A little over a year since the passage of the US Inflation Reduction Act, success of the legislation largely aimed at reducing greenhouse gas emissions will be determined by how effectively different states take advantage of the tax credits and other incentives created by the IRA, experts said Sept. 26.
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President Joe Biden signed the IRA on Aug. 16, 2022, clearing the way for $370 billion in energy security and climate change spending over the next decade, with the intention of spurring innovation in clean energy and transportation manufacturing and decreasing GHG emissions.
The legislation includes $60 billion to support domestic manufacturing for clean energy technologies, establishes new tax credits for nuclear power, hydrogen, and energy storage facilities, and contains some power transmission provisions.
"The interesting thing is that fundamentally the IRA is a recognition that clean energy policy will likely be made by states," Abraham Silverman, director of the Non-Technical Barriers to the Clean Energy Transition initiative at Columbia University's Center on Global Energy Policy, said during a virtual New York Energy Forum meeting.
"It provides puzzle pieces for states to 'choose their own adventure' to a net zero by 2050 goal," he said, adding that it has been left to state legislators and companies to figure out how to do this.
The path to a clean energy transition runs through 50 state capitals. How the IRA gets implemented depends on each state's desires, Silverman said.
The US Department of Energy's Loan Programs Office, which finances large-scale energy infrastructure projects, supports state-led efforts through the State Energy Financing Institution category of the Title 17 Clean Energy Financing Program. The office can provide additional financial support to projects that align federal energy priorities with those of US states, according to the LPO's website.
In total, the LPO has seen $143.9 billion in loans requested through all its programs as of August, according to a presentation given during the meeting.
There are 167 active applications for loans in various sectors including renewable energy, advanced nuclear power, advanced vehicles, virtual power plants, hydrogen, transmission, storage, and others.
Power grid performance will be stretched with electrification efforts, and it will be important to manage power use, so consumption does not coincide at the same time, an industry professional said.
This can start to reduce power demand peaks, changing demand profiles and helping to not overwork the existing grid, the meeting participant said.
Getting to net zero
It is interesting to think about different ways to get to net zero, with some entities promoting small modular nuclear reactors, green hydrogen, or battery storage, and "we probably need to mix and match those technologies to get there," Silverman said.
"The IRA reshuffles what a lot of technologies cost due to tax credits, which have eliminated a lot of the supply chain advantages of manufacturing batteries in China," he said.
Companies have announced plans to build or expand 83 clean energy manufacturing facilities since Biden signed the IRA, according to data compiled by the American Clean Power Association. Those announcements do not include facilities devoted to electric vehicle batteries and components, meaning total new investments disclosed in the past year are even higher.
But work still remains on streamlining the interconnection queues for power resources that want to connect to regional power grids and the IRA does not really address that.
"We need to talk about non-technical barriers to transmission and distribution so that when people want to connect to the grid they can," Silverman said. "We need to talk about siting and permitting, what is the 'time tax' associated with those processes," he said.
One thing the IRA does not have is nearly enough money for transmission and distribution system growth as many experts say we need, he said.