Morningstar Magazine - June/July 2017 - 75

fossil fuel generation. Just to meet RPS, we
forecast 8% average annual growth in wind and
solar capacity through 2024, assuming little
change in hydroelectric capacity. Other forecasts
such as that from the Nuclear Energy Institute,
which tracks individual project development and
proposals, suggest similar growth rates.
There are four primary reasons we think the solar
and wind federal tax incentives in the 2015
Omnibus Appropriations Bill will remain and might
even be extended yet again:
1 Treasury Secretary Steve Mnuchin said during his

confirmation hearings that he supports the current
policy, particularly the production tax credit.
2 Senate Republicans from renewable-energy-heavy
states will oppose tax incentive repeals.
3 Renewable energy growth would support the Trump
administration's manufacturing-centric platform.
4 The Trump administration would rather use
political capital to target infant environmental
regulation, such as the Clean Power Plan
and Regional Haze and Clean Water rules, than
fight renewable energy tax incentives.
We think the Senate will be the key hurdle if
Congress tries to unwind current renewable

energy tax credits. Republicans hold 52 seats
and likely can only afford to lose one vote
to pass legislation eliminating renewable energy
tax credits. Thus, we think Sen. Charles Grassley,
R-Iowa, and Sen. Dean Heller, R-Nevada,
will be pivotal votes. Given their states' strong
support and growth opportunities in
renewable energy, we doubt either one would
favor material changes in renewable energy
tax incentives.

Wind energy is increasingly a domestic business.
MidAmerican Energy estimates that 90% of the
components for wind turbines are made
domestically today, compared with 90% of the
components being imported 20 years ago.

Wind and solar energy also support Trump's
domestic manufacturing job creation
agenda. Rep. Tom Reed, R-New York, is the most
recent congressman to highlight this in a recent
editorial in The Hill. Wind energy alone supports
more than 100,000 jobs with the potential
to add another 148,000 jobs in the next four years,
according to a recent analysis by Navigant
Consulting. Rural areas that generally favored
Trump in the 2016 election are likely to be the
biggest beneficiaries. By 2020, the states
with the most wind industry jobs will be Texas
(31,500), Colorado (22,900), and Iowa (17,300),
according to Navigant's projections. The fastestgrowing profession in the United States is
wind turbine technician, according to the Bureau
of Labor Statistics.

EXHIBIT 1

Renewable Boom State standards should boost renewable energy demand.
Potential Non-RPS Growth
Obama Administration
Trump Administration RPS-Only (Morningstar forecast)

Renewable Energy % U.S. Electricity Demand
U.S. Electricity Demand

Renewable Energy
1,000
TWh

20
%
18

800
16
600

14
12

400
10
8

200
2009

2012

Source: Morningstar, U.S. Energy Information Administration.

2015

2018

2021

2024

The solar industry has also been a key contributor
to job growth in the United States. The
solar industry added 51,218 jobs in 2016, a 24.5%
increase from 2015, compared with a 1.45%
increase in the U.S. growth rate, according to the
Solar Foundation. A total of 260,077 people are
employed in the solar sector, with roughly
40% in the residential area. The Solar Foundation
estimated that one out of 50 jobs created in
the United States in 2016 was in the solar industry,
and it forecasts that sector jobs will grow
another 10% in 2017.
In addition to renewable energy growth from
state RPS, we see increasing demand from
largecorporations and other institutions as part
of their efforts to reduce their own carbon
footprint. Alphabet GOOG is the largest corporate
purchaser of renewable energy in the world
and now has commitments for over 2.5 GW
of capacity. Google's goal is to provide 100% of its
operations using renewable energy. In addition
to purchasing renewable energy, Google
has invested $2.5 billion in renewable energy
projects across the globe. It is not surprising that
data center companies such as Google have
been the early entrants in this market, given their
electricity intensity.
Additional future renewable energy demand might
be driven by consumers such as Microsoft
MSFT, Amazon.com AMZN, Salesforce.com CRM,
Facebook FB, Apple AAPL, Equinix EQIX,
Cisco CSCO, and others that want to reduce their
carbon footprint by purchasing renewable
energy from remote locations to offset their huge
energy use from data centers. In addition
to having big power appetites, these companies
usually have large tax liabilities. Tax credits
can provide savings that can reduce or eliminate
the extra cost of purchasing renewable power.
In addition, a power purchase agreement
allows companies to lock in fixed power prices for
many years, reducing bottom-line surprises
due to energy price volatility.

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