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Two years in, union leaders say Biden’s big climate law is making a difference.
The Inflation Reduction Act is by far the most important climate law ever passed in the U.S. But it also may go down as one of the most important labor laws of recent history. Overnight, jobs installing solar farms that were largely performed by an itinerant, low-wage workforce had the potential to become higher-paid positions occupied by skilled tradespeople — maybe even union jobs.
That’s because in order to qualify for a 30% tax credit on their investment or operating costs, clean energy developers now have to follow two key labor standards. They have to pay construction workers the federally determined prevailing wage for their region, plus hire a designated number of apprentices, who are provided with paid classroom instruction in addition to on-the-job-training.
“I don’t think people have a sense of the scale and the scope of what this law has done and is going to do,” Rick Levy, the president of the Texas AFL-CIO, told me. “From our perspective, putting community well-being and labor standards in the very fabric of this industrial expansion is going to pay dividends for generations.”
On the eve of the IRA’s two-year anniversary, a new report provided exclusively to Heatmap has identified 6,285 utility-scale clean energy projects planned, under construction, or already operating, that are likely candidates for these tax credits. Together, they represent an estimated 3.9 million jobs, according to the Climate Jobs National Resource Center, a nonprofit that supports unions fighting for worker-centered climate action, which compiled the data.
There’s no way to know, at least right now, how many of the projects still in progress will actually get built, or how many have or will adhere to labor standards. Safe harbor provisions in the law also allow developers to claim the full tax credit without adhering to the rules as long as they started construction by the end of January 2023, so the full effect of the provisions will take some time to be realized.
But the report reveals the vast potential for the law to create higher-quality jobs in clean energy all over the country. Based on my reporting, that potential is starting to materialize. Union leaders told me they’re now having conversations with developers who never returned their calls before. And renewable energy developers and tax credit consultants told me it was a no-brainer to meet the labor standards, even though they create substantial administrative burdens. Otherwise, they’ll only be eligible for a 6% credit, leaving a huge amount of money on the table.
Mike Fishman, the executive director of the Climate Jobs National Resource Center, told me that when he first started advocating for high-road climate jobs, he found that many trades workers were afraid of clean energy. “If they had a good job in the fossil fuel industry, then saying, we’re going to reach these goals and shut down all the fossil fuel plants, that was very scary to people.” But since the IRA passed, he’s seen a change in workers’ attitudes about supporting climate action. “It creates a sense that there’s a future for everyone — an economic future, as well as a climate future,” Fishman said.
The IRA’s potential to spur well-paid jobs and training opportunities is actually even larger than the Resource Center’s estimate indicates. The report only covers clean energy generation projects like wind and solar farms, but the law also tied labor standards to tax credits for the construction of clean energy manufacturing plants, EV chargers, carbon capture projects, hydrogen plants, clean fuel factories, and new, energy-efficient buildings.
The standards are likely to affect each of these industries in different ways, but it’s instructive to look at what’s already happening in renewable energy development. To do so, you first have to understand that developers sit near the top of a ladder of companies involved in bringing an energy project into the world. Above them sits investors; below, a series of contractors and subcontractors who manage the project on the ground and hire the workers who ultimately build it.
Before the IRA, everyone along this ladder had an incentive to keep costs as low as possible. At the top, developers are competing for power contracts with utilities. Contractors would try to win bids by quoting the lowest construction costs. Staffing agencies would source temporary workers from all over the country and negotiate wages and benefits on a case by case basis. An investigation into solar work by Vicefound that it was “common to have two workers doing the same job for vastly different pay and living stipends.” Some would travel to a new place for a gig and “pile into motel rooms with other workers on the same projects in order to save money.”
The IRA disrupts that incentive structure, creating a new regime whereby the top priority is getting that 30% tax credit. The law also extended the ladder, creating new rungs of accountability thanks to new tax credit transferability rules that allow developers to sell their tax credits to third parties. That means there are a host of other companies looming over developers’ shoulders with a stake in making sure they don’t cheat the rules. Tax credit buyers don’t want to end up in a situation where the IRS audits the developer who sold them the credits, finds that there weren’t enough apprentices on the project, and claws back the money. The risk is serious enough that buyers also purchase insurance for these transactions, adding another layer of oversight.
