian Roselund

On 4 August U.S. Senator Krysten Sinema (D-Arizona) announced that she would support the Inflation Reduction Act, the bill that contains multiple clean energy tax credit provisions and would invest $369 billion in climate mitigation. Following a deal reached with Senator Joe Manchin, Sinema has been seen as the most likely holdout in the Democratic Party, and E&E News states that with her support the Democratic Party has the 50 votes needed to pass a bill through the
reconciliation process.

As of 5 August, the Inflation Reduction Act (IRA) was still before the Senate Parliamentarian, who is examining it to ensure that all provisions comply with budget procedures. This is necessary for the bill to qualify for the reconciliation process, which means that it cannot be stopped by minority of Senators using the filibuster technique of obstruction. According to E&E News, Senate Majority Leader Chuck Schumer plans to hold its first procedural vote on the Inflation Reduction Act on
6 August.

As reported in a special edition of the U.S. Energy Transition Report, the IRA includes an extension of the Investment Tax Credit (ITC) at 30% for solar projects that begin construction through the end of 2024 and allows standalone energy storage to claim this credit. It also extends a 10-year Production Tax Credit (PTC) for wind at $15 per megawatt-hour, adjusted for inflation) for projects that start construction through the end of 2024, and allows solar projects to access this credit. Accessing these credit levels requires meeting labor standards, and after 2024 both are replaced with similar but technology-neutral versions of the ITC and PTC credits for projects that start commercial operation through 2032.

In addition to the ITC, PTC, and technology-neutral ITC/PTC, the bill also includes extensive manufacturing tax credits to support domestic production of solar PV modules, wind turbines, and batteries. This includes specific tax credits for multiple steps of the supply chain for these technologies.

News coverage: Senate approves climate, budget reconciliation bill (E&E News)

Analysts See More Wins for Clean Energy Than Gifts for Fossil Fuel Business (Inside Climate News)

Sinema strikes deal on reconciliation; Schumer sets vote (E&E News)

U.S. H1 SOLAR DEPLOYMENT LAGS, WIND BEATS FORECAST

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By Christian Roselund

The U.S. Department of Energy’s (DOE) Energy Information Administration (EIA) reports that the United States installed 4.2 gigawatt-AC (GWAC) of solar PV projects 1 megawatt and larger in the first half of 2022. EIA currently expects only 17.8 GWAC of large-scale solar to come online over the full year 2022.

The 17.8 GWAC figure is a decline from EIA’s January estimate that the nation would install 21.5 GW of solar over the course of the year but is still larger than the 15.5 GW installed in 2021. AC figures represent delivered power to the grid, not the capacity of modules installed, and as such this 17.8 GWAC could translate to about 24 gigawatts-DC of modules installed, based on DOE’s estimated 1.34:1 DC-AC ratio for utility-scale projects.

EIA cites “pandemic-related challenges in supply chains” and the anti-circumvention investigation into solar imports from Southeast Asia as likely causes for the 3.7 GW reduction in expected full year 2022 installations. The agency did not mention the Uyghur Forced Labor Prevention Act (UFLPA) and this suggests that it may not have yet accounted for the market impacts of this policy.

As noted in the 26 July US Energy Transition Report, CEA has confirmed that three large Tier 1 Chinese solar manufacturers have had their modules detained under UFLPA. To date we have not confirmed that any of these modules have been released from detention, and one of these suppliers has temporarily stopped production at its Vietnam module factory.

Wind and Gas Installations Rise

EIA also found that 5.2 GWAC of wind was installed in the first half of the year; over the full year it expects 11.2 GW of installed wind. This is an increase from the 7.6 GW that was previously planned. However, the nation also installed 4.3 GW of natural gas-fired power plants during the first half of the year and EIA expects 9.2 GW of new gas capacity over the full year.

