Democrats’ deal to spend billions on clean energy tax credits could spur development of enough carbon-cutting infrastructure to slash planet-heating emissions in the world’s largest economy by 40%, putting the United States’ climate goal in reach.
But states will ultimately decide how quickly and how much of the Inflation Reduction Act actually ends up reducing emissions.
Should a power plant owner build a gas-fired plant with carbon capture technology or go with renewables? Public service commissioners and regional grid operators will decide. Key permitting requirements? Various state regulatory agencies are in charge there. Can transmission lines or pipelines pass through a tract of rural land? County officials will choose whether to rezone the property.
On its current trajectory, the U.S. is on track to cut its emissions by about 30% compared to 2005 levels by the end of this decade, when nearly two dozen coal-fired power plants are scheduled to close ahead of new environmental regulations taking effect. Once President Joe Biden signed the so-called IRA into law, the $369 billion earmarked for heat pumps, wind farms and carbon-capture infrastructure could slash emissions another 10% or so, three separate independent analyses found.
Combined with last year’s bipartisan infrastructure law, the legislation outlines the first permanent national strategy to stop the world’s No. 1 cumulative emitter from adding more warming gasses to the atmosphere. Alone it is insufficient to slow the planet’s rising temperatures. But if passed, the 10-year torrent of tax credits and subsidies it provides would give U.S. negotiators leverage for what’s really needed to change the planet’s temperature trajectory: a binding global decarbonization deal that includes China, India and Russia.
A 300-foot crane slowly lifts a rotor onto a tower on the Lone Star Wind Farm near Abilene, Texas.
Robert Nickelsberg via Getty Images
Yet federal funding can only go so far in a country where a patchwork of jurisdictions and slow-moving bureaucracies rarely align on the need to quickly construct large-scale clean energy projects.
The 19 gigawatts of solar panels the U.S. installed last year brought the country’s total capacity to about 93 gigawatts. But to achieve the IRA’s goals, the U.S. needs to add at least 117 gigawatts per year between 2029 and 2032, when the bill’s tax credits expire.
A growth rate that huge would require every U.S. state to install 2.3 gigawatts per year. Just two states – Texas and California – are currently hitting those numbers. Solar panels need a lot of space and blue-sky weather, something not every state has. So many states will need to build far more than that to compensate for others.
Since large-scale solar requires a lot of land, and most states don’t have as much of that as California and Texas, other states will need to make up the difference with even higher rates of solar growth.
And that’s just one of the many types of projects needed to bring emissions down.
“Whether or not you have tens of billions of dollars in federal incentives, unless the state utility commission decides it wants to deploy more zero-carbon resources, it’s not going to happen,” said Tyler Norris, a North Carolina-based renewable-energy developer and the co-chair of the Clean Power Suppliers Association.
The vast majority of American adults understand that the climate is changing and support policies that shift the U.S. economy away from fossil fuels. But as more cities and states adopt laws to phase out gas and build more wind turbines, the fossil fuel industry has struck back in states where it dominates.
Republican states led by Oklahoma sued the Obama administration over its emissions-cutting regulations, and successfully prevented a landmark power plant rule from taking effect. Many of those same states are among the 20 that recently prohibited their cities and towns from following New York City and Seattle in banning new gas line hookups.
Over the past few years, state treasurers in nearly two dozen states, including fossil fuel producers such as Oklahoma, Texas and West Virginia, have organized to block climate policies from taking effect and use the taxpayer money in their control to punish companies that try to reduce emissions, a recent New York Times investigation found.
“I do think you’ll see some of the fossil fuel states chip away at it in terms of what happens at the state level,” said Rich Sorkin, chief executive of the climate-risk consultancy Jupiter Intelligence.
Partisan hardliners may also seek to sabotage legislation that Democrats passed without a single Republican vote. Arizona, which has far more solar-power potential than fossil fuel reserves, is “trending pretty hard right,” he said, and the state’s utility regulators voted 3-2 in January to oppose setting a clean energy goal. Even in Florida, where Gov. Ron DeSantis (R) saved the only major pro-solar policy from his own party’s lawmakers, the governor’s potential White House run may encourage “foot-dragging on implementing things in this bill,” Sorkin said.
In a string of Twitter posts Friday evening after the House passed the IRA, Neil Chatterjee, the former chairman of the Federal Energy Regulatory Commission, warned that “by avoiding Republicans through this partisan path, Dems have also avoided stability.”
“Everyone is taking it as gospel that the bill will reduce emissions by 40% by 2030,” he wrote in a tweet. “But EVERYTHING would have to [go] right: cooperation from Republican governors and legislatures – and possibly Republican Congresses and Presidents. Without R buy-in, that cooperation won’t come.”
Inertia is an even bigger barrier and could play out differently depending on how a state organizes its electricity market.
In states like those in the Southeast where monopoly utilities own the power plants and distribution lines and work with elected commissioners to set fair rates, any change in power generation requires “quasi-judicial” proceedings that can take 18 months or more, Norris said.
President Joe Biden speaks about the economy on July 6 at Max S. Hayes High School in Cleveland.