“The lawyers are scaring everyone about this,” Derek Silverman, the co-founder and chief product officer of Basis Climate, a startup that matches tax credit buyers and sellers, told me. For example, the law contains a loophole for companies to claim the credit without hiring the required number of apprentices as long as they show they made a “good faith effort.” Treasury defines that as having reached out to at least one registered apprenticeship program in the area every year the project is operating. Silverman said he’s seen lawyers challenge companies that are trying to get around the requirement, asking them who they reached out to and berating them if it wasn’t a legitimate effort.
“They’re saying, you have a huge part of your capital stack that’s based off this tax credit,” said Silverman. “It’s not worth the downside of the government questioning through an audit that you didn’t meet these requirements, and then, boom, you owe them $20 million when it would have cost you $100,000 to do the documentation and get that all square.”
The upside is valuable enough that it’s generated a whole new cottage industry in tax credit compliance. Empact Technologies, for example, is a software company that collects and evaluates payroll data from contractors to make sure they are paying the correct wages and have the right number of apprentices. “Then we have to go back and essentially fix all of the mistakes that they made every single week” — like classifying workers incorrectly and paying them the wrong amount, or falling behind on apprenticeship hours — “which every single contractor does. It’s insane,” Charles Dauber, Empact’s founder, told me.
All of this has added much complexity — and cost — to renewable energy development. David Yaros, who co-leads Deloitte’s US Tax Sustainability Practice, told me that the cost of compliance, including hiring companies like Empact and Deloitte to compile all the documentation, could eat into 5% to 20% of the tax benefits.
“This has raised our costs,” Rodrigo Inurreta Acero, a government affairs manager at the international developer EDP Renewables, confirmed, referring specifically to the added cost of consultants rather than the mostly negligible cost of paying prevailing wages. “But, we are very, very happy to comply with this, because the juice is worth the squeeze.”
There’s clear incentives for developers to do everything in their power to meet the labor standards. The key question is whether these two little provisions — prevailing wage and apprenticeships — are strong enough to “build a strong pipeline of highly-skilled workers” and “ensure clean energy jobs are good-paying jobs,” as the Biden administration has said.
The need is definitely there. A census of U.S. solar jobs in 2022 found that 52% of solar installation and project development companies found it “very difficult” to find qualified workers, with electricians and construction workers being among the most difficult positions to fill.
But even if armies of lawyers are scaring companies into making serious efforts to hire apprentices, that doesn’t mean they are actually finding them. “It’s not clear at this stage whether apprenticeship programs are scaling up fast enough to match labor supply to project demand,” Derrick Flakoll, a policy associate at BloombergNEF told me. He pointed to an announcement made by the White House just last month of $244 million in grants to expand the Registered Apprenticeship system throughout the country. “I’d be skeptical that apprenticeship programs have been able to scale up yet,” said Flakoll.
There’s a catch with the wage requirement, too: “Prevailing wage” doesn’t necessarily mean a living wage, and it can vary dramatically from place to place. The rate is determined by surveys sent out to contractors and labor organizations, and is typically higher in jurisdictions with active labor unions. For example, in Falls County, Texas, where the 640 megawatt Roseland Solar project is under construction, prevailing wage for a general laborer is $8.75 an hour. In Sangamon County, Illinois, where the 800 megawatt Black Diamond Solar project is being built, prevailing wage for a laborer is $34.04 an hour plus benefits worth $29.26 an hour.
Nico Ries, the lead organizer for the Green Workers Alliance, which organizes solar and wind workers, told me solar wages seem to have only increased in places with higher union density. That’s because unions are now on a more even playing-field to compete for jobs in those areas, since their typical rates have become the de facto minimum.
To be clear, the prevailing wage and apprenticeship provisions do not require developers to hire union workers to build their projects. And there are plenty of non-union, registered apprenticeships. Ries told me that the temp staffing agencies that have served the solar industry in the past are quickly standing up apprenticeship programs to stay on top of the market under the IRA. The main problem with that, they said, is that unlike union apprentices, these workers have no representation.
