President Biden’s signing of the Inflation Reduction Act (IRA) should provide further impetus for growth of U.S. renewable energy, coming on the heels of a report from the Federal Energy Regulatory Commission (FERC) that installations of solar and wind power accounted for more than two-thirds of new domestic utility-scale generation in the first six months of this year.
The Aug. 16 signing of the bill, which passed both the U.S. Senate and House along party lines earlier this month—all Democrats supported the bill, while Republicans voted against it—provides almost $400 billion to fund energy and climate projects. The bill, a $740 billion package in total, is considered the most significant U.S. investment ever to combat the effects of climate change, with a goal of reducing carbon emissions—mostly from power generation and transportation—by at least 40% by 2030.
“With this law, the American people won and the special interests lost,” Biden said in remarks Tuesday from the White House. “We didn’t tear down, we built up. We didn’t look back, we looked forward. And today offers further proof that the soul of America is vibrant.”
The legislation touches all sectors of power generation, both thermal and renewable, with particular support for renewables and also nuclear power.
“The signing of the Inflation Reduction Acts signals our country’s commitment to combating the climate crisis through an accelerated transformation to a carbon-free electricity system,” said Julia Hamm, president and CEO of the Smart Electric Power Alliance, in a statement Tuesday. Hamm was a keynote speaker at POWER’s Experience POWER and Distributed Energy Conference events in 2021. “When paired with the 2021 Infrastructure and Jobs Act, these policies and funding will support the vast number of entities, including states, cities, utilities and large energy users, who have made commitments to aggressive carbon-reduction goals.”
Peter Davidson, CEO of Aligned Climate Capital, a group that invests in decarbonization technologies, in a statement said, “It is exhilarating to watch President Biden sign the Inflation Reduction Act into law today. Ten years ago, I had a front row seat to the last time the federal government took concerted action to address climate change. As the Executive Director of the Department of Energy’s Loan Programs Office, we invested $32 billion to launch companies like Tesla and build the first utility-scale solar projects in the United States. Now, as a private investor in clean energy and other climate solutions, I believe that this legislation will provide another spark that will bring cleaner, cheaper, and safer energy solutions to more Americans.”
Support for Nuclear Power
Part of the carbon-reduction effort involves nuclear energy. There are key provisions in the IRA that support nuclear, said Judi Greenwald, executive director of the Nuclear Innovation Alliance, including:
- Two technology-neutral clean electricity tax credits that include advanced nuclear energy as an eligible zero-emitting energy source: a production tax credit (PTC) and an investment tax credit (ITC). A nuclear project developer can elect either tax credit based on their specific project needs.
- An investment tax credit (ITC) and production tax credit (PTC) for clean hydrogen production that includes hydrogen produced using nuclear energy.
- Federal funding of $700 million to help make high-assay low-enriched uranium (HALEU) available for advanced reactor demonstration and commercialization through public and private partnerships and actions. This funding will catalyze the creation of a domestic commercial HALEU market.
Greenwald told POWER, “NIA applauds the president for signing the Inflation Reduction Act into law. This monumental legislation includes major clean energy and infrastructure investments and incentives that will drive advanced nuclear energy innovation and commercialization. To be clear, enactment of the IRA is just the beginning: swift and effective implementation of this law will be crucial to ensuring it meets the goals intended by Congress and supported by the president with his signature today.”
The legislation also impacts other sectors; significantly, it sets a minimum 15% corporate tax rate for the largest and most-profitable companies, including some in the energy business. It also involves caps on prescription drug costs, and provides $80 billion in funding for the Internal Revenue Service (IRS), in part to help that understaffed agency improve its service, and boost enforcement to collect unpaid taxes from wealthy Americans, according to the bill’s supporters.
“This historic bill will lower the cost of energy, prescription drugs, and other health care for American families, combat the climate crisis, reduce the deficit, and make the largest corporations pay their fair share of taxes,” the White House said Tuesday as Biden signed the legislation.
Analysts told POWER that big winners in the bill include solar and wind energy companies, along with utilities that are transitioning toward renewable energy. It also will benefit companies involved with electric vehicle (EV) manufacturing, and also groups that extract and process materials like lithium—a key part of batteries used for battery energy storage systems and of course EVs.
The bill also provides direct consumer incentives to buy energy efficient and electric appliances, electric and hybrid vehicles, rooftop solar systems, and to make investments in home energy efficiency.
- $9 billion in consumer home energy rebate programs to electrify home appliances, and for energy efficient retrofits.
- 10 years of consumer tax credits to make homes energy efficient and run on clean energy, with incentives for purchasing heat pumps, rooftop solar, and electric heating and cooling systems, and water heaters.
