pv magazine: What does the recent bilateral agreement between the U.S. and China to reduce CO2 emissions mean for the U.S. and international solar industries?
Laura E. Stern: Under the agreement, the United States has committed to achieving an economy-wide target of reducing emissions by 26 to 28 percent below 2005 levels by 2025. China has agreed to a peak emissions level in 2030, with levels then remaining steady or beginning to decline. As a clean, renewable source of power, solar photovoltaics can be expected to play a big part in helping the United States achieve this goal. However, while solar has entered the mainstream — it accounted for more than half of new electric generating capacity added in the first half of 2014, according to the SEIA (Solar Energy Industries Association) — it still makes up only a miniscule portion of the U.S. energy supply — 0.23 percent in 2013, according to the U.S. Energy Information Agency — and will need continued support in the form of incentives such as a continuation of the federal Investment Tax Credit (ITC) at current levels if it is ever to make up a significant part of the U.S. energy supply.
pv magazine: Many renewable energy and climate protection proponents, including the German Solar Industry Association, have said the agreement does not go far enough and described the targets as "unambitious and non-binding." Indeed, China has not even offered specific targets. How would you rate the agreement?
Stern: Could the agreement have gone further? Yes. On the U.S. side, while many have hailed the agreement as a major step forward in reducing carbon emissions, others have argued that the agreement relies on environmental policies that are already in place, extending until 2025 the trajectory of cuts to which the Obama administration had already committed through 2020. On the China side, critics have emphasized that the agreement sets no binding targets. Critics on both sides, however, underestimate the power of the symbolic act. The agreement sends a powerful signal to the business community, to investors and to political leaders that solving climate change is a top priority on both sides of the globe, providing the public support required for the implementation of measures that will help both countries achieve these goals. To understand the power of the symbolic act, we need only look at the space program. President Kennedys 1961 challenge to the nation to commit to the goal of landing a man on the moon by the end of the decade played a significant role in the fulfillment of that dream by the Apollo 11 astronauts eight years later. As a Chinese philosopher so famously said: A journey of a thousand miles begins with a single step. The climate change agreement is just such a step.
pv magazine: To what extent will this agreement achieve what Barack Obama and Xi Jinping said they hoped to achieve: Inject momentum into the global climate negotiations and inspire other countries to join in coming forward with ambitious actions as soon as possible.
Stern: Anyone who has been in the renewables industry for any length of time has heard the argument many times that theres no point in reducing the United States carbon footprint as long as China — the worlds largest producer of greenhouse gases — is building coal-fired power plants to fuel its economic engine at a frenetic pace. Or even more pointedly: that the United States would be imprudent to voluntarily put itself at a competitive disadvantage in the global economy through the enactment of stringent carbon regulations.
While we cant ignore its commitment to coal, China has also made a huge commitment to renewables, with the current five-year energy plan calling for a goal of 11.4 percent of electricity generation from renewables by 2015. Indeed, China is expected to add more than 14 gigawatts of solar this year, almost one-third of the worldwide total, and can be expected to include policies aimed at achieving the goals in the new agreement in its next five-year plan. One motivation for Chinas commitment to renewables is its well-known air pollution problem, with the dangerous levels of air pollution in large cities causing a so-called airpocalypse that has become a political touchpoint. The new agreement reinforces the commitment to change initiated by the air pollution issue, creating a strong foundation for renewable energy growth.
pv magazine: Obama and Xi also stressed the fact that smart action on climate change now can drive innovation and strengthen economic growth. Can we expect to see greater government support for research and development in terms of subsidies and incentives?
Stern: Yes. One proposal on the horizon is the Environmental Protection Agencys Carbon Pollution Standards for Existing Power Plants (a.k.a. 111D or the Clean Power Plan), proposed on June 2, 2014. The Clean Power Plan is projected to achieve an overall 30 percent cut by 2030 from 2005 emission levels through the establishment of target emission rates for each of the states based on regional variations in generation mix and electricity consumption. One barrier to the increased penetration of solar has been that government incentives strongly favor fossil fuels. Since the plan includes renewable energy as an option for cutting carbon emissions, it should help level the playing field between fossil fuels and renewables. Also, because each state is charged with developing its own approach to meeting the targets, we can expect the plan to drive new state policy initiatives, as well as innovative new renewable energy technologies.
pv magazine: What impact do you expect the recent Senate elections and the Republican victory will have on the White House’s goals?
