Green Tech It’s the IRA’s First Birthday. Here Are Five Areas Where Progress Is Piling Up – GWC Mag gwcmagSeptember 19, 2023051 views “Unprecedented.” “A landmark.” “The Super Bowl of clean energy.” Those are just a few of the superlatives that hit the airwaves when the Inflation Reduction Act (IRA) was signed into law on August 16, 2022. The act’s passage came as a surprise both politically—emphasizing lower energy costs helped the bill clear years of oppositional brinksmanship—and for its unprecedented scale. Toward the goal of shifting the U.S. grid to 80% clean electricity and cutting climate pollution by 40% by 2030, the act mobilized an estimated $370 billion in federal incentives. A year in, the early fanfare has resolved into unprecedented progress. Twelve months after passage, the IRA’s impact—in industrial investment, new jobs, and other economic activity—already exceeds early estimates. To date, we have seen: $278 billion announced in new private clean energy investments. Projects announced accounting for 170,000 new jobs. The availability of $70 billion was announced in grants, rebates, and other non-loan funding. And while politics could yet alter its trajectory, the impact to date has been weighted towards traditionally Republican-leaning regions, a bias which may ensure its longevity in years to come. Given the rapid uptake, Goldman Sachs earlier this year upped their estimate of public IRA investment over the next decade to more than $1 trillion, with private sector spending potentially a multiple of that. By design, incentives are drawing this investment widely across the United States, with a focus on disadvantaged, low-income, and [clean-] energy communities. RMI estimates that, if they take full advantage of the IRA and adopt clean energy at the pace and scale needed to meet national climate targets, by 2030, each state could see: Cumulative investment of from $1 billion (for smaller states) up to $130 billion (for the largest beneficiaries). Per capita new investment of $1,500 to $12,000. The creation of 2,000 to 100,000 new jobs. Lower healthcare costs and impacts by avoiding 4,000 to 300,000 negative health outcomes avoided. On the ground, IRA incentives have already translated into a rush of announcements and projects spanning regions and industries, including both legacy and cleantech sectors. On the advent of the IRA’s first birthday, here’s a rundown highlighting the breadth of this progress. Manufacturing boom Nourished by the IRA, manufacturing announcements have mushroomed across the country. While heavy on electric vehicles (EVs) and batteries, the greenfield factories and upgrades also include wind and solar sites, along with semiconductors, electronics, and others. The new capacity promises to boost U.S. energy security and independence by reshoring key supply chains and strengthening U.S. competitiveness as global leader in clean energy technologies. To date, 272 new clean energy projects have been announced, including: 91 new battery manufacturing sites. 65 new or expanded EV manufacturing facilities. 84 wind and solar manufacturing announcements. Electrifying transportation Globally, sales of internal combustion vehicles peaked in 2017, and are now in long-term decline, according to Bloomberg NEF. As older cars and trucks are retired, the world’s combustion vehicle fleet will start to shrink after 2025. In the United States, the IRA is supercharging this shift, with incentives that span from electric school buses to battery factories and new charging infrastructure: For consumers, the IRA offers rebates on new and used electric vehicles, peaking at $7,500. Juiced by this incentive, US sales of new EV passenger cars are expected to surge by 50 percent in 2023 to over 1.5 million, the White House estimates. The incentives will help heavier vehicle classes electrify more quickly too. By 2032, RMI estimates that the share of EV sales using IRA credits will be close to 100 percent for Class 1–3 commercial fleets, and 84 percent for medium- and heavy-duty trucks. To supply incentive-amped demand, global automakers such as GM and Ford and their battery partners are leveraging the act’s $45-per-kilowatt battery production tax credit to turbocharge construction of new plants across a “battery belt,” stretching from Michigan to Georgia (see map, in above section). Increased output of US-made batteries is, in turn, helping carmakers boost output of popular EVs, such as Ford’s F-150 Lighting electric pickup (image, top of page). IRA also provides funding for the federal government to lead by example. The US Postal Service (USPS) received $3 billion for clean vehicles. And starting in 2026 the post office will buy only EVs. RMI analysis shows IRA credits will help electric passenger cars and light-duty trucks achieve total cost of ownership (TCO) parity with ICE vehicles between 2023 and 2025. Without the IRA credits, EVs would have reached TCO parity with ICE vehicles between 2024 and 2027. Greening buildings Buildings account for around a third of U.S. emissions, making it one of our largest, most complex sectors to decarbonize given the age, diversity, and costs to retrofit America’s stock of millions of buildings. The IRA is tackling this challenge on multiple fronts: Guidance on funding for the Home Energy Rebate programs is being rolled out and has generous carve-outs for low-income households. States are currently designing programs based on this guidance to help consumers save money and live more comfortably. The first state programs could be rolled out as early as the end of this year. Appliance efficiency standard programs like CEE and ENERGY STAR, which some IRA incentive programs rely upon, continue to align with decarbonization efforts that ensure the most efficient HVAC systems and appliances are installed in homes across the country. New HUD programs prioritize healthy, efficient, electrified retrofits for affordable housing HVAC and appliances; more than $800 million is available and funding from these programs can’t go towards in-unit fossil fuel appliances. The General Services Administration (GSA)—which oversees the federal government’s vast portfolio of buildings and properties—is using $1 billion of IRA funding to shift federal facilities towards electrification, with near-term plans to electrify over 100 buildings, including one of their largest, the Ronald