What does business want? predictability. Installing new wind and solar energy installations plummeted in the United States during the first six months of 2022 as renewable energy developers could not predict what incentives would be available. The Inflation Reduction Act — assuming it actually gets passed — will fix that.
Earlier, Congress set arbitrary end dates for renewable energy tax credits, giving the industry just one or two years to respond. That leaves little time to purchase the necessary hardware, obtain all necessary permits, and secure financing before the premiums expire. The new legislation solves that by providing a new 30% investment deduction for clean energy projects, including geothermal and advanced nuclear technology. Best of all, the credit will be held for the next 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 transport renewable electricity from where it is generated to where it is consumed. As a result of all this, we can expect an explosion of renewable energy in the next decade, driven by the new package of incentives that will further drive down the cost of clean energy.
Inflation reduction and CO2 capture
Most of us on CleanTechnica think carbon capture is a myth invented by the fossil fuel industry to continue the thermal generation of electricity. It’s a bait-and-switch proposal that says, “Today, let’s continue burning coal and methane to make electricity and we promise to back off the carbon emissions we create at an unspecified date in the future.” the atmosphere will suck.” It is similar to the commitments made to clean up old mines and wells. They cross their hearts and hope to die if they make such promises, but somehow they never really get around to cleaning up their mess.
Maybe this time it will be different. (Emphasis on maybe.) Federal stimulus helped cut the price of solar energy by 90% or more over the past 15 years. Perhaps carbon capture will be something similar – a new technology that will become commercially viable over time. According to Bloomberg Green, the new law will increase the carbon capture incentive from $50 per tonne to $85 per tonne. It costs about $300 a ton these days, so there’s still a long way to go, but who knows?
Cracking on methane leaks
we all know methane is a potent greenhouse gas, but billions of tons of the stuff escape into the atmosphere every year. Virtually every oil well emits methane, but oil companies do not deal with methane and so they are content to release it as it costs them nothing to do so. Oil producers have been vehemently against being forced to fix their mess, and lax laws have allowed them to avoid it. Until now.
The Inflation Reduction Act imposes a fine of $900 per tonne for excess methane emissions from 2024 and increasing to $1500 per tonne by 2026, according to the New York Times. The legislation also includes other incentives to get fossil fuel companies to spend what it takes to fix the ongoing leaks in their pumping and transmission infrastructure.
Heat pumps and electrical systems
The Inflation Reduction Act puts a lot of emphasis on manufacturing heat pumps domestically and helping people and businesses to install them. It provides important incentives for low- and middle-income households to electrify their homes, replacing furnaces, boilers, boilers and stoves that run on fuel oil or methane with high-efficiency electrical appliances that can be powered by renewable energy.
The $4.28 billion High Efficiency Electric Home Rebate Program would provide a discount of up to $8,000 for the installation of heat pumps that can both heat and cool homes, and a discount of up to $1,750 for a heat pump water heater. Homeowners can also get up to $840 to offset the cost of a heat pump dryer or electric stove, such as a high-efficiency induction range.
Many homes require an upgrade to their electrical panels before these appliances can be installed, and the program offers a discount of up to $4,000 for such improvements. To make homes more energy efficient, a discount of up to $1,600 will be available to insulate and seal a home. A discount of up to $2,500 is also offered for electrical wiring improvements needed to support all those new electrical appliances.
The program is administered by the states and runs through September 30, 2031. Homeowners can claim up to $14,000 in discounts. To qualify, household income must not exceed 150% of the area’s median income.
“The impact of this program is huge as it will help more than a million low- and middle-income households make the switch to electric,” Sam Calisch, head of special projects for Rewiring America, said in an email to Bloomberg Green. “This looks like a slam dunk win for electrification. We estimate at current prices that households that get heat pumps for space and water heating, an EV, and put solar on their roof stand save $1,800 a year on utility bills. Not only that, but these households will come off the rollercoaster of fossil fuel inflation, with stable bills going forward.”
For homeowners who don’t qualify for the rebates, the IRA provides a tax credit of up to $2,000 to install heat pumps. Other energy efficiency measures, such as installing an induction cooktop or new windows and doors, qualify for tax credits of up to $1,200 per year.
Investments in domestic production
The IRA is earmarking $60 billion for clean energy production in the US, including $30 billion in manufacturing tax credits for solar panels, wind turbines, batteries and critical mineral processing, and $10 billion in investment tax credits to build manufacturing facilities that make electric vehicles and renewable energy technologies.
These provisions are intended to halt and reverse the migration of clean energy production abroad to countries like China, something neoliberals have been promoting for 40 years. The bill will also invest $500 million through the Defense Production Act for the production of heat pumps and the processing of critical minerals and set aside $27 billion for a “green bank” aimed at establishing clean energy projects, especially in disadvantaged communities.
Other provisions
The Inflation Reduction Act will invest more than $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 effects of highways, bus depots and other transportation facilities, as well as construction projects near underserved communities.
An additional $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 generates about 11% of the greenhouse gases emitted by the United States. The bill would also fund grants to support forest conservation, the development of fire-resistant forests and more urban tree planting, along with the conservation and restoration of coastal habitats.
The takeaway
Politics means that you should always say you regret something. The fossil fuel industry got some of the things it wanted in the new legislation, mainly an agreement to open federal lands to all forms of energy — solar, wind and geothermal, as well as oil and gas drilling. 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 the official quarterly report from the Dallas branch of the Federal Reserve, who noted that even with high oil prices, there hasn’t been a surge in investment in the oilfield. The reason, one executive explains, is the success of divestment campaigns over the past decade:
“Investors are still, so to speak, not coming back into the pit. Private investors such as donations and foundations have structurally disappeared for good and this time it is really different. Retirement plans are also hesitant to commit capital despite high prices. Investors in public stocks are still demanding too much, which has led to companies going public through a special acquisition company and reverse merger transactions, indicating that the discount demanded by traditional investors in IPOs is too high to bear. The administration may be blamed, but it’s the investors’ fault.”
McKibben says: “I read that and thought about the hundreds of thousands of people who played a big or small part in those divestment campaigns around the world. We can do much more. We now have momentum and the best use of momentum is to roll over the opponent.” Forward!
Do you appreciate the originality of CleanTechnica and the coverage of cleantech? Consider becoming one CleanTechnica member, supporter, technician or ambassador — or a patron on Patreon.
