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Vulnerable Communities Poised for Big Solar Gains in Senate Bill

Aug. 8, 2022, 7:12 PM

Low-income and other marginalized communities that have been largely abandoned in the clean energy revolution could see far more community solar projects and rooftop solar panels under the Senate-passed climate package.

The more generous credits would add either a 10% or even 20% bonus credit for solar projects in disadvantaged communities depending on certain criteria—on top of the 30% solar energy investment tax credit available in the measure.

“You could be looking at a 50% ITC for putting solar in a low-income area,” said Jeremy Woodrum, the Solar Energy Industries Association’s director of congressional affairs.

The House is expected to pass the Inflation Reduction Act (H.R. 5376) on Aug. 12, and President Joe Biden is expected to sign it.

The enhanced incentives for disadvantaged communities are just some of the provisions in the legislation that would benefit communities of color, rural regions suffering from declining fossil fuel jobs, and other communities bearing the brunt of US pollution.

Multiple Hurdles

The legislation would extend incentives for solar installations for 10 years. But getting as much as a 50% credit would only be available if projects overcame multiple hurdles.

For example, to get the more generous base 30% credit, projects have to pay prevailing wages for the first five years of construction phase and meet apprenticeship requirements. Those that don’t would only be eligible for a 6% “base rate.”

The legislation would pave the way for the solar industry to meet its goal of accounting for 30% of all US electricity generation by 2030, according to Abigail Ross Hopper, who heads the SEIA.

The Senate-passed bill provides bonus credits that could be applied on top of the 30% credit. For example, it would provide an extra 10% investment tax credit for projects either built on a formerly polluted brownfield site or an area that has a history of significant employment from the oil, gas, or coal industries—or where coal-fired power plants have closed.

A separate provision would provide an added 20% credit, which the bill terms an environmental justice solar and wind capacity incentive, for projects that are part of a low-income residential building project or other project specifically benefiting those communities.

Projects providing broader community benefits—for tribal areas or in low-income communities—would be eligible for a 10% bonus credit.

A Net Positive on Equity?

Environmental justice advocates generally see the legislation as a net positive for addressing communities that haven’t benefited much from renewable energy, electric vehicles, and other clean energy infrastructure and incentives.

The legislation includes $60 billion in new environmental justice funding, including $27 billion Greenhouse Gas Reduction Fund that would function as the nation’s first green bank and focus much of its attention on building wind, solar, electric vehicle, and energy efficiency projects in marginalized communities.

Enhancing the renewable energy tax credits for such communities is also being embraced.

“It’s very important. Will it help these communities catch up? Absolutely,” said Raul Garcia, legislative director for Earthjustice’s healthy communities program.

“But there’s still a lot more to do,” he said. For example, Congress and federal agencies must follow through with outreach to ensure marginalized communities are made aware of the incentives and other benefits under the bill.

Some advocates object to provisions in the legislation that encourage more fossil fuel drilling and provide incentives for capturing and storing carbon dioxide, a process that would reduce the primary greenhouse gas but not other air pollutants from continued use of fossil power.

“Along with all the positive items included in the package, there are significant and deeply concerning trade-offs, with handouts given to the fossil fuel industry, many of whom are experiencing record-breaking profits at the expense of cash-strapped consumers,” a coalition of Latino groups said in an Aug. 5 statement.

To contact the reporter on this story: Dean Scott in Washington at dscott@bloombergindustry.com

To contact the editor responsible for this story: Chuck McCutcheon at cmccutcheon@bloombergindustry.com