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A year and a half ago, President Biden signed the Inflation Reduction Act, the biggest climate law in American history — and arguably in world history. The law will spend an estimated $500 billion in grants and tax credits to incentivize people and businesses to switch from burning fossil fuels to using cleaner, zero-carbon technologies.
That’s the goal, at least. But is the IRA actually working? Now, 18 months after its passage, we’re starting to be able to answer that question. A new report from a coalition of major energy analysts — including MIT, the Rhodium Group, and our cohost Jesse Jenkins’ lab at Princeton — looks at data from the power and transportation sectors and concludes that yes, the law is starting to decarbonize the American economy.
But it isn’t working in the way many people might expect, because while electric vehicles are on track to meet the IRA’s climate goals, the power sector is not.
That’s the opposite of what you might think from reading the popular press, which has bemoaned an alleged slowdown in new EV sales. But the new report finds that the transportation sector actually came in at the upper end of what modelers expected to see this year. About 9.2% of new cars sold last year in the United States were zero-emissions vehicles; after the IRA passed, modelers had expected EVs to come in anywhere from 8.1 to 9.4% of sales.
But the power sector is lagging behind what modelers had expected to see. While the three groups had projected that 46 to 79 gigawatts of new zero-carbon power would come online last year, only 32.3 gigawatts of new capacity actually did. That is primarily due to a drop in new onshore wind projects, which fell below the installation levels achieved in 2020 and 2021. While solar and batteries continued to go gangbusters, exceeding previous records, they could not make up for the drop in wind. That means that the power sector is not on track to cut emissions 40% by 2030, as compared to 2005 levels, as the bill’s supporters have hoped.
Jesse Jenkins, an energy systems expert and professor at Princeton University, and I dive into the details on the latest episode of Shift Key.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Robinson Meyer: First, let's do the moment of truth. Let’s just first get into the data. So in the power sector, what do we see?
Jesse Jenkins: What we see in the electricity sector is a new record set for zero carbon electricity generation and storage capacity additions. So that's new power plant and battery storage construction.
In aggregate, we saw over 32,000 megawatts or 32 gigawatts of new zero carbon generation and storage added to the U.S. grid in 2023. That's about a 32% increase from the rate in 2022. And it edges out a previous record that we saw in 2021 of about 31.6 gigawatts. So good news is we're setting new record growth rates in total in terms of wind and solar and battery additions.
Unfortunately, that does fall on the lower end of what we were projecting in most of the modeling results. We were looking for, on average, about 46 to 79 gigawatts, so call it 40 to 80 gigawatts on average of additions in 2023 and 2024. We fell short of the low end of that range at 32.3 gigawatts. So unless the pace accelerates substantially in 2024, we're probably going to fall a bit behind schedule in terms of capacity additions.
Meyer: And do we have a sense of what's driving that? Because I think that's a very surprising finding, that we're behind schedule in the power sector, where I think people feel pretty good generally about the pace of decarbonization. Or I think where the common wisdom, at least, is that the pace of decarbonization is like proceeding apace. What's driving this underperformance of the model?
Jenkins: So it's really the difference between solar and wind additions.
The solar sector added about 18.4 gigawatts of capacity in 2023. That's up massively from just about 11 gigawatts in 2022. It's about double what we had seen in 2020, which was kind of our reference when we were doing our modeling as we started the REPEAT project in 2021. And so that's looking encouraging and in fact is running ahead of schedule with the average pace of additions that we saw in REPEAT project results.
Batteries are growing way faster than we expected.
And that helps really make the most of those solar capacity additions because solar and batteries are kind of like peanut butter and jelly, they go together quite well. And that's because solar has this nice, regular daily fluctuation, right? From the sun rising and setting. And that pairs really well with batteries, which today in a way lithium ion batteries are best suited for, you know, only a few hours of storage. So they'll charge for three or four hours in the middle of the day when we've got an abundance of sun. And then they'll discharge in the evening to help meet the evening peak of demand when everybody's coming home from work.
The batteries basically helped shift the solar output from the middle of the day to hit that evening peak. And that's, that's really helpful. Where things are running behind schedule is really in the wind sector, where we only built about half of the peak rate, actually less than half that we've seen historically in 2023. Additions of wind power in 2023 were only about 6.3 gigawatts, and that's down from nearly 15 gigawatts in each of 2020 and 2021.
