Post-election analysis

Post-election analysis

December 08, 2020 | By Keith Martin in Washington, DC

Congress is back in Washington for a short "lame-duck" session before year end. President-elect Biden will take office on January 20. A new Congress will also be seated in January. Democrats will retain control of the lower house in the new Congress, but by a much narrower margin than before. Control of the US Senate will turn on the results of runoff elections in Georgia for two Senate seats in early January. Republicans will retain control of the Senate, unless Democrats win both seats.

A group of Washington insiders talked three days after the national elections in November about what the results mean for the renewable energy market and project finance transactions more broadly.

The group is Joe Mikrut, partner with Capitol Tax Partners and a former tax legislative counsel at the US Treasury and former senior legislation counsel on the staff of the Congressional Joint Committee on Taxation, John Gimigliano, principal in charge of federal tax and regulatory services for KPMG in Washington and a former Republican tax counsel to the House Ways and Means Committee, Christine Tezak, a managing director of ClearView Energy Partners, an independent research firm that advises investors and management of large energy companies about how policy is likely to affect the energy sector, Eric Wolff, one of several energy beat reporters for Politico, a highly respected specialized news service that was started by The Washington Post political team and is widely read in Washington, and Brandon Hurlbut, a partner with Boundary Stone Partners, a consultancy that helps business clients interpret what is going on in Washington, and a former chief of staff to the US energy secretary, former liaison to the energy and environment cabinet agencies in the Obama White House and co-host of the Political Climate podcast. The moderator is Keith Martin with Norton Rose Fulbright in Washington.

Lame-duck outlook

MR. MARTIN: Joe Mikrut, Congress must come back for a lame-duck session starting in late November. It has only funded the federal government through December 11. There is also the unresolved question of an economic stimulus bill. Do you expect a stimulus before year end?

MR. MIKRUT: As of today, yes. As of last week, I would have said no, but the Senate majority leader, Mitch McConnell, who had been opposed to doing a stimulus just a few days ago, made it clear that he thought a stimulus would be important in a lame duck. Clearly the House speaker, Nancy Pelosi, wants to do one as well, so I expect some sort of stimulus in the lame duck. They still have to agree on the size and obviously the makeup of the provisions, but I think that now that there is a will, both sides will find a way to get it done.

MR. MARTIN: There was a wide gap when the talks broke off. Pelosi was at $2.2 trillion. The Senate had passed a bill, but it was for $650 billion, of which only $300 billion was new money. How do you bridge such a wide gap?

MR. MIKRUT: That will be one of the problems, but I think the way the Democrats will look at it is that if they don't get enough done in the lame duck, they can always come back for more when presumably Mr. Biden will be president. To the extent that there is a need, it will probably force things to come to a resolution some place in the middle between the half trillion that the Senate had passed and the $2.2 trillion that the House was proposing.

MR. MARTIN: John Gimigliano, do you agree with that, and if there will be a stimulus, will Trump sign it if he ultimately loses the election?

MR. GIMIGLIANO: I will answer the second question first because I think it is easier.

I think the answer is yes for no other reason than, if he doesn't sign it, it gives an incoming President Biden an immediate win. I don't see a reason why even an outgoing President Trump would refuse to sign.

As for whether there will be a stimulus before year end, I understand what Joe said and he is probably right, but there is still friction in getting a bill done this year. The biggest obstacle is what you mentioned, which is the wide gap in dollar amounts. I think the House Democratic position was that Senate Republicans needed a bill more than House Democrats, and that's why Speaker Pelosi was sticking to the $2.2 trillion number, thinking that eventually Republicans in the Senate would come around.

A lot of them proved that they could win without it. There is no new incentive for them to agree to a higher number. That leads me to think you are going to have both sides stuck at their numbers, and whether or not they can meet somewhere in between depends on other factors: will there be continuing acrimony around the election as well as the Georgia Senate run-offs. We will have to see what the political dynamic is when they get back to Washington.

MR. MARTIN: Fair enough. Joe Mikrut, there was talk about a year-end tax extenders bill. Do you see that happening either separately or folded into a stimulus or federal funding bill to keep the government operating?

MR. MIKRUT: It will not happen separately. It will have to be folded into something else.

