In N.C., all eyes on Senator Tillis as IRA tax credits hang in balance

Yahoo

2 days ago

Now that the U.S. House of Representatives has passed a measure to kill nearly every federal tax credit there is to support the clean energy transition, gobsmacked advocates and industry leaders in solar, wind, and electric vehicles are looking desperately to the Senate to amend it.
In North Carolina, that means all eyes turn to senior U.S. Sen. Thom Tillis, a second-term Republican up for reelection next year in this steadfast purple state, which is already reaping benefits from the clean energy economy.
'Sen. Tillis is going to be so important, along with other voices,' said Stephen Smith, executive director of the nonprofit Southern Alliance for Clean Energy, 'because he has indicated that we don't want to whipsaw 180 degrees back and forth between approaches to energy policy.'
Tillis is among four Senate Republicans who signed an April letter urging a targeted approach to reforming renewable energy tax incentives rather than a wholesale repeal. The four signatories alone could sink the House measure if they joined Senate Democrats in opposing it.
The senator's stance, the economic benefits of clean energy, and bipartisan support among voters for solar, wind, and efficiency all give advocates in the state some cause for cautious optimism. So does the reality that solar and batteries are the quickest, cheapest way to solidify the nation's 'energy dominance,' a frequently stated goal of President Donald Trump.
'We need energy today and tomorrow,' said Chris Carmody, executive director of Carolinas Clean Energy Business Association, a trade group. 'Not only are renewables and storage the lowest-cost option, they're also the fastest to build.'
The clean energy economy has an intricate foothold in North Carolina. Largely owing to its acres upon acres of solar fields, the state was home to the fourth most solar capacity in the country last year, supporting over 7,000 jobs, according to the Solar Energy Industries Association. And the region doesn't just use solar equipment, it also makes it: Vietnamese panel manufacturer Boviet Solar opened its first U.S. plant in Greenville, North Carolina, in April, with plans for expansion next year that would create over 1,300 local jobs.
The Tar Heel State is also a leader in the emerging electric vehicle supply chain, with lithium mines, Toyota's massive battery plant in Randolph County, and EV factories all in the works. Its robust manufacturing sector already produces a number of renewable energy components. In all, North Carolina boasts over 109,000 clean energy jobs, the ninth most in the country, per the national nonprofit E2.
The federal tax credits that helped spur this economic activity were first enacted decades ago with bipartisan support. Combined with favorable state policies, that means that wind, solar, and battery storage were on the rise during the first Trump administration and before. But the incentives were undoubtedly supercharged by the Inflation Reduction Act of 2022.
The landmark climate law extended the tax credits for large wind and solar projects and rooftop solar through 2032, then tapered them down over several years. It enacted new and expanded incentives for rooftop solar, EV purchases, and energy-efficiency improvements, set to end around the same time. It also included an advanced manufacturing incentive, designed to spur domestic production of minerals, battery components, and more.
This 10-year runway of economic certainty sparked a wave of clean energy development across the country. After the passage of the climate law in August 2022, E2 says 27 new projects were announced in North Carolina alone, representing an investment of over $21 billion.
Experts say the House Republicans' budget measure, which cleared the chamber by just one vote, would imperil all of these economic gains. The tax credits that benefit large clean energy projects will last until 2028, but only for those that begin construction within 60 days of the bill's passage, an impossibility for most.
'Unless your project is shovel-ready and has gotten every permit, there's no project, in any type of energy, that can go from zero to begin in 60 days,' Carmody said.
The rare developer who can begin construction that quickly faces another seemingly insurmountable hurdle: It must document that no component of its project, no matter how small, is linked to a 'Foreign Entity of Concern' such as China. That requirement also applies to the advanced energy manufacturing tax credit, rendering that incentive all but useless even though it's extended beyond 2028.
'It's never been done before for any industry. It's incredibly onerous,' said John Szoka, CEO of the Conservative Energy Network. 'We have a global interconnected economy. We definitely want more manufacturing back in the U.S., and I agree with the president 100% on that. But the way that [provision] is worded, it's almost impossible to meet.'