So that's a step backwards at a time when we should be smashing new record growth rates across all of these sectors. And that's giving me the biggest concern as we look at in the next couple of years.
Meyer: And that's, I mean, last show we talked about offshore wind and the troubles in offshore wind and how it seems like some big offshore wind projects that we thought might be coming online in the middle of this decade might not be coming online till the end of the decade. But when we talk about wind underperforming in terms of the whole country over the past year, we're really still talking about onshore wind. This is like big turbines in the middle of the Great Plains, not big turbines off the coast of New York, New Jersey, right?
Jenkins: That's right. Yeah, I think I don't think we had any significant offshore wind capacity additions coming in 2024. You know, most of that we were expecting would come in between 2026 and 2030 or 2035. So this is really a story about onshore wind, where if we look at the economics of onshore wind across the country, there's a tremendous number of sites that look very economic given the incentives provided by the Inflation Reduction Act.
And unfortunately, we're just not building out at the pace that would be economically justified. And that is really an indicator that there are a substantial number of other non-economic frictions or barriers to deployment of wind in particular at the pace that we want to see.
The full transcript is here.
This episode of Shift Key is sponsored by Advanced Energy United, KORE Power, and Yale …
Advanced Energy United educates, engages, and advocates for policies that allow our member companies to compete to power our economy with 100% clean energy, working with decision makers and energy market regulators to achieve this goal. Together, we are united in our mission to accelerate the transition to 100% clean energy in America. Learn more at advancedenergyunited.org/heatmap
KORE Power provides the commercial, industrial, and utility markets with functional solutions that advance the clean energy transition worldwide. KORE Power's technology and manufacturing capabilities provide direct access to next generation battery cells, energy storage systems that scale to grid+, EV power & infrastructure, and intuitive asset management to unlock energy strategies across a myriad of applications. Explore more at korepower.com — the future of clean energy is here.
Build your skills in policy, finance, and clean technology at Yale. Yale’s Financing and Deploying Clean Energy certificate program is a 10-month online certificate program that trains and connects clean energy professionals to catalyze an equitable transition to a clean economy. Connect with Yale’s expertise, grow your professional network, and deepen your impact. Learn more at cbey.yale.edu/certificate.
Music for Shift Key is by Adam Kromelow.
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A conversation with the Guardrails Alliance’s Shaunna Thomas.
This week’s Q&A is with Shaunna Thomas of the Democrat-allied super PAC Guardrails Alliance, which describes itself as “not anti-technology” but supportive of AI “rules, accountability, and a government that actually represents the public.” Part of that AI accountability they’re calling for is on data centers.
After the midterms, Guardrails Alliance sent a memorandum to all House and Senate Democratic offices arguing for AI and data center accountability to be a key part of their message and plans heading into the new Congress. Described as a “playbook for how to understand and channel anxieties about AI and data centers,” the document laid out “key narratives” that they said voters who care about these issues want to see reflected and echoed by their politics. They said the push against data centers could help Democrats build more lasting political power.
I reached out and asked if Thomas could explain further what all of this means to my readers. She kindly obliged.
The following conversation was lightly edited for clarity.
Let’s start with the elections. What were your takeaways when it came to what voters want to see on data centers?
I think the elections were a rebuke of the status quo on a number of fronts. We saw across the board that people are frustrated with what amounts to legalized corruption and the forcing without consent of new technology, and new infrastructure to support a technology that they didn’t ask for in ways that are harmful to their lives and the country.
What we saw in polling is that the data center backlash is one of the most bipartisan political issues of our time, driven by everything from noise pollution to rate hikes to Big Tech trying to steamroll state and local governments. Americans are sick and tired of the AI industry trying to control our lives by building data centers in our communities, which goes along with trying to control our data and who represents us in government. The AI industry was also trying to spend a lot on elections trying to control the outcome.
When we dig deeper on all that, it’s not just about elections. They’re seeing this unholy alliance between Big Tech and the Trump administration.
In the post-election analysis laid out in that memo, you explain these key narratives that you think Democrats should pick up against the tech sector. Can you explain how you developed these?
What we dug into during the primaries and the lead-up to the general election was questions in focus groups and polling with Republicans and Democrats about what was behind the frustration. Is this just about buildings they don’t want in their backyard or is this connected to AI and bigger picture concerns over who makes choices? About control? The data centers people were most opposed to were data centers specifically for AI, which was a really important indicator it was both/and.
