How big a deal was Congress extending the renewable energy tax credits? A very, very big deal.

Back in December, Congress did something it rarely does any more these days — struck a series of compromises and passed a bill, specifically a giant $1.8 trillion spending bill.

Among many other things, that bill extended the two key federal tax credits that support renewable energy: the production tax credit (PTC), which mostly goes to wind, and the investment tax credit (ITC), which goes to solar.

It went by quickly in an otherwise news-packed month, so it’s worth pausing a moment to note that for US renewable energy it was a very, very big deal.

Just how big a deal is revealed by a new analysis from the wonks at the Rhodium Group. Before we get into that, though, a quick word of background about the tax credits.

Tax credits are not an ideal way to support social goals. They are a form of industrial policy, which picks and chooses individual industries to support. That offends the refined sensibilities of economists, who hasten to remind us at every opportunity, to the point of tedium, that a uniform, economy-wide price on carbon is to be preferred.

Nonetheless, politically speaking, tax credits have proven much easier to secure than a broader, more comprehensive climate policy approach.

The big problem with tax credits is that they are fickle, forever being extended for another year or two or allowed to lapse.

Take the PTC, originally implemented as part of the Energy Policy Act of 1992. Since then, it has been allowed to lapse six times, and Congress has voted to extend it six times (seven, if you count December).

This wreaks havoc on the industry. Here’s a chart of installed US wind capacity over time, which the effects of the PTC expirations in red.

On-again, off-again support like this makes investment planning very difficult.

(The ITC isn’t quite as bad. It was renewed twice in the first two years after its original passage as part of the Energy Policy Act of 2005, but then Emergency Economic Stabilization Act of 2008 extended it for eight years.)

In 2014, Congress extended the expiring PTC for one more year. It was set to expire this year, and the ITC next year. Doom for the industry was nigh.

Then Congress, uncharacteristically, rode to the rescue.

Both tax credits were extended for five years. Over those five years, they will decline incrementally until they reach zero. (Well, the ITC will remain at 10 percent for non-residential and third-party-owned residential solar, from its current level of 30 percent.)

This gradual phaseout is actually, wonders that be, smart policymaking. It gives renewable energy investors a decent time horizon over which to plan.

And it does much more than that. Which brings us back to the Rhodium Group analysis.

Outfits like Bloomberg have done short-term market analysis of the impacts of the renewable energy tax extenders, but Rhodium attempted to do a longer-term analysis, trying to pick up on how the extenders might interact with Obama’s Clean Power Plan (CPP), which kicks in starting in 2022.

In order to do the analysis, Rhodium had to make some assumptions, including about how the CPP might play out.

Under the CPP, states have wide latitude to construct the systems they want, so it’s difficult to predict on a state-by-state basis. Instead, Rhodium assumed “allowances are auctioned and freely traded across the country to facilitate efficient and least-cost compliance.” This is an idealized picture of how the CPP might unfold, but it provides a decent baseline.

(If CPP implementation is messier and more piecemeal, it would ding the renewables numbers some, but not a ton. Also, there are assumptions, for instance technology costs taken from the US EIA, that are probably unduly negative about renewables. So it all balances out, roughly, in the end.)

Anyway, skipping over the rest of the nerdy methodological stuff, what did they find?

There are two key results.

The first: Without the tax extenders, the economics of wind and solar would have undergone a serious blow. New capacity additions would have dropped off a cliff, leading to hundreds of lost jobs and lasting damage to the industry’s infrastructure and manufacturing base.

What’s more, natural gas would have been cheaper when CPP compliance began. In that case, CPP would have mostly driven demand for new gas.

With the tax extenders, renewable energy beats out natural gas and will provide almost all CPP requires.

That’s a big deal. It won’t mean any additional carbon reduction — the target is established by the CPP and will be hit either way — but it better prepares the US for the much more substantial carbon reductions to come.

Eventually, if the US takes climate change seriously, it’s going to target zero carbon. The farther along renewable energy industries are at that point, the better.

Second result: The tax extenders give wind and solar a bridge to the CPP.

The CPP itself would have provided some incentive for new renewable energy, but not for almost a decade and not a huge amount. Without the extenders, it wouldn’t have saved wind and solar from dropping from their current 15-plus gigawatts of annual capacity additions down to about 5, for years to come.

The CPP coupled with the tax extenders, however, will drive enormous capacity additions in the next decade.

Here’s a chart showing utility-scale wind and solar capacity additions through 2030, with and without the tax extenders:

Looks like 2021 is going to be quite a year.

Senate Minority Leader Harry Reid deserves some credit for this. There was a huge and likely unstoppable push underway to remove the ban on oil exports. Reid insisted that it be coupled with the tax extenders.

Getting the tax extenders was probably the best Reid could have done in the circumstances, and it was a key, fateful win for the renewable energy industry.

American wind and solar now have a clear path ahead of them, extending out over a decade, something those industries have wanted and needed for many years. The clean energy transition is slowly getting locked in.