Democrats Introduce US Infrastructure Plan that Includes Support for Microgrids

Democrats in Congress introduced the Moving Forward Act, a $1.5 trillion infrastructure plan that may open a contentious debate. Photo by Andrei Medvedev/Shutterstock.com

The legislation proposes an extension of the federal investment tax credit for solar and geothermal energy and ratcheting the incentive back up to 30% through 2025 before phasing out over a few years. The current program will phase out residential solar tax credits entirely after 2021, and step down the incentive for commercial and industrial deployments to 10% by 2022 (and then continue indefinitely at that rate). The bill also would expand the tax credit to include standalone energy storage systems and extend tax incentives for carbon capture and sequestration technology for a few more years. 

Wind, hydropower, and biomass projects that begin construction before the end of 2025 would still be able to claim the federal production tax credit, instead of the current phase out at the end of this year. 

Interestingly, the bill calls for inclusion of a ‘direct payment’ option for these incentives, whereby recipients would get 85% of the value of the credit in the form of a tax refund. This provision could be a major boost for developers looking to avoid tax equity markets, and enable organizations that are not seeking a large tax liability offset to more easily finance renewable energy projects.

In a statement on the bill’s introduction, Tom Kiernan, head of the American Wind Energy Association said, “Providing a direct payment for the credits is especially crucial as the wind industry works to withstand the enormous challenges caused by the COVID-19 pandemic.”

Beyond clean energy tax credits

The comprehensive plan goes far beyond just $70 billion in clean energy initiatives, allocating more than $100 billion for Internet upgrades,  $100 billion for low-income schools, $25 billion for clean water programs, $30 billion to upgrade the nation’s hospitals and healthcare, $100 billion in funding for public housing, and $25 billion for the postal service.

The bill also includes cyber security provisions, prioritizes grid modernization and low-income housing initiatives, and calls out smart city-type programs for acceleration of electric vehicle charging networks and other innovative, integrated energy technologies. 

Within the $100 billion for hospitals, largely intended for healthcare capacity improvements, grants are also included to make critical emergency infrastructure like hospitals and first-responder facilities more resilient, which could include microgrids, on-site generation, and energy storage solutions.

“The House infrastructure bill shows that Congress understands the importance of resiliency in the age of climate change, extreme weather, and COVID-19.  With the right policy framework, microgrids can play a substantive role in improving the resiliency of essential infrastructure, like hospitals, data centers, and grocery stores,” said Asim Hussain, vice president of commercial strategy and customer experience at Bloom Energy, which recently partnered with Microgrid Knowledge on a special report, Microgrids for Hospitals and Healthcare.

Within the allocation for the US Post Office, nearly a quarter of the funds are directed specifically for zero-emissions fleet vehicles and related infrastructure enhancements. Called ‘next generation delivery vehicles’, $6 billion is set aside for the purchase of electric and zero-emissions vehicles to replace the iconic and durable right-hand drive box trucks mail carriers have used for decades.

The rapid expansion of the natural gas industry in the US would face additional scrutiny, as the bill aims to once again restrict transport of liquified natural gas by train and to initiate a probe into safety and environmental failures by the industry — reminiscent of the ‘bomb train’ concerns that banned transport of oil and gas by train, until those regulations were overturned by the Trump Administration last year.

The biggest ticket item included in the omnibus bill is a $500 billion transportation infrastructure package that Democrats have championed, dubbed the INVEST in America Act. Funding for roads, bridges, tunnels, and public transit, aimed at putting Americans back to work and stimulating the economy, makes up the centerpiece of House Democrats plan. Stringent provisions within that section (like requirements for states to conduct emissions accounting before undertaking major infrastructure projects) have drawn the ire of the bill’s opponents.

“Republicans have been a bit critical at points during the markup and saying this is Green New Deal 2.0,” said House Transportation and Infrastructure Committee Chairman Peter DeFazio (D-Ore.) when the package was introduced. “Those who don’t believe in climate change, tough luck. We’re going to deal with it. And this proves that we can both deal with climate change, fossil fuel pollution and actually create millions of new high-paying American jobs. That is the promise of this legislation.”

