US President Joe Biden pledged last month to use “every power” at his disposal to push his administration’s long-suffering climate bill through Congress – and get his ambitious but faltering domestic and global climate action agenda back on track after repeated set-backs.
On 8 August the Senate passed the Inflation Reduction Act (IRA) of 2022, which features almost $370bn for renewable energy investment and emissions reduction, an unprecedented federal spend that could singularly supercharge the country’s energy transition. Then on Friday the House backed the legislation, leaving Biden needing only to add his own signature to secure its passage into law.
Early independent dissection of the clean energy provisions within the bill – which was negotiated by majority leader Charles Schumer and coal-state Democrat Joe Manchin, who had singlehandedly spiked earlier versions of the proposal – suggest it could place the US on a flight path to cut greenhouse gas levels by 2030 by as much as 44% from 2005 levels, putting it within reach of its 50-52% Paris Agreement commitments.
Biden’s declamation that the Senate’s passage of the IRA was “the action the American people have been waiting [to] address the problems of today [including] investments in our energy security for the future” was echoed enthusiastically by many US renewables industry bodies in the days following.
‘Addressing the problems of today’
“A monumental day for America’s clean energy progress and global climate leadership,” said Abigail Ross Hopper, CEO of the US Solar Energy Industries Association; and a “watershed moment in [the US’] renewable energy transition,” offered Liz Burdock, CEO of US advocacy group Business Network for Offshore Wind.
Heather Zichal, CEO of American Clean Power Association – which less than a week earlier had released calculations pointing to development of up to 550GW of new utility-scale battery storage, solar, and wind power projects between now and 2030, and the creation of 550,000 sector jobs if the bill were passed – called it “a generational opportunity after years of uncertainty and delay”.
Though the IRA is far less aspirational than the sweeping but unsuccessful $1.9bn Build Back Better climate and social spending bill that it replaces, it is nonetheless seen a huge, energising boost for the US energy transition and expansion of renewables build-out that will come with it.
For American’s fledgling offshore wind sector, the package of federal investments, loans, and tax credits baked in to the IRA is seen as a “historic step forward”, not least in the potential positive economic development of the bill’s $5.6bn to the Department of Energy (DOE) for clean energy and related “national interest” power transmission project loans; $1bn for DOE in state grants to help site grid lines; $150m to hire personnel for permitting on federal lands, and $100m for DOE to conduct analysis, modelling, and planning for inter-regional offshore transmission grids.
‘Historic step forward’
And the emerging US hydrogen sector had even more to cheer about. As Recharge opined as the dimensions of the bill emerged, the IRA could be “the single most important event in the history of green hydrogen to date — and a turning point for the nascent industry, given that tax credits included for renewables-produced H2 would mean production that was ‘Made in the USA’ would be the cheapest in the world.
The ripple out from this coming reality was evinced in shares in US hydrogen sector companies soaring since the US climate bill was announced and European companies in the H2 space also seeing substantial increases.
Despite the undoubted global energy transition game-change represented by the 725-page IRA, as Recharge analysis revealed, the bill did omit key federal permitting reforms and a tax credit for transmission that is reckoned to be critical to overcoming development and delivery hurdles across much of the country.
There are also the issues lying in wait around several giveaways to the oil & gas industry, such as hinging new renewables permitting on hydrocarbon leasing on federal lands, which has incurred the wrath of climate activists despite independent number-crunching highlighting that the bill’s CO2 cuts outweigh emissions links to forecast new hydrocarbon production by a factor of 24.
Note: Update reflects bill's passage through House