“There’s a lot of misinformation,” Ries said. “People think they are joining an apprenticeship and it’s going to be a whole thing, but it’s really just a little training or two, and then they slap a sticker on your hard hat.”
Nonetheless, unions are starting to make inroads in solar in places that have long been hostile to organized labor. Ethan Link, the assistant business manager for the Southeast Laborers’ District Council, which has members in right-to-work states throughout the south, told me that before and after the IRA was like “night and day.” For the first time, solar developers are calling the union directly to talk about projects on the horizon and to figure out how to work with them. As a result, the union is investing in more solar-specific training for its apprenticeship instructors.
“The Inflation Reduction Act is one of the most consequential and, I think, also most innovative ways of inducing the market to have broad based benefits for the community,” Link said. “The way I’ve experienced it, it’s changed the landscape on the ground with these developers within a matter of months, rather than a matter of years.” He said they don’t yet have a lot of workers actually assigned to projects, but “we’re really optimistic about where things sit right now.”
Kent Miller, president of the Wisconsin Laborers’ District Council, told me his union has been able to double its apprenticeship program from around 300 to 400 students a few years ago to closer to 700 to 800 post-IRA. It’s now looking to build another training campus to expand its capacity. Not all of that growth is thanks to renewable energy, he said, but the union now has a significant portion of its membership that just works in utility-scale solar.
Earlier this year, Wisconsin’s four biggest electric utilities pledged to employ local, union labor on all future renewable energy projects. Miller doesn’t think this would have happened without the incentives in the IRA. Though every wind farm in Wisconsin has been built by union labor, the more nascent solar industry was starting to bring in non-union workers from out of state to build projects. The IRA incentives gave Miller’s union leverage in negotiations with the utilities, because future projects were going to need to be able to find registered apprentices. “Unions run the best registered apprenticeship programs,” he said. “It was showing what we could do, what we could bring to the table.”
There is one more small but potentially powerful incentive for developers to work with unions. The Internal Revenue Service has said that if companies sign a project labor agreement — an agreement with one or more unions, made prior to hiring, that establishes wages and benefits — then they are less likely to be audited, and won’t have to pay penalties if they are found to be non-compliant.
To Levy, of the AFL-CIO in Texas, and others in the labor movement, getting workers to support clean energy is essential to tackling climate change. “Unless workers see themselves and their interests reflected in these new energy technologies, there’s never going to be the kind of political support that we need to be able to do the things we need to do to save the planet,” Levy said. The first step to achieve that, he said, is making sure these jobs are “good union jobs.”
The Climate Jobs National Resource Center connected me with Kim Tobias, a union electrician in Maine, as an example of how union jobs can change lives. Tobias used to work in call centers, providing customer service for healthcare software companies, before leaving to join the International Brotherhood of Electrical Workers. She was making $16 an hour in her last call center job after more than 10 years in the field, and was fed up after getting passed over for a promotion. When she started as an electrical apprentice in 2019, she essentially doubled her salary overnight once benefits were taken into account.
Today, in part because of the IRA, but also because of a state law that requires developers to pay prevailing wage on all large renewable projects in Maine, Tobias mainly works on solar projects. The work isn’t always ideal — she told me she once had to commute 75 miles away for a solar job — while she was pregnant, no less. “Then again, a year and a half later, I worked a solar job that was 0.9 miles away from my house. So it’s give and take,” she said.
But Tobias also said she sees potential to create high-quality clean energy jobs beyond solar in Maine, where, she lamented, “people under the age of 30 are leaving in droves.” She noted that an old paper mill in Lincoln, Maine, is being turned into an energy storage site, and the developer has already said it would establish a collective bargaining agreement with the Maine Building and Construction Trades. Illustrating Levy’s point about political support, the union is also now advocating for the construction of a new port to support the offshore wind industry, which would have to be built with union labor under a recent state law.
