The COVID-19 virus has impacted nearly every business in America, but few as severely as those in the energy sector. In addition to shutdowns disrupting supply chains, halting construction and installations, and making face-to-face meetings nearly impossible, energy demand has fallen off, hurting sales and chocking off revenue streams.
With the congressional August recess just days away, Senate Majority Leader Mitch McConnell (R-KY) has one last chance to pass emergency relief funding to help American energy companies.
Of particular concern are businesses in the renewable energy sector—which also hold the highest potential for hastening the nation’s economic recovery. Renewable energy companies were creating jobs 12 times faster than the rest of the economy before the pandemic. Maintaining the sector’s ability to employ millions of Americans is still possible if Congress reassures investors that it's committed to clean energy.
About 106,300 jobs were added back to the economy by clean energy companies in June, according to an analysis by BW Research; but that still leaves 514,200 people in renewable energy industries that have been out of work since March. The unemployment rate in the renewables sector improved from 18 percent to 15 percent last month. However, that's still high by conventional standards, and many workers among that 15 percent are now permanently unemployed.
Moreover, the slight uptick in employment occurred when states were re-opening their economies, and people were heading back to work. With the latest spike in the infection rate, especially in the South and West (big solar energy generating regions), communities are once again restricting movement.
Many businesses have also depended on the federal Paycheck Protection Program to keep employees on the payroll. The jobless rate could rise even more when that program ends.
So what's the solution? That’s the trillion-dollar question. McConnell will have plenty of competing ideas, from unemployment payments to infrastructure investments, to sort through putting together the next relief package.
House Democrats have offered a climate-focused stimulus with a $3 trillion price tag; while there are some useful proposals, it is also loaded with unrealistic approaches and stifling regulations.
However, a group of Republicans is leading the charge with their own market-based ideas for driving clean energy investment, as Republican Senators Thom Tillis and Richard Burr of North Carolina, Lindsey Graham of South Carolina, Susan Collins of Maine, Lisa Murkowski of Alaska, Cory Gardner of Colorado, and Martha McSally of Arizona signed a letter to Leader McConnell calling for assistance for the clean energy sector in this round of stimulus.
“Federal investments in clean energy have provided strong taxpayer returns, while also providing critical and sustained job growth,” they wrote. “As we focus on getting the country back to work, we must include an industry that had already been putting Americans to work faster, and in more places, than the overall economy before the COVID pandemic hit.”
Whatever Senate Republicans settle on must include what we already know works. The Investment Tax Credit (ITC) and Production Tax Credit (PTC) have proven to be among the most cost-effective and impactful tax policies in a generation, accelerating the adoption of renewable technologies and delivering excellent returns on government investments.
Unfortunately, these credits had been scheduled to phase down this year; the start date requirements should be postponed, given that progress on many projects will be set back several months.
Additionally, a program is needed to provide a choice between utilizing the existing tax credit or accessing direct cash payments. Many developers are facing challenges securing financing amid the pandemic. Companies need the flexibility of being able to turn the credits into cash to continue to operate.
At a minimum, McConnell should ensure the ITC/PTC provisions are included in the final legislation and do well to pick and implement other targeted measures to support energy innovation and development; there are plenty of ideas to work with that have garnered bipartisan support before. However, the clock is ticking, and the worst outcome of all would be to fail to work out a final bill because of partisan squabbling.