SAUL LOEB via Getty Images
“There’s so much inefficiency in the decision-making process in the states … and that’s a barrier in and of itself,” he said. “There’s good reason to have these quasi-judicial processes, because it allows for a check and balance on the utility. But it nevertheless still takes an extraordinary amount of time and effort and resources.”
Commissioners calculate how much electricity rates need to increase over a period of time to allow a utility to recoup its investment in a new power plant. The business-as-usual approach in most states is to discount the risks climate change or extreme weather pose to these new facilities, erasing from the analysis any advantage cleaner generators might have in the long run.
Just last month, Georgia’s Public Service Commission rejected a proposal to expand a successful solar program and approved plans to boost gas demand in a vote on what should be in Georgia Power’s 20-year plan.
In North Carolina, regulators are considering a long-term plan from Duke Energy to cap how much utility-scale solar the monopoly utility builds over the next decade, effectively “seeking a state-level directive to artificially cap the amount of our most readily available, least-cost zero-carbon resource from coming onto the system,” Norris said.
Some states’ aversion to renewables stemmed from uncertainty over federal incentives. Congress has repeatedly extended the tax credits that helped make solar and wind cheap over the past decade, but only for a year or two each time.
“So any time we were involved in state proceedings regarding renewable modeling, utilities would often hedge and say we don’t know if those tax credits are going to be extended, we don’t know if they’ll be around for very long,” said Simon Mahan, executive director of Southern Renewable Energy Association. “Oftentimes those incentives would be excluded from analysis, and what does in effect is make renewables more expensive in models.”
The Inflation Reduction Act addresses this problem by extending those credits for 10 years, and making all other zero-carbon-generating sources eligible for the benefit after 2024.
Stalled Transmission, Stalled Transition
A different kind of short-term thinking dogs the majority of states whose grids are part of regional, multistate markets.
Under that system design, power plants bid against each other at auctions to see which one can generate the cheapest electricity. Renewables are competitive in those markets, particularly against coal or nuclear power stations with higher fuel or maintenance costs. But the markets do not on their own incentivize building more power lines, which are necessary to bring more solar and wind power on to the grid.
Transmission lines are very difficult to build in the U.S., since they cut across so many parcels of land and American property laws favor not-in-my-backyard landowners. Making it even harder is the fact that the usual advocates of clean energy — environmentalists — often oppose high-voltage lines, especially when the route cuts through forested areas. An alliance of green groups and fossil fuel companies last year won a campaign to block a new power line to carry zero-carbon hydroelectric power from Québec into New England.
“Whether or not you have tens of billions of dollars in federal incentives, unless the state utility commission decides it wants to deploy more zero-carbon resources, it’s not going to happen.”
– Tyler Norris, vice president of a renewable energy developer in North Carolina.
It doesn’t help that the grid operators tasked with designing new transmission routes struggle to make the most persuasive case. A Lawrence Berkeley National Laboratory study published this month found that “many existing transmission planning approaches are likely understating the economic value of new transmission infrastructure” because forecasting models can’t account for new patterns of extreme weather.
There is progress on this front. In April, the Federal Energy Regulatory Commission announced a new rule to require more long-term transmission planning and determine how best to divvy up the cost of building new lines.
In July, the board of the Midcontinent Independent System Operator, the grid region facing the most severe problems from lack of transmission, approved a $10.3 billion plan to erect new power lines across the region spanning all 15 states along the Mississippi River. Once complete, the 18 high-voltage lines could allow some 53,000 megawatts of new renewable power onto the grid.
Whether those lines get built, however, will depend on regulators from states ranging from oil-rich Louisiana to windswept Iowa.
Senate Democrats said they reached a second “side deal” to introduce legislation to reform the federal permitting process, making it easier to complete environmental-impact assessments and placing a new priority on approving necessary infrastructure. But passing the deal into law may prove tricky, and will likely scramble the ideological coalitions that formed to pass the Inflation Reduction Act.
Some of the most debatably clean energy projects the IRA may incentivize would benefit from the fossil fuel industry’s control of certain states. The federal cash that could flood into projects to capture carbon dioxide from smoke stacks and inject it back underground will spur demand for more CO2 wells. The only federally approved injection well, located in Illinois, took about six years to permit.
But federal authorities approved states such as North Dakota and Wyoming to permit wells on their own, and Louisiana and Texas are likely to win the same “primacy” authority.
Elsewhere, the IRA will provide funding to state agencies to help speed up reviews of other projects.
Despite certain advantages fossil fuel projects may get under the bill, the consultancy Energy Innovation, which authored one of the three most-cited analyses of what the IRA would do for emissions, projected that 24 tons of emissions reductions from clean energy projects would offset every one ton of emissions from new oil and gas infrastructure.
Leaving that much cash on the table for clean energy may be hard for even the most ardent fossil fuel hardliners to pass up, said Jesse Jenkins, the Princeton University researcher behind one of the other most-cited analyses of the bill’s emissions impact. The existing barriers on the local level to building clean energy, he said, “are not getting worse because of this bill.”
“It’ll actually get better,” he said. “If you’re a business that wants to make money doing this or you’re a consumer advocate who wants to take advantage of savings for ratepayers or you’re a local politician who wants to drive economic development, all those incentives are there and get stronger to help overcome those limitations.”
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