Donald Trump called renewable energy “really just an expensive way of making the tree-huggers feel good about themselves” in his 2015 book, “Crippled America.” On Wednesday afternoon, on a press conference call with the World Resources Institute, representatives of the renewable energy industry responded to Trump’s election with their own show of confidence: “It’s now cheaper to cut carbon emissions and use renewables than to rely on fossil fuels — period,” said Mindy Lubber, president of Ceres, an organization that promotes private investment and public policy aimed at reducing carbon emissions and protecting the environment.
Both those statements are wrong, according to economists and analysts who study the renewable energy industry. Despite nearly a decade of investment gains and plummeting costs, wind and solar are not the cheapest energy options (in most places, most of the time), and the industry still owes a lot of its stability to two federal tax credits. If they go away, there will be some serious upheaval, energy analysts and economists (even Lubber) told me. But, at the same time, wind and solar power are no longer just something that hippies in corduroy overalls use for fun. Today, the tree-huggers wear business suits and, over the last 10 years, they’ve turned wind and solar into real industries — with all that entails, including, experts say, the political capital necessary to fight for their interests.
More Science & Health
Job creation is a key part of bolstering that capital. Just over 600,000 Americans are employed in industries related to alternative energy1 — not including the 1.9 million employed in the energy efficiency industry, which is aimed at reducing the amount of energy people have to use for services like transportation, or home heating and cooling. The solar and wind industries account for about 61 percent of those jobs. There are far more people employed in all the industries related to fossil fuels, 3.6 million in the U.S. in total. But 600,000 jobs is a big deal to the American economy. As a point of comparison, that’s similar to the number of jobs the Economic Policy Institute estimates that the United States lost to Mexico because of NAFTA. (And that estimate could be high because the EPI is a union-funded organization that opposes NAFTA.) Those lost jobs have played a key role in the politics of the recent election. It’s hard to argue that NAFTA destroyed so many jobs as to be dangerous for America but that renewable energy isn’t creating enough jobs to matter.
Solar and wind are each increasingly competitive with fossil fuels in terms of cost. It’s hard to make generalizations about the cost of one type of energy versus another. The numbers vary a lot, depending on where you are in the country and what you want to use the energy for — the cost of electricity meant to cover peak afternoon demand in Florida is different from the cost of electricity needed for non-peak demand in Michigan. Most comparisons don’t account for hard-to-calculate indirect costs — like the financial impact of oil spill cleanup, the effect that burning coal has on lung disease or the cost of updating electric grid infrastructure so that solar power can be more easily integrated. Both the renewable and fossil fuel industries benefit from federal subsidies, which further complicates the equation. And because of rapid growth and technology improvements, the costs of renewable energy have fallen at a rate that is sometimes difficult to keep up with. “Two years ago, if you had 6-month-old data, then you had a significant risk of overestimating the cost,” said Michael Taylor, senior analyst for the the International Renewable Energy Agency.
That said, wind power — even without subsidies — can be cheaper in some places than natural gas or coal. The same can be true of solar power, though in a more limited number of locations and only if you’re talking about large installations like utility-scale solar power plants or multifamily community solar — for example, a neighborhood association that has shared panels. Single-family residential solar isn’t cheaper anywhere.
But that doesn’t mean the subsidies aren’t important or that the industry could coast along without them, said Michelle Foss, an energy economist at the University of Texas. That’s apparent by looking at what’s happened whenever the two main federal subsidies — the Production Tax Credit (which provides, for example, a company that owns a wind farm with a tax credit of 2.3 cents per kilowatt-hour of electricity produced for the first 10 years of production on a new project) and the Investment Tax Credit (which provides a 30 percent tax credit to homeowners or commercial solar power plant owners against the cost of installing a new renewable energy project) — have been threatened. These credits come up for renewal by Congress on a regular basis. When the production credit expired in 2012, the installation of new wind power projects fell by 92 percent the next year, before rebounding with the production credit’s renewal.
What’s more, Foss said, the subsidies affect researchers’ ability to calculate the total cost of renewable energy accurately. That’s especially true of the production credit, which she said had enabled some wind companies in Texas to sell electricity at a price that would have been a loss otherwise. The practice of selling wind-generated electricity at an unnaturally low rate makes the impact of the subsidies more difficult to disentangle from the overall cost of energy production. It’s one thing to simply subtract the tax credit from a cost calculation that includes the price of electricity, the construction and maintenance of facilities, and other factors. It’s another thing entirely to figure out what the wholesale electricity market would be paying for that power without it.
The current production credit is set to phase out by 2019. The investment credit is scheduled to phase out in 2023 for residential projects. Large solar projects will get much smaller rebates after that year. Both credits could be repealed earlier by legislation. If they go away, it will almost certainly stall the growth of the wind and solar industries, said Heidi Garrett-Peltier, assistant research professor at the Political Economy Research Institute at the University of Massachusetts, Amherst. But, she and others pointed out, the health of these industries isn’t entirely dependent on the federal subsidies. At this point, there are subsidies and incentives at every level of government — just as there are for fossil-fuel companies. States, counties, municipalities, utility companies and even neighborhood associations all have policies that affect wind and solar, regardless of what happens at the federal level. And where those exist, she said, they aren’t likely to go away.
Trump himself has been equivocal on renewables. He has called policies that prioritize renewables a disaster and promised to heavily boost the fortunes of oil, gas and coal. But he also told Iowa voters that he was fine with the Production Tax Credit at a campaign stop there during the primary. He appears to believe wind and solar are more expensive than they actually are, but he has also included wind and solar as part of an “all of the above”-style energy strategy. It’s even possible that his promises to remove regulations, including environmental regulations, limiting the expansion of energy development could reduce the cost of building wind and solar power, just like they would reduce the cost of building a natural gas derrick, Taylor and Garrett-Peltier said.
And there are good reasons to suspect that the federal subsidies will stay in place. Climate change may be a politically contentious issue, but energy change is not. Seventy-three percent of Americans want to prioritize alternative energy over oil and gas, according to a March 2016 Gallup poll. For the first time, that included a majority of self-identified Republicans — 51 percent. That’s part of a long-term trend, one that’s happening alongside lower oil and gas prices. Gallup analysts think increased interest in renewables might be a side effect of increased consumer confidence in energy affordability — when we pay less for conventional energy, we feel more comfortable investing in renewables. Given Trump’s emphasis on making energy even more affordable, the result could be greater public support for renewables, not less.
If Trump does try to eliminate the federal renewable energy tax credits, he’d be up against the popularity of renewables with the public and the power these industries now have on both sides of the aisle, said Gurcan Gulen, a senior energy economist at the University of Texas. “Many Republican representatives have wind and solar investments in their own states,” he said. Dark-red Texas, for instance, isn’t just the state with the most crude oil production — it also has the most installed wind generation capacity of any state (that’s the amount of energy existing wind turbines could produce under ideal conditions). Both the production and investment credits were created under Republican presidents, George H.W. Bush and George W. Bush, respectively.
This isn’t big, conservative corporate fossil fuels versus mom-and-pop, liberal hobbyist renewables. The lines just aren’t drawn that way. Fossil fuels and renewables are both bipartisan, corporate interests with profits and jobs and tax bases at stake. “When you start looking at these numbers, it becomes difficult to say it’s a marginal industry,” Gulen said. “This is not a Republican or Democrat issue anymore.”