The Inflation Regulation Act, the United States’ most ambitious climate legislation to date, was passed in August of 2022, delivering a range of grants, loan programs, tax incentives and a greenhouse gas reduction fund, all targeted to accelerate clean energy and technologies to mitigate climate change, including energy storage, hydrogen production and direct air capture to name a few.

In this Energy Minute, co-hosts Dana Dohse and Steven Goldman are joined by Michael Panfil, Senior Director & Lead Counsel for Climate Risk & Clean Energy at Environmental Defense Fund, to unpack the legislation and its potential to accelerate clean energy and transform our energy infrastructure, with huge potential impacts for communities and corporations alike.

Key Takeaways

1. The IRA is a big opportunity for any company in the United States with climate commitments and clean energy adoption targets, because it’s designed to accelerate clean energy and energy storage deployments, and lower energy costs in the process.
2. If you are a company that has clean energy commitments, the new standalone energy storage tax credit creates new opportunities for energy storage projects – as a resource for firming solar or wind output to meet corporate energy procurement needs, or as standalone flexibility assets to support the overall decarbonization of electric grids businesses draw power from.
3. The IRA implementation is a golden opportunity for states to supercharge progress and clean economic growth on lower energy costs, on reductions in harmful air and climate pollution, and for significant clean energy investment for local organizations and local governments.

Resources

• The Inflation Reduction Act Tracker, a joint project of EDF and Columbia Law School’s Sabin Center for Climate Change Law, compiling information about the climate change-related provisions of the 2022 Inflation Reduction Act (IRA): https://iratracker.org/
• EDF blog post on how the IRA’s $369 billion in funding for clean energy breaks down: “The Inflation Reduction Act: A breakthrough for lower energy costs and climate progress”
• EDF+Business blog post: “3 big wins for businesses in the Inflation Reduction Act”

Transcript

Dana Dohse: Welcome to this week’s Energy Minute, brought to you by Cleartrace. I’m Dana Dohse.

Steven Goldman: And I’m Steve Goldman.

Dana Dohse: On this Energy Minute, we’re going to be diving into the most impactful legislation for climate change passed in the United States, the Inflation Reduction Act, in particular its clean energy provisions, and how the guidance and implementation are taking shape.

Steven Goldman: Passed in August of 2022, the Inflation Reduction Act includes a wide ranging set of funding, programs, and incentives that are poised to accelerate deployment of clean energy, energy storage, electric vehicle infrastructure, and building decarbonization, as well as domestic manufacturing that supports these sectors.

Dana Dohse: Right. And for corporations, there’s a lot at stake as the details get ironed out, and we learn how easy it will be for them to meet the conditions associated with the tax credits. We’re joined this time by Michael Panfil, Senior Director and Lead Counsel of Climate Risk & Clean Energy at the Environmental Defense Fund.

The Environmental Defense Fund is an environmental nonprofit that has been working at the intersection of policy advocacy, regulatory development, legal defense, and corporate partnerships covering a wide range of sustainability areas.

Steven Goldman: And there’s a lot to cover, both from what EDF covers as well as the legislation itself, so let’s get into it. Welcome to the podcast, Michael.

Michael Panfil: Steve, Dana, thank you both so much for having me.

Dana Dohse: Well, first of all, you’ve been with EDF, which is one of the most established environmental NGOs in the United States, for over a decade. Can you tell us about your work there and how EDF and you in particular have come to focus on the IRA?

Michael Panfil: So at EDF, I help to advance public health safeguards to advocate for action that feeds up to achieving our national goal of reducing greenhouse gas emissions by 50 to 52% by 2030, and help in driving programs that accelerate the growth of clean energy. And on that last one we are helping to accelerate the growth of clean energy. But over that time, I’ve seen a trend line there that’s just incredible and fantastic at promising, which is clean energy is increasingly affordable, and it increasingly goes hand in hand with driving innovation with new technology, with economic growth, with new jobs.

And so clean energy, it’s core to meeting the climate goals as well. And the Inflation Reduction Act, the IRA, it is 369 billion in clean energy investment. It represents the most ambitious piece of climate legislation in US history, so its supercharges those goals. It offers the chance for American companies, for states, for communities, for the American public to be a part of and to lead in this energy transition.

Steven Goldman: Like any similar legislation, there’s key levers that Congress can pull to spur any industry like the clean energy sector that EDF works to advocate for. One is tax credits, another is grant or loan funding programs through the executive agencies.

Obviously, this is a large and complex piece of legislation, but can you give us a brief walkthrough of the core clean energy, or maybe we should specify zero carbon because I feel like that got brought up a number of times in different circles, provisions of the IRA?