The United States experienced the highest monthly natural gas prices since 2008 in May at $8.12 per million British thermal units (MMBtu) and EIA expects an average gas price of $5.97/MMBtu in the second half of 2022. This is higher than for most of the previous decade and these higher prices may have an impact on new gas projects. However, the projects coming online in 2022 likely started construction two or three years earlier under very different future price expectations.

But if natural gas power plants continue to come online, the story is different for coal. During the first six months of 2022 the nation retired 6.7 GWAC of coal plants, and EIA expects 11.6 GW to retire by the year’s end.

Source: The U.S. power grid added 15 GW of generating capacity in the first half of 2022 (EIA, Today in Energy)

Joe Manchin reverses, Democrats present new clean energy bill

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by Christian Roselund

In a surprise turn of events, on July 27 Senator Joe Manchin announced that he has reached a deal with Senate Majority Leader Chuck Schumer on clean energy tax legislation. Given Manchin’s newfound cooperation, this legislation is likely to become law in September. The Inflation Reduction Act (IRA) features provisions related to solar, wind and energy storage tax credits, as well as U.S. solar and wind manufacturing.

This includes the following:

• Solar Investment Tax Credit (ITC) for businesses returns to 30% for projects that begin construction through the end of 2024: The full 30% is contingent on labor provisions o Energy storage 5kWh and larger becomes eligible for the ITC; An additional 10 – 20% ITC (to reach 40%-50% of project costs) is available for certain projects in low-income communities

• ITC for residential solar is extended for 10 years through the end of 2032

• Wind Production Tax Credit returns at $0.015/kWh through the end of 2024 (contingent on labor provisions)

• After January 1, 2025, the ITC for businesses and the PTC for wind both go away and are replaced with a technology-neutral PTC for zero-emitting technologies:
0.015/kWh for installations smaller than 1 MW o $0.003/kWh for installations larger than 1 MW

• Incentives for U.S. clean energy manufacturing: Eligible solar components: modules, cells, wafers, polysilicon, backsheets, inverters; Eligible battery components: modules, cells, electrode active materials, critical minerals; Eligible wind turbine materials: blades, nacelles, towers, offshore wind foundations, inverters ; The above credits begin phasing out in 2030 and expire in 2033

The IRA now goes before the Senate Parliamentarian, who will ensure that it qualifies for the “reconciliation” approach, meaning that it can pass the senate with only a simple majority. It will also need to be approved by the House of Representatives; however, the House goes on recess on July 29. This means that the House will need to either reconvene for a special session or that the IRA will come to a vote in September.

CEA gives this legislation a 75% chance of passage; one of the few concerns is that progressive Democrats may balk at some of the other provisions in the bill for the oil and gas industry. As this bill will likely face united Republican opposition, it cannot afford to lose even one Democratic vote in the 50/50 Senate. If it does pass the House and Senate, President Biden has indicated that he will sign it. If passed, this bill is likely to provide a significant mid-term (through 2025/2026) boost to solar, wind and energy storage markets, as projects come online under the ITC and PTC. It is also likely to spur some domestic manufacturing, at least of solar and energy storage components. CEA has not done an analysis of the impact that the IRA incentives would have on wind manufacturing.

Source: Inflation Reduction Act of 2022 (U.S. Senate)

GERMANY WANTS TO IMPOSE NEW MEASURES TO PREVENT GAS SCARCITY

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Problem: Russia has threatened to cut off German gas supply and Germany does not have enough stored gas or replacement sources lined up. Government, industry, and public all worry about the effects of the expected embargo as German domestic and industrial heating is largely generated by gas.

Policy: A new set of measures was announced in mid-June, aimed at decreasing demand and further filling up storage capacities. The government announced steps to ensure supply reliability, including ”the provision of a credit line of 15 billion euros in order to ensure that the gas storage tanks are filled.”

On July 5, the German cabinet also approved plans to quickly assist struggling energy companies in regards to the approaching Russian cut -off and scarcity of affordable gas.

