The Race to Spend the IRA’s $100 Billion in Grants Has Begun

All across the United States, grant money from the Inflation Reduction Act has begun to flow.

There’s more than $100 million for protecting the Pacific Ocean’s salmon and steelhead fisheries.

Hundreds of millions more to plant urban canopies in Atlanta, Phoenix, and dozens of other cities.

$1 billion for two new weather research ships for the National Oceanic and Atmospheric Administration, and tens of millions for mapping the best “fuel breaks” — roads, rivers, and other natural features that will slow wildfires in Colorado, Wyoming, and other states.

The Biden administration has begun the gargantuan work of spending down the more than $110 billion in grant funding in the new climate law, the Inflation Reduction Act. It is in a race to spend as much of the money as it can in the next year — before a potential change of administration in 2025 and before climate change gets any worse.

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That effort is about 10% complete. The government has disbursed about $11.8 billion in grants, rebates, and other funding in law, according to an analysis conducted by Heatmap.

The spending is expected to pick up in the next year as the administration accelerates its efforts to get money out the door.

The grants are not the only source of funding from the climate law. The IRA contains three new pots of money: grants and rebates, new loans from the Department of Energy’s Loan Programs Office, and tax credits for clean energy.

The tax credits are the bill’s centerpiece and largest source of funding in the law. They are meant to incentivize people and businesses to switch to clean energy and other climate-friendly technologies. Although they could eventually disburse more than $1 trillion into the economy, according to a Goldman Sachs estimate, we do not yet have public data on their takeup.

The Loan Programs Office, meanwhile, has sent out more than $13 billion in loans to help build new electric-vehicle and battery plants since the law’s passage.

Grants and rebates make up the IRA’s third plank — and one of the largest portions of publicly available funding from the law. They are our first glance at how the law is working.

So far, most of the $11.5 billion in IRA funding already awarded by the Biden administration have gone to pre-existing federal programs or to expand government capacity. The money has decarbonized federal buildings, for instance, or been spent to hire more conservation scientists.

You can see that in the agency that has sent out more IRA-funded grants than any other: the U.S. Department of Agriculture, which has disbursed nearly $3.4 billion from the law this year. That money has largely funded pre-existing agricultural programs, such as the Conservation Stewardship Program, that have now been rewritten to boost “climate-smart agriculture.”

The law’s second-largest tranche of money has gone to the U.S. Postal Service to buy electric delivery vehicles. Although that money has been transferred to the agency, most of it remains unspent. The Postal Service plans to buy 66,000 electric vehicles through 2028 as it moves to an all-electric fleet.

Another $2.4 billion has gone to the Energy Department, which has used the funding to upgrade national labs, including in Idaho, Oregon, West Virginia, and Pennsylvania.

By comparison, the government has sent out relatively little money from new programs established by the IRA.

That is most evident from the Environmental Protection Agency. The EPA has yet to start making grants from its $27 billion Greenhouse Gas Reduction Fund, for instance, a multi-purpose fund which will eventually help capitalize dozens of green banks and provide loans to cut the cost of rooftop solar.

The EPA has also yet to disburse money from its new programs to reduce air pollution from ports, cut methane emissions from oil-and-gas infrastructure, and help environmental-justice organizations.

The IRA also provided nearly $10 billion to the USDA to help rural electric cooperatives decarbonize their power plants; that money has yet to flow as well.

In a statement, the White House said that it had launched about two-thirds of the grant and rebate programs in the IRA, totaling more than $70 billion. (In other words, it may have opened up applications to receive funding from those programs, but not yet awarded any money from them.)

“It's a pace we’re proud of, especially since many programs in the Inflation Reduction Act are being set up from scratch,” Michael Kikukawa, a White Housethe spokesman, said. “These programs are investing in communities, creating good-paying jobs in the clean energy economy, and tackling the climate crisis in every corner of the country.”

Advocates said that the pace of funding would likely pick up over the next few years.

“Given that we have spent the past year working with the Biden administration standing up these grant programs, it’s really not surprising at all that we haven’t seen the eventual pace this bill will reach in the first year,” Holly Burke, communications director for Evergreen, a nonprofit that fights for and advises on federal climate policy, told me. “It does leave us the challenge of running in 2024 on a bill that has only begun to deliver on its promise.”

The perils of going too slow

Among Democrats, some concern persists that the government is not spending the funding fast enough.

Perhaps the easiest place to see this worry is in Democrats’ growing anxiety about the IRA’s home-upgrade rebates, which are administered by the Department of Energy.

These programs are meant to help Americans buy climate-friendly appliances — such as heat pumps, induction stoves, and smart breaker boxes — as well as insulate and weatherize their homes. Last month, dozens of Democratic lawmakers wrote to the Energy Department, asking for a faster rollout of the program.

Democrats love these programs, which rank among the law’s most consumer-facing policies. When President Joe Biden signed the IRA last year, he mentioned these rebate programs before any other policy.

The IRA was “about showing … the American people that democracy still works in America,” Biden said at the time. “It’s going to offer working families thousands of dollars in savings by providing them rebates to buy new and efficient appliances, weatherize their homes.”

But the rebate programs have taken longer to implement than Democrats once hoped. There are two rebate programs in the IRA — one focused on efficiency and weatherization, the other on electrification — and the rules governing them have yet to be finalized by a Department of Energy office. Even though states will eventually administer those rebate programs, few states have received funding even to start up their programs.

At this point, most states will probably launch their rebate programs around the middle of next year, Andy Frank, the chief executive of Sealed, a home-retrofit company, told me.

Some states might lag beyond that. In Georgia, state officials have warned they are aiming to launch by September 30, 2024, at the latest.

Companies, too, are starting to get nervous about the slower pace. Because consumers know that the rebates are on the way, they’re delaying buying new appliances or updating their home insulation, Arch Rao, the chief executive of Span, which makes a new kind of circuit-breaker panel, told me.

That caution is hurting contractors and other installers at exactly the moment that they should be staffing up and preparing for a surge in demand.

“Homeowners are saying, ‘Wait, if rebates are going to be imminently available, then we’re going to wait to decarbonize.’ But contractors can’t plan for that,” Rao said, who was previously a head of product at Tesla. “Supply and demand are being built, but coordination between the two isn’t happening.”

“The Department of Energy is laser focused on cutting costs for working families and businesses through the historic consumer rebates program made available by President Biden’s Investing in America agenda,” Charisma Troiano, a Department of Energy spokeswoman, told me.

“We are working with states to help them move as fast as they are ready to, and look forward to continuing the work of helping American families keep more money in their pockets with an energy efficient and electrified home.”

At least one other IRA rebate program is meant to solve some of these problems: a $200 million program meant to train home contractors to install heat pumps and other home efficiency measures. The program will start awarding grants on November 1.

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