Tim Steller's column: Arizona industry's boom could fizzle due to new mega-bill

If adding $3.3 trillion to the national debt isn’t enough ...

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There’s another issue that Rep. Juan Ciscomani cares about that might convince him not to vote for the mega-bill passed in the U.S. Senate Tuesday: The harsh impacts on clean energy and related industries.

Ciscomani, the Tucson Republican representing Congressional District 6, flew back to Washington, D.C., on Tuesday as the House swung into discussions of the bill. Pres. Trump has set an arbitrary July 4 deadline to pass the bill, and Congressional Republicans are still apparently bowing to that demand, no matter what the damage of the rush.

It is perhaps folly to think Ciscomani might not vote for the so-called Big Beautiful Bill in the end. After all, he grumbled about parts of it related to Medicaid and clean-energy tax breaks, signing onto multiple sternly worded letters, before ultimately voting for it anyway in late May.

But he is a vice-chair of the Conservative Climate Caucus in Congress. And there is a growing Arizona industry that has been fueled by tax credits and related policies, many of them in the Inflation Reduction Act. Renewable energy, battery storage and electric vehicle businesses have been popping up around the state.

Total investment has been about $12 billion, with around 19,000 jobs, said Steven Zylstra, president and CEO of the Arizona Technology Council.

Now, the policies driving that growth are scheduled to be phased out or abruptly terminated under this reconciliation bill.

Take, for example, solar projects at commercial or utility scale. They have had a good run thanks to a tax credit which offers up to 30% of project costs. It’s known as “48E,” for its line in the federal codes.

Suddenly, under the new bill, projects that could be proposed and completed over a longer timeline must be 100% complete by the end of 2027 in order to get the tax credit. After that, it’s gone.

This threatens to drive up the price of electricity, because solar projects are being built relatively fast and cheaply due to the tax credit, said John Mitman of Obodo Energy Partners. With this, they won’t be so cheap, but no other source of power will be buildable quickly, since natural-gas projects have too big a backlog.

“It’s just going to be a gigantic void that can only be filled by solar energy and storage, but it’s going to be a lot more expensive,” Mitman said.

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In an email, Tucson Electric Power spokesman Joseph Barrios said "We’re not aware the bill would impact any of the projects we’ve recently announced." But he added, "We anticipate the bill could increase the cost of renewable and energy storage systems we own and operate in the future, and has the potential to increase the cost of clean energy delivered to customers through power purchase agreements."

Residential solar installation is likely to swoon, too. A different tax credit with a different number and letter, 25D, would be phased out by the end of this year under the bill.

“About 95% of our clients use the residential 25D tax credit,” said Louis Woofenden of Net Zero Solar. “This is really bad for us.”

A lot of factors are at play, but Woofenden can foresee his company’s business shrinking by about half. With the tax credit, consumers’ investments may take 7-10 years to pay off financially. Under this change, it could take 12-16 years, which might be too much.

“It pretty much doesn’t pencil out anymore” for many customers, he said.

Arizona’s fledgling electric vehicle industry, too, could suffer as a result of the bill. Another tax credit with a different number and letter, 45X, has boosted companies such as Lucid Motors, which has its American plant in Ciscomani’s district in Casa Grande.

A key aspect of this tax credit is it requires final assembly in the United States. Changes in the mega-bill would make “unworkable for many of the manufacturers trying to use it now,” said Ingrid Malmgren, senior Policy Director at Plug In America, an EV industry group.

While that affects the supply side of the EV industry, the demand side also would be hurt. Tax credits for buying electric vehicles would end Sept. 30, meaning fewer Americans would be able to afford the cars. The market will likely shrink.

Ciscomani is clearly aware of these risks. He’s signed onto at least two letters asking for some of these credits, and this burgeoning industry, to be protected.

But he has not shown himself to be a model of courage in the past on this particular bill. He demanded protections for Medicaid in similar letters before ultimately signing onto the House version of the bill anyway in May.

So maybe additional arguments are needed, beyond the threat to this industry, and the Congressional Budget Office estimates of how much it would inflate national debt, and how many people would lose insurance, according to the CBO, and how some hospitals would be threatened with closure.

Maybe sheer unpopularity would work? While some portions of the bill are popular, most polls show the bill is opposed by the majority of American voters. In the most recent, a Quinnipiac Poll released Thursday, 55% opposed the bill while 29% supported it.

There’s got to be room to vote against a bill, or at least change a bill, that the people simply don’t like, especially when it hits a growing Arizona industry hard.