Context: On April 30, the revised energy industry law (Energiewirtschaftsgesetz) went into force. If a gas storage is not filled by its user, the current user loses the capacity and the Trading Hub Europe (THE) steps in.

Robert Habeck, Federal Minister for Economy and Climate, is pushing through the mitigation measures announced in June, in case of a sudden supply stop by Russia, andalso urged  the implementation of energy savings efforts over the next few months.

The Federal Government bought and stored 950 million cubic meters in natural gas, just 56% of total storage capacity. But the construction of LNG terminals is being accelerated, in order to diversify the gas supply.

In detail:

  • To reduce gas usage in the generation of electricity, Germany will return to coal. The corresponding legislation is currently in parliamentary procedures.
  • A gas auctioning platform will be designed by the Trading Hub Europe (THE), the German Federal Grid Agency, and the Federal Ministry of Economy and Climate
  • The KfW (the German government’s development investment bank) will provide additional funding for the THE to buy and store gas. The THE will then fulfill its legitimate monopolist task of ensuring the usage of gas storage capacity in Germany.

Despite re-activating coal plants in the short term to manage the threat from Russia, the government still plans to meet its ambitious climate targets and a coal phase-out by 2030.

Timeline: On December 1, 2022, the government aims to have gas storage filled at 90%, either by a special call for tenders or the THE buys gas itself

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GERMAN FEDERAL PARLIAMENT ADOPTS THE “EASTER PACKAGE”

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Solar energy

Policy: Germany’s new government is aiming to accelerate the transition to renewable energy resources with a set of laws and regulations termed the “Easter Package” passed in early July.

The package incorporates measures necessary to increase installed wind and solar energy capacity, in particular.

Politics: In the past, local and regional political interests as well as powerful German wildlife defense lobbies have significantly slowed down the permitting process for wind especially, making needed growth in the renewable energy sector impossible.

In detail: The coalition of Social Democrats (SPD), Greens, and Liberals (FDP) developed the reform of planning law, construction law, environmental protection law, and the renewable energies law.

  • By 2023, 2% of the Germany’s land mass must be designated onshore wind areas. Every state needs to designate areas on its own for wind energy.
    • In the windy north, proportionally more (2.2 % by 2032 in Lower Saxony) than in the Southern states (1.1 % by 2026 in Bavaria, and 1.8 % by 2032).  
    • Targets will be enforced by revoking the state’s distance regulations for renewable energy production, if the state fails to deliver. (Some German states wrote into law required distances between houses and wind turbines, which reduce the available area for wind energy so much that the country previously couldn’t meet agreed targets.)
    • In order to increase solar energy, the Easter Package focuses on removing existing obstacles to rooftop solar panels. The legislation further strengthens the installation of solar energy destined for private usage by apartment blocks.
    • Also in the spotlight is hydrogen: New combined-heat-and-power plants have to ensure their adaptability from gas to hydrogen, i.e.“hydrogen readiness.” In addition, the law promotes new wind and solar energy plants , that can store energy via producing hydrogen; the energy can later be recovered from the hydrogen in the form of electricity.
    • Capacity targets by 2030: 115 GW installed capacity of onshore-wind energy (today: 56.13 GW), 30 GW installed capacity of offshore-wind energy (today: 7.8 GW) and 215 GW installed capacity of solar energy (today: 59 GW)
    • The final passed legislation was close to the original proposal, but with a few changes, e.g. it no longer included the 2035 target to achieve climate neutral electricity supply.

Market: The legislation will change the renewable energy landscape in Germany. Investors will find designated areas that enable shorter permitting procedures and an easier permission process for repowering existing wind energy plants. In solar energy, the exploitation of rooftops offers new usable space with a direct customer base (tenants).

The German wind industry has praised the government’s commitment to shorten permitting procedures, but also demanded clearer rules on protected species and other environmental protection, to establish a more stable situation for investors.

