HOUSTON, Oct. 2, 2024 /PRNewswire/ -- Regardless of the outcome of the upcoming US elections, the investments in renewable assets like PV, wind, and battery storage will continue, experts state. The Inflation Reduction Act (IRA), a main driver of the current expansion, has broad support among both Republicans and Democrats and will remain mostly intact, creating jobs in the US and reducing the dependency on China. Only in a worst-case scenario, renewable additions would fall by almost 30% in the next ten years.
"Trump alone can't change legislation, he needs Congress. Our overall expectation is that it is unlikely that major modifications would be made to the IRA that negatively impact solar, wind and storage. However, there remains an outside, remote chance that material modifications are made to finance tax cuts if Republicans sweep the executive branch and congress," says Chris Seiple, vice chairman of Wood Mackenzie's power & renewables division, and one of the keynote speakers on the Solarplaza Summit Energy Storage North America in Houston, Texas on October 29 and 30.
Renewable energy sources now cover over 30% of total US utility-scale electrical generating capacity and provided a quarter of the nation's power generation during the first seven months of 2024. After adding a record-breaking 8.9 GW of new storage capacity in 2023, this year 12.9 GW of storage capacity will be connected, leading up to a forecasted 75 GW of added storage capacity in the 2024-2028 timeframe.
This expansion was primarily boosted by the Inflation Reduction Act (IRA), experts say. For instance, by introducing investment tax credits (ITC) for battery storage, which provides a credit of up to 30% of certain costs spent to build a facility, until 2033. "Batteries are an essential part of the renewable energy ecosystem as we move into our clean energy future," says Andrea Herman, tax expert and associate of Latham & Watkins, one of the speakers at the summit.
One of the incentives for reaching the 75 GW of new storage capacity is the new bonus credit regime, she thinks. For instance, projects located in energy communities in specially designated areas where the government wants to incentivize growth, may be eligible for an additional 10% ITC. Also, projects that use certain US-manufactured products. Certain tax credits can be sold in the open market, for instance to investors or companies with an ESG-policy. This has opened up the market for smaller developers who want to be involved, besides the big developers, backed-up by big banks. "That's one of the great things about the IRA. It totally changed the way taxpayers can monetize tax credits," Herman says. "There is a lot of enthusiasm for it and a lot of jobs are created by it. Hopefully that's something we are still willing to invest in as a nation."
Could the upcoming US elections reshape the energy storage and trading landscape? In general, a Harris administration would continue the Biden policies. A Trump administration, however, has already announced to drop out of the Paris agreement and to dismantle the Inflation Reduction Act. "We don't think that is true," Seiple says. "In general there is a pretty broad support for most provisions of the IRA from both parties, although there are elements with less support, like tax credits for electric vehicles. The reason for this support is there is so much investment flowing to republican districts. The IRA supports investment in both battery storage facilities and storage manufacturing facilities, with a high concentration in swing states. All these facilities are creating jobs, generating strong support for the IRA. There's also broad political support because it's reducing our dependence on China for renewable energy equipment."
However, a Trump administration would propose various tax cuts that could cost up to US $10 trillion, causing record high budget deficits. If Trump wins the presidency and Republicans win the House and the Senate, there is a possibility that there could be modifications to the IRA in order to help finance all of these tax cuts, Seiple says. In this unlikely scenario Wood Mackenzie forecasts renewable additions through 2033 would fall by almost 30% and total investment in new renewable plants would fall by US $350 billion over the next 10 years. "It's likely we won't see something like this, but it is not out of the question," he says. "And it's important to remember that even with modifications to the IRA a lot of states have renewable energy targets, mandates and policies. These state level programs will still be in place and support the industry."
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