Clean Tech Quarterly Update: Winter 2021

This edition of Holland & Knight's Clean Tech Quarterly Update highlights the biggest clean tech updates and government-related developments from the past few months, and summarizes what these changes may mean for clean technology and investors in the coming quarter and year.

Building on last year's congressional accomplishments, clean energy initiatives and legislation are advancing and expanding significantly with unprecedented momentum, direction and clout with the opening of the Biden-Harris Administration and 117th Congress. Indeed, COVID-19 rescue and relief will likely continue as the primary focus of the administration and Congress over the course of 2021. Nevertheless, Democrats, including President Joe Biden, hold that COVID-19 recovery in itself is a unique opportunity to meld climate action with a focus on economic revitalization and are expected to leverage funding to deploy clean technology in order to drive emissions to net zero in the coming decades.

Against the backdrop of the evolving political climate and the implications for energy innovation, drivers include increasing corporate net zero carbon commitments, national security concerns, a need for technology and innovation, market participation, education and competition from foreign governments, all of which are only increasing during the Biden Administration.

Key developments from throughout the federal government:

White House

• President Biden opened his administration with a number of executive directives and legislative proposals to address the pandemic response, and to change the course on environmental, social justice and immigration policies.
• President Biden signed three Executive Orders (EOs) on Jan. 27, 2021, to launch a "whole of government" approach to align federal policy with climate change, building upon three prior EOs that he signed on Day One of his presidency. Notably, the president's directive to transition the federal fleet to clean and zero-emission vehicles thrusts federal sustainability back into the limelight and signals his intention to "green" the federal government and position it as a market leader in the low-carbon economic transition to bring net emissions to zero.
• By leveraging federal regulations and purchasing power in issuing the federal procurement EO, the president took a first step to reorient federal energy purchases around clean power resources and federal procurement of renewables, batteries and electric vehicles. The order requires agencies to comply with the Buy American requirements in making procurement decisions, consistent with President Biden's EO of Jan. 25, 2021, titled "Ensuring the Future is Made in All of America by All of America's Workers."
• President Biden also signed an EO on America's Supply Chains, mandating a 100-day review of the global supply chains used by key industries. The review will address vulnerabilities of supply chains of four key products: large-capacity batteries, pharmaceuticals, critical minerals and semiconductors. The review will also seek to determine whether U.S. firms in these sectors are too reliant on foreign suppliers, particularly those in China, as well as other vulnerabilities, such as extreme weather and environmental factors.
• The president said that the solution to supply chain issues will be to increase domestic production in certain industries as well as work with allies to prevent future shortages. The review called for under the EO could potentially lead to financial incentives, tariffs or changes in procurement options. If the risks are dire, the Biden Administration could use the Defense Production Act (DPA) to force companies to produce certain goods domestically or expand federal agencies' existing DPA authorities. The president might also work with Congress to fashion incentives and worker training programs to get suppliers to relocate to the U.S. or its allies.
• Key Takeaway: Through the use of Executive Orders, President Biden has laid out an aggressive agenda for tackling complex challenges that previous administrations have been unsuccessful in resolving or did not make a priority to resolve. All of these actions require the leadership and focus of a cadre of political appointees and federal career staff in the White House and agencies that are still getting their footing. In addition, congressional support is needed to fund the initiatives required to achieve the ambitious goals of the EOs.

U.S. Department of Energy (DOE)

• Congressional support for clean energy research and development (R&D) remains strong, as evidenced by increasing budgets for most of the relevant programs at DOE – meaning that billions of dollars will continue to be available through grants, cooperative agreements, loan procurements and other types of federal support. In total, energy programs at DOE will receive nearly $40 billion in funding, an increase of more than $1 billion above the Fiscal Year (FY) 2020 enacted level.
• Increases in authorized funding for the programs such as the Office of Technology transitions (OTT), established by the Energy Act of 2020, can improve the commercial impact of DOE's research investments by focusing on tech transfer and commercializing energy and climate innovations that advance the agency's mission and the Biden Administration's agenda. (President Biden's budget request to Congress is expected in late March or early April.)
• On Feb. 11, 2021, DOE's Advanced Research Projects Agency-Energy (ARPA-E) program issued a $100 million open solicitation to validate disruptive clean energy technologies that could address climate issues. This funding is available through ARPA-E's OPEN 2021 funding opportunity, which occurs once every three years. The program is expected to be highly competitive, and historically the majority of awards go to universities and national labs, but private sector awards are also given. Concept papers are due to DOE by April 6, 2021.
• On Feb. 25, the U.S. Senate voted 64-35 to confirm former Michigan Gov. Jennifer Granholm as Secretary of Energy, with all Democrats voting in favor along with 14 Republicans. Deputy Secretary of Energy Nominee David Turk also received his confirmation hearing before the Senate Energy and Natural Resources Committee on March 4, and his nomination is expected to process favorably through committee and floor consideration.
• Secretary Granholm announced on March 3 that clean energy entrepreneur Jigar Shah will lead the DOE's Loan Programs Office (LPO) to support the deployment of innovative energy and automotive technologies. Choosing Shah to lead LPO suggests a reinvigoration of the office and an aggressive use of its money, as he has made his living investing capital into clean energy and is a well-known climate hawk. The LPO program currently has $40 billion in unspent funds that the agency can use to push its clean energy agenda. Secretary Granholm said the loans, which under former President Barack Obama had been used to fund clean energy startups, would now be turned to focus on speeding the deployment of clean energy sources to meet Biden's goal of eliminating carbon emissions from the power sector by 2035.
• Secretary Granholm has also launched a new Office of Energy Jobs to coordinate government efforts to help fossil fuel industry workers who have lost their jobs find new work in the clean energy industry.
• Key Takeaway: As DOE continues to execute on familiar program plans awarding funds to energy research and development, priorities are beginning to shift as the focus is placed on deployment, jobs and achieving net-zero emissions. Funding opportunities are already becoming more competitive for applicants, and industry experts continue to observe and weigh in (where possible) on how the Biden Administration – and specifically Secretary Granholm – can use existing DOE tools to deliver on their energy and climate objectives.