Even if the IRA’s labor provisions are starting to work, which it seems they are, they contain one significant weakness. The rules only apply to the construction of projects — not to their operations. It’s an improvement to have labor standards for construction jobs. But once they are built, wind and solar farms don't take many people to operate. The federally subsidized clean energy manufacturing plants springing up around the country due to the IRA will create a lot more jobs, but, at least right now, those jobs don’t have to be “good.”
“I think that people need to understand the opportunity here,” said Levy, and make sure that we continue to build on it and not turn back.”
Editor’s note: This story has been updated to clarify the “good faith effort” exception to the apprenticeship provision and that both provisions apply only to construction.
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Want to understand what’s happening to electric cars? Look at the Golden State.
As California goes, so goes the American car scene. This sentiment has long been true, given that the Golden State is the country’s biggest automotive market and its emissions rules have helped to drag the car industry toward more efficient vehicles.
It is doubly true in the EV era, since California is where electric vehicles first went big and where electric adoption far outpaces the rest of the nation. A look at the car sales data from the first half of 2024 shows us a few things about what the electric car market is and where it’s headed.
Electric cars went mainstream in a hurry here, growing from 5.8% of California car sales in 2020 to 21.5% in 2023. Then the graph flattens out: For the first half of this year, EVs made up 21.4% of new registrations. That would seem to support the gloomy narrative of a supposed EV sales slump. The truth, as it tends to be, is more complicated.
Look at the numbers broken down by quarters, rather than years, and the chart looks a little different. EV sales reached a peak in the third quarter of 2023, dipped a bit, and then jumped back up in April to June 2024 to the second-best quarter ever. That’s a blip, not a crisis, as EVs appear poised for slow growth but growth nonetheless.
Consider the context for a moment: California reached a place where 1 in 5 new cars sold are electric even with the EV affordability problem. That trend wasn’t going to continue unabated up to 30, 40, or 50% of auto sales without the industry putting out vehicles that can compete on cost with a $25,000 Honda Civic or a $30,000 Toyota RAV4. In its summary of the numbers, the California New Car Dealers Association blames inflation and rising monthly car payments for suppressing all vehicle sales at the moment, EVs included. Money matters will decide where things go from here.
The flipside of this year’s EV doomerism is the notion that drivers are turning to hybrids instead. The numbers bear out that sentiment for the moment in California. Traditional hybrid vehicles (excluding plug-in hybrids) more than doubled their market share from 6.1% in 2020 to 13.2% in the first half of 2024. Not too surprising, considering their wide availability and how appealing they are for California drivers who buy some of the nation’s most expensive gasoline.
Plug-in hybrids accounted for 3.4% of sales in the first half of this year, not far from the number they posted back in 2021. That might sound odd, given automakers’ rumblings about turning to these vehicles instead of true EVs, but a new wave of PHEVs is still in development. For now, the difficult calculus remains: Plug-in hybrids are a great choice for a lot of drivers, but they are significantly more expensive than combustion cars for not much electric range, and PHEVs can be hard to come by.
Take all these electrified powertrains together, however, and the picture is clear. Compared to 2018, when gas- and diesel-burners made up 88.4% of auto sales, that number is down to 62% for the first half of this year. Combustion-only is sinking fast, a trend that will spread from the West Coast to the rest of the nation.
My eyes don’t deceive me. Since the start of 2024, it has felt like Rivian’s trucks and especially SUVs are all over Los Angeles, driven by the kind of people who used to own Range Rovers. It turns out RJ Scaringe’s company is the fastest-growing car brand of any kind in California, with sales up nearly 77% in the first half of 2024 compared to the same period in 2023.
Now, that number is deceiving. It’s easy to grow by big percentages at the beginning, and Rivian’s sales numbers are relatively small: It moved just shy of 7,000 vehicles through June, which pales in comparison to the 100,000 Teslas and 150,000 Toyotas registered in California during the same period. But Rivian’s early success in California suggests the brand is finding traction and that it might pick off plenty of drivers from Tesla's bread-winning Model Y once the more reasonably priced R2 and R3 arrive.
After all, the story of the supposed EV slump is actually the story of Tesla squandering its huge halftime lead. Ford, Toyota, Mercedes, Rivian, BMW, and Hyundai/Kia EV sales are up this year, but Tesla’s slump wipes out much of their gains.
