How the Inflation Reduction Act May Impact the Energy Industry

by Bob Shively, Enerdynamics President and Lead Facilitator

The big news in the energy sphere this week is that the Inflation Reduction Act of 2022 has been passed and signed into law by President Biden. With so much incomplete news coverage floating around and the broad scope of a bill including many provisions beyond energy, most of us have been left wondering just what exactly is included in its 755 pages. Here is a summary of many key energy provisions.

The bill was clearly designed to help foster an energy transition to reduce greenhouse gas emissions and move to a new modernized electric grid. Here are some of the key energy sectors what will benefit:

	Energy efficiency and heat pumps
	New generation nuclear power
	Wind and solar power
	Energy storage
CO₂	Carbon capture and storage
H₂	Clean hydrogen production
	Electric vehicles (EVs) and charging infrastructure
	Biofuels

Here are some important provisions:

Extension of tax credits for wind and solar. The current credits (see details on current solar credits here) have been expanded to provide solar developers the option of the Investment Tax Credit (ITC) or the Production Tax Credit (PTC), and the availability of tax credits for both wind and solar has been extended for 10 years.
The ITC will now be available for stand-alone energy storage projects including batteries and thermal storage. In the past, it was only applied to storage connected to a solar project.
The ITC will also now apply to microgrid controllers (reducing the cost of constructing microgrids) and to the new linear generator technology.
The PTC will be available to nuclear power and to generation by clean hydrogen.
Some nonprofit and government entities will be able to access direct payments in lieu of tax credits for these technologies, helping municipal and co-op utilities to participate even thought they don’t pay taxes.
Tax credits and loans will be available to manufacturers producing clean vehicles such as EVs in the U.S.
Tax credits for buyers of new EVs have been extended, and a new tax credit is now available to buyers of used EVs.
$9 billion is earmarked for federal procurement of U.S.-made clean energy technologies, including $3 billion for the Postal Service’s zero-emissions vehicle purchasing plans.
$9 billion will go toward consumer home energy rebate programs to fund electrification of homes with appliances such as heat pumps and to help pay for energy efficiency retrofits.
$27 billion will fund loans, grants, or other financial assistance for emissions reductions investments.
Requirements for leasing of federal land for fossil fuel production, attempting to ensure continued access to fossil fuels; the other provisions allow the clean energy industry to grow while providing loan guarantees and tax credits for reductions in methane emissions from the industry.

The intent of the bill is clear. The federal government will lend extensive financial support to the expansion of the clean energy economy. Rather than using the “stick” of increased environmental rules or carbon taxes to reduce greenhouse gas emissions, the bill took an approach of providing “carrots” of financial support. As West Virginia Senator Joe Manchin says on his website, the bill will “decarbonize through innovation, not elimination.”

Implementation of the Inflation Reduction Act is expected to provide a strong boost to various aspects of developing a vibrant clean energy economy. Many previous financial barriers are addressed. While we expect to see renewed vigor behind clean energy development, we must remember that other difficulties still exist. These include transmission and interconnection, siting and permitting, state-level regulations, utility practices, supply chain weaknesses, and limited workforce availability.

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