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December 22, 2020

Stroock Client Alert

By: Marvin J. Goldstein, Michelle M. Jewett, Richard G. Madris, Jeffrey W. Meyers, Katherine Nuñez, Lauren W. Shandler, Brian M. Wells

President-elect Joe Biden has proposed an ambitious agenda to transform energy policy in the United States, largely in favor of renewable energy and clean-energy technology.  During the campaign, Biden announced a series of proposals, including his Plan for a Clean Energy Revolution and Environmental Justice, and a Plan to Build a Modern, Sustainable Infrastructure and an Equitable Clean Energy Future (together, the “Climate Plan”)[1] and intends to spend $2 trillion over four years to address climate change, increase the use of clean energy, and strengthen infrastructure, among other objectives.  Headlines from his agenda include achieving 100% zero-carbon power generation no later than 2035, and net-zero energy by 2050.

The degree to which Biden’s agenda will be implemented remains unclear. The election results do not necessarily suggest broad support for highly progressive green energy policy.  Whether the Senate majority will be Democratic or Republican will not be decided until the Georgia runoff elections for both of its senators on January 5, 2021.  Nevertheless, a Republican Senate will not necessarily prevent the Biden administration from making progress in supporting green energy, as renewable energy has historically received bipartisan support.  These will be important considerations in the development of renewable energy policy under the Biden administration.

Stroock’s Energy Group has been monitoring these developments and working with clients to prepare for changes in energy policy.  Acknowledging all that remains unknown at this time, this client alert is intended to provide a practical summary of the possible Biden administration priorities regarding renewable energy policies and tax incentives.

Areas Where Biden Can Act Without Congressional Approval

  • Offshore Wind.  One of Biden’s goals is to double offshore wind by 2030.  The Biden administration is expected to consider the development of renewables on federal lands and waters to aid this effort and is expected to expedite approvals on offshore wind projects, many of which were stalled under the Trump administration. 
  • Reversal of President Trump’s Regulatory Policies.  A number of environmental protections that President Trump eliminated through executive order can be restored by Biden, when he becomes president, through executive order, including limiting carbon dioxide emissions from new coal power plants and strengthening efficiency standards for appliances.  Biden intends to sign a series of executive orders regarding clean energy on his first day in office. 
  • Paris Climate Accord.  Biden has pledged to rejoin the Paris climate accord.  Biden intends to work with the leaders of major global economies in an effort to curb global warming.  He has voiced interest in convening a climate summit within his first 100 days in office.
  • Federal Government Procurement.  The federal government procurement system spends $500 billion every year and Biden plans to increase that amount by $400 billion. Biden intends to encourage the purchase of American-made, American-sourced clean energy vehicles for federal, state, tribal, postal, and local fleets.  Biden also plans to make a commitment to use American-made battery technology in electric vehicles and the grid.
  • Moving Away From Oil and Gas.  Biden has pledged to require aggressive methane pollution limits for new and existing oil and gas operations.  He also plans to ban new oil and gas permitting on public lands and waters.  This ban is likely to face legal and political challenges. However, some industry leaders are hoping to work with the new administration on the initiatives they support and may not make decisions about legal challenges until they better understand what the new administration is proposing.
  • Tariffs on Solar Panels.  In 2018, President Trump imposed four-year tariffs on imported solar panels, which adversely affected use within the solar industry.  A solar industry trade group has asked Biden to remove the tariffs a year early.
  • Federal Energy Regulatory Commission (“FERC”).  As president, Biden will have the ability  to  appoint a new chair of FERC.  As of publication, a name frequently mentioned is current Democrat commissioner, Richard Glick.  If appointed as chair of FERC, Commissioner Glick may be more likely to implement policies that align with clean energy than the current chair. 