Timeline: Several items enter into force over the coming weeks with the full package taking effect at the start of 2023.

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THE EUROPEAN PARLIAMENT DECIDES TO INCLUDE GAS AND NUCLEAR IN THE EU TAXONOMY ON CLIMATE-FRIENDLY ENERGY SOURCES

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Problem: The EU Commission’s proposed Taxonomy Complementary Climate Delegated Act (Third Delegated Act) was agreed to in early July, after the EU Parliament voted not to object to it. The regulation includes specific nuclear and gas energy activities in the list of environmentally sustainable economic activities covered by the taxonomy and its disclosure requirements.

The decision will weaken the position of renewable energies in the EU Taxonomy by putting them in direct competition to fossil gas and nuclear energy, assuming it goes into effect.

Politics: In contrast to the ordinary legislative procedure, a “delegated act” put forward by the EU Commission is automatically adopted, if neither the EU Parliament nor the Council of the EU voice objection to the proposal.

The inclusion of fossil gas faced criticism of “greenwashing” and problematic investment incentives in the face of the Russian war in Ukraine.

On the issue of nuclear energy, member states like France see in nuclear plants their climate-neutral future, while others say that, due to nuclear waste, it is not a sustainable energy. The drastic increase in energy prices and the looming gas shortages convinced many of the (short-term) necessity for nuclear energy.

Austria and Luxembourg have indicated their intention to sue to revoke the inclusion of nuclear and natural gas, with Spain and Denmark considering joining them.

Timeline: The delegated act will enter into force, if no lawsuits are successful, and be fully operational by January 1, 2023.

EUROPE INTRODUCES AN EMBARGO ON RUSSIAN OIL

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Policy: The EU bans seaborn oil imports from Russia, but leaves out the 30% of Russian oil that arrives through land-based pipelines.

Context: The countries most reliant on pipeline gas (Hungary, the Czech Republic, and Slovenia) are also dependent on land-based alternatives to deliver fuel, since they have no coastline or seaports, though hydrogen infrastructure may be able to replace the current fossil fuel pipelines. Poland and Germany pledged to end pipeline imports, which represents blocking 90% of Russian oil to Europe.

Politics: Hungary forced an exemption for itself because around 65% of the landlocked country’s oil demand is met by the Druzhba (“friendship”) pipeline, which delivers crude oil from Russia.

Timeline: The embargo entered into force immediately and the member states will evaluate the initial results next month.

The EU will revisit the exemption of the final 10-11% supply to Hungary, Slovakia, and the Cech Republic.

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 REPOWEREU INITIATIVE TAKES SHAPE

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solar panels with wind turbine and sunset .concept power energy in nature

Problem: Much of the EU has been heavily dependent on oil, gas, and coal, in particular from Russia. Europe’s infrastructure is designed for traditional energy sources and there has not been sufficient political will to transition to renewables and build the infrastructure they require – until now.

Background: Russia’s attack on Ukraine has motivated the EU to publish the REPowerEU initiative as a pathway to get to energy independence. The initiative’s three key ideas are:

1. Speed up the transition to renewable energy (solar and wind)

2. Increase efficiency and energy savings

3. Switch to green gases, particularly hydrogen, and diversify the import channels of these sources

Policy aims:

The REPowerEU initiative, if turned into law, will expand the scope – or increase the ambition – of current EU Commission proposals, primarily the Energy Efficiency Directive (EED), the Renewable Energy Directive (RED) and the Energy performance of buildings directive (EPBD).

