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Inside season 2, episode 1 of Shift Key.

Two years ago this week, President Joe Biden signed the Inflation Reduction Act, the largest investment in clean energy and climate mitigation in American history. It contained roughly two dozen new or expanded tax credits that will — if the forecasts bear out — provide hundreds of billions of dollars in funding over the next decade. The administration is now rushing to finalize those provisions before the November election.
Perhaps no official has been more central to setting up those tax credits than Wally Adeyemo, the deputy secretary of the U.S. Treasury Department. He is also the Treasury’s No. 2 official and chief operating officer. Adeyemo has led the agency’s effort to implement the climate law, overseeing a group of tax lawyers and political appointees who are critical to the legislation’s ultimate success. He joins Shift Key this week to help us kick off our second season and talk about how the effort to implement the climate law is going, what could stand in its way, and why he wants some kind of permitting reform.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
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Robinson Meyer: So obviously, one of the huge risks for investors is that the IRA is repealed, in part or in full, in the next Congress. And we know, just as a fact, that Congress is going to have to do something on taxes. Next Congress, the Trump tax cuts are expiring, there’s going to be, there’s interest in doing something with a child tax credit. It’s going to really come down to who has control of the two chambers.
How are you thinking about, as a Democratic administration, protecting the IRA going into a very ambiguous 2025 environment, and how are companies who you talk to thinking through that quite large political risk around the threat of repeal next year?
Wally Adeyemo: So maybe I’ll break it down into two different types of tax credits, the business tax credits and the consumer-oriented tax credits. When it comes to business tax credits, as you both know from following this for a while, those don’t usually go away. Because ultimately, what happens is that, for these businesses, they do a fairly good job of making clear to members how those tax credits are tied to jobs that end up being in their districts.
One of the things that I’m proudest of is, when you look at the dispersion of projects tied to the IRA throughout the country, it puts us in a place where a number of people who voted for — and even, in some cases, many who didn’t vote for — the IRA now have significant projects being funded by the IRA happening in their districts, that they’re hiring people based on IRA-related projects, and it’s driving real economic activity. So when it comes to these business tax credits, my sense is that there’s going to be a case for keeping them, independent from the climate goals, which they’re helping to achieve because of the fact that they’re creating jobs in these districts that are helping to power those local economies.
On the consumer tax credits — and just today, I think we’re speaking on August 7, we put out a report about more than 3 million Americans claiming a set of consumer-oriented credits to help install things like solar panels on their homes, and heat pumps. And on these credits — they existed before the IRA. And frankly, what we did with the IRA was, we further incentivized people and created some flexibility within these credits.
These credits existed in the last administration. They’ve existed during the Obama administration. So the reality is that for some of these consumer-oriented credits and some of the business-oriented credits, they had both existed in Republican administrations. There have been Republicans who have supported them. For example, when you think about the wind credits, there have been a number of senators from the Midwest, both Democrats and Republicans, who have been huge advocates for them because they matter to their district.
So from my standpoint, the most important thing we can do to preserve the IRA is to make sure that we get these rules done as quickly as possible, so that not only businesses but individuals start to rely on them. They help, from my standpoint, address the climate crisis that we face. But from the standpoint of consumers, they help lower their cost. And the report we put out today showed that for some consumers installing a heat pump, for example, it lowered the cost of utilities by up to $3,000 a year. The more that happens, the more people who take advantage of it, the more likely that those tax credits are going to remain. And I think that’s also true for the business tax credit. So that’s the strategy, and I think that it’s one that’s been borne out by other business and consumer tax credits in the past.
This episode of Shift Key is sponsored by …
Watershed’s climate data engine helps companies measure and reduce their emissions, turning the data they already have into an audit-ready carbon footprint backed by the latest climate science. Get the sustainability data you need in weeks, not months. Learn more at watershed.com.
As a global leader in PV and ESS solutions, Sungrow invests heavily in research and development, constantly pushing the boundaries of solar and battery inverter technology. Discover why Sungrow is the essential component of the clean energy transition by visiting sungrowpower.com.
Antenna Group helps you connect with customers, policymakers, investors, and strategic partners to influence markets and accelerate adoption. Visit antennagroup.com to learn more.
Music for Shift Key is by Adam Kromelow.
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Even in the worst case scenario, BAAJA wouldn't increase emissions, an analysis by the Rhodium Group concludes.
The bipartisan permitting reform bill is likely to slightly cut greenhouse gas emissions and lower electricity bills by 2040 — or at worst leave emissions on the same trajectory that they are on today — as compared to the status quo, according to a new analysis of many of its provisions by the Rhodium Group, an independent research firm.
The analysis examines the policies in the Bipartisan American Affordability and Jobs Act, or BAAJA, that would have the most-clear cut effects on climate pollution and the energy system. It is the most comprehensive account of the bill’s effects on emissions so far, although it does not examine all of its provisions.
The bill is hard to analyze because — unlike recent partisan energy bills, such as the Inflation Reduction Act or President Trump’s tax and spending bill — its effects on the climate are more ambiguous and often seem to counteract each other. BAAJA will make it easier to build not only long-distance transmission lines, which are essential for clean energy, but also natural gas pipelines, which can expand fossil fuel production.