Congress

• Democrats have assumed practical control of the Senate for the first time in six years after victories in Georgia's dual Senate runoffs. The 50-50 split in the Senate allows Democrats the technical majority, as Vice President Kamala Harris has a tiebreaking vote.
• Despite the slim majority, lawmakers can use a tool known as budget reconciliation to pass some of their legislative priorities. Created by the Congressional Budget Act of 1974, budget reconciliation is a mechanism by which Congress can use expedited procedures to consider spending, revenue and debt-limit laws as set by an annual budget resolution. Importantly, the process allows the Senate to enact legislation with a simple majority vote, though it also limits the scope to provisions that directly affect federal spending, revenues and debt.
• President Biden and Congress spent most of February on crafting the $1.9 trillion American Rescue Plan Act (H.R. 1319), which was passed by Congress on March 10 and signed into law by President Biden on March 11. The 50-50 party split in the Senate necessitated the passage of COVID-19 rescue and relief through budget reconciliation to avoid the need for a bipartisan vote. For an in-depth overview of key provisions, see Holland & Knight's alert, "American Rescue Plan Act of 2021: Summary," March 10, 2021.)
• Long-awaited progress on a comprehensive infrastructure bill is expected in the coming months, with Senate Majority Leader Chuck Schumer (D-N.Y.) having announced on Feb. 24 that he plans to pivot the Senate's focus to infrastructure after passage of the American Rescue Plan.
• The Biden Administration is currently assembling an infrastructure package to align with the "Build Back Better" plan released during President Biden's campaign. The plan is expected to include, among other items, installing up to 500,000 electric vehicle charging stations, new funding for road and bridge repair and construction, workforce training, transportation infrastructure for underserved communities, transportation electrification projects and resources for communities transitioning away from fossil fuels.
• Meanwhile, in Congress, both chambers have begun the legislative process to draft infrastructure legislation. The House is out in front, having released several key pieces of legislation, notably the CLEAN Future Act and LIFT America Act, that will form the basis for a comprehensive legislative package in the coming months. The Senate Environment and Public Works Committee is expected to engage in a more deliberative process and kicked off a series of hearings on infrastructure on Feb. 24.
• The CLEAN Future Act has far-reaching implications for many sectors of the economy. The bill intends to create a pathway for the U.S. to achieve a national, economy-wide target for net-zero emissions by 2050 through provisions impacting the power, building and automotive sectors as well as ports, manufacturing, oil and gas extraction, waste management and recycling. It features robust incentives for renewable energy as well as increased regulation of non-renewable energy and other emitting industries. Notably, the CLEAN Future Act defines "reasonable prospect of repayment" for the Title 17 loan program (Title V, Subtitle A, Section 503) and institutes reforms to the Advanced Technology Vehicle Manufacturing (ATVM) Loan Program that also define "reasonable prospect of repayment" (Title IV, Subtitle E, Section 442).
• The LIFT America Act aims to modernize the nation's infrastructure, combat climate change, protect public health and the environment, and help rebuild the economy. The legislation authorizes up to $312 billion in spending across several federal agencies and was sponsored by all 32 Democrats on the House Energy and Commerce Committee.
• Tax proposals are also under consideration as part of the infrastructure package. Several key tax proposals were released by Democrats in February.
  • On Feb. 5, Democrats on the House Ways and Means Committee reintroduced a comprehensive climate tax bill, H.R. 848, the Growing Renewable Energy and Efficiency Now (GREEN) Act, which included a title focused on electric vehicles. The bill is expected to form the basis for the tax title under any climate-focused infrastructure package. Under this legislation, electric vehicle manufacturers would see the cap for tax credits for plug-in vehicles lifted to 600,000 from the current 200,000 cap, though the credit would drop by $500 after the first 200,000. It also offers a credit to buyers of used electric vehicles and for manufacturers of electric buses and heavy-duty vehicles through 2026. Other components focus on the renewable energy sector.
  • On March 1, Sens. Joe Manchin (D-W.Va.) and Debbie Stabenow (D-Mich.) together with Sen. Steve Daines (R-Mont.) released a bill focused on clean energy manufacturing, the American Jobs in Energy Manufacturing Act. The bill aims to invest $8 billion in manufacturing and other industrial processes to retool, expand or build new facilities that produce a wide range of products, including advanced light-, medium- and heavy-duty vehicles, components and related infrastructure. The bill will expand upon the successful Section 48C Advanced Energy Manufacturing Tax Credit, which contributed to building U.S. clean energy manufacturing facilities.
• Key Takeaway: As lawmakers turn to a large stimulus measure with a focus on climate and infrastructure, expect measures designed to fulfill President Biden's pledge to promote the use of clean energy by spending on renewable power programs. Climate and energy legislation with bipartisan backing still has the best shot at passage with thin Democratic majorities in the House and Senate. Should Democrats elect to utilize budget reconciliation, the process likely would limit the scope of what could be included in the next big legislative package, as provisions of a reconciliation bill must adhere to strict revenue-related rules.