The tax extenders are not as popular as they once were, although there is bipartisan support for the 30-odd provisions that are expiring at the end of the year. The really popular ones have all been picked off by being made permanent or being given long-term extensions.

Another factor is that when you talk to the Democratic staffs on the tax-writing committees, they say the optics of doing tax extenders, which are primarily business provisions, but not providing relief for individuals hurt by the pandemic, are bad, and they also think the policy is bad.

Unless we get a stimulus bill that provides relief for individuals, I think the extenders will have to wait on the sidelines until later. That said, if there is a stimulus bill, then I bet we will have the extenders attached to it, at least on a short-term basis.

MR. MARTIN: John Gimigliano, do you agree?

MR. GIMIGLIANO: Yes. It would be a bad look for Congress to do a business tax extenders bill and not do another round of COVID relief. So the COVID relief bill has to come first, and then extenders can come along.

To me the question is if that COVID bill is at the lower end of the cost spectrum that we talked about, how big can extenders get in cost? Obviously if the bill is closer to $2 trillion, there is more headroom to do business relief. If the bill is much smaller, then the optics concern that Joe talked about becomes more important.

Solar tax credits

MR. MARTIN: Joe Mikrut, how likely is Congress to extend the solar tax credit this year? As you know, the solar industry has been pressing for a five-year extension of the deadline to start construction of solar projects and qualify for a 30% investment tax credit.

MR. MIKRUT: They pushed for it last year, and it did not happen then. I think the extenders bill, if it happens this year, will be a minimalist bill, and the solar credit, because it is on the books and not expired, will be something that will have to wait to be done later. I think the focus will be on things that expire at the end of this year and go away in 2021.

MR. MARTIN: John Gimigliano?

MR. GIMIGLIANO: Joe is right. Congress is not very good at dealing with expiring tax provisions until they have actually expired. It was not always that way, but in recent years, as Joe said, because some of the most popular extenders have been addressed separately, the dynamic has become that they expire and then they are extended retroactively.

Help may be on the way. A group of extenders that is popular with Republicans out of the Tax Cuts and Jobs Act — the bonus depreciation provision, the expensing of research and experimentation costs, the relief on the interest limitation — is coming up and may become the new mega-extenders that can pull the other extenders across the finish line.

But we are still probably another year away before Congress grapples with those. It is hard to see provisions that have not yet expired being dealt with this year.

MR. MARTIN: Joe Mikrut, do you agree that the odds improve next year or beyond for a solar tax credit extension?

MR. MIKRUT: Yes, and I also think that if we get into next year and there is a need for a bigger stimulus bill very much like there was in 2009, then a long-term extension of the renewable energy provisions, not just solar but all of them, would be something that could fit into a package like that. So for the lame duck, no. Next year, maybe.

MR. MARTIN: What odds would you place on maybe?

MR. MIKRUT: I'd say it's 100% maybe. [Laughter]

MR. MARTIN: John Gimigliano, what odds would you place on it?

MR. GIMIGLIANO: One percent less than what Joe said. [Laughter]

I think overall the climate is going to improve for all things renewables if you have a Biden White House. That doesn't mean anything is certain, but the overall climate will be better. Even with a Republican-controlled Senate, if that is the way it ends up, there are always deals to be made.

The question will be how much might Democrats have to give up to a Republican-controlled Senate to get some of these things? It just becomes a question of priorities. Is it the number one priority or is it the number 10 priority? You don't always get your top 10, but you might get the top one, two or three. It will put a lot of pressure on a Biden administration, as well as the Democratically controlled House to decide whether renewable energy and the climate agenda are in the top three? If so, then there is the potential to get some of these things done.

MR. MIKRUT: I agree with everything that John said, but I think that the Democratic priorities change if the Senate remains in Republican hands.

With Democrats in control, the priority will be health care, shoring up the Affordable Care Act.

That is not going to happen with a Republican Senate. So the priority will be something else and, if the economy continues to worsen, infrastructure might creep into the top three or four. If there is an infrastructure bill, then I think there will be a significant tax title like there was in 2009.

