Monthly Archives: February 2016

Coal’s Collapse – 2/29/16

Coal’s collapse is a matter of where, when, and how. Though the where might stay contained to developed nations with capital to spare and strong environmentalist lobby groups, the risk of substitution throughout the world is becoming more feasible as costs of alternatives fall and countries weigh the negative externalities of emissions more heavily. When seems to get closer every day as coal companies see profit margins falling, burdensome regulation rising, and prospects for new mining and power capacity dimming. The how will vary from country to country and company to company in the magnitude of disruption.

The fall in Chinese consumption of coal has been devastating for coal prices and profit margins at some of the world’s largest trading and mining companies. China’s recent commitment to cutting pollution and, by extension, some coal types sets a negative tone for the country, which accounted for around half of global demand before imports of coal dropped nearly 30% in 2015  Noble Group, a major commodities trader, recently admitted the long term picture for coal is not good. The company cut its five-year forecast for coal from $85 per metric ton to $55 after factoring in the recent climate-change agreement in Paris as well as the “lower for longer” mentality for oil prices. With the fall in the price of coal, go too the profit margins as many firms report their worst performance in recent history.

Coal’s problems with China will only continue if Chinese coal companies successfully lobby for a domestic price floor. The proposal for a floor to protect against bankruptcy and prevent job cuts would be another market distortion likely causing subsidized Chinese coal to flood foreign markets much as its steel and oil products have. Since the central government has made plans to reduce overcapacity and eliminate as much as 500 million tons of annual output in 3-5 years, the actual chances of it agreeing to such a measure is unlikely. Still, provincial officials are likely to resist cuts that would create social unrest and eat into their tax revenues.

In the US, regulatory and economic pressures are putting coal-fired power plants on the spot. A case in which American Electric Power Co. and FirstEnergy Corp. defend a plan to keep money-losing coal plants in Ohio open by increasing utility bills has come under review by the state’s consumer watchdog. Utility owners claim that increase in bills to keep uneconomic plants in operation will result in long-run savings as well as preserved tax revenue and jobs. Critics of the plan say that it is basically a subsidy for inefficient, dirty generators. The bailout plan coming under fire may be representative of a more hostile politic environment for coal as the EPA steps up emissions regulation. Compliance costs lower profitability and demand for the already depressed coal sector.

Damage Control Duty for Chinese Officials – 2/26/16

Putting it mildly, China is not doing well. In spite of attempts to control data, China’s situation is clearly dire as shown by the following: its stock market is tanking; its currency is declining and under threat; its leadership’s competence is being questioned; its banking system is being swamped with bad loans and inefficient distribution; its capital is flowing out in hundreds of billions of dollars a month; and its heavy industry and infrastructure, which it has long relied on to drive economic growth, are rife with overcapacity. Air pollution, water pollution, desertification, loss of biodiversity. Rapid population aging, matching Japan in magnitude, combined with a male-skewed gender ratio due to widespread sex-selective abortion. Increasing use of automation onshore by countries that once used offshore labor. Chinese officials have an unbelievable amount of damage control to work on.

Reserves, controls, and other government interventions may protect China from the worst of the first set of problems except doubts about Chinese official’s abilities. For an economy heavily managed by the government, the importance of trust in the people running the government cannot be overstated. To help restore trust after sloppy stock market regulation and currency manipulation, President Xi and the Chinese State Council removed Mr. Xiao from his position as head of the China Securities Regulatory Commission based on such failings as the “circuit breaker” while promising further reforms focused on reducing debt, closing “zombie” business overcapacity, and reducing the housing glut in the many parts of the country where building badly outpaced actual demand.