Yet the climate benefits likely outweigh or balance out the harms, at least among the studied policies, the report finds. In the best case scenario, the bill could cut U.S. economy-wide emissions by 4%, reduce energy bills by $78 per year, and drive more than 200 gigawatts of new clean energy capacity by 2040, compared to status quo policy. In a worst case scenario, greenhouse gas emissions would remain unchanged on their current trajectory.
The results should be viewed as more directionally instructive than a precise accounting of the legislation, Ben King, an energy and climate director at Rhodium, told me.
“We don’t see emissions increasing because of the bill,” King said. “This bill should drive some emission reductions, it should drive some more clean energy on the grid, and it should drive electricity bills down. And given the complexity of the bill, that’s what we can say at this point.”
The analysis does not look at the bill’s permitting certainty provisions, which Democrats initially sought to stop President Trump’s war on wind but have become one of its thorniest sections. Rhodium’s modeling is also a crude tool for assessing transmission policy, since the model can look only at economic inputs such as supply and demand, and not the physical reality of the U.S. grid, such as where transmission lines run or where the bottlenecks are.
It is the second analysis to find that the bill could modestly lower carbon pollution. A more limited report focusing only on the power grid, published last week by the think tank Resources for the Future, found the legislation could cut electricity emissions by 6% while reducing power bills by $350 billion through 2041.
The effects of the bill may sound small, but BAAJA is not a climate bill. It’s not engineered to reduce reliance on fossil fuels or boost clean energy technologies. Its overarching purpose is to address various federal bottlenecks that bog down America’s ability to build stuff, whether that’s a pipeline or a highway or a power line or a solar farm. So it’s not entirely surprising that it’s not expected to have a dramatic effect on emissions.
The reason it’s a priority for Senate climate champions is that many of its provisions are important precursors to decarbonizing the U.S. economy more quickly. By enabling faster expansion of the power grid, the bill would put the country in a much better position to transition to clean energy. After Joe Biden’s big climate bill, the Inflation Reduction Act, passed in 2022, Princeton University researchers found that the country’s slow buildout of transmission lines would be a major obstacle to gleaning the law’s benefits. Unless the country more than doubled the rate of transmission expansion, they wrote, more than 80% of the IRA’s emission reduction potential by 2030 would be lost.
BAAJA could nearly triple the build rate of high-voltage transmission, the Rhodium Group found, from an average of about 0.7 terawatt-miles added per year over the past decade to an average annual pace of 1.9 to 2.6 terawatt-miles through 2040. Because Republicans and President Trump have repealed so many of the IRA’s provisions, this won’t drive as much clean energy as the Princeton researchers expected, but Rhodium estimates that by 2040, BAAJA would help between 17 and 249 gigawatts of clean resources get built compared to a world without it.
The growing grid is the main reason why the bill cuts energy costs, because it enables more lower-cost resources to connect to the grid. The bill’s requirement that data centers pay the full cost of connecting to the grid also puts downward pressure on electricity rates.
“If your goal is to do climate policy in the future, this is an important down payment to making progress there,” King said.
The authors studied the bill’s provisions under a range of economic assumptions, including a “best case” scenario in which clean energy gets cheaper and easily outcompetes natural gas, and a “worst case” scenario where natural gas prices collapse and the inexpensive fuel keeps dominating the U.S. energy system.
The authors limited their analysis to the bill’s provisions that speed up transmission line and natural gas pipeline permitting. They assumed that when you make it easier to approve transmission lines, the lines get cheaper to build and get built more quickly. The same goes for gas pipelines. Then they looked at how the energy system would respond. Would we build more power plants? Would there be more natural gas production? Where will that gas go?
The caveats, aside from omitting the bill’s “project certainty” provisions, are that they did not account for policies that support geothermal energy, virtual power plants, advanced transmission technologies, or the ways in which the bill would reduce congestion on the grid — all of which could result in fewer emissions. At the same time, the modeling assumes that all of the data centers that get built between now and 2040 connect to the grid, even though today, many data centers are planning to run on inefficient off-grid natural gas plants. That means this modeling likely underestimates emissions from data centers. (Although the authors did a separate exercise that went deeper into data centers, which I’ll explain shortly.)
The report also limited its analysis to the United States. While the modeling found that liquified natural gas exports would increase by 8% to 15% under BAAJA, the authors did not account for how those exports could affect the energy mix or emissions in the rest of the world.
They found that the bill’s changes to the Clean Water Act and the National Environmental Policy Act would enable more gas pipeline development, which, in isolation, would increase emissions relative to a world without BAAJA. More pipelines means more production of oil and natural gas, which means higher methane and CO2 emissions throughout the fossil supply chain. Under a worst case scenario, they estimate a 4% increase in the amount of new gas capacity, although gas-fired generation as a whole increases by less than 1% in 2040. Even then, emissions would simply be flat compared to current expectations.
“On net, the emissions increases that we see there are outweighed by the emissions benefits that come from the transmission provisions of the bill,” King said.