- A $4,000 consumer tax credit for lower- and middle-income individuals to buy pre-owned clean vehicles.
- Up to $7,500 in tax credits to buy new clean [electric and hybrid] vehicles.
The legislation has nods to the fossil fuel industry. It says that federal lands and offshore waters that are utilized for renewable energy development must also be opened up for oil and gas drilling. It also provides incentives toward installation of efficiency upgrades and carbon capture solutions at power plants.
There is also a new tax on stock buybacks, which could impact several industries, including energy groups. The tax is intended to encourage companies to invest cash back into their businesses.
Anne Kelly, vice president of government affairs for Ceres, a business sustainability group, in a statement said, “Companies and investors know the new law is going to dramatically bolster the U.S. clean energy industry to ensure our nation competes in the global economy of the future, while bringing jobs, cost savings, energy security, public health benefits, and flourishing new industries to communities across the country. By lowering emissions, it will reduce the vast risk of economic damage and human harm from the climate crisis.”
Kelly added, “As we celebrate the largest climate investment in U.S. history, we must recognize that it is a starting point. The work is not over. It is now the responsibility of those at all levels of both the public and private sectors—including companies, investors, and state and federal lawmakers and regulators—to ensure we not only capitalize on this important package but build upon it to achieve our national climate and environmental justice goals.”
The bill includes amendments to the federal 45Q tax credit program for carbon capture use and sequestration (CCUS), increasing the program’s carbon credits in support of CCUS projects.
“Today’s signing of the Inflation Reduction Act into law by President Biden is a significant milestone, as it signals a new beginning for the country’s efforts to decarbonize, while also embracing Carbon Clean’s vision to deliver industrial decarbonization on a gigaton scale,” said Aniruddha Sharma, co-founder and CEO of Carbon Clean, a group that advocates for carbon capture, a major talking point for power generators operating coal- and natural gas-fired plants. “[West Virginia Democratic] Senator Joe Manchin often speaks about the importance of ‘decarbonization through innovation not elimination.’ Today there is no technology that embodies that approach better than the carbon capture industry, particularly point-source capture which aims to stop the carbon-dioxide emissions produced by hard-to-abate industries from entering the atmosphere. Policies such as the increased value of the 45Q carbon capture, utilization, and sequestration [CCUS] tax credit as well as the first-ever hydrogen production tax credit are excellent next steps, following the passage of last year’s historic infrastructure law which included billions of dollars for carbon-capture demonstration projects at industrial facilities over the next five years.”
Energy analysts also have increased support for renewable energy also should include incentives for upgrades of the nation’s aging power grid. The reliability and resiliency of the U.S. power supply has been questioned in recent years as more renewable energy has been added to the grid.
Hudson Gilmer, co-founder and CEO of LineVision, a company that works with utilities on the energy transition and its impact on the power grid, in a statement shared with POWER on Tuesday said the IRA “injects significant capital and incentives to address climate change, providing the certainty needed to continue the growth of the clean energy industry. Notably, it also provides hope for all of us working toward a more livable planet. We applaud Congress and the President for working to pass the IRA. To ensure the IRA is fully realized, however, we must get to work on the backbone of the energy transition: the electric grid.”
Said Gilmer: “By many accounts, we need to double the size of the existing power grid if we are to accommodate the renewable energy assets required to meet our nation’s climate goals. And we need to accomplish this before 2030. We are pleased that once again Congress has specifically identified Grid-Enhancing Technologies (GETs) as an important solution for clean energy integration. Building new transmission and maximizing the efficiency of the existing grid by implementing GETs must be our next priority.”
Renewable Energy Additions
Even before Tuesday’s action, renewable energy continued to drive new U.S. installations of power generation capacity. FERC’s recent report on renewable energy said wind (5,722 MW) and solar (3,895 MW) provided 67.01% of the 14,352 MW in utility-scale—or greater than 1 MW—capacity that came online during the first half of 2022.
Additional capacity was provided by geothermal (26 MW), hydropower (7 MW), and biomass (2 MW). The remainder came from natural gas (4,695 MW) and oil (5 MW). No new capacity was reported for 2022 from either nuclear power or coal.
FERC’s report said renewable energy now accounts for 26.74% of installed U.S. power generation capacity, up from 19.7% five years ago and 14.76% from 2012.
FERC reports that there may be as much as 192,507 MW of new solar capacity in the current pipeline, including 66,315 MW marked as “high-probability” additions and no offsetting “retirements.” The “high-probability” additions alone would nearly double utility-scale solar’s current installed capacity of 74,530 MW, while successful completion of all expected projects would be about a fourfold increase.
—Darrell Proctor is a senior associate editor for POWER (@POWERmagazine).