UPDATE: Nov. 19, 2021: The U.S. House of Representatives passed the roughly $1.9 trillion Build Back Better legislation Friday and sent it to the Senate.
“The legislation finally moves the country beyond years of on-again, off-again renewable tax credits and establishes a stable, predictable and long-term clean energy tax platform that will spur critically important investment in renewable power, energy storage and advanced grid technologies,” Gregory Wetstone, American Council on Renewable Energy president and CEO, said in a statement.
The $1.85 trillion budget framework agreed to by the White House and Democrats in Congress on Thursday includes $550 billion over 10 years for clean energy and climate programs.
Besides $320 billion in tax credits, the package, which will likely evolve, includes $110 billion in incentives to increase domestic supply chains for solar, batteries and advanced materials, and to make manufacturers more efficient.
If approved by Congress, the "historic" package would be the largest U.S. investment in clean energy, according to Advanced Energy Economy. The proposed bill released by Democrats in the House of Representatives "supercharges existing and well-understood programs, like tax credits," Leah Rubin Shen, federal policy director for the clean energy trade group, said.
The energy transition is already underway, but the reconciliation bill and the pending $1 trillion infrastructure bill would accelerate the shift away from fossil fuels in the power, transportation and building sectors.
Although the details of the budget package are just emerging and could change, utilities are considering how the legislation could affect their outlook.
"This proposed plan creates significant customer benefits by lowering the cost of our proposed resource plans and potentially accelerating our clean energy transition," Robert Frenzel, Xcel Energy president and CEO, said Thursday during a quarterly earnings call with analysts.
The legislation extends existing tax credits for wind and solar projects. It would also allow project owners to receive a direct payment for their investments instead of a tax credit.
"A direct pay option would provide greater financial flexibility, increased corporate cash flow and credit metrics, which would reduce our financing needs," Frenzel said.
A proposed production tax credit for "green" hydrogen made with electricity from renewable sources would bring "significant value," Frenzel said.
"It could help accelerate the time frame in which we could begin incorporating hydrogen into power generation and into our natural gas distribution operations at a cost that's more economic for our customers," Frenzel said.
Xcel is optimistic the plan will be passed, Frenzel said, noting discussions among lawmakers are ongoing.
The legislation extends and creates new tax credits for various resources, including wind, solar and transmission, according to a 137-page summary of the bill prepared by the House Budget Committee.
It expands the investment tax credit program to include energy storage technology, biogas property, microgrid controllers, dynamic glass and linear generators, according to the summary.
Other highlights include:
- $29 billion for a greenhouse gas reduction fund, with 40% of the spending going to disadvantaged communities;
- $800 million in state grants for electric vehicle charging stations;
- $2 billion for high-capacity transmission lines and for upgrading interties between interconnections;
- $800 million for transmission siting;
- $100 million for offshore wind transmission planning; and,
- $125 million and $75 million for the Department of Energy and the Federal Energy Regulatory Commission, respectively, for more efficient permitting.
In a major change from the initial Build Back Better plan, the legislation drops the $150 billion Clean Electricity Performance Program, which would have rewarded electric providers for meeting clean energy targets and penalized those that didn’t.
The Whites House estimated the latest package would cut greenhouse gas emissions by more than a billion metric tons in 2030.
The bill appears to put the U.S. on track to meeting Biden's pledge to cut greenhouse gas emissions by 50% below 2005 levels by the end of this decade, Jesse Jenkins, assistant professor at Princeton University, said on Twitter after an initial review of the framework.
There will likely be significant changes to the legislation as negotiations continue on the specific details of the package, Morgan Stanley analysts said in a note Friday.