MR. MARTIN: We should say that control of the Senate seat will turn on run-off votes for two Senate seats in Georgia. Republicans control 50 seats and Democrats have 48. If Democrats can win both Georgia Senate seats, then they will have control over the Senate because the vice president can cast the deciding vote.

MR GIMIGLIANO: The Georgia run-off date is January 5. We could be waiting for some time after to get a resolution.

MR. MARTIN: One more question about this year, and then we will move into next year. The US Chamber of Commerce has been lobbying for a plan to allow quick refunds of 31 business tax credits claimed in 2019 or 2020, or carried into those two years from as far back as 20 years ago. Joe Mikrut, is that likely to be enacted?

MR. MIKRUT: I don't think so in the current climate.

The Democrats, even though they passed business relief in the original CARES Act and allowed a five-year carryback period for net operating losses, had buyer's remorse afterward and have been trying to repeal the carryback. If that is the dynamic, then it will be very hard to provide for refundability of the business tax credits, even though some of the credits that would be refunded are things that are generally Democratic priorities. I just don't see it for the lame duck.

If we get into next year and there is a dramatic need for an economic stimulus, then the issue will come up. There is some bipartisan support for the idea, but the bills have been introduced by Republicans and I think the idea will be viewed more as their priority. It could happen through horse trading if Republicans retain control of the Senate, but it will still be difficult to get that one done.

MR. MARTIN: John Gimigliano, same answer?

MR. GIMIGLIANO: Yes, for a bunch of reasons.

One is the cost of the provision is enormous and if Democrats truly view it as a Republican priority, then it would not be surprising for them to tell Republicans that they need to help find a way to pay for it. Republicans are not going to go for that. I am not sure how much of a Republican priority it actually is.

Keith, you know this as well as anybody that back in the financial crisis in early 2009 when we had a very similar conversation about the renewables credits and finding a way to add liquidity at a time when tax equity had all but vanished — you know, because I know you were involved in those discussions — Democrats were not that interested then in making those credits refundable, and that is what ultimately gave birth to the 1603 cash grant program. I don't think Democrats' thinking — although it have been 10 years — has really changed in terms of writing checks to the private sector, even businesses they favor, like renewables. You never say never, but I think it is a real uphill push.

Early 2021 stimulus?

MR. MARTIN: Let's move to next year. I have two more questions for Joe and John, and then I want to bring in the larger group. The first question is, if Congress passes a stimulus in the lame-duck session, will that leave room for any large economic measures early next year? What would Biden be able to do?

MR. GIMIGLIANO: I think the answer to that is yes. One of the first things that a Biden administration will say is there is work left to be done.

If we do get any kind of COVID relief or stimulus bill during the lame-duck session, it will be on the smaller side, and I think there will be a lot more that the Biden administration feels is left to be done. Joe is right. It could be infrastructure oriented. When we talk about infrastructure, lots of things could happen. Republicans and Democrats generally view infrastructure differently. Republicans are less interested in sending money to state and local governments to do state-and-local spending, and Democrats are less interested in sending checks to the private sector to do private-sector spending. I think they will find a way to get something done, and that is the kind of thing that I expect to see early on.

MR. MARTIN: Joe Mikrut, if you agree with John Gimigliano that there will still be room for some sort of additional economic measures next year even if a stimulus bill passes in the lame duck, on what timeline do you see that happening next year?

MR. MIKRUT: An incoming administration likes to get things done in the first hundred days. I would put action toward the end of that period, maybe going into the second or third quarter of the year. The administration has to get its team in place. That will take time. All of this will depend on what the economy and job report look like. If things worsen significantly, that could accelerate the pace.

MR. MARTIN: Let's broaden the discussion. Apart from the 2017 corporate tax cuts and the CARES Act last spring, Congress has largely been sidelined by partisan gridlock at least the last two years, and one could argue even the last four years. Is anything likely to change, particularly if Trump is waiting in the wings as a potential 2024 presidential candidate?

MR. HURLBUT: I am not totally sure that a stimulus will get done in the lame duck. Even if one is passed, you could have Mitch McConnell take the view that "we've done everything we can" and Biden will not get a second bite at the apple.

MR. MARTIN: Fair enough. John Gimigliano, do you see more partisan gridlock going forward? Has much changed?

