Renewable energy firms shift focus as reconciliation prospects fade
Executives look to stand-alone bills for climate action
Business leaders focused on clean energy say they are shifting their attention toward smaller bills targeting specific climate issues as the chances for Congress to pass a broader budget reconciliation measure diminish.
Executives across electric utilities and renewable energy companies signaled in earnings calls last week they are moving on from the House-passed $2.2 trillion climate and safety net reconciliation package.
Instead, companies in the energy industry — and across other sectors — are upping the ante on Congress to pass separate legislation on extension of the production and investment tax credits that have supported the build-out of solar and wind energy, as well as funding to support climate-friendly solutions in low-income and disadvantaged communities.
The business case for stand-alone bills is that not only would they help their companies' bottom line, but it could ward off investors concerned with environmental, social and governance issues that have brought forward shareholder proposals on climate matters.
“I think there's a chance that the Build Back Better climate provisions would pass as written or they could be slightly scaled back,” said Edward Fenster, co-founder of rooftop solar installer Sunrun Inc.
During Sunrun’s earnings call on Feb. 17, Fenster told analysts the climate provisions will likely have two opportunities to become law: either in March once Sen. Ben Ray Luján, D-N.M., returns after recovering from a stroke, or at the end of the year as part of broader legislation on various tax extensions. The renewable energy tax credits have been previously extended in similar measures since 2015.
“I do think there's interest, including bipartisan interest frankly, in trying to get something done there where possible,” Fenster said.
Executives are making the pivot as Senate Democrats rethink their strategy to pass the reconciliation package dubbed the Build Back Better Act. Democrats have yet to get Sen. Joe Manchin III, D-W.Va., on board with the legislation due to his reservations on spending.
Democrats aimed to pass the bill through the budget reconciliation process, which requires 51 Senate votes instead of 60 and allows them to avoid a GOP filibuster. With no Republicans supporting the entire package, the Democrats need all 50 members including Manchin to pass the bill with Vice President Kamala Harris to serve as the tie-breaking vote.
“As we look at that, the Build Back Better Act is not going to pass in its current form,” said Chuck Sutton, vice president of sales at REC Silicon ASA, a company that produces silicon materials used in solar panels.
Companies have been advocating and lobbying for lawmakers to support tax credits for renewable energy and other clean energy technologies alongside provisions to support electric vehicles, carbon capture, energy efficiency and environmental justice. They argue these provisions are critical to reaching their corporate emission reduction targets and satisfying the Biden administration’s climate agenda.
This month, a coalition of 27 companies including BP America, Duke Energy Corp. and General Electric Co. sent a letter to Senate Majority Leader Charles E. Schumer, D-N.Y., and House Speaker Nancy Pelosi, D-Calif., urging leadership to overcome the partisan gridlock to pass the climate provisions. The letter also included prominent non-energy companies, such as Salesforce, HP Inc. and Intel Corp., whose ESG and sustainability initiatives would flourish with the climate components of the reconciliation package.
“America’s ability to compete in a low-carbon global economy will be shaped by the choices we make today,” they said in the Feb. 9 letter. “The actions you take to invest in U.S. leadership in the low-carbon economy will greatly affect the extent to which we can realize the commercial opportunities associated with the export of technologies, products and expertise.”
"The climate and clean energy provisions in Build Back Better, including tax credits for innovation as well as grants and other funding to support communities in transition, would harness market forces and help spur private sector investment at the scale needed to meet our long-term climate goals," they continued. "Crucially, these investments will also support the growth of sustainable domestic industries and the good jobs that come with them in communities across the country."
ESG investors have also been vocal about the reconciliation package. Asset managers including Boston Common Asset Management, Generate Capital PBC and Miller/Howard Investments Inc. have supported the legislation in a public letter in December organized by Ceres, a leading nonprofit association for impact investors.
"Inaction in the face of the climate crisis will prove far more costly than the necessary and cost-effective investments to take action," according to the letter.
Legislation focused on the reconciliation package's climate aspects could incentivize companies to address ESG investors' concerns on corporate emission reduction goals and other decarbonization activities, with the hopes of reaching an agreement with investors that ends with them withdrawing shareholder proposals.
Companies seeking to avoid shareholder votes on ESG issues now face a higher burden to have the Securities and Exchange Commission grant their requests after the agency’s staff last issued a legal bulletin on no-action requests under a provision known as Rule 14a-8 authorized by the Securities Exchange Act of 1934.
The agency said it will be more likely to require companies to hold shareholder votes on public policy issues such as the environment and worker arbitration than it was during the Trump administration as part of its repeal of three legal bulletins issued between 2017 and 2019.
While executives have touted bipartisan support for several provisions focused on energy, climate and environment, some are becoming wary about the future of climate-focused legislation. Even if the reconciliation bill splits into smaller bills, the climate provisions would still be competing with a host of issues, including government funding and upcoming Supreme Court nomination for consideration in a split Senate.
“I think long term, both parties agree that we should do something” on climate, said Tom Fanning, chief executive of Southern Co., an Atlanta-based electric and gas utility company that operates in six states. Southern was one of the signatories on the joint letter to Schumer and Pelosi.
“I think the methods of doing something, especially in light of the inflation signals we are seeing and potentially the national security issues we are seeing right now lend themselves to nothing happening for the rest of the year,” Fanning told analysts on Feb. 17. “I wish it would. I don't think it will.”