Explainer: Clean Energy Tax Credits Worked Before and Will Work Again
The clean energy industry is an economic winner. Investing in solar, wind, batteries, energy efficiency, electric vehicles, and other emerging technologies has a proven track record of creating jobs, cutting climate pollution, and reducing energy costs. In just a decade, the industry growth has sped up from a snail's pace to one that now employs more people than any other part of the energy sector.
This incredible acceleration happened in large part by the American Reinvestment and Recovery Act (ARRA) investment foresight. And, the success of ARRA is proof that Biden’s climate agenda will champion climate action across the nation while building a stronger, more equitable economy. Because today still, investing in clean energy is a surefire way to create jobs, reduce pollution, and cut costs for families who are paying out the nose for electricity and gas.
This post dives into:
I. ECONOMY: How ARRA sparked the beginnings of the clean energy economy we know today (and how Biden’s climate plan will strengthen our economy).
II. WORKFORCE: How ARRA expanded the clean energy workforce from one that hardly existed to the job creator it is today.
III. GRID: How ARRA set the stage for the clean energy transition, and how new investments will take it further.
IV. CONSUMERS: How ARRA launched consumer-focused clean tech – such as EVs and rooftop solar – from hopes to reality, and how Biden’s climate plan will only lower the barrier of entry so more people can benefit.
I. The American Reinvestment and Recovery Act (ARRA) sparked the clean energy industry and proved it could be an economic winner.
ARRA sparked the first significant investments – $90 billion in total – in clean energy, and that sparked economy-wide growth. Under the ARRA’s loan program, the construction of new wind and solar generating capacity alone is estimated to have created between $26 and $44 billion in economic output that boosted the American economy and the American worker. The full ARRA raised U.S. GDP by between two and three percent from late 2009 through mid-2011.
In addition, ARRA set the stage for more private investment in this promising industry, leveraging approximately $150 billion in private and other non-federal capital for clean energy investments. As a result, the share of private equity funds allocated towards renewable energy has increased significantly since 2016, standing at about 80% of all energy investments made this year as of July 2021.
What does this mean for President Biden’s clean energy investments? President Biden’s clean energy plan will sustain and build upon the progress of the ARRA, creating clean energy jobs while supercharging the American economy after the turbulence created by the pandemic and the war in Ukraine.
The President’s plan makes these benefits available for ten years, giving certainty to businesses, innovators, and workers, so they can make better, more reliable, and more affordable energy technologies. His plan also establishes strong labor standards and centers environmental justice in ways ARRA didn’t. All of this means more jobs, cheaper energy, and less pollution in communities across the country.
The plan’s emphasis on investing in sustainable industries with long-term growth and job potential means that Americans will soon see an economy with good-paying jobs and relief from inflationary pressure.
Investments in clean energy won’t hurt American families’ pocketbooks while supporting a cleaner environment for their children to thrive in.
The clean energy plan will alleviate long-term inflation concerns. With its 10-year investments and focus on supporting critical energy industries with high growth potential, this agenda will create a stable trajectory for economic and job growth.
In 2021 alone, climate disasters cost American taxpayers $145 billion. The cost of inaction is high, and the climate provisions in Biden’s plan will take strong action to mitigate the worst effects of the climate crisis--and the cost of these disasters, too.
II. The American Reinvestment and Recovery Act was critical to expanding the clean energy workforce. President Biden’s climate plan will take it further.
The clean energy programs of the American Recovery and Reinvestment Act supported roughly 900,000 full-time jobs each year from 2009 to 2015. The ARRA helped support the training of over 30,000 students for solar and clean energy careers, and its investments in solar tax credits played a role in jumpstarting this now booming industry. Before the ARRA, solar jobs were essentially flat. Today, the solar industry alone employs thousands of people. And overall, 3,355,419 Americans were employed in clean energy — in energy efficiency, renewable energy, solar, wind, clean vehicles, storage, and grid mobilization.
At the start of 2020, there were three times as many clean energy jobs as
fossil fuel jobs. And that’s not stopping: An astonishing 56% of workers in the oil & gas sector said they wanted to work in renewables compared to 38.8% last year.
III. The American Reinvestment and Recovery Act led to record renewable production, but it didn't go far enough.
From 2010 through 2020, the U.S. more than tripled its wind power generation capacity. In 2008, solar produced 0.1% of the country’s power and wind produced less than 1%. Today, solar and wind power provide 10% of the country’s electricity.
The ARRA supported the installation of more than 104,000 wind, solar, geothermal and biomass projects that provided more than 33 GW of power – enough to power more than 8 million homes each year. In the decade following ARRA, wind generation increased fivefold and solar generation grew by a factor of 48.
By 2011, wind production had already surpassed the Energy Information Agency’s predictions for installation by 2030.
IV. The American Reinvestment and Recovery Act launched consumer-focused clean tech into the accessible, affordable mainstream.
The ARRA spurred a big reduction in cost for many clean energy technologies by expanding the Production Tax Credit and Investment Tax credit, making renewable energy more affordable. They brought down costs so dramatically that solar and wind power are now two of the cheapest sources of electricity generation. In fact, in the last decade, solar installation costs have dropped by more than 70% and the costs of battery packs used in electric vehicles have dropped 85%.
Costs for solar and wind power technologies have continued to fall annually since the passage of the ARRA, and Biden’s climate plan will only continue the downward trend. The investments in the Build Back Better Act will save an average household $500 on energy costs and utilities per year.
In 2020, the United States hit a record for renewable energy deployment, generating 30 gigawatts total in the year. The BBBA will double that, and bring renewable, reliable energy to an estimated 12 million homes across the nation.