MR. GIMIGLIANO: A lot of this comes down to whether the Republicans control the Senate. There is a history of Mitch McConnell and Joe Biden working together. Perhaps they can find a way to do what is needed, even if it is not everything that Democrats hope will be done. If the Democrats are able to wrest control of the Senate away from Republicans by getting to a 50-50 split, which would give them control, then I expect to see significant action because history tells us that when one party controls everything, it is go-for-broke time because you do not know when you will have that chance again.            

Even if the Republicans maintain control in the Senate, there will be things that have to be done. There are the debt limit and government funding, and every time you have a must-pass bill, there is an opportunity to add other things, and some of those things might be in the energy sector.

MR. WOLFF: It is interesting to me how the actual election results have changed everyone's tune.

Before the election, when there was a widespread assumption the Democrats would take the Senate, we heard from Republicans that they were going to start calling for austerity and that we would hear about nothing but austerity from that caucus for the next two years, which suggests that Senate Republicans will not back any kind of spending. As soon as the results came in, we had Mitch McConnell saying, "I want to get a stimulus done before the end of the year."

So I ask, why before the end of the year? Probably because he would rather have Donald Trump sign it than have to worry about getting Joe Biden to sign it. Strategic considerations like these will play a role.

Does Nancy Pelosi agree to a deal? On the one hand, she is under pressure to help the American people who are hurting, but on the other hand, she is saying, "If I wait two months and have a friendly White House, then we can start talking about trillions of dollars."

The point is it is not clear we will get a deal in the next two months.

Likely executive actions

MR. MARTIN: Christi Tezak, the most visible actions by Trump have been executive or regulatory actions — rolling back environmental regulations, pulling the US out of the Paris climate accord, tariffs on solar panels, Chinese goods, steel, wind towers, you name it. In which areas is Biden most likely to use executive or regulatory action as president?

MS. TEZAK: I think Biden will be substantially limited to executive and regulatory action, even if he has a 50-50 Senate that is nominally under Democratic control.

Even if the Democrats were to eliminate the filibuster, they would still find it hard to move forward with massive policy initiatives. For example, legislating pollution limits on greenhouse gases does not pencil out for us. In fact, we could not make it pencil out, even if the Democrats had 54 Senate seats just because of the breakdown of Democratic senators from oil-and-gas producing states versus consuming states.

The only thing that might be possible in a 50-50 Senate is a clean energy standard, but likely not the one as ambitious as proposed by Joe Biden's campaign. Any such standard would need to define "clean energy" broadly to pass. It would probably need to target 2050 rather than 2035. A narrowly divided Congress implies that you probably need to bring nuclear and conventional hydro along just to start the conversation.

This takes us to what can be done on an executive and regulatory basis. The substantially more conservative judiciary that has materialized over the last four years of the Trump administration is likely to challenge any administration that tries to push the bounds of its statutory authority. We are even seeing judges appointed by Democrats be a little more attentive to things like standing and clear links back to statutory authority as they review cases that are coming before them now. Given this, something as ambitious as the Clean Power Plan looks doomed.

MR. MARTIN: If such a plan is proposed, you may not see it implemented for several years because of court challenges.

MS. TEZAK: If the Clean Power Plan was stayed by the Supreme Court in 2016, then it is hard to imagine the current court taking a more favorable view. Simply resurrecting the Clean Power Plan will not work.

That is why things like a clean energy standard would help. There are other things that a Biden administration can do, like revising the National Environmental Policy Act regulations that were recently finalized, pulling them back from judicial review and modifying those.

MR. WOLFF: The executive branch is huge and has vast authority, as we have witnessed for the last 12 years, in particular.

We probably will not see a new Clean Power Plan, but the environmental movement has largely shifted its tactics. There has been a big move away from things like carbon taxes and other economy-wide actions to what environmentalists call "standards and justice," where they hone in on particular industries. A clean energy standard could be a part of that. Clean energy standards have generally been popular. I don't know if you can move them through a Republican Senate, but certainly in 2018, we saw a lot of governors win on such standards at the state level.