Overcapacity is a particularly pressing issue for China as it faces worldwide backlash for dumping its supply glut onto other markets which, in turn, consider raising barriers to trade to protect their own domestic industries. Even as internal and external demand shrinks, Chinese production continues to grow. And, as a recent report by the European Chamber of Commerce in China shows, the increased capacity is a terribly inefficient usage of capital. According to the report, the gap between the available capacity and utilization has grown from 0% in 2007 to 13.1% in 2015 for overall industry and much higher for heavy industry. Distortions in the market have been difficult to address in a country where regional protectionism, weak regulatory enforcement, low resource pricing, misdirected investment, inadequate protection of intellectual property rights and an emphasis on market share hinder central government reform efforts.

Although “ghost cities” make for more interesting example of speculative investment, encouragement from the government usually results those cities filling over time in contrast to heavy industry. Massive factories may create the illusion of productivity in a way that empty residential buildings can’t, but heavy industry quickly becomes a money loser when prices fall below break-even levels. Outpacing property in new investment since 2000,  manufacturing of mining equipment and other industrial goods now faces debt overhang that devastates profits as returns on assets of state firms, which dominate heavy industry, are a third those seen at private firms, and half those of foreign-owned firms in China.

In a free market economy, firms would close or consolidate. Cheap credit and subsidies would dry up. Firms would pay dividends instead of ineffectually throwing all earnings at expansion. In China, provincial officials, who control most of the publicly owned firms, oppose such badly needed measures on the grounds of avoiding social unrest from mass firing and the loss of tax revenue needed to pay benefits. The balance between stability and reform will be hard to maintain amid the country’s economic slowdown. Necessary reforms threaten to leave millions jobless during the move from export-driven to a consumer spending- and service-driven economic growth. Distortions caused by cheap credit, price floors, and subsidies flowing almost exclusively to large, state-backed firms  are prime targets for China’s national leadership but province-level administrators are not so easily controlled when their interests are threatened.

Outdated industrial capacity contributes to another major problem in China: environmental devastation. Air pollution in the form of smog is a visible form of the contaminants filling the lungs and lowering life expectancies of Chinese urbanites on a daily basis thanks to the poor emissions control in many coal burning plants and millions of cars. Just as costly, more than half of China’s surface water is too polluted for treatment due to chemical leaks and dumping. Reuters reports similarly disturbing levels of groundwater pollution as well as attempts by the government to cover up the extent of the problem. Desertification due to deforestation and agricultural development has left as much as 1/4 of the nation’s total land surface defined by bare soil and rock, suffering from dust storms, mud-choked rivers and eroded topsoil due to a lack of vegetation.

Exacerbating all of China’s problems is an aging population. Decades under a one-child policy combined with urbanization and modernization, greatly reduced China’s potential workforce in turn making it harder for Chinese officials to meet growth targets forcing them to rely on traditional boosting methods based around throwing money at over-saturated industry and infrastructure projects. Ironically, increased automation might be China’s best shot at replacing the never born workers though more capital-rich countries like the US are better suited. What cannot be fixed with robotics is the societal tensions sure to bubble up as China’s skewed gender-ratio results in a generation full of men unable to find wives creating a social catastrophe on top of economic and environmental ones.

China’s problems are not insurmountable. Sometimes damage control can be an opportunity to make essential changes. Demographics can change, economies can be retooled, and environments can be restored, at least in the long term. Unfortunately, the short term is what we live through and when the world’s most populous nation stumbles it can be devastating. If you have any doubts about that, just check the energy markets to see much pain reduced demand can bring.

Solar Developments: At Home and Abroad – 2/24/16

More solar developments are hitting the news each year. As the industry continues to grow in size and importance, solar is attracting more attention from nations looking to reduce emissions and entrenched interests looking to prevent the disruptive rise of another power source.

In the US, new solar installations are coming online at higher rates than any fossil fuels providing large increases in total capacity and solar sector jobs. Obligations to reduce emissions required under the Clean Power Plan as a means of meeting Paris Climate Change Agreement targets positions the zero-emission energy source for significant growth. Threats still exist, of course, for the industry as some states revisit their feed-in tariff and infrastructure usage fee legislation. As seen in the case of Nevada, solar is vulnerable to sudden changes in policy.

