With incumbent President Donald Trump having finally allowed for the transition towards a Biden presidency to start this week, it would appear that the dust is finally beginning to settle from a election that now took place more than three weeks ago. But as Trump continues to cry foul, the reality is the US solar sector remains uncertain over what shape the four years following 20 January 2021 will take.
While the US election has delivered a fairly resounding win for the Biden-Harris ticket, it was not quite the complete repudiation of Trumpism some had forecast and, as a result, the Democrats have not yet sealed the hattrick of winning the White House, Congress and the Senate. The result of the latter will be decided by two run-off elections in the state of Georgia, scheduled for 5 January 2021, which will now become arguably just as hotly contested as the presidential election.
For the Democrats to be able to push through as much of their legislative agenda as possible, they need to control all three. Failure to regain control of the Senate will allow Republicans to block any prospective policy they find umbrage with or, as has been in the case of late, simply decide to blockade for the sake of it being lobbied for across the aisle.
For the US solar sector, this could mean two critical pieces of supportive legislation – the Investment Tax Credit and Section 201 tariffs – could become embroiled in political deadlock or allowed to be adjusted to meet the Democrat’s aims, depending on what happens in Georgia early next year. Speaking at last week’s Solar & Storage Finance USA event, organised by PV Tech publisher Solar Media, Marathon Capital’s Ammad Faisal described the outcome of the Georgia run-offs as a “US$200 million question”, saying that the “whole picture changes if the Dems control the senate”, regardless of Biden’s much vaunted ability to ‘work across the aisle’.
For the ITC, or at least a mooted extension at the full 30% it was introduced at, there is – thankfully – a “healthy probability” that such an amendment could pass, according to Roth Capital’s Philip Shen, who pointed to the fact that Republican house leader Mitch McConnell included an ITC extension in a Bill introduced to the House earlier this year, indicating bipartisan appetite for it. Indeed, renewables are no longer the bastion of the Democrats, and an increasing number of Republican senators have come to support the industry in the US.
What could, however, be more difficult to push through is an ITC for standalone storage. As it stands, energy storage facilities can benefit from an ITC but only if they are co-located with solar and installed at the same time. There has been a considerable push to relax these rules to further promote the installation of energy storage but, as yet, that change has yet to happen. Shen says it would remain possible for the Biden administration to push through, but it would be harder without control of the Senate.
Talk has also turned to how amendments to or an extension of the ITC could be enacted, given that it would require legislative change. Democrats did try to include the extension in the US stimulus bill earlier this year, only to see their efforts thwarted. Shen said a continuing resolution could be added to two potential bills – both the COVID relief bill and the omnibus spending bill – however probability on these fronts is “low”, Shen said, given to a potential desire to “keep the COVID bill clean” to give it the best possible chance to pass.
Regardless of how an extension is implemented, the path to an extension is all the wider should the Dems complete a Senate win in Georgia in January. “If the Senate flips, then I’m pretty bullish on a robust extension of the ITC for solar and standalone storage… there’s definitely a path to an extension with a 50/50 split,” said Ja Kao, CEO at Onyx Renewables, said.
Of a more complicated nature altogether is the future of Section 201 tariffs, which, further to Trump’s presidential proclamation last month are set to rise to 18% next year and extended once again.
There is said to be questionable appetite to push back on Section 201 tariffs given their protective nature over US manufacturing, but even then, the Trump administration could make life all the more difficult. In the wake of the presidential proclamation in October, Shen said there was every expectation that the US Trade Representative will request the Trade Commission to conduct a study of the impacts of an extension to the tariffs. This would possibly open the window for Trump to extend the tariffs by a further three years before Biden’s inauguration on 20 January. If these were to be extended for three years, there would also be no mid-term review, meaning it would be 2024 before tariffs could be repealed.
The impact such a decision would have on solar deployment is, however, open for debate. Solar deployment has accelerated in the US over the last four years regardless of the obstacles and hurdles thrown in its path, and as Kao says, the industry has “had to bob and weave for much of the last decade”.
Any change of direction from a Biden administration would simply be upside the industry can capitalise on.