I had a bunch of people tell me before the election that the federal government has a lot of buying power, and merely shifting the federal government's buying power toward efficiency and renewables is wind in the sails of the renewables industry.

The Department of Interior has been dragging its feet on offshore wind. That will change.

The other issue you mentioned is tariffs and trade. The Obama administration put duties on imported solar panels. It is not clear to me that the Biden administration will drop the global tariff on solar panels that only has a year left. Biden has real animosity toward China. He called the leader of China a thug. That is not the sort of thing that a Chinese leader forgets. It is probably a genuinely held opinion.

A lot of things can happen on the executive side without Congress. Sure, a Democratic Senate would make more things possible for renewables, but just shifting the White House is addition by subtraction.

MR. HURLBUT: When I was in the Obama administration, after we lost control of the Congress in 2010, we had to think really carefully about how to use executive branch authorities. You will have people going into the Biden administration who served in the Obama administration and have experience with that.

Over the last couple of years, while Democrats have been out of power, there has been a lot of thought behind the scenes about how to use executive branch authority. They will not start on day one from scratch. They will have a whole menu of policy options that people have been thinking about for years to go implement if they want.

One example, for the project finance folks, is the Department of Energy loan guarantee program has tens of billions of dollars in unused authority that can be a down payment on an infrastructure package. The Department of Agriculture also has unused loan guarantee authority. Those programs will be open for business, and you will see a lot of activity.


MR. MARTIN: Eric Wolff, last night, Trump replaced the Republican chairman of the Federal Energy Regulatory Commission, Neil Chatterjee, with James Danly. You broke the story. What is that all about?

MR. WOLFF: Tricky question for me to answer because I am working on further developments and hope to have another story out later today with my colleague, Gavin Bade.

The part that I can talk about is that there was concern within the administration about some of Chatterjee's more climate- and renewable-friendly policies. The administration was not thrilled with Order 222, which was the order that allowed distributed energy resources, like small batteries and rooftop solar, to aggregate and participate in wholesale markets. The administration did not love that there was a carbon pricing technical conference or a carbon pricing proposed policy statement.

So former Chairman Chatterjee might have been a bit on the outs. I can't get into why the Trump administration did this in the middle of counting ballots in an election. We are still working that part of the story. I guess the president felt the need to make a change, even though Danly will likely only be chairman for a couple of months.

I will be interested to hear the opinions of other panelists on whether the two nominated FERC commissioners will get Senate time. I am skeptical that they will. If they do not get confirmed, then you almost certainly will have Chairman Richard Glick as of January 20, which would give him control of the agenda even though he remains in the minority. Control of the agenda is not trivial. It means maybe we start to see things like downstream carbon dioxide emissions inside pipeline permits and some other things about which Glick has been very vocal during his time on the commission.

MR. MARTIN: Why would the Senate not take up Allison Clements and Mark Christie, the Democratic and Republican nominees for the two open seats on the commission? Wouldn't failure to confirm them just leave the field to Biden to appoint two Democrats?

MR. WOLFF: I would really rather defer to our Congressional experts, but there is only a certain amount of time left on the Senate clock. McConnell has already announced his preference for doing a COVID stimulus bill. Putting another Republican and another Democrat on the commission secures the Republican majority, so maybe McConnell will decide that is important, but he may just decide not to prioritize it.

MS. TEZAK: I agree with Eric. It depends on what McConnell wants. It is not uncommon at the end of Congressional terms, although not as common at the end of the presidency, for the Senate to do batches of appointments. If the Senate puts both of them on the commission, then you will have five FERC commissioners, with a three-to-two Republican majority, but not for long.

When Chatterjee was still chairman, he made it clear that he did not plan to leave before his term expires at the end of next June. Danly has not made such a commitment. He could take his short tenure as chairman, put the feather in his cap and move on to the next thing, clearing the seat for someone else.

If Danly goes back to being a regular commissioner, one of the interesting things is to what extent does Chatterjee become the Anthony Kennedy or the John Roberts of FERC, with a willingness to reach across the aisle? Does he become a swing vote at least on some electricity issues? He and Glick are not on the same page about PURPA, but on carbon pricing and potential offshore wind transmission interconnection and other issues, he is more aligned with Glick, and the two of them have moved orders over Danly's dissent.