Aggressive legislative battles at the state level are becoming a defining feature of US solar. Financing solar energy for public institutions is one of the more interesting challenges facing a proponents as schools and churches – both large scale architecture that are well-suited to solar installation – are not tax-paying entities and as such do not receive federal tax breaks like businesses and residents. The most common financing option for public institutions is third-party financing but some states still have barriers to financing solar projects like North Carolina’s prohibition of such financing. Pushes to allow third-party energy sales, upgrade net metering policy, and make utilities invest more heavily in solar-friendly infrastructure improvements will become much more visible as the US states are driven to meet emission reductions obligations set by the Clean Power Plan.

In Japan, the post-Fukushima energy industry has seen a steadily growing solar market thanks to strong incentives for non-nuclear clean energy. Japan’s solar installations are expected to peak this year with the addition of 13-14 GW of panels, moving closer to 10-12 GW of installations next year. Japan is expected to cut its feed-in tariff for solar power producers by 11% while leaving rates for wind, biomass, geothermal, and hydro unchanged.

Technology, policy, and finance will decide solar’s future.

Falling costs via sustained technological progress have been a major boon to the solar industry. The IEA said in its Projected Costs of Generating Electricity report that “The costs of renewable technologies — in particular solar photo-voltaic — have declined significantly over the past five years.” provides the chart below which shows the monumental decrease in hard costs for solar panels over just the 2010-2013 period showing a major shift in share of total costs to soft costs.

Screenshot 2016-02-22 at 8.31.25 PM

Though the policy battle for solar’s future is still raging, technological breakthroughs put more pressure on the financing and labor costs. Customer acquisition, installation labor, and supply chain costs make up over 30% of total costs nearly matching the cost of the actual panels. There are plenty of ways to cut costs in these areas but so far implementation has not keep up with the pace of hard cost reductions. Third-party financing would reduce up front costs and give more people the opportunity to install solar and learning-by-doing will also naturally reduce labor training costs over time. Much more exciting for customer acquisition departments will be the increased number of people and companies looking to solar as a means of cutting emissions.

Oil Recovery to be Slow-Going Process – 2/23/16

Another week, another round of experts saying the oil recovery will be slower than expected.

U.S. oil prices are set to stay near $30 a barrel, down 70% from their peak in June 2014, due to a continued mismatch between supply and demand. High volatility around a low average price are defining the current oil market as global production continues to grow even though inventories are filling to near maximum levels and oil prices are expected to stay below $50 for the rest of 2016.

So far, talks between major oil producers both in and outside OPEC about a freeze in output have resulted in nominal price spikes without any fundamental changes in production.

In an effort to cap the supply of oil to over-saturated markets, Saudi Arabia and Russia reached a preliminary agreement in Doha to freeze output if other states join them. Doubts about the efficacy of the talks still abound since the outcome depends heavily on Iran abandoning its plan to raise production by 1 million barrels a day from sanction-levels as sanctions on the nation’s exports were lifted last month. Though the talks have given some hope to oil producers, most aren’t holding their breath since Russia, Iran, Iraq, and Saudi Arabia make for an incredibly unlikely match up for an agreement that relies on trust and cooperation.

Follow through by each nation is essential for forcing prices higher but conflicting geopolitical goals and governments desperate for revenue stand in the way of a cohesive effort. Recent comments by Iran’s oil minister calling the proposed freeze “ridiculous” sent oil prices sums up the chances of any deal where Iran doesn’t get preferential treatment actually occurring. And if Iran is going to get an exception to the freeze then the planned rise in Iranian output will only balance out declines in US tight oil. A freeze on Iraqi output would conflict with the countries attempts to produce revenues needed for its continued operations against ISIS. The drama involved in just stopping additional barrels from coming to market bodes poorly for an actual cut in production.

The possibility of production cuts following the freeze talks is a pipe dream.