We then started to talk to voters in Ohio and Iowa and Michigan about what they’d want to see in terms of changes, in terms of new leadership, how they would want to see this framed. What was appealing? We tested a number of frames and these key narratives are a compilation of that data. So for example, a key narrative says, The AI oligarchs and their political allies are wildly out of step with a supermajority of the public. There’s also sample messaging under it in the memo. And it’s a reflection of the sentiment and the tone and the language a lot of people used when they got into robust conversations about what they’re really concerned about or what they want to see their leaders doing differently.
Can you say more about these focus groups? And can you say more about what you saw in terms of bipartisan shared concern around not just data centers but these messages you’re bringing up?
I can tell you about some of the key findings of the focus groups we did in Michigan and Ohio and Iowa in August and September. People are generally open to the idea AI can have some benefit to their lives, and they’re open to using it personally. But everyone we talked to expressed some concern about the pace it was being developed. You can see technology having value but also see there’s no regulation in place or guardrails around the technology itself.
Most people we spoke to expressed concerns about how the technology has been affecting society and the environment — that came up a lot in data center conversations. People are also concerned about the role chatbots could have in their children’s lives, and that AI could replace teachers.
It’s also a lot of concern about and a lack of confidence in either government regulators or AI companies to properly regulate the technology. You saw more support for regulators at the state level and people deeply opposed to federal pre-emption, because they see more evidence of democracy working at the state level as opposed to the federal level.
People express mixed reviews about the specific policy solutions. What we’re seeing is people see AI as a vehicle for a small handful to amass more wealth and power. I don’t think we have had enough of a robust debate about how you deal with that problem.
So, on that point in particular, I want to drill down. What do we know about what voters want to see? What does accountability or guardrails look like to them?
First of all, there’s blanket support for federal regulations in general to deal with the way the technology is developed and deployed. We see a lot of clarity from voters about the fact they may not have a lot of confidence the federal government will step in. They want to see it.
When it comes to the economy, where there’s still broad public support is taxing billionaires and CEOs of these companies and raising the minimum wage and raising the social safety net. People’s interest in seeing that move forward has been growing in intensity.
On AI specifically, people don’t want to have a conversation about distribution of wealth without a conversation about distribution of power. They don’t want to be bribed to accept the acceleration of AI in their lives. They want to know that the power of those companies to do what they’re doing is going to be significantly limited and safety guardrails are put in place to keep us all safe from what the new technology is capable of.
I think once the safety conversation is step one. Step two is the conversation about how you distribute wealth from a technology built on other people’s labor and intellectual property.
On the concern about bribes, we’ve been reporting on Trump’s call for cash payments to communities to accept data centers. Are you telling me proposals like that might not be a good political strategy?
It was precisely because Trump was talking about it that we heard it brought up in focus groups, and how it was described was that voters may get some short term incentive to accept a technology they don’t trust is designed to help them fundamentally. They believe it is being deployed to more deeply consolidate power and wealth. And they don’t want that. When the president or a big AI company says they agree with it, it’ll have an impact on how the idea is perceived.
It has to also be coupled with a set of policies that are putting democratic governance over the technology itself before its deployment. People want to see technology isn’t going to continue to advance without guardrails.
Distinct from Trump’s data center dividend, some policymakers have suggested a “data dividend” — a distribution of wealth from the usage of AI products because they’re using people’s data. That’s more of what we’re talking about.
What do we know about what the public wants to see regarding data centers?
It’s important we recognize local leaders have had demands driven by their local communities. But as a structural matter, the public sees slowing down data centers as a mechanism for slowing down the project of AI generally. It remains an open question about how you do that.
There are federal policymakers working on a set of solutions that could create more space for people at the local level to be in the driver’s seat on when, how, or if data centers get built. I think we’ll see more proposals on that front.
So where do you think this conversation goes next?
I would expect the public to continue to make demands from policymakers and I would expect the Big Tech sector to continue down the path they’re going, which is, we were always Democrats and pro-regulation all the time. This will look like policies resembling always being okay with regulation but actually avoid putting checks on their power. And that’ll mean the public has even more at stake and the government has an even bigger obligation to make sure AI is deployed for public benefit as opposed to for the profits of a few companies and CEOs.
Plus more of the week’s biggest development fights.
1. New York City — We have a new must-watch offshore wind lawsuit with potential implications for the entire sector — and this time, it’s from lobstermen seeking damages.