MR. MARTIN: But only until June, Christi.

MS. TEZAK: Yes, but it takes time to get a new commissioner through the Senate. You know there will be things that are going to be on rehearing before the commission between now and June.

MR. WOLFF: I need to throw in one more interesting detail that my colleague Alex Guillen mentioned in terms of Chatterjee. There were rumors a month or two ago that Chatterjee was interested in running for governor of Virginia, and he did not slap those down. There is a Facebook group. The filing deadline for that job is the end of March. He says he will serve out his term, but if he seriously wants to run for public office in Virginia, he can't serve out his term. The question is how long the Republican majority at FERC will last.


MR. MARTIN: Eric, developers of utility-scale renewable energy projects rank grid congestion as their number-one problem. It proved impossible to get Congress to pass the same siting authority for transmission lines as for gas pipelines during the Obama administration. The real action has to come from FERC. Is anything likely to be done on transmission?

MR. WOLFF: If nothing changes, no, because it is too easy to stall new transmission lines through litigation. Transmission lines have to go through red and blue states, and both types of states seem to agree that they don't like the look of transmission lines.

But it may be an area where an agreement is possible at the federal level. A number of Republicans want to promote new infrastructure projects. There is a fair amount of environmental support for transmission lines. I have talked to folks in gas trade groups and in some of the renewables trade groups who say they are ready to put real lobbying muscle behind trying to get siting authority over at FERC.

Can they get it done? Maybe some of the vote counters have a better sense of it, but the fact that trade groups on both sides are ready to make that a priority is interesting. If you talk to Abigail Ross Hopper at the Solar Energy Industries Association, she will tell you her group has had to spend the last four years on defense. It has had to defend against import tariffs and fight off a coal subsidy at the beginning of the administration. In a Biden administration, the solar industry gets finally to start playing offense. It believes that it should be able to win support from both Republicans and Democrats on some issues, and maybe transmission is one of them.

MS. TEZAK: I will take the other half of that bet.

Offshore wind

MR. MARTIN: As already mentioned, offshore wind projects have been stalled. The Bureau of Ocean Energy Management placed a hold on construction permits in August 2019. Trump has been no fan of wind, but there has also been a political element to this. There is opposition from fishermen. Brandon Hurlbut, is offshore wind the market segment most likely to be helped by a Biden win?

MR. HURLBUT: It could be. What I will be paying attention to is the eventual structure of the White House clean energy and climate policy-making apparatus because that will provide insight into how Biden plans to exert influence over the agencies to drive his clean energy and climate agenda.

Some people are calling for a climate council within the White House that would have the equivalency of the National Security Council or the National Economic Council. Then you would have a kind of climate cabinet apparatus where you would drive a top-down policy agenda. I will be paying very close attention to whether they do it that way, or they have a smaller office like they had with Carol Browner, the Office of Energy and Climate Change, or just a top senior advisor who owns the issue.

MS. TEZAK: One problem with the extended review of Vineyard Wind is that it has almost become a programmatic-level analysis of offshore wind. However, at the end of the day, that might play out as a net positive because it not only could help approval of the Vineyard Wind project to withstand judicial scrutiny and challenges from the fishermen, but it might also prove to be a useful building block for other projects.

We think there is a possibility that the breadth and depth of the Trump administration's analysis, to the extent it has been a delaying tactic, may actually prove to be a step forward for the next round of offshore wind projects.

Politics of climate change

MR. MARTIN: Interesting point. Eric Wolff, you mentioned that FERC issued a policy statement recently suggesting it is willing to accommodate carbon pricing by RTOs. Does anyone see a shift in attitudes in Washington about climate change if Trump leaves? John Gimigliano?

MR. GIMIGLIANO: The real question is whether there has been a shift on the Republican side because the Democrats have been there for years.

I think there is some softening on the issue. During my time on the House Ways and Means Committee staff, a Republican-controlled Congress enacted the solar investment tax credit with broad bipartisan support. Something changed during the Obama years that sort of rallied Republicans against climate change, but I do think that opposition is softening. Is it a sea change? No, but maybe you don't need a sea change. If you just get a small group of Republicans to go along, you could have a policy change in terms of how Congress responds to the problem of climate change.