Comments from Iranian officials rejecting a freeze at sanction-level output and from the Saudi Oil Minister rejecting cuts to production on the basis of not trusting other countries to join in, make it clear that it will be the high cost producers, like those in US shale-oil and Canadian oil-sands, who will have to cut back production. Analysts are quick to cite the failure of Russia to live up to a 2008 agreement to curtail supply and its role in backing Syria’s Assad, who Saudi Arabia wants deposed, as reasons why a pact is unlikely. Saudi Arabia is already producing at record rates so a freeze is much less onerous than curbs on output which it sees as subsidizing high cost producers and delaying a re-balancing of markets. Officials have deemed such measures would be counterproductive even if promises from Russia and Iran were taken at face value.

According to the IEA, the oil glut will persist well into 2017 despite large cutbacks for US shale oil production. The adviser attributed the extended period of low prices to the dampening effect of large stockpiles and OPEC policies of defending market share at the expense of reduced revenues. It projected that the shale oil industry will begin expanding again between 2016 and 2021 as drillers lower costs and improve efficiency. It also predicted Iran would replace Iraq as OPECs biggest source of supply growth by 2021. The very real possibility of the glut lasting to the end of 2017 is the last thing cash strapped companies and nations want to hear about but at this point it doesn’t seem like there is any avenue that would bring prices back above $50 anytime soon.

Wind Builds Momentum – 2/22/16

The wind energy industry has grown significantly since we entered the 21st century. According to data from the GWEC, installation of new wind capacity has accelerated to the point that capacity appears to follow an exponential curve as shown below.


Growth trends favoring wind are especially impressive given that natural gas and coal prices falling greatly in recent years has had little effect. So why has it done so well? Falling costs have definitely been a major factor. The cost of wind power has come down by 60-70% for unsubsidized wind in the last five years as turbines become less expensive to produce and more efficient in harvesting energy. Seeing wind as one of the few cost-effective solutions to quickly reduce carbon emissions and water use, many governments have also pushed utilities to adopt the renewable energy source. Low volatility in price, independence from foreign suppliers, and emission reduction commitments have led those governments to provide the subsidies and tax credits that have spurred growth. The US Department of Energy Wind Vision report shows a path for wind power to rise from supplying 5% of US electricity needs to 10% by 2020, and to 20% by 2030.

Offshore wind farm capacity has also been increasing at an exponential pace since 2000. Global cumulative capacity only passed the 1000 megawatt threshold in 2007 but, by 2014, installation has accelerated rapidly as capacity neared 9000 megawatts thanks to falling costs and increased private and government investment. Offshore wind farms benefit from stronger winds better matched to times of peak demand than those found over the land as well as being located closer to coasts where populations and industry tend to congregate. The UK (5 GW), Germany (3.3 GW), and Denmark (1.3 GW) have had some of the most successful offshore industries in Europe where even low gas prices haven’t been able to stop record amounts of investment flowing into wind.

All renewables are set to make significant gains as President Obama’s Clean Power Plan returns to lower courts after the Supreme Court issued stay earlier in February with out commenting on its merits. With the vacancy left by the sudden passing of Justice Antonin Scalia, the Supreme Court is split 4-4 with little chance of a justice being replaced before the issue returns for a ruling in fall. The loss of a conservative justice is expected to greatly increase the chances of the Clean Power Plan surviving judicial review and puts pressure on states to find ways to cut emissions to meet stricter EPA regulations. Though a Republican in the White House appointing another conservative justice would be able to take steps to roll back the new regulations, the GOP has so far failed to unite behind a single, strong candidate.

Oil News – 2/19/16

Some recent oil news:

Evidence linking oil and gas companies to seismic activity is growing. As if fracking wasn’t already in enough trouble with devastatingly low prices threatening US operations, the Sierra Club sued Chesapeake Energy Corp. unit, Devon Energy Production Co. and New Dominion LLC over the triggering of tremors in Oklahoma and Kansas. The environmental group said the practice of injecting liquid oil and gas waste into deep wells contributed to the more than 5,800 earthquakes in Oklahoma in 2015, compared to an annual high of 167 in the years from 1977 to 2009. With analysts already predicting a wave of bankruptcies in 2016, this lawsuit and the possibility of being linked to major ecological disturbances is the last thing oil and gas companies needed.