Reagan Building in DC. Decarbonizing electricity Clean electricity is essential to decarbonize the wider U.S. economy, whether to charge EVs and power greening buildings (see above), or to decarbonize industry (below). The shift is advancing steadily. In the first five months of 2023, wind and solar produced more power than coal, a first for the U.S. The IRA is continuing this shift: Commercial solar is on pace to grow by 12 percent in 2023, and over the next seven years, we expect twice as much wind, solar, and battery deployment as there would have been absent the IRA. The IRA-linked credits reinforce renewable powers’ long-standing price edge over gas- and coal-fired generation, an advantage which endures despite some demand-led inflation in the price for new solar and wind. With IRA funding, USDA is making the largest investment in rural electrification since the New Deal — nearly $11 billion for rural electric co-ops. In particular, the Empowering Rural America (New ERA) program gives rural electric cooperatives an unprecedented opportunity to modernize aging grid infrastructure to maintain reliability, lowering costs for members and reduce emissions. Michigan’s largest investor-owned utility, DTE, filed the first resource plan in the country that attempts to demonstrate the IRA’s intended changes to the economics of clean energy, projecting $500 million in savings for customers over 20 years. The proposal includes building 15 gigawatts (GW) of new solar and wind, improving DTE’s exploration of battery pilots, and moving up the retirement of the Monroe Power Plant – the fourth largest coal plant in the US. Energy Infrastructure Reinvestment announced funding for solar and storage in Puerto Rico, replacing a retired coal power plant. Transforming industry Steel, cement, petrochemicals, and other hard-to-abate heavy industries pose a special challenge to decarbonize. For now, many rely on raw materials and/or high temperatures that only fossil fuels can affordably deliver at scale. The IRA aims to scale up affordable alternatives — such as hydrogen which, if implemented cleanly, offers a clean alternative — along with greener raw materials and recycling options: Incentives for industry and hydrogen have had a big impact on economic analyses. Many projects have been announced, focused on advancing U.S. global competitiveness. Policies are meant to drive applications and interest in first-of-a-kind projects and hubs demonstrating industrial decarbonization opportunities. From the IRA and Bipartisan Infrastructure Law, the Office of Clean Energy Demonstrations (OCED) has been allocated $6.3 billion for Industrial Demo Grants. OCED funds will de-risk technologies that are not yet demonstrated on a commercial scale. A range of tax credits is being clarified that will spark investment. For hydrogen, guidance on the Hydrogen Production Tax Credit (45V) is forthcoming. And the Advanced Manufacturing Production Credit (45X) will unlock a major build-out of the lithium-ion battery supply chain, stationary storage manufacturing, and solar and wind supply chains. Likewise, guidance has been released and the first round of applications reviewed for the Advanced Energy Project Credit (48C), which offers $4 billion for projects that expand clean energy manufacturing and recycling, expand critical minerals refining, processing, and recycling, and reduce emissions at industrial facilities. The U.S. Energy Department’s roster of funding opportunities, among other things, prioritizes heat pump manufacturing, signaling a clear shift towards supporting beneficial electrification. Finance The act has also unlocked financing via the reform of tax credits and innovative financing that prioritizes climate-friendly investment in historically disadvantaged communities: For the first time, the IRA widens access to investment and production tax credits (ITCs and PTCs) for non-taxable entities, such as states, local governments, co-ops, and non-profits that in the past had little or no way to use the credits to finance new renewables. Historically, constrained demand for tax credits has limited the scale of ITC and PTC financing. For instance, RMI analysis of 2019 financial disclosures found that U.S. investor-owned utilities had aggregate tax liabilities sufficient to build less than 4 GW of new solar and storage per year, barely enough capacity to replace one or two coal plants. Later this year, Treasury will release final guidance for organizations to tap into these direct pay and transferability options. The Notices of Funding Opportunity (NOFOR) for the Greenhouse Gas Reduction Fund’s three grant competitions are now live, with deadlines in September and October. These grants will be disbursed in 2024, capitalizing a national network of clean energy financiers who will be focused on mobilizing private capital at scale to fund emissions-reducing projects, especially in low-income and historically disadvantaged communities. Looking ahead The IRA is not only the most ambitious climate bill in US history. It is one of the most ambitious and complex efforts at economic and industrial reinvestment ever. By these standards, the progress the act has already made is enormous, but years of work—and meaningful obstacles—remain to fully deploy the IRA at the pace and scale needed to reach climate targets. Chief among these obstacles is permitting. As project timelines stretch into the years—whether to connect renewables projects onto the grid, or site new critical mining and industrial facilities—streamlining the thicket of overlapping regulatory and administrative approvals is emerging as a make-or-break challenge for the US energy transition. Despite challenges in implementation, the hundreds of announced projects and hundreds of billions of dollars in investment show the energy transition is out of the starting gate and gaining speed. The challenge is increasingly shifting to subnational players—such as states and cities as well as businesses and non-profits—to mobilize the funding the IRA has unlocked. Ultimately, the IRA’s full potential will be limited only by our own ambition to realize a clean energy future. Hannah Perkins is the marketing and communications lead for RMI’s U.S. Program. Adam Aston is a climate communicator at RMI. This article originally appeared here. 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