  • To meet its climate targets, the EU must sharply increase the number of heat pumps and solar panels installed in or on buildings over the coming few years.
    • Gas heating will need to be replaced by renewable sources like biomass, solar thermal, geothermal, and excess heat.
    •  The proposed legislation includes:
      • Improving building insulation, increase renovation rates, and change to smart home features
      • Switching to district heating (H2, geothermal, excess heat)
      • Expanding public charging networks for electric vehicles
      • Attracting investment in the tech and infrastructure necessary for fully electrified cities.
  • The legislation calls for defined “go-to areas” for renewables, shortening the permitting process and enabling greater investment.
  • In the short run, liquified natural gas (LNG) will replace Russian gas, with renewable “green” hydrogen the focus for the mid- and long run. The policy’s target for 2030 is 10 million tonnes (mt) of domestic hydrogen production from renewable sources and 10 mt of imported renewable hydrogen.
  • The EU additionally proposes measures to enhance planning security and build in other incentives, since innovation in and expansion of hydrogen and its infrastructure will require long-term, large-scale public as well as private investments.

Timeline: In late September 2022, the EU Parliament will make concrete proposals of how to implement and incorporate the objectives of the RePowerEU plan into the RED and EED. The amendments will also entail an additional law that is looking to fast-track permitting procedures for renewables and low-carbon infrastructure projects of critical strategic importance.

In detail: On July 12, the EU Parliament’s ITRE committee already considered parts of the RePowerEU ambitions in its position on the RED, and the EED raised the ambition level of the EU Commission (EU COM) significantly:

  • 45% renewable energy by 2030, in line with the RePowerEU objective (EU COM had proposed only 40%) 
  • 14% energy savings by 2030 (had been only 9%, from EU COM)
  • 5,7% e-fuels in transportation by 2030 (instead of the 2,6% from the EU COM), which would translate into > 50 GW hydrogen capacity for the transport sector alone
  • 5% quota for innovative renewable energy technologies (floating PV, etc.)

On July 26, the European energy ministers will discuss the current gas crisis, scenarios for the winter, and ways to curb gas demand and to fill the gas storages.

The ITRE agreement will seek plenary adoption by the EU Parliament in September 2022, after the summer break and before the trilogue negotiations with the EU Council (Member States) and the EU Commission are initiated.

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THE EU’S AMBITIOUS FITFOR55 CLIMATE INITIATIVE PASSES THE EU PARLIAMENT

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Context: Last year, the EU Commission put forward a group of new laws and regulations, FitFor55, aiming to reduce emissions 55% by 2030 — particularly, reforms to its Emissions Trading System (ETS).

Currently: Some of the most important pieces of Europe’s highly publicized FitFor55 climate initiative passed the European Parliament in an second vote, including:

  • the reform of the ETS
  • the introduction of a carbon border tax
  • and the establishment of a Social Climate Fund.

It is hoped that a new ETS, in particular, will help set a precedent for other regions to emulate.

Background: The ETS is Europe’s central tool to cut emissions and reach its climate targets. Today, certain industries that are deemed at risk of carbon leakage (cement, steel, chemicals etc.) receive free carbon emission allowances. They will have to invest in emissions reduction innovation and the EU ETS review now plans to shorten the timeline to phase-out free allowances. A new parliamentary compromise demands an end to CO2 emissions by 2032, while the EU Commission had originally proposed 2035.

The Carbon Border Adjustment Mechanism (CBAM) is supposed to build a level playing field and diminish the possibility of carbon leakages. It gives EU companies the chance to develop disruptive technologies and increases requirements for non-EU-suppliers.

The sectors proposed by the EU Commission for increased investment in innovation: aluminum, cement, fertilizer, electricity, iron and steel. The Parliament also added: hydrogen, ammonia, organic chemicals and polymers.

Timeline: The EU Parliament plenary voted in favor on June 22, and the EU Council agreed in its “general approach.” The “trilogues” between the EU Council, the EU Commission, and EU Parliament will now begin.

The ETS revision and CBAM could be adopted by the first half of 2023.