Adding to the 60 oil and gas companies bankruptcies filed over the last 16 months, Paragon Offshore, an offshore drilling rig company, filed for Chapter 11 bankruptcy. Devon Energy Corp. is also stumbling as it cuts dividends and jobs in a bid to save the shale driller’s balance sheet. Analysts expect as much as a third of the US oil and gas industry could be consolidated as a result of the downturn.

Looking now at OPEC, Iran and Iraq have refused to commit to capping oil production so desperately needed by Venezuela, Nigeria, and other weak oil-dependent members. Since Iran and Iraq were set to be the largest contributors of additional output refusal to cap their production hits OPEC’s power especially hard. Saudi-Iran tensions and a recent lifting of sanctions against Tehran had expectations for an agreement low. Iraq’s refusal to commit to curbing oil production is also unsurprising given the country’s need for revenue to fight ISIS. The news is bad for Venezuela. Almost completely dependent on oil and facing widespread shortages of necessities, the country is set to enter a vicious economic crisis.

China’s Future Energy Demand – 2/18/16

Pessimism about China’s future is rampant. Although the country’s growth is still the envy of most major economies, investors are pulling out capital on doubts that Chinese officials will be able to fix the nation’s broken growth model that relied heavily on excessive investment in heavy industry and infrastructure. Boosted by cheap credit, massive state enterprises managed to deliver good economic growth on the back of overcapacity making officials reluctant to tackle the unsustainable system. Years of promises to enact market reforms resulting in lackluster progress and sudden interventions in recent stock market woes explains some of the anxiety among foreigners. Authorities, after claiming support for loosening their grip on the economy, were quick to bar large investors from selling and make moves to prop up state-run businesses when the most recent bout of irrational exuberance went south.

Capital outflows, speculative attacks on the yuan, and overcapacity issues aside, China is relatively stable. The government’s leadership is taking steps to support the economy which should, at the very least, prevent a hard crash even though many easing tools at the government’s disposal rely on funding new infrastructure projects and industry already weighed down by overcapacity. The relentless overproduction fueled by cheap credit has especially hurt smaller cities in China. Looming debt problems have led to a pullback on credit and support for production of unneeded goods resulting a disproportionately large slowdown in non-coastal cities that won’t see the new tech companies and industrial upgrading needed to replace the jobs lost in the overcapacity cuts. Guiding the economy towards a consumer spending focus while minimizing strain on the industrial backbone of the economy will not be an easy task but proactive government policies should stave off a doomsday scenario.

With the slowdown and overcapacity cuts, Chinese energy needs are nowhere near what they once were. China’s crude oil imports are falling by hundreds of thousands of barrels a day as state refiners slow output amid stockpiles of fuel. When crude prices crashed, refined oil products initially benefited from lower input costs. The result was a flood of diesel and kerosene onto the market which was met by weak demand leading to a rapid increase in stockpiles that eroded the price of such products as storage and strategic reserves became filled. Coal imports also fell by about 9% from a year earlier. China’s commitment to curtailing wasteful production in heavy industry combined with Chinese support of unprofitable state coal companies will continue creating a downward force on global coal prices currently at 1/3 of their 2011 peak.

Oil Deal Between OPEC and Russia – 2/17/16

What sort of oil deal could reverse the collapse in oil and gas prices that has devastated balance sheets and budgets around the world? Many believed that OPEC would always step in to keep prices relatively high only to see months of inactivity as Saudi Arabia let prices fall in a bid to regain market share from US shale-oil producers who only seemed profitable at high prices. Surprisingly robust shale production due to cost cutting and increased efficiency, in turn, led to the current long period of low prices. Countries dependent on oil such as Venezuela have been begging OPEC leaders to come to an agreement on cutting oil output to little effect until recently when Saudi Arabia, Russia, Qatar, and Venezuela called for a coordinated freeze of output levels. How effective or tenable the agreement will be when exposed to reality remains to be seen.

