President Biden’s Interior Department just announced that it will reduce the fees on renewable projects on federal lands after announcing recently that royalty rates and rents would increase for oil and gas projects on federal lands. The reasoning was that the American public was not getting their rightful value out of the oil and gas projects. That—along with canceling 3 lease sales in offshore waters, stopping projects in Alaska, and a historic slowdown in onshore leasing—shows that the Biden administration does not want to lower gasoline prices for the American public. It wants to push Americans into non-carbon energy by ensuring the price of fossil fuels is as high as Biden’s administration can get it.
To encourage the development of renewable energy, the Biden administration is cutting in half the amount it charges companies to build wind and solar projects on federal lands. That contrasts with a 50 percent increase in royalty rates for oil projects, increasing from 12.5 percent to 18.75 percent that he announced earlier this year.
The federal Bureau of Land Management also announced that it would create five new offices across the West to review proposed renewable projects in order to increase its ability to handle an increasing number of applications from wind, solar and geothermal developers. That action is a reversal of a previous Biden administration decision to move employees back to D.C. that the Trump administration moved out West to bring decision-makers closer to the lands that they manage. The Trump administration’s action was geared to improve the processing of all forms of energy, not solely renewables. The processing by federal employees can take the better part of a year, while states can approve similar projects within weeks.
To meet Biden’s pledge to cut greenhouse gas emissions in half by 2030, the administration is focused on executive actions that could spur renewable energy and reduce the use of oil, gas and coal. Last year, for example, the administration approved two major solar projects on federal lands in California. The solar farms are the Arica and Victory Pass projects. According to the Interior Department, the photovoltaic solar projects have a capacity of 465 megawatts and back-up battery storage of 400 megawatts. The combined projects would cost about $689 million to build. In a report to Congress in April, the Interior Department said it was on track to approve 48 wind, solar and geothermal energy projects with a capacity estimated at 31,827 megawatts by the end of the fiscal 2025 budget cycle.
Commerce Investigation of Tariffs on Chinese Solar Panels and Components
The reduction in fees and rental rates comes during a Commerce Department investigation into whether Chinese companies are hiding their solar panel production from U.S. tariffs by moving components for solar panels through four Southeast Asian countries. At the request of a small solar-panel manufacturer in California, the Commerce Department is investigating whether Chinese solar producers are illegally circumventing tariffs by routing operations through Cambodia, Thailand, Vietnam and Malaysia. The investigation could culminate in the retroactive imposition of significant tariffs on solar cells and modules from Chinese companies operating out of those countries, which produce roughly 80 percent of U.S. solar imports. The investigation has supposedly held up hundreds of new solar projects across the country.
The Solar Energy Industries Association asked its members in April to sign a petition against the complaint, warning “there is not sufficient capacity to meet U.S. demand anywhere else in the world except China.” The association claims that investigating the complaint “will also make it impossible to meet President Biden’s climate goals,” which include making 40 percent of the U.S. power supply solar powered by 2035.
Biden’s Latest Action
Bowing to the solar industry, President Biden is using executive action to pause solar tariffs to the detriment of U.S. solar manufacturers and the benefit of Chinese manufacturers. The White House will not impose any new tariffs on solar imports for two years—a decision that is a win for U.S. solar developers and utilities and a loss for domestic solar manufacturers. Tariffs could be levied on panels imported after the 24-month period, but retroactive payments would be off the table. Biden plans to invoke the Defense Production Act to supposedly benefit U.S. manufacturing of solar panels and other renewable energy technologies, having the federal government support the effort with loans and grants.
Wind and Solar Track Record
More than 120 new power plants began operating in the first quarter of 2022, with over 80 of them being wind or solar farms. There were 11 wind projects with a capacity of 2,469.8 megawatts and 71 solar projects with a capacity of 2,196.7 megawatts. Four coal-fired power plants closed during the quarter, including two large ones: Avon Lake plant near Cleveland, which went online in 1970, with a capacity of 680 megawatts; and Cheswick Generating Station near Pittsburgh, which also went online in 1970, and had a capacity of 637 megawatts. See the chart below.
In the first quarter of 2022, wind and solar combined generated 14.4 percent of total U.S. electricity generation—an increase from first quarter 2021 when they generated 12 percent. Wind’s share increased from 9.8 percent in the first quarter of 2021 to 11.6 percent in the first quarter of 2022. Solar share increased from 2.2 percent to 2.8 percent between the 2 quarters.
The disconnect between public and private words and deeds illustrates a solar industry that presents itself as on a progressive mission to save the planet actually behaving more like a traditional big business. It is managing expectations in the political and business arenas through messaging geared to those separate audiences. Behind the words is a highly competitive business focused on keeping costs low—even if that means sourcing cheaper materials from Chinese companies, some of which are accused of relying on highly polluting coal power, using slave labor, or violating trade agreements.
And, clearly, now the Biden administration is helping the solar industry along by halving the fees to generate power on federal lands, while increasing the rates for oil and gas projects. This is to help the solar and wind industries to expand despite their having the lowest capacity factors of U.S. generating technologies, meaning they generate some of the least electricity relative to capacity. A 500-megawatt wind farm generates about 4,200 megawatt-hours in a day, and a 500 megawatt solar farm generates about 3,000 megawatt-hours, based on national averages. That compares to a 500 megawatt nuclear plant that generates 10,800 megawatt hours a day—2.5 to 3.5 times the wind or solar farm. That means that the generating capacity often cited in media sources (and indeed, in the chart above) must be similarly adjusted in order to estimate the actual power produced. Plus, because of their intermittency of generating power, wind and solar farms require battery back-up when the wind isn’t blowing or the sun isn’t shining. Those costs are not included in the cost that the Biden administration uses to determine the competitiveness of wind and solar farms.
The renewable energy industry in the United States continues to get lavish taxpayer subsidies in the form of tax credits for solar power and payments for producing energy from wind turbines. Nevertheless, the Biden administration has chosen to reduce their fees by 50 percent while increasing the rates for oil and gas produced on federal lands by 50 percent. Americans concerned about steeply increasing energy costs should be aware that there are policy choices being made by their government, which are contributing to these hikes.