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News Roundup

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Ultium Receives Conditional Commitment for $2.5 billion Loan Guarantee

On 25 July, 2022, the U.S. Department of Energy (DOE) announced that it has made a conditional commitment to guarantee a $2.5 billion loan to Ultium Cells to support the construction of three battery cell factories in the United States. Ultium is a joint venture between Korea’s LG and General Motors, and plans to build facilities in Michigan, Ohio, and Tennessee to make large-format nickel-cobalt-manganese-aluminum cells for use in EVs.

Under solar industry pioneer Jigar Shah, the DOE’s Loans Programs Office issued its first loan guarantee in nearly a decade to the ACES green hydrogen storage and generation project in Utah in June 2022. DOE also issued a conditional commitment to Syrah Technologies to build a graphite-based active anode material processing facility in Louisiana in April 2022.

Source: LPO Offers Conditional Commitment for Loan to Build New EV Battery Cell Manufacturing Facilities in Ohio, Tennessee, Michigan (Loan Programs Office)

TVA Seeks 5 GW of Carbon-Free Electric Generation

On 11 June, 2022, the Tennessee Valley Authority issued a request for proposals for up to 5 gigawatts of carbon-free generation that must come online by the end of 2028. Eligible generation sources include solar, wind (onshore or offshore), hydro, geothermal, biomass, nuclear, “green gas,” and battery energy storage, or any combination of these resources. TVA will require that developers submit proposals by 19 October, 2022.

TVA is a federally owned electric power company that provides wholesale electricity to utilities serving roughly 10 million people in Tennessee and parts of six other states in the U.S. South. It has a goal of reducing the greenhouse gases emissions from its operations 70% by 2030.

Source: TVA Issues One of the Nation’s Largest Requests for Carbon-Free Energy (TVA)

GM, EVgo, and Pilot Plan Nationwide Fast-Charging Network

Pilot, the owner of the nation’s largest truck stop chain, has partnered with General Motors (GM) and charging company EVgo to build out a network of 2,000 fast-chargers at up to 500 locations spanning the continental United States. Unlike Tesla’s Supercharger network, this network will be open to all EVs. However, GM customers will receive special benefits at Pilot Company’s Pilot Flying J locations. A map provided by Pilot shows a particularly high density of chargers in the Midwest and South. These chargers are in addition to an EVgo/GM partnership to build more than 3,250 charging stations in U.S. cities and suburbs by the end of 2025.

Source: GM and Pilot Company to Build Out Coast-to-Coast EV Fast Charging Network (Pilot Company)

Panasonic Chooses Kansas for $4 Billion EV Battery Factory

Panasonic has announced that it has provisionally chosen DeSoto, Kansas as the location for a new $4 billion factory to produce lithium-ion batteries for electric vehicles. Panasonic currently produces cells for Tesla, and CEA has concluded that this will likewise be a battery cell facility.

In its statements, Panasonic has sited the approval of a state incentive program for large businesses as a key factor, and Canary media reports that Panasonic will receive $829 million in tax breaks in exchange for meeting hiring targets. Panasonic has said that it will hire 4,000 workers for the site. According to state officials cited by Canary Media, the shell of a 4-million square foot facility could be completed next fall, allowing for the installation of manufacturing tools.

Source: Panasonic Energy and Kansas Partner to Advance Plans for US-based EV Battery Facility (Panasonic Energy Co. Ltd.)

Georgia Power Plan with 3.2 Gigawatts of Renewables Approved

On 21 July, 2022, regulators in the U.S. State of Georgia approved Georgia Power’s latest long-term plan, which includes procuring an additional 2300 megawatts of renewable energy over the next three years, as part of 6000 megawatts to be added by 2035. Under the plan, by 2028 the utility will also retire all its coal-fired power plants except one, Plant Bowen. Georgia Power further plans to procure an additional 2000 megawatts of electricity from natural gas-fired generators, and to make investments  in its legacy hydroelectric plants.

Source: Georgia Power’s transformational plan for state’s energy future approved, helps ensure company will continue to meet needs of customers and state (Georgia Power)