A familiar, unfriendly bargaining table

This is the latest attempt to advance an infrastructure bill in Congress, something that has been discussed as a priority since the early days of the Trump Administration but has failed to gain traction. While Republicans have derided the focus on renewable energy and sustainable infrastructure, there is some bipartisan support for aiding the hard hit renewable industry.

It is estimated that the clean energy sector has lost more than 600,000 jobs during the pandemic, and some Republican leaders see the emphasis on a clean energy-led recovery as a ‘second Green New Deal’, something the party platform staunchly opposes. In an op-ed for Fox News, Senate Environment and Public Works Chair John Barrasso (R-Wyo.) also mocked the infrastructure package House Democrats are spearheading as “a laundry list of liberal priorities”.

Sen. Lisa Murkowski among Republicans pushing for support of renewables. Photo by Mark Reinstein/Shutterstock.com

But others, like Republican Sens. Lisa Murkowski of Alaska, Tom Tillis of North Carolina, and Susan Collins of Maine, drafted a letter to the Trump Administration seeking additional relief for renewable energy companies beyond the recent economic stimulus package. This drew the ire of the President, who on Twitter said he would endorse any challenger with “a pulse” who would try to unseat Murkowski, the chair of the Energy and Natural Resources Committee (though other GOP Senators are hoping these are idle threats).

These positive signs of bipartisan agreement are belied by ongoing discussions with energy industry leaders. Jigar Shah, co-founder and president of Generate Capital, who has been a part of a weekly Cleantech CEO forum for the past few months, said on Twitter that almost every speaker (all Federal experts) have said that there is very little chance that #ClimateSolutions get into another COVID bill.

It also doesn’t help that renewable energy tax credits have been a potent political bargaining chip in recent years. In 2015 — the last time the investment tax credit was fought over — Republicans were able to negotiate an end to a 40-year prohibition on oil export in exchange for a multi-year extension. Just last year, the White House specifically removed solar, off-shore wind, and electric vehicle charging tax credits from the $1.37 trillion spending deal in December that clean energy advocates were hopeful would be included in the final language of the bill. 

In March of this year, debate over the initial coronavirus relief package saw Democrat-supported clean energy incentives pitted against Republican party desires to prop up the struggling oil and gas sector where demand declines have sent markets spiraling. Recently it was revealed  that the US shale oil and gas industry has lost more than $300 billion in the last 15 years — with many more bankruptcies ahead and the public left footing the cleanup bill for abandoned and uncapped wells.

A closely watched debate in Congress

The language included in this bill is the opening foray in what could be a contentious debate over any future relief package to aid the US economic recovery from COVID-19.

With the economic stimulus in the March relief package meant to stave off the worst impacts of the coronavirus pandemic coming to an end soon, all eyes are on Congress to act. The Payroll Protection Program to help businesses weather the crisis is all but exhausted after a shaky rollout, and CARES Act expanded unemployment benefits run out in just a few weeks.

Leaders of the House Sustainable Energy and Environment Coalition sent a letter to Speaker Nancy Pelosi last week emphasizing that the expiring payroll loans were already not enough to protect clean energy sector jobs in solar and wind, saying “it’s hard to keep workers on payroll even with federal support when the projects employees would return to are collapsing.”

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While energy incentives are a contentious issue in Congress, Democrats in both chambers have expressed their commitment to moving some type of financial support forward for the weary renewables industry.

But they will face strong opposition from Republican leadership who have painted the effort as external to the core debate and a disingenuous way to promote a favored industry during a crisis, ensuring a long road of compromise ahead if any legislation moves.

“Democrats won’t let us fund hospitals or save small businesses unless they get to dust off the Green New Deal,” Senate Majority Leader Mitch McConnell said on the floor this week.

Matt Roberts is the director of strategic growth & government affairs at Microgrid Knowledge.