Energy stakeholders applaud Senate passage of Inflation Reduction Act
The U.S. Senate on Sunday passed the historic and comprehensive Inflation Reduction Act (IRA) of 2022, the most consequential energy legislation in decades and what many supporters say is the most significant federal climate action ever taken in the United States.
The bill — which includes $369 billion for tax subsidies and other measures designed to hasten the clean energy transition, and also contains tax and healthcare provisions — is expected to be passed into law this week.
“President Biden entered office with a pledge to build a new economy powered by clean energy — one that lowers costs for American families, creates good-paying jobs for American workers, and increases our energy independence,” U.S. Energy Secretary Jennifer Granholm said. “Thanks to the Senate’s passage of the Inflation Reduction Act of 2022, the Biden-Harris administration is on the cusp of delivering on that pledge. I look forward to watching President Biden make history and begin a new American century with the stroke of his pen,” added Granholm.
The IRA’s investments in clean energy and decarbonization technologies could position the U.S. to lead a global market on track to reach a minimum $23 trillion by the end of this decade, while revitalizing domestic manufacturing and employing millions more American workers, according to the secretary.
“These clean energy tax credits will make cost-saving products like EVs, rooftop solar and heat pumps far more affordable, so the average household can immediately enjoy the benefits of the cheap, clean energy revolution,” Granholm said. “And they will give us a bulwark against both the volatility of fossil fuel markets and the existential threat of climate change.”
According to a bill summary provided by congressional staff, these steps will strengthen American energy security via policies designed to enhance reliability, ensure domestic production and bolster supply chains by bringing manufacturing and mining back to North America.
For instance, the IRA includes a provision to transition electricity tax credits to a fuel-neutral format, allowing all zero-emission fuels to take advantage of either an investment or production tax credit. As a result, for the first time ever, there are tax credits available to incentivize technologies like energy storage, fusion and advanced nuclear reactors.
The bill also increases the value of the 45Q carbon capture tax credit and institutes the first production tax credit for existing nuclear and hydrogen; unlocks energy tax credits for non-profits like rural electric cooperatives and municipal and other public power utilities; and provides seed funding for loan programs to invest in innovative technologies and for states to establish revolving loans for low-emission projects, the summary says.
Additionally, the measure provides stronger tax credits and rebates for energy efficiency upgrades to commercial and residential buildings, provides $1 billion for states to adopt updated building energy codes on a voluntary basis, and supports energy and water efficiency upgrades in affordable housing.
Likewise, the bill revises the tax credit for electric and hydrogen vehicles to drive the onshoring of supply chains for critical minerals and batteries and expands the 48C investment tax credit for clean energy manufacturers, with $4 billion reserved for use exclusively in coal communities.
“Electricity customers across the country will benefit greatly from the clean energy tax credits included in the Inflation Reduction Act,” Edison Electric Institute (EEI) President Tom Kuhn said. “This monumental legislation provides much-needed certainty and will help electric companies reach a clean energy future faster, without compromising on the reliability and affordability that customers value.”
EEI, which represents the nation’s investor-owned utilities, commended Senate leaders for their efforts to engage stakeholders and for their willingness to return to the negotiating table to reach an agreement.
“With the Senate’s passage today, we are one step closer to this transformational legislation being sent to the president’s desk and look forward to the House reconvening to finish the job,” Kuhn said on Sunday.
The Working for Advanced Transmission Technologies (WATT) Coalition, which works to resolve economic and policy obstacles to the use of Grid Enhancing Technologies (GETs) on the U.S. transmission grid, pointed out that the IRA identifies GETs as an important solution set for clean energy integration.
“GETs can double capacity for renewable energy on the existing grid — with the support for wind and solar deployment in this bill, we’ll need all the delivery capacity we can get,” Ted Bloch-Rubin, chairman of the WATT Coalition, said.
The coalition’s Executive Director Rob Gramlich pointed out that the IRA will be a powerful market signal to develop more renewable energy across America. “We cannot allow the grid to be an obstacle to the energy transition,” he said, adding that the WATT Coalition urges governors and public utility commissioners to push utilities to make long-overdue investments in grid optimization and flexibility.
“Funding from the Infrastructure Investment and Jobs Act can ensure that local ratepayers see less upfront costs, while upgrades pay for themselves with systemwide benefits,” Gramlich added. “Wind and solar projects are ready to break ground — state leaders can make sure that the grid is ready for them to plug in.”
In fact, long-term solar and storage tax incentives, investments in domestic solar manufacturing and other critical provisions included in the IRA also will help decarbonize the electric grid with significant clean energy deployment, according to Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association.
“With the passage of the [IRA] in the Senate, solar and storage companies are one step closer to having the business certainty they need to make the long-term investments that decarbonize the electric grid and create millions of new career opportunities in cities and towns across the country,” Hopper said, noting that the solar industry has set a goal to account for 30 percent of all U.S. electricity generation by 2030.
“This legislation will be a catalyst for reaching that target. Now the work can begin to build out America’s clean energy economy with historic deployment, domestic manufacturing, investments in low-income communities, energy storage, smoother interconnection, and so much more,” Hopper added.
Paula Glover, president of the Alliance to Save Energy, said the IRA also includes unprecedented investments in energy efficiency, including the expansion of tax incentives, new energy efficiency rebates, the advancement of energy building codes, and key policies to drive equity and energy affordability.
“Energy efficiency is our nation’s most abundant energy resource, a critical component of U.S. productivity, and represents one of the largest and fastest-growing employment sectors in the energy economy,” Glover said.
The IRA, she explained, specifically includes provisions to expand and extend the 25C energy efficiency tax credit for homeowners that would allow at least a $1,200 credit annually for qualified energy efficiency investments, as well as both the 45L credit and 179D deduction targeting construction of single-family and multi-family housing and commercial buildings.
The bill also will provide rebates for consumers when purchasing and installing energy efficient upgrades, as well as grants and other financial assistance to expand energy improvements and reduce carbon emissions in low-income and disadvantaged communities, said Glover, adding that the alliance will continue to work with Congress and the Biden administration to ensure that energy efficiency investments are maximized.
Likewise, the National Rural Electric Cooperative Association (NRECA) applauded the Senate-approved IRA’s inclusion of major electric cooperative policy priorities that CEO Jim Matheson said “provide electric co-ops with crucial new tools as they navigate the ongoing energy transition and prepare for a future that depends on more electricity to power the American economy.”
Two provisions in particular are of interest to electric co-ops, Matheson said. The direct pay tax incentives would give them direct access to energy innovation tax credits, and parity with industry counterparts, when they deploy new energy technologies. The direct payment would be available for all existing technologies for which clean energy tax credits are currently accessible and would create a direct payment for a new slate of technologies, he said.
Secondly, another provision in the bill would establish a new voluntary $9.7 billion grant and loan program designed specifically for electric co-ops that purchase or build new clean energy systems, including carbon capture, renewable energy, storage, nuclear, and generation and transmission efficiency improvements. Co-ops would be able to receive an award for as much as 25 percent of their project cost, with a maximum amount of $970 million for any one entity, Matheson said.
