What does the business want? Predictability. New wind and solar installations in the United States fell sharply in the first six months of 2022 as renewable energy developers failed to predict what incentives would be available. The Inflation Reduction Act—assuming it actually passes—will fix that.
Previously, Congress set arbitrary end dates for renewable energy tax credits, giving the industry only one or two years to respond. That leaves precious little time to acquire the necessary hardware, obtain all required permits and secure financing before the incentives expire. The new legislation addresses this by providing a new 30% investment tax credit for clean energy projects, including geothermal and advanced nuclear technologies. Best of all, the credit is locked in for another ten years, giving developers the time they need to design, finance and build new renewable energy infrastructure.
As Tina Casey reported this week, major new transmission lines will soon be built to carry renewable electricity from where it is produced to where it is consumed. The upshot of all this is that we can expect an explosion in renewable energy over the next decade, fueled by a new package of incentives that will further reduce the cost of clean energy.
Reducing inflation and sequestering carbon
Most of us in CleanTechnica carbon capture is a myth invented by the fossil fuel industry to allow it to continue to generate thermal electricity. It’s a bait-and-switch proposal that says, “Let’s keep burning coal and methane to make electricity today, and promise to suck the carbon emissions we create back out of the atmosphere at some unspecified future date.” It’s similar to with promises to clean up old mines and wells. They cross their hearts and hope they die when they promise something like this, but somehow never actually get around to cleaning up their mess.
Maybe this time is different. (Emphasis on maybe.) Federal incentives have helped reduce the cost of solar power by 90% or more over the past 15 years or so. Perhaps carbon capture will be something similar – a new technology that will eventually become commercially viable. According to Bloomberg Green, the new law will increase the carbon capture incentive from $50 per ton to $85 per ton. It’s actually about $300 a ton today, so there’s a long way to go, but who knows?
Tackling methane leaks
We all know that methane is a powerful greenhouse gas, but billions of tons of the substance escape into the atmosphere every year. Virtually every oil well emits methane, but oil companies are not in the business of methane, so they are content to let it escape because it costs them nothing. Oil producers were vehemently opposed to being forced to deal with their mess and were able to avoid it because of lax laws. Until now.
The Inflation Reduction Act imposes a $900 per ton penalty for excess methane emissions starting in 2024 and increasing to $1,500 per ton in 2026. New York Times. The legislation also includes additional incentives to get fossil fuel companies to spend what it takes to fix persistent leaks in their pumping and transmission infrastructure.
Heat pumps and electrical systems
The Inflation Reduction Act places a strong emphasis on the domestic production of heat pumps and on helping people and businesses install them. It provides significant incentives for low- and moderate-income households to electrify their homes, replacing furnaces, boilers, water heaters and stoves that burn heating oil or methane with high-efficiency electrical appliances that can be powered by renewable energy sources.
The $4.28 billion High Efficiency Home Rebate Program would provide up to $8,000 in rebates for installing heat pumps that can heat and cool homes and up to $1,750 in rebates for a heat pump water heater. Homeowners can also get up to $840 to offset the cost of a heat pump clothes dryer or electric range, such as a high-efficiency induction range.
Many homes will need to upgrade their electrical panels before these devices can be installed, and the program offers up to $4,000 in rebates for such upgrades. To make homes more energy efficient, a rebate of up to $1,600 will be available for home insulation and sealing. A rebate of up to $2,500 is also offered on the electrical wiring upgrades required to support all of these new electrical appliances.
The program will be administered by the states and will run through September 30, 2031. Homeowners can claim rebates of up to $14,000. To qualify, household income must not exceed 150% of the area median income.
“The impact of this program is huge as it will help more than a million low- and moderate-income households switch to electricity,” Sam Calisch, special projects manager for Rewiring America, said in an email. Bloomberg Green. “It looks like a slam dunk win for electrification.” At current prices, we estimate households that purchase heat pumps for space and water heating, EVs, and rooftop solar to save $1,800 per year on their energy bills. Not only that, but these households will get off the rollercoaster of fossil fuel-fueled inflation with stable bills for the future.”
For homeowners who do not qualify for rebates, the IRA provides a tax credit of up to $2,000 for installing heat pumps. Other energy efficiency measures, such as installing an induction cooker or new windows and doors, are eligible for tax credits of up to $1,200 per year.
Investment in domestic production
The IRA earmarks $60 billion for clean energy production in the U.S., including $30 billion in production tax credits for solar panels, wind turbines, batteries and critical mineral processing, and $10 billion in investment tax credits to build manufacturing facilities for electric vehicles. and renewable energy technologies.
These measures are intended to stop and reverse the migration of clean energy production overseas to countries like China, which the neoliberals have been pushing for 40 years. The bill also invests $500 million through the Defense Production Act to produce heat pumps and process critical minerals, and earmarks $27 billion for a “green bank” aimed at deploying clean energy projects, particularly in disadvantaged communities.
Additional Provisions
The Inflation Reduction Act invests over $60 billion to support underserved communities disproportionately burdened by the environmental and public health impacts of climate change. This includes grants for zero-emission technology and vehicles, as well as money to mitigate the negative impacts of highways, bus depots and other transportation facilities, along with construction projects near disadvantaged communities.
Another $20 billion would be earmarked for programs to reduce emissions from cows and other livestock, as well as farmland and rice production. According to the government, agriculture produces about 11% of the greenhouse gases emitted by the United States. The bill would also fund grants to support forest conservation, development of fire-resistant forests and increased urban tree planting, along with coastal habitat protection and restoration.
Takeaway
Politics means you have to say you’re sorry all the time. The fossil fuel industry got what it wanted in the new legislation, primarily an agreement to open up federal lands to all forms of energy — solar, wind and geothermal, as well as oil and natural gas. On balance, the good far outweighs the bad.
In his latest email, Bill McKibben has some interesting news about the fossil fuel industry. He cites an official quarterly report from the Federal Reserve’s Dallas branch, which says that even with high oil prices, there has been no increase in investment in the oil patch. The reason, explains one executive, is the success of divestment campaigns over the past decade:
“Investors are still not getting back into the well, so to speak. Private investors like subsidies and foundations are structurally gone for good, and this time it’s actually different. Pension funds are also hesitant to inject capital despite high prices. Public equity investors are still demanding too much, which has caused firms to go public through special acquisitions and reverse mergers, suggesting that the discount demanded by traditional IPO investors is too high. The administration can be blamed, but it is the investors’ fault.
McKibben says, “I read it and thought about the hundreds of thousands of people who played big or small roles in these divestment campaigns around the world. There is much more we can do. Now we have momentum, and the best use of momentum is to overwhelm the opposition.” Forward!
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