For Russia, the second-largest crude producer in the world, the collapse in oil prices combined with continuing economic sanctions has been devastating. A weakening ruble, significantly reduced government income, over-reliance on natural resources to fuel growth, and widespread corruption are just a few of the challenges facing the country. Despite Russia’s agreement to freeze output, an actual cut in output seems unlikely. Besides purely technical issues like the difficulty of stopping and restarting wells in the freezing regions of Russia’s primary oil reserves or a lack of crucial storage facilities, the country has, historically speaking, cheated OPEC in the past.

When it comes to output cuts, Russia is not a reliable partner. Although, OPEC has more or less managed to deliver the optimal result of a Prisoner’s Dilemma when it came to the cartel’s output cuts, its de facto leader, Saudi Arabia, has no reason to trust Russia to meet its obligations. Trust was first lost in 2001 when Russian officials broke a deal with OPEC by increasing exports instead of meeting cut obligations. In more recent affairs, Russia is basically fighting a proxy war with Saudi Arabia as it bombs Saudi-backed rebels in Syria. Additionally, the two nations has competing to be China’s oil supplier. Russia is also in need of more revenue to fund other foreign operations in Georgia and Ukraine as well as a military modernization effort which Putin has been reluctant to scale back. Some cheating on output limits is not uncommon but putting faith into partners with a history of selfishness and active undermining of your interests is not a recipe for a stable relationship. Even the freeze agreement, conditional on other nations agreeing to participate, seems like a stretch.

Iran will likely reject attempts to bring it on board with the output freeze. Following the recent lifting of sanctions on the nation, Iran has been preparing to boost output and exports to begin regaining market share, and though the nation has voiced support for the freeze it has been more coy on the subject of its own contribution to the effort. A superficial cap on Iranian production may be possible but Iran is not likely to abandon its planned increase in output of 1 million barrels a day during 2016. Given that Iran is expected to be one of the largest contributors to the continued glut such a gesture would do little to change the fundamental mismatch of supply and demand. Oil revenue, low price or no, is vital for Iran, like Iraq and Saudi Arabia, in financing military opposition to ISIS forces.

In the end, the agreement will likely be remembered as Saudi Arabia and Russia throwing a symbolic bone to weaker producer nations. Desperation from Venezuela led the country to campaign hard for actions to restore oil prices and end the crippling economic consequences that have led to superinflation, GDP declines over 5%, and collapsed government revenue for much needed social programs and import of essential good. No matter how “historic” officials may claim the oil deal is, supply outmatches demand by millions of barrels a day. No increase in demand are likely to appear and there is little chance seeing of voluntary output cuts necessary for a short-term rebound in oil prices. Stockpiles rise and rise to the point of overflow going to floating tankers. It is sure to continue to be a volatile year for oil.

Residential Solar: Challenges and Opportunities – 2/16/16

Residential solar is facing challenges and opportunities as utilities use regulatory pressures to push back against solar’s recent growth.

According to a recent report from GTM Research, falling installation costs and rising retail rates for electricity have made residential solar more attractive in the US. 20 US states are currently at grid parity, and 42 states are expected be past that point by 2020, if current trends and assumptions hold. Accounting for favorable regulatory environments (net metering rules, rate design, and other incentives), California, Massachusetts, and Hawaii are the most attractive for new installations. On the other side of the spectrum are states typically associated with fossil fuel extraction like North Dakota or West Virginia.

Screenshot 2016-02-17 at 8.53.36 AM

Despite recent successes in reducing the cost of solar energy, the industry still relies on regulatory support and high retail electricity rates to reach grid parity. The instability of those two pillars of support has been especially apparent after an increase in fees for solar rooftop projects in Nevada threw solar businesses in the state into chaos and low natural gas prices kept electricity prices low through most of 2015. Demand for residential solar soared in previous years (48%, 2015; 52%, 2014) on solar leases determined on the basis of net-metering but push back from utilities puts net-metering and, by extension, the whole value proposition for solar in jeopardy.

