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INDUSTRY OPTIMISM: Solar leaders are hopeful that incentives in Democrats' Inflation Reduction Act will give the market new investment certainty and help to slow the “solar coaster” driven by supply-demand imbalances and tariff policies that have long bedeviled the industry.

The bill, set to be signed into law this afternoon, expands eligibility for the existing residential clean energy tax credit through 2034 and adds battery storage to the list of eligible technologies.

It also extends eligibility for the existing energy investment tax credit, which advantages solar energy and other green tech, and creates a 40% investment tax credit for solar or wind projects located in a low-income community or on tribal lands, in addition to creating a new advanced manufacturing credit for solar component manufacturing.

Abigail Ross Hopper, president of the Solar Energy Industries Association, said the legislation helps to give solar energy and storage companies “the business certainty they need to make the long-term investments.”

She and other industry leaders have been advocating for these kinds of measures in the face of ups and downs over the past year and a half, a period that has been simultaneously characterized by both record new solar deployment and substantial project delays, in the hope that they can provide more stability.

Riding the ‘solar coaster:’ Thanks to federal incentives, cheaper financing, and advancements in technology, solar power has become progressively cheaper over the industry's short life, such that the International Energy Agency in 2020 declared electricity generated from solar photovoltaics to be "the cheapest source of electricity in history.”

Solar as a percentage of total electricity generation in the U.S. is still well behind traditional generating sources, but total capacity has shown extraordinary growth over the past three decades. Utility-scale solar electricity generating capacity rose from about 314 megawatts in 1990 to about 61,014 megawatts at the end of 2021, according to Energy Information Administration data.

Last year was another exceptional year. SEIA and Wood Mackenzie released a report in March showing the domestic solar industry enjoyed record deployment in 2021, having installed 23.6 gigawatts of capacity — a 19% increase over 2020.

At the same time, though, the blossoming demand has run up against the same supply constraints that are hitting every other industry, while solar faces compounding issues somewhat unique to itself. SEIA and company heads have complained that uncertainty about future tariffs on solar imports related to the Commerce Department’s anticircumvention probe have driven prices higher and contributed to delays (Remember, President Joe Biden circumvented that proceeding in June by exempting imports from new tariffs for two years, something domestic solar component manufacturers strongly criticized).

That same SEIA-Wood Mackenzie report found that solar prices increased in 2021 for the first time in more than a decade, and project delays are starting to add up.

Ed McKiernan, president of solar racking and technology company Terrasmart, said these kinds of countervailing forces have always characterized the industry’s performance and emphasized that the “solar coaster” dictum is used widely for a reason.

“In some respects, every year has its own ups and downs, and every industry has that, but certainly the solar industry gets involved [in issues like] regulatory dynamics or financial dynamics,” McKiernan told Jeremy.

With project delays and inflation, ups and down have been more “pronounced” but by no means “catastrophic,” he said, thanks to strong demand.

“Demand is as firm as it's been, and with passage of the Inflation Reduction Act, even more firm,” he said.

Other variables: The demand is strong, and the federal policy support is now more aggressive. What else is there?

McKeiernan predicted some "growing pains" to continue as investors and firms take advantage of the incentives.

Commerce could still impose duties on solar imports from Asia, for example, limiting component sourcing. The other thing he brought up is enforcement of the Uyghur Forced Labor Prevention Act.

U.S. Customs and Border Protection have started seizing Chinese solar products under the new law for failing to prove that forced labor wasn’t used during assembly, the Wall Street Journal reported last week.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

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CALIFORNIA NET METERING COULD BE UP IN THE AIR FOR ANOTHER YEAR: California’s battle over net energy metering could endure for at least another year. A new proposed order would extend the deadline for the Public Utility Commission’s controversial proceeding by 12 months to August 27, 2023, potentially adding another lengthy delay to a process that has split the broader solar industry and some environmental and other activist groups.

