(Courtesy: mjmonty/Flickr)
Contributed by Gabe Phillips, Founder & CEO, Catalyst Power
The tragedy unfolding in Ukraine has rattled energy markets, sparked prices, and renewed the potential of major energy legislation to be passed in Washington D.C.
The disruption in the energy markets caused by the war is yet more proof of the fact that fossil fuels are extremely vulnerable to outside events–whether those are natural or manmade. Moving towards renewable energy has many benefits, but a big one is that it’s predictable, reliable, and American.
The faster we accelerate the clean energy transition–the sooner we’ll protect our economy and businesses from these huge price spikes. Europe is doing exactly that. They are rapidly shifting their economies away from Russian gas and toward wind and solar. Washington decision-makers can do the exact same by moving forward on the energy provisions in Build back Better (BBB), the major infrastructure bill with nine lives. Reports suggest that the Senate may be considering doing this.
Small and mid-sized business are one of the most powerful levers for accelerating the economy’s growth. There are 31.7 million small businesses in the U.S.–utilizing this huge market could be the engine that turbocharges the transition toward energy independence. Although there are exceptions, it is generally true that the millions of small and medium-sized industrial and commercial businesses are not leading the transition to clean energy. This isn’t a criticism. These companies don’t have the time, money, or expertise to take advantage of the opportunities in renewable energy.
It should not be difficult to include this sector of our economy in climate actions. Commercial and industrial consumption accounts for 60% of the electricity usage in the United States and electricity generation produces 25% of our country’s carbon emissions. It would be a significant step in reducing our nation’s carbon footprint to shift commercial and industrial electricity use towards renewables. Furthermore, focusing our energy on midsize companies in this sector will provide a greater rate of return than individual efforts or appeals to large corporations. These businesses are being overlooked.
One reason is that clean energy companies lack the right incentives to offer innovative products or solutions to this customer group. That’s something that could be fixed if Build Back Better gets another chance.
The investment tax credit, or ITC, is the best financial incentive available to encourage businesses to use solar power. The ITC gives owners of any solar project in America a 26% tax credit with a gradual phasedown. This should mean that anyone who installs solar panels on their home or invests in other solar projects should be eligible to claim the credit. But that’s not how the ITC currently works.
The credit for commercial solar projects is not available to individuals or organizations that have the right type of taxable income and/or corporate structures. This makes it difficult for small and mid-sized businesses to consider switching to renewables. Clean energy companies that work with commercial entities are completely dependent on a small group of financial institutions who can take advantage the ITC. This group shrinks even further when you consider that only certain types of investment structures would be able to find smaller industrial and commercial projects worth the logistical hassle.
Congress and the Biden Administration could still change this.
All privately owned businesses, regardless of their income or corporate structure, should have access to ITC. They can use it against any income. In addition, if solar developers were able to effectively lower their costs using the ITC, a third-party ownership model for renewables like solar would be much more viable and less dependent on the small clique of tax equity investors currently picking and choosing the industry’s winners.
We will tap into the strength and potential of small- to medium-sized companies to accelerate the clean-energy transition. It’s a small policy change, but one that will have a massive impact. The solar tax credit can be used to help you. It already exists more accessible to everyone Congress will incentivize all American businesses to invest in clean energy— and with it, unleash the power of tens of millions of businesses.
Already, the tragedy in Ukraine has taken a heavy toll. The lives lost or ruined and the resulting humanitarian crisis will be with us forever–but we shouldn’t allow the energy-related vulnerabilities to our national security, economy, or planet. Relying on fossil fuels does not only mean relying on other countries, it also means relying on unreliable trade partners and bad actors. Renewables offer a cleaner, more ethical, and more American energy option.
About the author
Gabe Phillips began trading electricity and gas at Sempra Energy Trading. He went on to found and ultimately sell GP Energy Management, a comprehensive outsourced trading, risk, and energy management platform for the electricity, gas, and renewables markets. Today, Gabe uses his unique outlook on the inefficiencies of the energy industry to run Catalyst Power as a brand new type of power company.