The Model Y and Model 3 remain California’s best-selling EVs by far, with the second-place Model 3 selling three times the volume of the third-place finisher, Hyundai’s Ioniq 5. Yet Tesla sales in California are down 17% from the first half of 2023, and its market share dropped from 64.6% to 53.4%. Its only new model, the Cybertruck, sold 3,048 in the first half of this year. Californians bought nearly a thousand more Chevy Bolts — and GM isn’t even building that car right now.
Current conditions: More than 300,000 people in Louisiana are without power after Hurricane Francine • Hungarian lawmakers met in a dried riverbed yesterday to draw attention to the country’s extreme drought • An Arctic blast could bring snow to parts of the U.K.
More than 60 scientists have co-authored a new study, published in The Lancet Planetary Health, warning that human activity is damaging the natural systems that support life on Earth. Almost all of these support systems – including the climate, soil nutrient cycles, and freshwater – have been pushed into danger zones as humans strive for ever more economic growth. Thus, the researchers say, the health of the planet and its people are at risk, and the poor are the most vulnerable. The study concludes “fundamental system-wide transformations are needed” to address overconsumption, overhaul economic systems, improve technologies, and transform governance.
The Lancet
Carmaker Stellantis announced yesterday it is pouring more than $400 million into three facilities in Michigan to ramp up electric vehicle production and boost the company’s “multi-energy strategy.” The Sterling Heights Assembly Plant will be Stellantis’ first U.S. facility to build a fully electric vehicle, the Ram 1500 REV. The Warren Truck Assembly Plant will be “retooled” to produce the upcoming electric Jeep Wagoneer. And the Dundee Engine Plant will be upgraded for parts production for the company’s STLA Frame architecture. As The Associated Pressexplained, Stellantis “is taking a step toward meeting some commitments that it agreed to in a new contract ratified last fall by the United Auto Workers union after a bitter six-week strike.” The company is aiming for 50% of its passenger car and light-duty truck sales in the U.S. to be electric by 2030.
Police arrested a 34-year-old man suspected of starting a wildfire in California that has now burned more than 36,000 acres and is less than 20% contained. The Line fire is one of several large blazes burning in the state and threatening thousands of structures. Last month another man was charged with arson on suspicion of igniting the Park fire, which consumed 430,000 acres in Northern California. As Heatmap’s Jeva Lange reported, arson officially accounts for only about 10% of fires handled by Cal Fire. But when there are thousands of fires across the state during a given season, that’s not an inconsequential number. And a warmer world has made extreme fire conditions more common, as have decades of misbegotten fire suppression policies in the Western United States. As a result, arson fires in rural areas are more likely to burn out of control than they would have been half a century ago, Lange wrote. Experts warn that California’s fire season, fueled by “weather whiplash,” is only just ramping up and is likely to intensify with the arrival of the Santa Ana winds.
Brazil’s President Luiz Inácio Lula da Silva has pledged to finish the paving of a controversial road through the Amazon rainforest. The BR-319 highway would connect some major cities and improve cargo movement, which has been disrupted by record-low water levels in the Amazon River due to drought. But its construction could also hasten deforestation, including in old growth forests. “Without the forest, there is no water, it’s interconnected,” said Suely Araújo, a public policy coordinator. “The paving of the middle section of BR-319, without ensuring environmental governance and the presence of the government in the region, will lead to historic deforestation, as pointed out by many specialists and by Brazil’s federal environmental agency in the licensing process.” Lula made the pledge during a visit to assess the damage from massive fires in the rainforest, which his Environment Minister Marina Silva blamed on extreme drought caused by climate change.
A new survey of more than 1,000 EV owners in California has some interesting insights into what these drivers want from a charging station. It found they were 37% more likely to choose a charger with additional amenities like restrooms and convenience stores. “This symbiotic relationship between businesses and EV chargers may benefit both EV chargers and local businesses,” said Alan Jenn, assistant professor at the Electric Vehicle group of the Institute of Transportation Studies at UC Davis.