Administrative Law Judge Kelly Hymes’s proposed order, made public yesterday, concludes that the current deadline of August 27 of this year does not allow time for the PUC to adequately review and address comments on proposed net metering reforms for fuel cells. The proposed order also says the public needs more time to review and comment on proposed reforms.

The PUC proposed its net metering reforms in December, which would make significant changes to the incentive regime that helped California become a solar energy heavyweight. For example, the “NEM 3.0” proposal envisions a new “grid participation charge” of $8 per kilowatt of installed solar per month.

Some maintain that the existing incentive structure, which involves utilities paying residential solar users for their excess power, means that lower- and middle-class power customers are shouldering all the costs of traditional electricity generation and grid upkeep.

The PUC was operating on that same premise when it designed its reforms. It said the grid participation charge was meant “to capture residential adopters’ fair share of costs to maintain the grid and fund public purpose programs.”

Solar groups and a number of Democratic lawmakers oppose the proposal as it was introduced on the grounds that it would disincentivize solar deployment at a time when all the federal and state policy momentum favors more solar generation.

The proceeding was already delayed after Hymes opened it up to additional comment in May. The five-member PUC would have to approve the proposed order extending the deadline.

FEWER VOTERS FEEL PERSONALLY RESPONSIBLE FOR CLIMATE: A higher percentage of Americans now say they are less concerned about the effects climate change might have on them personally— and how their own personal choices might also hurt the climate— than in 2019, according to a recent Associated Press/NORC poll.

According to the survey, roughly half of U.S. voters said they believe their actions have an effect on climate change, down from two-thirds who said the same in 2019. The number of Americans who said they were “extremely” or “very” concerned about climate change’s effects on them personally also dropped to 35%—down from 44% who said the same in August 2019.

So whom do voters believe shoulders the burden for addressing climate change? Two-thirds of U.S. voters believe the U.S. government, other developed nations, and corporations have a “significant responsibility” to address climate change.

One Denver-based survey respondent told the Associated Press: “I don’t know if that makes sense to say that individuals should have to work and fix the climate. … I would say my individual actions hardly mean anything at all.” Read the full survey results here.

UNITED NATIONS APPOINTS A NEW CLIMATE CZAR: Grenada’s environment minister, Simon Stiell, was appointed yesterday as the next United Nations climate chief, a surprise announcement that comes as nations scramble to get back on track to meet shared climate goals ahead of this year’s fast-approaching COP27 summit in Egypt.

Stiell will succeed Patricia Espinosa of Mexico as the executive secretary of the UN’s Framework Convention of Climate Change, or UNFCCC.

Many praised the decision to appoint Stiell, a leader from the Caribbean, whose leadership role will they said highlight the vulnerability of low-lying island nations to climate change. “Islands have been the biggest champions of climate action and the multilateral system from the early 1980s. … It’s incredible to see proven island leadership take the helm at UNFCCC,” Yamide Dagnet, the director of local weather at Open Society Foundations, told The Guardian in a statement. “My hope is that this will bring renewed impetus for just transitions towards vibrant, more resilient low-carbon economies and societies.”

FEDERAL OFFICIALS EXPECTED TO ORDER COLORADO RIVER RESTRICTIONS: The federal government is slated to announce water restrictions today for multiple U.S. states in the Colorado River basin after the states failed to propose plans to slash their water usage by 15% by yesterday’s deadline.

The deadline comes as the West continues to suffer the worst drought in some 1,200 years, which has caused water levels at the region’s two major reservoirs—Lake Mead and Lake Powell—to plunge to historic lows, threatening to disrupt water delivery and hydropower production across the entire region.

Seven states—Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming—signed onto a plan in 2019 along with Mexico to help maintain reservoir levels.

The Associated Press reports that U.S. officials plan to hold back an additional 480,000 acre-feet of water this year to ensure the Glen Canyon Dam can still produce energy, which is expected to result in government-mandated cuts for Nevada, Arizona, and Mexico for 2023.

