| Focus on the USA
Source: Princeton University Zero Lab REPEAT (Rapid Energy Policy Evaluation and Analysis Toolkit) Project (
repeatproject.org)
Credit (CCS/DAC). These are separate from the technology-neutral tax credit structure. Also included in the IRA is provision for funding to increase domestic manufacturing, strengthen the supply chain, and ultimately lower the cost of critical components of the clean energy transition. These additions to the bill are meant to decrease reliance on imports and ensure the USA can increase energy independence while lowering emissions. Advanced manufacturing tax credits are available for production and sale of qualifying components such as inputs for batteries, solar panels, and wind turbines, with separate funding available for retrofitting auto manufacturing facilities to produce electric vehicles. Additionally, the IRA provides funding for President Biden’s Executive Order authorising use of the Defense Production Act to increase domestic manufacturing of critical minerals, heat pumps, electrolysers, transformers, and insulation.
A transmission tax credit originally in the bill did not make it into the final version, but the IRA provides the Department of Energy with funding to help support transmission buildout. This includes $2 billion in loans for transmission deemed as a “national interest corridor” and $760 million to help plan, permit, and facilitate interstate transmission lines.
The IRA will have far-reaching repercussions for pretty much every sector in the USA, from transport and energy to buildings and agriculture. For example, included in the IRA’s expansion of the Section 48 ITC is increased credit value for waste energy recovery property and new eligibility for combined heat and power (CHP) systems. Both systems are now eligible for a 6% base credit that increases to 30% if labour requirements are met and includes the stackable domestic content and energy community 10% bonus adders, potentially reaching a 50% total credit. “The increased tax credit for waste-to-energy recovery projects
provides a new pathway for both industrial facilities and commercial properties to address resiliency concerns and reduce their emissions,” says Matt Donath, senior policy analyst at Edison Energy. “In addition, the inclusion of these cogeneration systems under the ITC at the same credit level as renewable and other clean energy projects shows the importance placed on moving the industrial sector towards lowering emissions.”
Public input and implementation The US Department of Treasury, Department of Energy, and Environmental Protection Agency have begun implementation of the new and expanded programmes in the IRA by soliciting public input to aid in creation of programme guidelines.
We anticipate these guidelines, which are needed to fully rollout the law, will be released by the second half of 2023.
IRA: why it is transformational – a UL Solutions perspective
“Historically, the US renewables industry has relied on tax credits that required reauthorisation from Congress every few years, which created boom-bust cycles and significant challenges in terms of planning for long-term growth,” says Gillian Howard, global director of sustainable energy and infrastructure at UL Solutions. In contrast, the IRA establishes a 10-year policy in terms of tax credits for wind, solar and energy storage projects. “We expect the IRA to both significantly accelerate and increase the deployment of new renewable energy projects in the USA over the next decade,” Howard says. “This will be transformational.” “Providing an investment tax credit for standalone storage is the single-most important policy change in the IRA — period,” said David Mintzer, energy storage director at UL Solutions. “This one change sets up all of the other energy storage advantages gained from the new law. Those of us in the BESS industry have been waiting for this to happen for more than 10 years, and this is the most significant legislation to accelerate the transition to clean energy and smart grids.” The IRA allows placement of battery energy storage systems where energy demand is highest and removes longstanding requirements that storage systems must be paired to solar sources.
With Republicans securing a slim majority in the US House of Representatives in the midterm elections, it is expected that they will conduct oversight investigations of the federal agencies responsible for IRA implementation. While these investigations could cause headaches for the agencies and slow down programme rollout, the Republicans lack the votes in either chamber to repeal the IRA or pass legislation that materially impacts programme funding. If a change in administration occurs after the 2024 election, the IRA could be at risk, but it is widely thought that many of the tax provisions in the IRA will be safe from full repeal. This is largely because new clean technology manufacturing plants and renewable generators made possible by IRA tax incentives are planned in Republican-led states and will benefit the states’ economies with job growth, tax revenue and improved infrastructure.
Edison Energy’s Pulse on Policy series.
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