Next 10
Also, California’s EV drivers really don’t want to wait to charge up, and are willing to pay almost a dollar more per 100 miles of charge if there’s no wait time at the charger. With every minute of extra wait time, a driver’s willingness to use a charger falls by 6%. The survey was conducted by the non-profit Next 10 and the Institute for Transportation Studies at UC Davis.
“If Harris is now bragging about her administration’s support for fossil fuels, if she is casting the Inflation Reduction Act as a law that helped fracking, that means climate activists have much more work to do to persuade the public on what they believe. The Democratic Party’s candidate will not do that persuasion for them.” –Heatmap’s Robinson Meyer on Kamala Harris’ energy playbook.
The rapid increase in demand for artificial intelligence is creating a seemingly vexing national dilemma: How can we meet the vast energy demands of a breakthrough industry without compromising our energy goals?
If that challenge sounds familiar, that’s because it is. The U.S. has a long history of rising to the electricity demands of innovative new industries. Our energy needs grew far more quickly in the four decades following World War II than what we are facing today. More recently, we have squared off against the energy requirements of new clean technologies that require significant energy to produce — most notably hydrogen.
Courtesy of Rhodium Group
The lesson we have learned time and again is that it is possible to scale technological innovation in a way that also scales energy innovation. Rather than accepting a zero-sum trade-off between innovation and our clean energy goals, we should focus on policies that leverage the growth of AI to scale the growth of clean energy.
At the core of this approach is the concept of additionality: Companies operating massive data centers — often referred to as “hyperscalers” — as well as utilities should have incentives to bring online new, additional clean energy to power new computing needs. That way, we leverage demand in one sector to scale up another. We drive innovation in key sectors that are critical to our nation’s competitiveness, we reward market leaders who are already moving in this direction with a stable, long-term regulatory framework for growth, and we stay on track to meet our nation’s climate commitments.
All of this is possible, but only if we take bold action now.
AI technologies have the potential to significantly boost America’s economic productivity and enhance our national security. AI also has the potential to accelerate the energy transition itself, from optimizing the electricity grid, to improving weather forecasting, to accelerating the discovery of chemicals and material breakthroughs that reduce reliance on fossil fuels. Powering AI, however, is itself incredibly energy intensive. Projections suggest that data centers could consume 9% of U.S. electricity generation by 2030, up from 4% today. Without a national policy response, this surge in energy demand risks increasing our long-term reliance on fossil fuels. By some estimates, around 20 gigawatts of additional natural gas generating capacity will come online by 2030, and coal plant retirements are already being delayed.
Avoiding this outcome will require creative focus on additionality. Hydrogen represents a particularly relevant case study here. It, too, is energy-intensive to produce — a single kilogram of hydrogen requires double the average household’s electricity consumption. And while hydrogen holds great promise to decarbonize parts of our economy, hydrogen is not per se good for our clean energy goals. Indeed, today’s fossil fuel-driven methods of hydrogen production generate more emissions than the entire aviation sector. While we can make zero-emissions hydrogen by using clean electricity to split hydrogen from water, the source of that electricity matters a lot. Similar to data centers, if the power for hydrogen production comes from the existing electricity grid, then ramping up electrolytic production of hydrogen could significantly increase emissions by growing overall energy demand without cleaning the energy mix.
This challenge led to the development of an “additionality” framework for hydrogen. The Inflation Reduction Act offers generous subsidies to hydrogen producers, but to qualify, they must match their electricity consumption with additional (read: newly built) clean energy generation close enough to them that they can actually use it.
This approach, which is being refined in proposed guidance from the U.S. Treasury Department, is designed to make sure that hydrogen’s energy demand becomes a catalyst for investment in new clean electricity generation and decarbonization technologies. Industry leaders are already responding, stating their readiness to build over 50 gigawatts of clean electrolyzer projects because of the long term certainty this framework provides.
While the scale and technology requirements are different, meeting AI’s energy needs presents a similar challenge. Powering data centers from the existing electricity grid mix means that more demand will create more emissions; even when data centers are drawing on clean electricity, if that energy is being diverted from existing sources rather than coming from new, additional clean electricity supply, the result is the same. Amazon’s recent $650 million investment in a data center campus next to an existing nuclear power plant in Pennsylvania illustrates the challenge: While diverting those clean electrons from Pennsylvania homes and businesses to the data center reduces Amazon’s reported emissions, by increasing demand on the grid without building additional clean capacity, it creates a need for new capacity in the region that will likely be met by fossil fuels (while also shifting up to $140 million of additional costs per year onto local customers).