Utilities, who lose demand for every new rooftop solar user, have clear incentives to use regulations to obstruct installations. They need revenues to pay for the grid and social programs providing low rates to poorer customers. The utilities also find matching supply to demand on grid becomes harder when some customers generate and sell power on their own. Ultimately, the costs of renewables will fall to the point where utilities have to accept those issues as the new reality of electricity generation. Cheaper methods are always favored in the long run so what will happen when more and more people decide to cut their bills by installing residential solar systems? Who will pay for the grid? For those without the capital to invest in solar? As always some states have accepted the inevitable while others continue to put off planning to deal with the disruption just on the horizon, leaving businesses to move on the issue before politicians.

Some unlikely heroes may be fossil fuel companies that best understand how the energy industry is changing. Statoil ASA, Norway’s biggest oil and gas producer, announced that it will invest as much as $200 million in renewable energy over 4 to 7 years. The move to diversify the company’s energy holdings will have it taking stakes in startups developing technologies including wind power, energy storage, and smart grids. “The transition to a low carbon society creates business opportunities, and Statoil aims to drive profitable growth within this space,” Irene Rummelhoff, executive vice president of the clean energy unit, said in the statement. Support from large companies like Statoil and famous investors like Bill Gates, who unveiled his own Clean Tech Initiative last fall to encourage investment in energy innovation, should serve as writing on the wall for those who still doubt that major changes are coming to the energy sector.

Climate Change Politics in the US – 2/15/16

The few months have seen major developments in the climate change debate on Capitol Hill and the US proper. In December, quiet passage of extensions for both the investment tax credit (ITC) and the production tax credit (PTC) gave renewable energy an unexpected boost.  Even more surprisingly, Supreme Court justices made the decision to put a stay on enforcement of the Clean Power Plan only weeks before the passing of conservative Justice Antonin Scalia. Now political forces on both sides prepare for the one most consequential political seasons the issue of climate change has ever seen.

Wind- and solar-energy companies benefit from the ITC and PTC extensions in two ways: (1) direct subsidies for production and installation and (2) increased certainty and confidence on the part of investors.

According to Solar Energy Industries Association, the impact of the solar ITC on the 6500% growth of solar installation over 2006-2014 and the fall of utility-scale installed costs by more than 64 percent since 2010 was significant. For the larger wind energy industry, the American Wind Energy Association (AWEA) attributes to the PTC an increase in U.S. wind power of over 300% since 2008. The AWEA also attributes innovation in turbine technology to the PTC which has lead to a fall in wind’s costs of 66% over six years.

Beyond the obvious monetary incentives, the extensions will make it easier for projects to secure financing and other support necessary for large projects and insulation from boom and bust cycles that have afflicted solar and wind in the past.

Halting enforcement of the Clean Power Plan without discussing its merits, the Supreme Court put the landmark climate program in a precarious position. While some states — California, Colorado, New York, Virginia and Washington — continue to address targets laid out by the new rules, others — Texas and West Virginia — are vocal in their opposition to new regulations aimed at cutting CO2 emissions to 32% of 2005 levels by 2030. Although 26 states brought the lawsuit against the new rules to the federal court, regulators in many prepare to comply with the Clean Power Plan if only to avoid an EPA-designed plan should the suit fail. Some governors are even acting independently to promote clean energy industries based on their increasing importance as sources of jobs.

When a 5-4 majority issued a stay on the Obama administration’s Clean Power Plan, the program seemed likely to fail before the Supreme Court when the justices made an actual ruling. Now that Scalia has passed away the Court’s 4-4 split may leave a final ruling in the hands of a lower court which previously refused a request to freeze implementation. In this instance, the stalemate would probably result in the plan being approved.

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