What does the business want? Predictability. Installations of new wind and solar installations fell sharply in the US during the first six months of 2022, as renewable energy producers could not predict what incentives would be available. The Inflation Reduction Act—assuming it actually passes—would fix that.
Previously, Congress set arbitrary expiration dates for renewable energy tax credits, giving industry only a year or two to react. This leaves precious little time to acquire the necessary equipment, obtain all required permits, and obtain financing before the incentive expires. The new legislation addresses this by providing a new 30% investment tax credit for clean energy projects, including geothermal and advanced nuclear technology. The best part is that the credit is locked in 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, significant new transmission lines will soon be built to transport renewable electricity from where it is generated to where it is consumed. The upshot of all this is that we can expect an explosion in renewable energy over the next decade, driven by a new stimulus package that will further lower the cost of clean energy.
Inflation Reduction and Carbon Sequestration
In most of us CleanTechnica I think carbon capture is a myth invented by the fossil fuel industry to allow electricity to continue with heat production. It says, “Let’s keep burning coal and methane for electricity today, and promise to blow the carbon emissions we create out of the atmosphere at some unspecified future date.” This is similar to promises made to clean up old mines and wells. When they cross their hearts and make such promises, they hope to die, but somehow they never clean up their mess.
Maybe this time is different. (Emphasis added.) Federal incentives have helped lower the cost 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 carbon sequestration incentives from $50 to $85 per ton. Today it actually costs about $300 a ton, so it still has a long way to go, but who knows?
Cracking Methane Leaks
We all know that methane is a potent greenhouse gas, but billions of tons of the substance escape into the atmosphere every year. Almost every oil well emits methane, but the oil companies are not in the methane business, so they are content to let it escape because it costs them nothing. Oil producers have vehemently opposed being forced to deal with their own mess and have been able to get away with it because of lax laws. Until now.
The Inflation Reduction Act imposes a $900 per ton penalty on methane emissions starting in 2024, increasing to $1,500 per ton in 2026. New York Times. The legislation also includes other incentives for gas companies to spend what it takes to fix ongoing leaks in drilling and transmission infrastructure.
Heat Pumps and Electrical Systems
The Inflation Reduction Act focuses heavily on the production of indoor heat pumps and helping people and businesses install them. It provides significant incentives for low- and moderate-income households to electrify their homes, replacing fuel oil or methane-fired stoves, boilers, water heaters and furnaces with high-efficiency electrical appliances that can be powered by renewable energy.
The $4.28 billion High-Efficiency Electric Home Rebate Program will provide up to $8,000 in rebates for installing heat pumps that both heat and cool homes, and up to $1,750 for a heat pump water heater. Homeowners can also get up to $840 towards the cost of a heat pump tumble dryer or an electric oven like a high-efficiency induction range.
Many homes will need electrical panel upgrades before installing these appliances, and the program offers up to $4,000 in rebates for such upgrades. Up to $1,600 will be available to insulate and seal a home to make homes more energy efficient. A rebate of up to $2,500 is also offered for the electrical wiring upgrades needed to support all of these new electrical appliances.
The program will be administered by the states and will run until September 30, 2031. Homeowners can claim a maximum of $14,000 in rebates. To qualify, household income cannot exceed 150% of the area median income.
“The impact of this program is huge because it will help more than one million low- and moderate-income families switch to electricity,” said Sam Kalish, head of special projects for Rewiring America. Bloomberg Green. “It’s like a slam dunk win for electrification. At current prices, we estimate that a household that gets heat pumps for ground and water heating, an EV, and rooftop solar will save $1,800 a year on energy costs. Not only that, but these households will be off the roller coaster of fossil fuel-fueled inflation with fixed bills in the future.
For homeowners who don’t 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 furnace or new windows and doors, are eligible for tax credits of up to $1,200 per year.
Investments in Local Production
The IRA provides $60 billion for clean energy production in the U.S., including $30 billion in production tax credits for solar panels, wind turbines, batteries and processing of critical minerals, and $10 billion in investment tax credits for the construction of manufacturing facilities that produce electric vehicles. and renewable energy technologies.
These provisions aim to halt and reverse the migration of clean energy production abroad to countries like China, which neoliberals have encouraged for 40 years. The bill would also invest $500 million through the Defense Production Act for heat pump manufacturing and critical minerals processing, and allocate $27 billion to a “green bank” aimed at deploying clean energy projects, particularly in disadvantaged communities.
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 reduce the negative impacts of highways, bus stops and other vehicles, as well as construction projects located near disadvantaged communities.
An additional $20 billion will be allocated for programs to reduce emissions from cows and other livestock, as well as agricultural land 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 protect and restore riparian habitats, protect forests, develop fire-resistant forests and support increased urban tree planting.
Politics means you always have to say you’re sorry. The fossil fuel industry got some of 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 gas drilling. On balance, the good far outweighs the bad.
Bill McKibben has some interesting news about the fossil fuel industry in his latest email. He cites an official quarterly report from the Federal Reserve’s Dallas division, noting that even with high oil prices, there has been no increase in investment in the oil patch. The reason, one executive explains, is the success of divestment campaigns over the past decade:
“Investors are still not returning to the well. Private investors like foundations and funds have gone structurally for good, and this time is actually different. Pension plans are also hesitant to invest despite high prices. Public equity investors are still demanding too much, prompting firms to go public through a special-purpose buyout firm and cancel merger deals, suggesting that the discount traditional IPO investors demand is too high to stomach. “Maybe the administration is to blame, but it’s the investors’ fault.”
“I read it and thought about the hundreds of thousands of people around the world who played a role, big or small, in these exclusionary campaigns,” says McKibben. There is more we can do. We have momentum now, and the best use of momentum is to overcome the opposition.” Forward!
Do you value CleanTechnica’s originality and clean tech news? Consider becoming a CleanTechnica Member, Supporter, Tech or Ambassador, or a Patron on Patreon.