Stern: The most effective way to level the playing field between fossil fuels and solar would be through a national cap and trade program under which large emitters would be penalized for releasing greenhouse gas emissions. But since the 111th Congress, which was dominated by the Democrats, failed to adopt such legislation in 2009, its highly unlikely that a new Congress dominated by Republicans will succeed in this political environment.
That doesnt mean, however, that we should give up the fight. According to the 2014 World Energy Outlook from the International Energy Agency, worldwide fossil-fuel consumption subsidies were $548 billion in 2013 — more than four times the value of subsidies for renewable energy. Fossil fuel subsidies rig the game against renewables, the IEA has stated. In the United States, the average annual subsidy is $4.8 billion for oil and gas, compared to only $370 million for renewables or about 13 times more.
And these numbers dont even account for the externalities of the health and environmental burden of burning coal and other fossil fuels into consideration, which cost an additional $500 billion, according to Harvard Medical School.
We have to keep hammering that message home. In a truly free market there would be no subsidies, but as long as fossil fuels benefit from direct and indirect incentives, the solar industry will also need incentives in order to facilitate the transition to a low-carbon economy.
pv magazine: Do you see increasing support for renewable energy from the conservatives in Congress?
Stern: Not in the very short term. The solar industry is hoping for an extension of the federal Investment Tax Credit (ITC), which covers 30 percent of the upfront cost of installing solar. (The ITC is currently slated to go to 10 percent at the end of 2016.) But the outlook may be different in 2015 and beyond. Conservatives tend to take a pro-business stance, and solar is now a big business, creating new high wage jobs, spurring economic growth and lowering energy bills. Whats more, its getting bigger, which means a bigger constituency for renewable energy interests and increased recognition of the wisdom of investing in the technologies of the future.
Solar installations in the United States in 2014 will be 70 times higher than they were in 2006 and by the end of this year, there will be nearly 30 times more installed solar capacity, according to the SEIA. In addition, the industry now employs more than 143,000 Americans. This extraordinary level of growth — as well as the commitment from industry leaders — will become increasingly hard to ignore, even for conservatives who have historically not been the most prominent supporters of renewable energy initiatives.
pv magazine: The U.S. and China also announced new measures intended to better promote trade in green goods and clean energy technologies, including a U.S. trade mission to China in April led by U.S. Energy Secretary Ernest Moniz and Commerce Secretary Penny Pritzker. Could this lead to a resolution of the ongoing trade dispute?
Stern: Its clear that both countries are making efforts to promote trade in green goods moving forward, but difficult to say whether any past disputes will be resolved as a result of the current joint effort.
When the United States and China announced new carbon dioxide emission reduction targets as part of a joint effort, a statement on promoting trade in green goods was also announced. The statement promises encouraged bilateral trade in sustainable environmental goods and clean energy technologies.
Yet even with good intentions to promote green trade, on Dec. 16, the U.S. Commerce Department announced its affirmative final determinations in the antidumping investigations of solar PV products from China and Taiwan. The decision found that Chinese companies were selling products below the cost to manufacture and that they were benefiting from unfair government subsidies. The department announced anti-dumping duties of 26.71 to 78.42 percent on imports of most solar panels made in China, and rates of 11.45 to 27.55 percent on imports of solar cells made in Taiwan. In addition, the department announced anti-subsidy duties of 27.64 to 49.79 percent for Chinese modules, for an average of 38 percent. This determination will strain the bilateral efforts between the United States and China.
pv magazine: The focus of the increased trade cooperation appears to be on smart low-carbon cities and smart low-carbon growth technologies. What industry sectors or companies in the U.S. and China are likely to benefit from this area of focus?
Stern: The companies that will benefit the most will be those that help China and the United States reach their emissions reduction targets in a cost-effective manner. As a result of the agreement, the United States is now committed to reducing emissions by 26 to 28 percent by 2025, and China has stated its intent to peak emissions around 2030. Renewable energy technology has certainly become cheaper in recent years, and will need to continue to do so to replace more traditional carbon-emitting technologies. The door is wide open for cost-effective green energy technology companies in the United States and China to step up, and there are no limitations to the types of technology that will be necessary to help both countries reach their emissions reduction goals.
Nautilus Solar is a leading full service energy solutions provider headquartered in Summit, New Jersey. Nautilus is making solar possible by developing, funding, executing and managing distributed generation and grid tied solar electric systems throughout the United States and Canada, focusing primarily on the mid-Atlantic, northeast and western regions of the United States and Ontario, Canada. For more information, visit www.nautilussolar.com.