Arizona, for its part, is anticipating an additional 3% cut of its water allocation for 2023, in addition to the 18% cut it suffered the previous year. Nevada is set to lose roughly 8% of its supply, and New Mexico will likely lose 7% of its acre-feet supply. States with higher priority water rights are not expected to see cuts.

NEWSOM BACKS DIABLO REPRIEVE, CITING POWER GRID THREATS: California Gov. Gavin Newsom issued last-minute draft legislation to extend the life of the Diablo Canyon nuclear power plant through 2035, a once-unthinkable step opposed by environmentalists, in an effort to protect a grid threatened by extreme heat.

Late last week, Newsom requested lawmakers extend Diablo Canyon’s operations for another decade beyond its long-planned shutdown date of 2025. He also requested they approve a $1.4 billion loan to the plant’s owner, Pacific Gas & Electric Co. (PG&E) to extend operations of the facility.

“In the face of extreme heat, wildfires, and other extreme events that strain our current electrical system, the state is focused on maintaining energy reliability while accelerating efforts to combat climate change,” Newsom’s office said in an email.

Diablo Canyon is a major source of power in the state, supplying roughly 17% of California’s greenhouse-gas-free electricity supply and 8.6% of its total electricity. And the push to keep it open comes as California battles extreme heat, wildfires, and other events that have strained the state’s electric grid.

Newsom’s office described the effort yesterday as a limited-term bid to help ensure grid reliability for California: Diablo “continues to be an important resource as we transition away from fossil fuel generation to greater amounts of clean energy, with the goal of achieving 100 percent clean electric retail sales by 2045,” they said in a statement.

GERMAN INDUSTRY RAMPS UP WARNINGS AS RHINE WATER LEVELS FALL: Germany’s main industry lobbying group warned that factories may have to slow or even halt production temporarily due to the drop in water levels along the Rhine River, a key shipping artery for Western Europe, after levels fell today to a new record-low.

“The ongoing drought and the low water levels threaten the supply security of industry,” Holger Loesch, deputy head of German business lobby group, BDI, told the Associated Press. He warned that droughts like this could become more frequent in the years to come, and asked leaders in Berlin to react more quickly to weather conditions that could affect the Rhine or other waterways.

Industry officials have blamed the low water levels on a combination of unusually hot conditions and drought in the region, noting many barges will not ship cargo along the Rhine when its levels drop below 40 cm.

“It’s only a question of time before facilities in the chemical and steel industry have to be switched off, petroleum and construction materials won’t reach their destination, and high-capacity and heavy-goods transports can’t be carried out anymore,” Loesch said, citing fear of bottlenecks, especially for key energy supplies.

The Rhine is the most important river for delivery of diesel, coal, and other commodities in the region, as we previously highlighted. Low water levels also mean utilities could end up using more gas as an alternative—a dangerous situation that could exacerbate the bloc’s ongoing gas crisis.

MEANWHILE, GERMANY CONFIRMS PLANS TO KEEP REMAINING NUCLEAR PLANTS ONLINE: Germany is planning to keep its remaining three nuclear reactors online as the country, in an effort to ensure it has enough energy supply this winter as it braces for a feared Russian gas cutoff.

The temporary decision, reported by the Wall Street Journal, is a departure from the last two decades of policy as Germany continued to steadily phase out its nuclear plants.

The decision is not yet final, and will still require formal adoption by German Chancellor Olaf Scholz’s cabinet, as well as a likely vote from parliament. Read more about the effort here.

The Rundown

Washington Post Canada’s onetime ‘Green Jesus’ okays oil megaproject

Wall Street Journal Drought devastates U.S. cotton harvest

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TUESDAY | AUGUST 16

4 p.m. Experts from the group Securing America's Future Energy, or SAFE, and the Electrification Coalition will hold a virtual discussion assessing the impact of the IRA, IIJA and the CHIPs Act, including outcomes, opportunities, and implementation challenges for the landmark pieces of legislation. Register for the event here.