Michael Panfil: Yeah, happy to dive in here and as you point out, we’re not going to be able to do justice to everything that’s in the law, but I do want to call out a couple things. Maybe I’ll just bucket it actually. The sort of first bucket is a series of tax credits. So here generally think of the credits that sort of exist broadly over the next 10 years for things like zero emitting resources, wind, solar, et cetera. But it is designed as you point out around zero emissions for other technologies, think hydrogen, CCS, one for energy storage.

And then there are tax credits based upon not the substantive resource, but on other elements, so for instance, on location. So there’s a tax credit if the project’s in an energy community. And these are low-income communities and these were coal mines or plants or other parts of production existed. They’re tax credits based upon how it’s produced.It is a domestically sourced, it is using prevailing wage and fair pay apprenticeship opportunities.

There’s also a series of credits in here, sort of the second bucket because it’s not only credits, but there’s also rebates and other mechanisms available that are really relevant for the American family. These are things like credits for rooftop solar, for electric vehicles, for energy efficient appliances. It contains a multitude of rebates and tax credits designed to help households save money and be part of the fight against climate change.

And then the last bucket I call out is agency programs. So here, for instance, there is funding available for the Environmental Protection Agency to design a greenhouse gas reduction fund, that’s really important. It’s going to help to mobilize financing and leverage private capital for clean energy and climate projects that reduce GHGs. It’s designed with an emphasis on projects that benefit low-income community, disadvantaged communities, and that’s just one example. So those are sort of the three you have: Tax credits, rebates and tax credits designed really for the individual, and then agency programs.

Steven Goldman: It’s a really far-reaching set of provisions. I mean, it’s touching all kinds of sectors and we’ll get into some of the different areas to dig into.

Dana Dohse: So some of the top takeaways we’ve seen coming out of the legislation is longevity. There’s a really long lifespan to these tax credits, locking them in for 10 years. And this is a really welcome change compared to the renew and sunset cycles that we’ve seen in the past with investment tax credits and production tasks credits. It really gives developers and anybody looking to invest in projects that assurance that this tax credit’s not going to go away overnight.

Steven Goldman: Well, and it’s also going to help I think with certainty of supply. If we can get the interconnection queues right, it’s going to feed a lot more clean energy into the pipeline that corporate listeners like the ESG and sustainability teams who usually tune in for this show are looking to access.

It’s also interesting how the qualifying technologies of those credits have been expanded. So now it’s going to be open to existing nuclear, for example, and standalone electricity storage like battery-based assets, which is a first. And to my understanding, the industry’s been pushing for that for probably five, seven years already trying to make that happen.

Dana Dohse: And they also introduced a variety of boosters, everything from using domestically-sourced components, fair pay, and apprenticeship opportunities, projects built in communities where coal was an economic driver. And then also looking at disadvantaged communities where the unemployment rate was at or above the national average from the previous year. So really it’s far-reaching and hitting places where we really haven’t dug into before.

Steven Goldman: And we’re actually going to be touching on some of that later in the season with other guests that are going to be coming on. But the other thing I’d like to point out is I have to shout-out Jigar Shah, who moved over to take over the Department of Energy’s Loan Programs Office with this administration.

There’s going to be expanded lending authority through DOE’s Loan Programs Office, which has provided loan funding to a wide range of, at the time, startups that have grown into very mature businesses. Tesla had a good chunk of funding from them early on that they entirely repaid. With that, is there anything that we missed that you’d like to highlight?

Michael Panfil: I think that’s a fantastic summary, and I’m glad to hear you’ll have some folks on later to sort of pull apart some of these very specific provision. I look forward to listening to those. I would just say one thing here, which is across all of these to me it’s recognition that the IRA, again, it is hard to understate the importance and injects it 370 billion.

At the same time, it is designed to work with and accelerate the work being done by communities, by states, and by companies that are taking part in leading the deployment of clean energy. And one study the EDF conducted, we found that it’s not just the figure I mentioned a moment ago, it could also catalyze as much as 10 times that in private investment. It is just enormous, and it’s for all the reasons you just highlighted.

Steven Goldman: And it’s happening everywhere to my understanding. I think there was an article in Politico earlier this year saying that the pipeline of projects that are going to be qualifying for the ITC and the PTC are happening much more in red state congressional districts than they are anywhere else, which is amazing to see the spread of the country these are going to be benefiting.

Michael Panfil: In general, it is cheating I think one of the intents of the law, which is that this is a law made up of a variety provisions that are for the entire country. There should be the opportunity, and the development, and the growth across the country, and that is just really exciting.

Dana Dohse: So clean energy manufacturing in particular got a big boost. Can you walk us through what the bill does in that area?