MS. TEZAK: Carbon pricing in the wholesale electricity market that FERC oversees is not as much a partisan issue. The carbon price in wholesale market tariffs is being offered as a bridge between the preferences of the states that want to decarbonize and the owners of conventional assets, particularly natural gas, that would like to remain in the market.

There is a common interest that has changed the conversation.

The hope is that something like carbon pricing, which would look at carbon more like SO2 or NOx emissions and start baking it into the price of dispatch, would be a more market-oriented solution than the individual policy initiatives that are still underway at the state level. It might be a way to harmonize the competing interests more effectively.

MR. WOLFF: Christi has accurately articulated former Chairman Chatterjee's hope and dreams for carbon pricing. What he really wants to see — and the natural gas industry in particular, also wants to see — is a nice carbon price that can work smoothly inside markets and hopefully motivate states to drop or at least relent on all of their carbon climate policies and renewable portfolio standards.

But that is not reality. During the period FERC adopted the minimum offer price floor that is intended to counteract subsidized state subsidies, we have only seen states increase their climate goals, increase their renewable portfolio standards and become more aggressive instead of backing down. They are having serious conversations about exactly how to extract themselves from the markets and take over their own resource capacity.

Now that may prove too difficult. I talked earlier about how some big chunk of the environmental movement has shifted toward standards and justice and away from carbon pricing. Carbon pricing is old news.

MS. TEZAK: The environmental movement has never been a fan of carbon pricing. I agree.

MR. WOLFF: I am really skeptical that we will get a nice easy transition, which is certainly what Chatterjee wanted.

MS. TEZAK: I didn't say it would be easy. The question was whether the environment has changed. The conversation has changed. It is at least broadening a bit, but it remains to be seen where the conversation goes with different leadership in the White House and how active Trump remains on the political scene.

MR. WOLFF: We spent a lot of time talking about what happens to the Senate, which is not trivial, but if we get to a Democratic majority and a Democratic chairman at FERC, then does the minimum offer price rule even survive? Glick hates the MOPR, and I doubt Allison Clements is a fan of the MOPR.

If the MOPR goes, then you have state subsidized renewables competing against differently subsidized fossil fuels, but only one of these has to worry about a variable commodity price. The other one is zero margin.

MR. MARTIN: We are down to the last 10 minutes. Let's try to work in some audience questions, but before we do, I have one quick question for Joe Mikrut. Do you think a carbon border adjustment is likely next year?


MR. MARTIN: That was short and sweet.

MR. MIKRUT: For the same reasons that people said carbon pricing is a step too far, carbon border adjustments are in the same category.

Audience questions

MR. MARTIN: Moving to audience questions, if there is an infrastructure package in early 2021, do you think it will be paid for or debt-financed, and will the answer to that question affect the scope of the package that can be passed?

MR. GIMIGLIANO: The answer depends in part on who controls the Senate. If you have a Democratically controlled Senate, there will be a much greater willingness to dip into parts of the Biden tax plan to raise taxes in order to offset the cost, especially if the Democrats get rid of the filibuster. They could probably find a way to have at least a partially paid-for bill.

If the Republicans control the Senate, then I don't see any way that an agreement will be reached to pay for it. In that case, it will end up having to be pitched as more of a stimulus kind of bill. Historically, Congress doesn't pay for stimulus bills. There would be a limit, in that case, on the size because there is only so much that Republicans and probably even Democrats are willing to do in terms of deficit-financed stimulus.

MR. MIKRUT: I agree. I think the Democrats' priorities would be a combination of debt finance and some of the tax raisers, like a higher corporate tax rate and perhaps an increase in taxes on individuals earning more than $400,000 a year. I don't think the Biden administration will be interested in doing tax reform just for the sake of tax reform. It will want to raise the revenue to spend it for specific reasons. It is hard to imagine a Republican-controlled Senate voting to roll back some of the 2017 revisions, unless there are significant concessions in the same package. But I can't see a fully paid-for package in any scenario.

MR. MARTIN: Let me go back to Eric Wolff. An audience member asked, can you say more about the future of the MOPR after the Biden victory?