Neither hyperscalers nor utilities should be expected to resolve this complex tension on their own. As with hydrogen, it is in our national interest to find a path forward.
What we need, then, is a national solution to make sure that as we expand our AI capabilities, we bring online new clean energy, as well, strengthening our competitive position in both industries and forestalling the economic and ecological consequences of higher electricity prices and higher carbon emissions.
In short, we should adopt a National AI Additionality Framework.
Under this framework, for any significant data center project, companies would need to show how they are securing new, additional clean power from a zero-emissions generation source. They could do this either by building new “behind-the-meter” clean energy to power their operations directly, or by partnering with a utility to pay a specified rate to secure new grid-connected clean energy coming online.
If companies are unwilling or unable to secure dedicated additional clean energy capacity, they would pay a fee into a clean deployment fund at the Department of Energy that would go toward high-value investments to expand clean electricity capacity. These could range from research and deployment incentives for so-called “clean firm” electricity generation technologies like nuclear and geothermal, to investments in transmission capacity in highly congested areas, to expanding manufacturing capacity for supply-constrained electrical grid equipment like transformers, to cleaning up rural electric cooperatives that serve areas attractive to data centers. Given the variance in grid and transmission issues, the fund would explicitly approach its investment with a regional lens.
Several states operate similar systems: Under Massachusetts’ Renewable Portfolio Standard, utilities are required to provide a certain percentage of electricity they serve from clean energy facilities or pay an “alternative compliance payment” for every megawatt-hour they are short of their obligation. Dollars collected from these payments go toward the development and expansion of clean energy projects and infrastructure in the state. Facing increasing capacity constraints on the PJM grid, Pennsylvania legislators are now exploring a state Baseload Energy Development Fund to provide low-interest grants and loans for new electricity generation facilities.
A national additionality framework should not only challenge the industry to scale innovation in a way that scales clean technology, it must also clear pathways to build clean energy at scale. We should establish a dedicated fast-track approval process to move these clean energy projects through federal, state, and local permitting and siting on an accelerated basis. This will help companies already investing in additional clean energy to move faster and more effectively – and make it more difficult for anyone to hide behind the excuse that building new clean energy capacity is too hard or too slow. Likewise, under this framework, utilities that stand in the way of progress should be held accountable and incentivized to adopt innovative new technologies and business models that enable them to move at historic speed.
For hyperscalers committed to net-zero goals, this national approach provides both an opportunity and a level playing field — an opportunity to deliver on those commitments in a genuine way, and a reliable long-term framework that will reward their investments to make that happen. This approach would also build public trust in corporate climate accountability and diminish the risk that those building data centers in the U.S. stand accused of greenwashing or shifting the cost of development onto ratepayers and communities. The policy clarity of an additionality requirement can also encourage cutting edge artificial intelligence technology to be built here in the United States. Moreover, it is a model that can be extended to address other sectors facing growing energy demand.
The good news is that many industry players are already moving in this direction. A new agreement between Google and a Nevada utility, for example, would allow Google to pay a higher rate for 24/7 clean electricity from a new geothermal project. In the Carolinas, Duke Energy announced its intent to explore a new clean tariff to support carbon-free energy generation for large customers like Google and Microsoft.
A national framework that builds on this progress is critical, though it will not be easy; it will require quick Congressional action, executive leadership, and new models of state and local partnership. But we have a unique opportunity to build a strange bedfellow coalition to get it done – across big tech, climate tech, environmentalists, permitting reform advocates, and those invested in America’s national security and technology leadership. Together, this framework can turn a vexing trade-off into an opportunity. We can ensure that the hundreds of billions of dollars invested in building an industry of the future actually accelerates the energy transition, all while strengthening the U.S.’s position in innovating cutting- edge AI and clean energy technology.