Largest U.S. Solar Project Wins Federal Approval
On Monday, May 11, the U.S. Department of the Interior approved what is poised to be the largest solar plant in the United States — Nevada’s 690-megawatt Gemini Solar Project. The project is being developed by Arevia Power and Quinbrook Infrastructure Partners. Consistent with the new trend among large solar projects, the project will attach 380 megawatts of battery storage once constructed.
Nevada recently passed a bill requiring the state to generate 50% of its electricity from renewable resources by 2030 and 100% from clean energy by 2050. Accordingly, the project is set to assist NV Energy, a Nevada utility, in meeting those goals and will provide solar power to Las Vegas, among other potential surrounding areas.
Despite environmental concerns, the COVID-19 pandemic prompted the federal government to approve the project to combat the nation’s rising unemployment rate. The project is expected to create approximately 2,000 jobs in connection with its construction, which is on track to be completed by 2022.
The project’s approval is consistent with the federal government’s aim to accelerate and broaden energy development on public lands, renewable or otherwise. Notably, the federal government plans to take measures to protect wildlife during construction of the project.
EIA Forecast: Renewable Generation Will Outpace Coal Generation in 2020 and 2021
After years in which the generation of renewable resources has trended upwards and coal generation has demonstrably trended in the opposite direction, it appears that 2019 may be the last year that coal generates more electricity than renewable resources. The U.S. Energy Information Administration (“EIA”) recently published its Short-Term Energy Outlook (the “STEO”) for May 2020 reflecting an acceleration of this energy transition. For example, in 2019, while coal generated 959.5 billion kWh, renewable resources only generated 688 billion kWh. However, the STEO estimates that coal will generate 724.2 billion kWh in 2020 and 810.3 billion kWh in 2021, compared to 761 billion kWh in 2020 and 833.8 billion kWh in 2021 generated by renewable resources.
According to the EIA, the COVID-19 pandemic and low natural gas prices are the causes of this acceleration. Electricity consumption has decreased and will continue to decrease in the coming months as a result of the measures taken by local, state, and federal authorities in response to the pandemic — e.g., stay-at-home and social distancing orders, as well as business and factory closures — which, in turn, is estimated to reduce electricity generation in the U.S. by 5% this year.
This reduction in electricity consumption is expected to negatively impact coal consumption, which is estimated to decrease by nearly 25% this year. In today’s market, natural gas, renewable, and nuclear resources are cheaper than coal from a marginal cost perspective. As such, the EIA expects coal units to be the first to be turned off as electricity demand continues to decrease.
Renewables Supply More Electricity Than Coal to TVA for First Time in Over Six Decades
The Tennessee Valley Authority (“TVA”) received more electricity from nuclear and renewable resources than coal during the first three months of 2020 for the first time in over 60 years. Coal plants have traditionally supplied over two-thirds of TVA’s electricity. However, the COVID-19 pandemic, coupled with the region’s mild weather, has accelerated a change in this trend.
Last month, given school and business closures, TVA took all of its coal units offline for certain periods of time and utilized its nuclear, hydro, natural gas, solar, and purchased resources to meet the demands of its region — covering parts of Tennessee, Alabama, Mississippi, Kentucky, Georgia, North Carolina, and Virginia.
Today, TVA’s carbon-free electricity generation fleet is nearly double the national average. TVA is on track to meeting its goal of reducing carbon emissions by 60% below peak 2005 levels in 2020 and by 70% in 2023.
Trump Administration to Allow Wind and Solar Farm Owners More Time to Claim Tax Credits
Last week, the Trump administration announced that it will modify rules to allow wind and solar farm owners more time to claim renewable energy tax credits in connection with projects stalled by the COVID-19 pandemic.
The decision is in response to a bipartisan request received by the Department of Treasury seeking a modification to the rules that would allow a one-year extension to claim the tax credits for wind and solar projects that began construction in 2016 or 2017. Potentially, this means that wind and solar projects that began construction in 2016 or 2017 will be eligible to receive the tax credits over a period of 5 years, rather than 4 years. The Trump administration, however, has yet to provide any clarity on how it intends to modify the rules governing such renewable energy tax credits.
The anticipated extension will likely benefit wind projects in particular, as such projects can currently claim a tax credit worth 1.5 cents for every kilowatt-hour of electricity produced if construction is begun before January 1, 2021.
This is an encouraging sign for wind and solar farm owners and other renewable energy investors, as supply chain interruptions associated with the COVID-19 pandemic have significantly disrupted renewable project development in the United States.