Michael Panfil: Yeah, so certainly throughout the value chain across the operation and building of clean energy, there’s a lot to unpack. I think there in particular with the focus on manufacturing, probably two credits come to mind, I think. Although, again, not going to be able to do justice through the entire law here, but it’s the Advanced Manufacturing Production Credit, and the Advanced Energy Projects Credit.

So here, think about things like the manufacturing components along the supply chain, battery cells, solar modules, wind turbines, things like that.

Steven Goldman: And there’s a much greater emphasis now on components and materials that are being produced in America. And so the question I have is a lot of these incentives are coming with conditions. How prepared do you think companies are going to be to meet those?

Michael Panfil: The structure of the bill is wine that clearly reflects the designed to catalyze the building of clean energy and associated assets and operations here in the United States. We are going to build our domestic supply chain for all the reasons we’ve been talking about then.

So there are, I think, content in production requirements, but for certain credits to unlock the full value of the credit [inaudible 00:09:30] in America, for instance. One thing I would call out in particular this year is that recycling also qualifies and just want to raise that up in addition to me, that’s really exciting and important.

Steven Goldman: Absolutely. Well, there’s already been a lot of growth around the desire for electric vehicle and stationary storage, battery recycling where we’ve already seen a handful of really high profile startups like Redwood Materials. There’s a range of American companies that are already starting to come up and build the equivalent of recycling gigafactories in the US.

Michael Panfil: And this goes hand in hand with the intent of law. We’re going to see through the IRA, through those trendlines we already talked about just the continual development of new technology of innovation, and that’s again, really exciting.

Steven Goldman: So do you see it as somewhat of a master plan of getting the right incentives in place where you’re going to cultivate the supply chain, cultivate the demand side from A. Not necessarily setting goals for anybody and how much renewable energy they need to procure, but making it easy to put into place as there’s already big corporate appetite for renewables to help them meet their net zero goals.

Michael Panfil: Yeah. So couple things to unpack there. I do think generally speaking again, the IRA, it works with and it complements, and it catalyzes, and it accelerates those trendlines we’ve been talking about. And it’s going to help us get to our overarching GHG program. You mentioned corporate commitments, and I do think the IRA is fantastic was for any company with climate commitments. [inaudible 00:10:59]. That’s great news for any company in the United States, in part because it’s designed to lower energy costs for those companies that already procure clean energy or considering making the leap, this is a huge opportunity. If you are a corporate entity, just like if you are a community, just like if you are a state, this is a pathway that helped lead in energy transition.

Think of the IRA as a catalyst. And so whether it’s through REC purchases, or a PPA, or some other structure, the IRA’s going to bring onboard new players. It’s going to help to increase competitive, it’s going to help open up new pathways to meet those climate commitments. And maybe even entirely new structures to access clean energy, and that’s all really exciting. Again, it’s done with the intent to do so at lower costs.

Steven Goldman: And Dana, we were talking about this, about the role this can play in onshoring, bringing manufacturing here or getting the right conditions in place to really drive production here.

Dana Dohse: Right. We’re looking at companies looking to build electric vehicles or standalone storage systems like battery storage, and they might face some short-term supply issues when they’re looking to locate them in the United States as they’re getting brought online.

Light duty electric vehicles will need to be produced domestically, and hydrogen will need to be produced with a limited amount of carbon emissions to qualify. So Michael, I’m curious, are there any areas where you think those requirements could be too significant of an obstacle and kind of hinder adoption?

Michael Panfil: I think what we’re seeing is the answer’s no. And part of it’s by the law that they generally are phases, so it gives companies time to prepare, and set up those supply chains they need. But really what we’ve seen in the aftermath of the IRA is just a wave of investment right here in America. I saw one recent report that just between when the bill was passed in August and now, I think the report ended in late January. Those short number of months, companies have announced more than a 100,000 clean energy jobs in the United States. I mean, that’s just incredible, and this is critical.

We’re building a clean energy economy and that means we need it to not only help beat our climate goals, to meet them in concert with growing the economy and adding jobs. Again, the IRA is just going to be an accelerator, it’s going to be a catalyst here. It is going to reduce the overall cost. The design of the IRA is to be one that lowers the cost of energy, but also that’s especially true in seeing the ability to use clean energy resources to meet those commitments.

But I would also say in addition to that, that what the IRA does is it provides a platform for additional optionality. And what I mean by that is they’re going to be existing structures that will continue to become more affordable, and continue to be more competitive in here, and many sort of REC purchases, and PPA structures, and things like that. But the IRA is also going to bring on new players and new resources.

So the tax credits are not only designed for particular resources, it is around zero emissions, it is around energy sources. So you’ll see other pathways to meet those climate commitments open up, and I think that’s really exciting. It’s going to result, I think, in the ability to invest in a greater suite of technologies and of innovations.