The House bill abruptly eliminates at year's end an array of tax credits for EVs and charging infrastructure. Combined with the poison-pill provision on foreign components in advanced manufacturing, the termination of those incentives could kneecap the state's burgeoning EV sector.
'The bill passed by the House takes a sledgehammer to North Carolina's EV industry and undermines efforts to build secure and reliable access to critical minerals,' said Ben Prochazka, the North Carolina-based executive director of the Electrification Coalition, a national nonprofit.
'Removing these credits would pull the rug out from under the auto and aligned battery industries at a critical time, immediately putting North Carolina jobs at risk,' he said.
Individual consumers are dealt perhaps the sharpest blow by the House bill. Like the EV incentives, the credits for rooftop solar, energy-efficiency improvements, and the like would be eliminated at the end of this year. Studies show the resulting spike in demand for gasoline and increased electricity use will raise costs for everyone.
Tillis' office didn't respond to a request for comment. But the letter he penned in April — along with Sens. Lisa Murkowski of Alaska, Jerry Moran of Kansas, and John Curtis of Utah — echoes concerns flagged by clean energy advocates and businesses.
'For energy credits that provide a direct passthrough benefit to ratepayers, repeals would translate into immediate utility bill increases, placing additional strain on hardworking Americans,' the senators warn.
They advocate a 'balanced' approach to reforming the tax incentives. 'We caution against the full-scale repeal of current credits, which could lead to significant disruptions for the American people and weaken our position as a global energy leader,' the letter says.
Noting the 'substantial' investments American companies have already made 'based on the current energy tax framework,' the senators also write that a complete repeal would inject uncertainty into the market — jeopardizing capital allocation, long-term project planning, and job creation.
After the passage of the House bill just before Memorial Day weekend, Politico reported that Tillis wasn't backing away from his letter.
'We have a lot of work that we need to do on the timeline and scope of the production and investment tax credits,' the incentives that mostly benefit large wind and solar projects, he told Politico. 'Undoubtedly, there's going to be changes.'
Carmody says the comments fit with Tillis' track record.
'We applaud his position so far and his effort to support a stable and predictable tax system here,' Carmody said. 'Sen. Tillis is long acquainted with energy business in North Carolina, and he understands the need for certainty for all kinds of industries.'
Polls show Tillis would be on firm political ground if he stood up for the state's clean energy economy. The most recent survey from Conservatives for Clean Energy shows 72% of all voters in North Carolina, including 55% of Republicans, favor politicians who 'support policies that encourage renewable options.'
Asked specifically about 'President Trump's American energy dominance policy,' only a quarter of the state's voters, including just under half of Republicans, said they agreed with his plan to 'expand fossil fuel production while limiting … renewable energy sources like wind and solar.'
The conservative case for extending renewable energy tax incentives is straightforward, said Szoka, who is a former Republican legislator in the North Carolina House of Representatives.
'All forms of energy generation are subsidized in the United States. Every single one — some that have been around longer than newer technologies,' he said, noting that the oil and gas sector has access to tax deductions worth up to 80% of drilling costs.
'I've got nothing against the oil and gas industry,' Szoka added. But there's no reason it should continue to receive tax benefits while those for renewables are so abruptly axed, he said.
Szoka and other conservatives say renewables shouldn't get incentives indefinitely, and they aren't committed to the timelines in the Inflation Reduction Act. They also say the fact that the law was passed with only Democratic votes makes it susceptible to attack from the Republican trifecta.
The hope is that a bipartisan approach will be more durable, said Mark Fleming, head of Conservatives for Clean Energy, which covers six Southeast states, including North Carolina.
'I'm very glad to see Sen. Tillis and others in the Senate step up,' to foster a debate about individual tax provisions, Fleming said, 'rather than having a knee-jerk [partisan] reaction.'
Still, political tribalism has become a powerful force in policymaking. After all, 21 House Republicans went on record supporting clean energy tax incentives. None voted against the final bill.
'So, that doesn't bode well,' Smith said. 'We are hopeful that Tillis is going to lead and hold his ground firmly.'