Areas where Congressional Action is Necessary

  • Tax Credits for Renewable Energy.  It is expected that the Biden administration will propose a renewal, extension or expansion of existing and expired tax incentives for clean energy technology deployment in a stimulus bill.  The Production Tax Credit (“PTC”) for wind and certain other renewable energy technologies is due to expire for projects with respect to which construction commences after the end of 2020.  Similarly, the Investment Tax Credit (“ITC”), which is applicable to solar and certain other renewable energy projects, is scheduled to phase down from its original 30 percent to a permanent 10 percent of the cost of construction through 2022.  Although the Climate Plan does not contain specifics about these tax incentives, the PTC and ITC will likely be extended, regardless of the majority party in the Senate, considering how these credits have been crucial for the development of the renewable energy industry and the continued potential for growth.  One additional open question is whether any extension of the ITC or PTC will have the additional benefit of such credit(s) being refundable (i.e., equivalent to cash), which could meaningfully transform financing structures for renewable energy investments. For additional information on the PTC and ITC and relief granted thereunder due to the impact of COVID-19, please see our prior Stroock Bulletin here.  In addition, Congress has agreed on a broad package of legislation, the centerpiece of which is a $900 billion stimulus bill to respond to the COVID-19 crisis, which is expected to be enacted imminently. Included in this package is a tax bill with provisions to extend various renewable energy tax credits, including ITC and PTC, as well as appropriations funding for a variety of renewable energy programs.
  • Storage Technology.  Biden has said he aims to build new battery storage and transmission infrastructure using American workers and American-made materials.  Although the Biden campaign did not go into detail about how energy storage would specifically be addressed in the Climate Plan, incentivizing energy storage technology presumably would be an important component.  Energy storage systems are being deployed in a variety of applications, helping renewable and conventional generation sources become more efficient and cost-competitive.  However, the cost of such systems is often prohibitive, which limits their utilization.  While there are currently limitations on using existing tax incentives for storage unless integrated with a renewable energy facility, the industry has been pushing for an expansion of the application of the ITC to stand-alone energy storage systems.  It is expected that incentives to promote the utilization of storage systems and the development of storage technology will be an essential component of Biden’s energy policy.
  • Other Tax Incentives for Businesses.  The Climate Plan notes that “credits and subsidies will be available for businesses to upgrade equipment and processes, invest in expanded or new factories, and deploy low-carbon technologies.”  In particular, Biden has expressed an intention to enhance tax incentives for carbon capture, use, and storage (“CCUS”).  Making CCUS more cost effective will likely help accelerate the development of carbon capture sequestration technology.
  • Tax Incentives for Individuals.  In an effort to bolster the deployment of electric vehicles, Biden has expressed a desire to restore the full electric vehicle tax credit, targeting middle-class consumers.  Also related to reducing vehicle emissions, Biden hopes to create more affordable housing near public transit.
  • Carbon Pricing.  As part of his climate agenda, Biden has proposed enacting legislation that “establishes an enforcement mechanism” to curb greenhouse gas emissions.  Biden expressed support for a price on carbon emissions during the primary. The specifics of such carbon pricing were not clear, but possibly could involve a system for trading carbon credits.  However, it has been reported that Biden does not intend to try to regulate carbon emissions through a carbon tax.

Next Steps

The Climate Plan proposed by Biden is expected to result in significant changes in energy policy in the U.S., including a strong focus on clean energy and renewables.  Stroock’s Energy Group is available to discuss the impact of these plans and ongoing legislative and administrative developments with respect to energy, including renewables and tax incentives.  Please contact any member of the Stroock Energy Group to discuss these or other developments and how they will affect your business.

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For More Information:

Marvin J. Goldstein

Michelle Jewett

Richard Madris

Jeffrey W. Meyers

Lauren W. Shandler

Katherine Nuñez

Brian M. Wells  

[1] These plans are available at the Biden campaign website: https://joebiden.com/climate-plan/ and https://joebiden.com/clean-energy/ .  Information from these websites available  as of December 21, 2020 has been relied upon throughout this bulletin without separate citation in each case.

This Stroock publication offers general information and should not be taken or used as legal advice for specific situations, which depend on the evaluation of precise factual circumstances. Please note that Stroock does not undertake to update its publications after their publication date to reflect subsequent developments. This Stroock publication may contain attorney advertising. Prior results do not guarantee a similar outcome.