Sustainable Business Special Edition by the WSJ | August 13, 2022:
A spending bill that will direct roughly $369 billion toward climate programs will head to President Biden's desk next week, after having passed both the House and Senate.
The Inflation Reduction Act also includes tax incentives targeted at wind, solar and battery developments that will boost the proportion of clean energy in power grids.
Homeowners get subsidies to upgrade homes with more energy-efficient products. Consumers get a $7,500 tax credit for buying electric vehicles, although with conditions that could make it hard to qualify.
However, the companion legislation to speed the approval process for energy infrastructure projects, both clean energy and fossil fuel, is facing political headwinds, including from Republicans who are skeptical of assurances it will help the fossil-fuel industry and don’t like how it was tied to the tax-and-climate bill passed by Senate Democrats.
That could hinder the impact of the climate bill, which is projected to cut greenhouse-gas emissions 31% to 44% below 2005 levels in 2030 in the U.S., compared with 24% to 35% under current policy, according to Rhodium Group, an independent research firm.
Below: Roadblocks to the renewable-energy mission and a detailed look at the clean-energy plan.
The national energy policy goals of reducing the country’s emissions comes with a major assumption that renewable-energy projects will be built out quickly over the next decade.
Despite the new financial support for renewable technologies, the industry faces supply-chain snarls, logjams in securing project approvals and challenges in constructing new high-voltage power lines and large-scale batteries to support an unprecedented build-out of wind and solar farms.
Some executives of charging providers and manufacturers say it will be a race to make and install enough chargers to meet rising demand for electric vehicles as many auto makers’ new EV fleets will hit the road around 2025.
The Repeat project led by Princeton University’s Zero Lab is forecasting that large-scale solar capacity alone could increase by around 500 gigawatts between now and 2030, implying average annual growth at a pace roughly six times faster than that of 2020, said Jesse Jenkins, a Princeton assistant professor and energy-systems specialist who leads the Zero Lab.
“Whether or not we can actually permit and build projects at that pace is the big unknown,” Mr. Jenkins said.
Here is a detailed look at the main parts of the $369 billion clean-energy plan:
Hydrogen: A $3-per-kilogram tax credit for green hydrogen—produced using renewable-powered electrolyzers to split water—should kickstart the domestic industry, helping it to catch up to or even surpass European and Asian players.
Wind and Solar: The 10-year extension of wind and solar tax credits decreases uncertainty for developers, which should boost projects.
Green Bank: Smaller renewable projects will also benefit from the $27 billion for green bank funds, which have a mandate to use debt-financing techniques to back infrastructure projects meant to lower carbon emissions.
Storage: A new standalone tax credit for energy storage could be a real turning point for one of clean energy’s most important missing pieces.
Energy Efficiency: There are tax credits for homeowners to invest in energy-saving measures like more efficient windows, doors, heating and cooling systems and insulation.
Electric Vehicles: Buyers of used EVs could get a new tax credit. There are also tax incentives on EV charging stations and $15 billion has been set aside for automakers to retool their factories or build new ones.
Carbon Capture and Storage: Fossil-fuel companies stand to benefit from higher tax credits for capturing and storing carbon-dioxide emissions, which could extend the life of oil-and-gas assets.
Secure Supply Chains: Initiatives also encourage a shift to friendly or domestic manufacturing of key components of EVs, batteries and renewable equipment. Solar developers have faced a series of challenges buying panels.