2. Hinds County, Mississippi — The largest proposed solar farm in Mississippi is moving forward after an appeals court rejected arguments from aggrieved local residents that it had been improperly approved.
3. Dakota County, Minnesota — I’m scrutinizing a lawsuit against a data center developer centering on allegedly improper permitting of its cooling technology.
4. Polk County, Florida — Will the Sunshine State remain a challenging place for data centers after Ron DeSantis? A test case could reveal the future quite quickly.
Trump’s “data center dividend” appears to have backfired. Our latest poll results help explain why.
This year’s midterm elections called into question the efficacy of a push to pay local residents directly in exchange for building data centers.
Before the elections, I profiled the campaign for politicians to embrace the data center “dividend,” a policy idea modeled off Alaska’s Permanent Fund, which doles out checks to residents from profits off state oil, gas and mineral royalties. The Bitcoin Policy Institute, a tech policy think tank, was one of the first to trumpet the concept, but it was quickly taken up by President Donald Trump, who started raising it in speeches and on social media. “If companies want to make their Data Centers popular, pay the community, and/or individuals within the community, a ‘dividend,’” Trump posted to Truth Social on October 21.
Clearly the idea didn’t stop the bleeding. Democrats trounced Trump’s party in the midterms on a message that was heavy on attacks against data centers. But that still doesn’t explain why direct payments did so little to move the American public.
A Heatmap Pro poll conducted in early-to-mid October, right before the midterm elections, gives us an answer. As part of a broader survey of 2,500 registered voters, we asked about the idea — what we believe to be the first independent poll on direct payments for data centers by a news organization. We asked respondents whether there was a specific dollar amount they’d accept as a one-time cash payment in exchange for a data center being built near them. We also gave them the option to say no amount of money was sufficient.
Shockingly, a majority of people surveyed said they’d reject the data center cash payment in any amount. Among those who said they’d actually take the money, the median figure was around $10,000. The average was a whopping $146,000, skewed by the number of people who wrote $999,999, the maximum allowed by the survey.
This tracks what we’re seeing play out in communities where developers have tried this idea. In Hazle Township, Pennsylvania, NorthPoint — developer of an Amazon-linked data center project — proposed $10,000 cash payments to residents, no catch. Residents compared it to a bribe. In De Soto, Kansas, data center developer Digital Realty is offering annual $1,000 tax credits for a decade to neighbors of its proposed data center project. That proposal has been reportedly met with mixed reviews, too.
Clearly one of the problems here is that data centers not only face public perception issues around their local impacts, but are also more broadly associated with systemic inequality in the U.S. economy. The same Heatmap Pro survey found that a majority of voters believed AI companies have more control over the government than the oil and gas industry, pharmaceutical companies, banks, or other large industries.
Shaunna Thomas, executive director of Democratic-allied super PAC Guardrails Alliance, told me that during the campaign season they found that residents often associated the dividends with bribes, and that the president’s support for direct payments ultimately fed into voter sentiments about the tech sector controlling the government and society.
“People don’t want to have a conversation about distribution of wealth disconnected from a conversation about distribution of power,” Thomas said. “Specifically because Trump was saying that, we started hearing from voters in focus groups that it didn’t work for them. They’re hearing it as a bribe. They’re hearing they may get some sort of short-term economic or financial incentive to accept a technology they don’t trust is designed to help them.”
The Heatmap Pro survey results about cash payments ultimately reveal how emotionally driven the data center debate has become, said Sam Lyman of the Bitcoin Policy Institute. I asked Lyman to respond to the results because I thought they called into question the political effectiveness of the proposal we’d discussed months earlier. Lyman stipulated that he thinks the one-time payment nature of the question may have undermined the results, saying he prefers the dividends be paid out “in perpetuity.” But he acknowledged they also show “there’s still a lot of education to be done on data centers, what they do, and the impacts they have on the places where they’re built.”
“I think there’s a lot of Americans out there who have legitimate concerns that the future economy doesn’t include them. That’s something that needs to be addressed,” said Lyman, who said he laid part of the blame on what he called “irresponsible rhetoric” from AI industry executives about their technology’s impacts on society. “With data center dividends, the idea behind this policy is to help Americans understand the AI economy includes them. To give them a very material stake in that economy as it gets built out, especially in the rural communities that make data centers possible in the first place.”