MR. WOLFF: It will depend on the composition of FERC. Democrats hate it. Their constituents hate it. Environmentalists hate it. Environmentalists will talk your ear off about how it is a straight-up subsidy for incumbent fossil-fuel generation. Glick has made his opinion of the MOPR very clear. If you end up with a Democratic majority at FERC, my best guess is that they will simply withdraw the whole thing.

MS. TEZAK: FERC can't just withdraw it.

MR. WOLFF: It will figure out a way to neuter it.

MS. TEZAK: There are a couple ways.

MR. WOLFF: Go for it.

MS. TEZAK: One way to neuter it is for PJM to come up with an alternative plan. I think various stakeholders in PJM are currently considering what they can propose to FERC as an alternative. Certainly taking a different approach to basic generation services is step one. Revisiting the draconian limits on bilateral contracting for public power is a big deal for states like Virginia, where Mark Christie is from. The MOPR makes it more challenging for states like Virginia to meet future targets to be carbon free. FERC can withdraw orders that are under litigation in the US court of appeals for the 7th circuit. It could revisit them. However, I think what any FERC would prefer to see is for PJM to come back with a replacement program that makes stakeholders a lot happier than they are today.

MR. WOLFF: But not any FERC because the current FERC already had its chance at that and did not take it.

MR. MARTIN: Let's see how many other questions we can fit in quickly with very short answers by one person. Brandon Hurlbut, an audience member asks, what plans does the Biden administration have for green hydrogen?

MR. HURLBUT: Climate hawks want all options on the table. The Biden team will try to take every approach possible to addressing climate change. Hydrogen is one of those options, and I think you could see more support for it.

MR. MARTIN: Joe Mikrut, what is the likelihood the government will allow for direct payment of federal tax credits under a Biden administration?

MR. MIKRUT: I don't think refunds for all general business credits will happen. I think Biden will support the more limited direct-pay proposal for renewable energy tax credits that passed the House the first week in July. It allows owners of new renewable energy projects to apply to the IRS for quick refunds for 85% the federal tax credit amount. The haircut is recognition that when the government makes a direct payment, the project owner is able to keep the full payment, unlike a tax credit that must be bartered in the tax equity market.

MR. MARTIN: Another audience member asks, if Secretary Bernhardt at Interior announces a decision on Vineyard's construction permit that is adverse to the offshore wind industry, will a Biden appointee be able to reverse that decision?

MS. TEZAK: Probably yes, because there is usually a procedure for administrative reconsideration and then there is also the opportunity to go to court. Once you go to court, a differently aligned administration could request an abeyance or a voluntary remand of the issue to Interior to revisit it.

MR. MARTIN: Related question, can Biden supersede Trump's executive order establishing a moratorium on new offshore wind leasing in North Carolina, South Carolina, Georgia and Florida? Same answer, Christi?

MS. TEZAK: Yes, executive orders can be superseded by their successors.

MR. WOLFF: Executive orders are even easier to reverse than an agency action.

MR. MARTIN: Eric Wolff, do you have a view on the fate of the Trump executive order on the bulk-power system that has bedeviled the power industry because it is so unclear?

MR. WOLFF: No, for some of the reasons that I said before. You have a real chance that Biden will bring in people who will try to untangle it, but Biden's view on China is pretty negative. It has been so for a while. There may be project developers and investors on this call who can at least rest a little easier that the Biden administration will not use the order to target all Chinese products in the same way people were really nervous about how the Trump administration would use the order.

In terms of cybersecurity, everyone agrees that grid cybersecurity is a concern. China is not a friendly player. The Biden administration may try to clarify the order and make it more straightforward, but it may also decide that this is a real issue that is worthy of its attention.

MR. MARTIN: Last question, as we are at the end of our allotted time. John Gimigliano, do you see section 45Q tax credits for carbon sequestration in the mix if Congress extends tax credits for renewable energy?

MR. GIMIGLIANO: Yes if Republicans are in control of the Senate. That is one thing that could be an area of bipartisan agreement by throwing a lifeline to some carbon-emitting facilities. If Democrats are in control, then the question will be whether the Democratic caucus will agree to it. In the context of a larger deal, I think it could.