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A Sunnier Vision for Pennsylvania: An Alternative to Giving Tax Breaks to Fossil Fuels

On Sept. 19th, the Pennsylvania House of Representatives voted to give yet another gift to the already heavily subsidized natural gas and petrochemical industry: a 20 percent tax break to companies that build petrochemical facilities that turn natural gas to plastics and other products. This archaic vision of economic development in Pennsylvania is a threat to our communities, ecology, and climate. Instead of giving fossil fuels even more subsidy, state policymakers could get more jobs, grid resiliency, and pollution reduction by providing a similar tax credit for utility scale solar instead.

HB 1100: A Windfall for Polluting Petrochemical Projects

HB 1100 is part of the so-called “Energize PA” package of policies aimed at giving the economic keys of the Commonwealth to the petrochemical industry. It would be more accurate to call the package “Fossilize PA”, and it says a lot about what is wrong with Pennsylvania politics. Our legislators are still acting like they can ignore climate change and chase the hope of short-term economic rewards through fossil fuel subsidies, at the cost of long-term economic growth and environmental degradation. 

While scientists tell us we need to get to net-zero carbon emissions by 2050, this bill gives climate-killing companies a 30-year tax break. The young Swedish climate activist Greta Thunberg may as well have been talking directly to them when she said at the United Nations, “all you can talk about is money and fairytales of eternal economic growth.” 

HB 1100 is, essentially, an extension of the $1.6 billion tax break the legislature gave Shell to build the ethane cracker plant in Beaver County. Offered to any company that invests $1 billion to construct facilities that utilize Pennsylvania fracked gas, the Department of Revenue estimates that the credit is worth an average of $26.5 million annually per facility through 2050.

This means the taxpayer subsidy could total $795 million dollars per facility, meaning taxpayers could guarantee developers almost 80 percent of their initial investment in tax breaks—a major windfall for these projects. And, if they don’t have enough tax liability on their own, they are allowed to sell the tax credits to someone else. Since this money doesn’t show up as an appropriation in the budget, it’s also much less likely that the legislature will revisit the subsidy in the future.

Creating a “Solarize PA” Tax Credit to support Utility-Scale Solar Projects

What would happen if our Legislature took Thunberg seriously and actually tried to develop new, clean energy sources like utility scale solar?

We have vast potential for developing projects here in Pennsylvania, and we are seeing some growth, but our weak Alternative Energy Portfolio Standards (0.5% solar by 2021) have made it far more attractive for companies to build projects in other states. That’s why New York, New Jersey, Maryland, Massachusetts, and Connecticut all have much more solar generation than we do. 

When Brent Alderfer, CEO of Community Energy, testified before the Pennsylvania Senate in May, he said that utility-scale solar was already below one dollar per watt and the prices are expected to continue to fall. Based on a calculator provided by the National Renewable Energy Laboratory, each $1 billion investment at today’s prices could build about a gigawatt of solar and generate more than 1.3 million MWh of clean energy per year. That is enough energy to power more than 130,000 Pennsylvania homes.

HB1100 could be redesigned to give the same magnitude of transferable tax credit to solar companies that it currently gives polluters, but without the negative climate and environmental impact. A $26.5 million dollar transferable tax credit per billion dollars of private investment in utility scale solar would equate to almost $20 per megawatt-hour. That would, in effect, be similar to raising the Solar Alternative Energy Credit (also called SREC) price around $20 without directly impacting consumers’ electric bills. This would encourage a boom of new private investment dollars into the state and significant growth in solar jobs.

The impact on Pennsylvania’s climate goals would also be significant. If that new clean energy generation replaces natural gas generation, we would save over half a million tons of carbon pollution per year. Assuming a social cost of carbon of $31.2 per ton of CO2 emissions, the carbon reductions alone would have an annual value of more than $31 million dollars—more than the direct cost of the tax break itself.

A transferable tax credit for utility scale solar would also produce more homegrown jobs. Penn State University recently signed a contract with Lightsource BP to build a 70MW facility. That is, to date, the largest single project in Pennsylvania and it is designed to generate half of Penn State’s annual energy demand. That project is projected to result in an additional 250 local jobs. Using that same job-creation rate, a gigawatt of solar projects would create over 3,500 jobs—three and a half times what HB1100 requires to qualify for the subsidy.

Furthermore, building more solar generation would provide much needed diversity in Pennsylvania’s energy grid. Right now most of our generation comes from a mix of nuclear, gas, and coal, but the nuclear and coal plants are rapidly approaching retirement. If we continue to subsidize the gas industry, we will get what we pay for and gas will dominate our electric grid. Having all of our eggs in that basket is a recipe for volatile prices and even blackouts. 

Pennsylvania’s Choice Between Two Futures

What has been stunning about HB 1100 is how little the legislature has debated its efficacy, given how significant a decision it is. Pennsylvania is at a fork in the road—we can invest in the industries, like solar, that are rapidly growing, future proof, and protective of our environment or we can invest in the industries of yesteryear, with an uncertain future, and harsh polluting realities. There is a better vision for Pennsylvania—let’s turn the 20 percent tax break for polluters into an investment in an industry of the future like utility scale solar. Let’s  “Solarize” Pennsylvania instead of “Fossilizing” it.

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