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article imageQ&A: What the U.S. midterm elections mean for the energy sector Special

By Tim Sandle     Oct 14, 2018 in Politics
With the midterm elections on the horizon, the outcome will help shape the future direction of the energy and climate sectors. LevelTen Energy CEO, Bryce Smith provides some expert analysis.
The U.S. midterms will shape both state-level policies and Washington’s future appetite to consider federal legislation across energy and climate policy. For example, will the proposed Republican Carbon Tax Bill succeed? Rep. Carlos Curbelo of Florida last month introduced a carbon tax bill, the first substantive climate policy from a Republican in nearly a decade. Or, will the California Gas Tax Repeal happen? This California tax ballot initiative would repeal a recent gasoline tax hike that raised the fuel tax by 12 cents a gallon.
To unravel the complexities of this pivotal election, Bryce Smith, the CEO of LevelTen Energy, provides insight. The midterms take place on Tuesday, November 6, 2018.
Digital Journal: What is the current state of the U.S. renewables market?
Bryce Smith: The U.S. renewables markets are exploding. Solar and wind prices have never been more competitive, nor have companies procured renewable energy in such massive quantities. According to our latest Q3 PPA pricing index, renewables PPA prices decreased across nearly all evaluated North American ISOs, with median prices decreasing $1.5 MWh on average. We have entered the age of low-cost clean energy, and that’s a genie that can’t be put back in the bottle.
DJ: Does this rest on different views about global warming?
Smith: My optimistic views of renewables markets are not tied to global warming. While the vast majority of Fortune 500 companies, their employees and their customers understand that climate change is upon us, that is only one piece of the puzzle. Setting aside the overwhelming science and people’s empirical experiences of a changing climate, the economics of new wind and solar projects are irrefutable. Further, renewables are often cheaper than fossil-generated electricity, and saving money is apolitical.
DJ: What are the policy differences between the Republicans and the Democrats with regard to renewables?
Smith: In 2015, Congress approved an extension of vital tax credits for wind and solar as part of a bipartisan bargain that also lifted a ban of the exportation of oil. As an institution, though, the Republican party doesn't have a climate policy, and it actively creates an anti-renewable agenda that dismantles the Obama Administration's Clean Power Plan. That’s not to say that individual Republicans haven’t supported renewables at the state level. The vast majority of wind and solar projects are located in red counties and generate significant local revenue.
Recently, though, we've seen a few proposals emerge from individual Republicans. Jim Baker, George Shultz, and Hank Paulson, Jr. pitched a carbon tax in 2017, for instance, and Carlos Curbelo, a Republican lawmaker from Florida, recently proposed something similar to a carbon tax. Though these proposals barely saw the light of day, their mere existence is significant. Ultimately, for a climate solution to become politically palatable, it will probably have to come from someone on the conservative end of the political spectrum.
DJ: Which renewable technologies are the most efficient?
Smith: Cost per kilowatt-hour is really the vital metric of economic efficiency. In this regard, both wind and solar are exceedingly compelling, assuming you site a project well.
DJ: Are there any state policy initiatives that you find interesting?
Smith: California is, unsurprisingly, on the vanguard of state policy, having just passed a 100 percent clean energy mandate (SB 100). Separately, 29 states and the District of Columbia have passed renewable portfolio standards (RPS). These state policies helped renewables achieve scale and, of course, they reflect widespread public support for clear energy.
Keep an eye on Washington State though, which has the most anticipated November ballot initiative. Washington residents will vote on a carbon "fee" (tax). If passed, this would be the first carbon tax in the country and could pave the way for similar state-level initiatives.
DJ: How about at the national level, which policies look to be the most effective?
Smith: Beyond the extension of the Investment Tax Credit (ITC) and Production Tax Credit (PTC), federal policy is virtually non-existent.
DJ: What is the significance of the mid-term elections with respect to environmental policy?
Smith: The number one thing to keep your eye on is what Washington State will do regarding the carbon “fee” (tax). It is one of the most ambitious climate policies since Trump came into office and would slot Washington into the forefront of the national fight against global warming
DJ: Which policies do you think are most likely to get through Congress?
Smith: I’m not an expert when it comes to Congress, but it’s hard to see significant energy policies getting out of Congress, and certainly past the president's desk, even if Democrats take back the House or the Senate.
DJ: Which changes will be most important to LevelTen Energy?
Smith: Fortunately, our business is driven by steady corporate demand for clean energy, and by the rapidly falling cost of renewables. The upside to having no federal support is that there’s not much to take away from our business opportunity.
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