Steven Goldman: And just to build on that, we’ve already seen a certain trend of energy storage being procured to either hybridize renewable assets, or as a standalone asset that’s helping with overall integration of renewables on the grid, serving as a replacement for gas peakers, of helping with augmenting transmission systems.

I think this speaks to those kinds of trends accelerating as well. Like we have a standalone energy storage tax credit for the first time in history where it’s going to be able to add different kinds of flexibility into the grid from a technology neutral perspective. So it could be pumped hydro, it could be batteries, it could be compressed air. So it allows the system to be, in a way, redesigned in real time.

Michael Panfil: I think you put it so well. And when I had mentioned greater optionality, really what I’m thinking about here is that because of the suite of tax credits, and if you are a company again with climate commitments, maybe means seeking a closer look at an asset like energy storage.

In doing so in a way that works with the grid, works with those commitments, works with other existing assets in that particular location. And that’s both good news for the company, and that’s also good news for the grid.

Steven Goldman: Well, and we’re going to talk later in the season about this, but there’s also difficulty to decarbonize industries where some of them can shift towards greater electrification, in which case they can be trying to source renewable energy to meet those needs, in which case the tax credits on that side are going to really help drive supply into the market to serve them.

But then on the flip side, you’re going to have companies that are trying to integrate things like fuel stocks like hydrogen into the mix, and where you’ve also got a tax credit in place based on production below a certain CO2 threshold. And so it seems like it’s been structured in a way that’s going to help give companies a lot more options in terms of how they approach that.

Michael Panfil: But then add in the programs that the IRA unlocks. And so here I’m thinking again of, for instance, that program we talked about just a moment ago, the DOE. So you’re going to see that complemented by innovation and technology unlock through the IRA there.

Dana Dohse: Coming back to EDF, where does EDF see its role in the IRA and the implementation as we move forward and things start to unfold, and we start to understand the broader implications?

Michael Panfil: There’s a lot around IRA implementation and more broadly about what we see happening in the next days and months. First thing I would say is right now, any agency, it was mentioned in the law, and treasury is a big one is in the process of creating the specific rules around implementation. And this is a really importance. So the law sets forth law and then the thing about this as the details by the agency.

And so we EDF have been follow closely, we’ve been filing as well in these proceedings. So that’s one thing. And at the same time, just stepping back from that treasury process, I think this is a critical moment to ensure that everybody has access to information about the IRA, what’s in it? What are the programs? What are the credits? What are the rebates? I would call it in particular, the White House has opened up a portal particularly geared for Americans and helping families, all the ways in which the IRA can see them.

And then if you’re a startup, if you’re a community group, if you’re a company, if you’re a state or municipal government, there’s a lot of information out there as well, including information that EDF was putting out there. And so for states, so this is just a golden opportunity to supercharge progress, and clean economic growth on lower energy costs, on reductions in harmful air in climate pollution for companies.

Again, this is opportunity to leverage the IRA and translate that into significant clean energy investment. For local organizations and local governments, it’s turning the clean energy investment into concrete-specific bill at that local level for SWIFt. And then at the federal level, EDF remains engaged there and continues to advocate for policies and programs that we need to meet that 50 to 52% reduction in GHG emissions by 2030.

Steven Goldman: You’re based in essentially the “heartland of policy,” Washington, D.C. What kind of impacts could you foresee happening there in particular on the ground to take it as an example in the nation’s capital as a result of policies that are contained in the IRA?

Michael Panfil: Certainly here, I think everybody is energized. This is a really big deal. Candidly, what I’ve been perhaps even more excited by is what I’m seeing outside of DC. I grew up in the Midwest, I go back there with some frequency, I see my family, and it’s a question I get at our dinner table. And typically my work does not come home at the dinner table. And I think that’s because the intent here is one that really should matter to everybody in the United States.

It doesn’t matter if you’re in DC or Indiana, there is a promise, there is a potential here to help lower energy costs, to help build a reliable, resilient economy and a reliable, resilient grid, and do so in a way that adds to jobs, that supports healthy communities, that meets our climate goals, and that matters for everybody.

Steven Goldman: And I think it’s in a similar way to how the original stimulus package really ramped up solar and wind on the grid. I’m very curious what we’re going to be seeing 10 years from now the same way we are on the other side of the American Reinvestment Act.

Michael Panfil: It’s really exciting and part of the excitement is the creativity. And it goes to exactly what you’re seeing because of the way this is designed, it has a broad intent, it has a broad design. But what does this mean for the building of community solar? Just really exciting.

Dana Dohse: Well, thank you, Michael. This has been a great conversation and we’ve enjoyed having you on the podcast.

Thanks for joining us for this week’s Energy Minute. For more of the latest news on sustainability and decarbonization, visit cleartrace.io.