The report also studied how BAAJA might affect data center emissions. Its “base case” scenario — which includes all the analysis I’ve shared with you so far — assumes data centers will make up about 17% of electricity demand by 2040. That figure already supposes huge growth in data center energy consumption, because data centers only use about 5% of U.S. electricity today.
But what if data center demand grows even faster than that? The authors modeled two additional scenarios to see what would happen if data center electricity demand instead accounted for more than a quarter of U.S. electricity demand in 2040.
While BAAJA would make it easier for data centers to connect to the grid, it also includes ratepayer protection provisions that would make it more expensive to do so — roughly 10% more for a 1 gigawatt data center, Rhodium estimates. Determining whether that will drive developers on-grid or off-grid was beyond the scope of the analysis, so the modelers looked at the two extremes — a world where all additional data center demand hooks up to the grid and one where none of it does.
For the on-grid scenario, whether or not that additional demand is met with mostly gas plants or cleaner sources largely depends on the price of fossil versus clean generation. But even if most of the demand was met by natural gas plants on the grid, emissions would still be 30% lower than if it was met by natural gas plants off the grid, Rhodium found.
And more of the week’s top fights around development.
1. Richland Parish, Louisiana – Gird your loins for the coming fight over the Meta Hyperion data center’s gas pipeline.
2. Spartanburg County, South Carolina – I have one last data center race to tell you to watch on Tuesday: South Carolina’s 4th, on the northern rim of the state.
3. Goodhue County, Minnesota – Google reached a settlement with an environmental group suing to stop its data center in the small southern Minnesota town of Pine Island, resulting in what local press are saying will be the Land of 10,000 Lakes first state-level environmental review of a data center project.
4. Trumbull County, Ohio – Ohio looks like it just got a tad friendlier for data center opponents.
Talking with Kevin Gundersen, the head of public affairs for Digital Realty.
This week’s conversation is with Kevin Gundersen, head of public affairs for data center developer Digital Realty. On Wednesday, Digital Realty released a fascinating poll as part of Infrastructure for America, a pro-data center organization that also includes Compass, Vantage Data Centers, and QTS. The poll pushed back on the idea that we’re currently in the middle of a “data center election”; instead, it found most voters are not expected to choose their national elected officials based on a politician’s stance on data centers.
I reached out to folks involved in the poll's release, and they put me in touch with Gundersen, whom I’ve met before and consider to be a straight shooter. He accepted my invitation to do a candid hot-seat chat about the findings, his thoughts on all the data center attack ads, and whether his industry’s actually recovering any ground with the American people.
The following conversation was lightly edited for clarity.
So first off: Is this the “data center election”?
No. I think there are communities across this country that are learning about data centers and whose opinions are being formed by all sorts of things. I’ve also sat in communities that want data centers, that understand the benefits they provide, and I think there are loud voices on all ends of the spectrum saying things about data centers that frankly aren’t true. That’s unfortunate.
Now, that doesn’t dismiss people’s real concerns about data centers in communities that have never had them before or states that haven’t had them before. So it’s the industry’s job to have those conversations honestly and openly.
This is a new thing for the industry. If you look at the history of the data center industry, it was really confined to Northern Virginia, Santa Clara [California], and urban areas like New York City or Chicago where there are large customer bases and data needs. For the most part, people didn’t really pay attention to data centers.
This is now a historic build-out, so there’s an education going on. Data centers have become a physical manifestation of people’s fears about AI, and that’s something we need to manage as an industry. How we do that is to create organizations like IFA. Our company has been doing this for 25 years. We have 300 data centers around the world. For us, this is how we’ve always been doing this, but there’s no question our industry needs to be doing a better job as to why data centers benefit communities.
I think there’s a disconnect between what I see on the ground locally and the national narrative around the election. Every issue in America is nationalized. But if you look at some polls, this isn’t in the top five issues people are thinking about day to day.
It makes sense a data center developer would make this case. It’s your right to do so. But can you help me better understand the evidence, when we’re seeing so much television advertising attacking candidates for previous data center support?
The basis for me saying it is, I’ve sat in communities where people want data centers and been in parts of America that haven’t had revenue sources for decades. Now they have an opportunity for a data center in their city, county, state, and I think sometimes where there’s a disconnect is the national narrative around AI.
It’s hard to stop ChatGPT. But someone can use the data center as their target, so to speak. It’s the physical manifestation of their opposition to AI.
The biggest evidence is, there are a lot of communities that [have] welcomed data centers in the last 30 years. Not just the last couple of years. Santa Clara, California, is one of the nicest places in the country, and they have so many data centers. The history of people supporting data centers has been the norm, and the opposition is a relatively new thing in and of itself.
What about the electoral impacts? Have you personally not seen any? Either against your industry or for them?
We haven’t seen any of our developments’ electoral impacts on the local level yet. We could have this conversation next week after the election, but not yet. I honestly think I could answer that question better then.
But do I think data centers in most of America are the number one thing on people’s minds? No. Not when you talk to them outside the chatroom on Facebook when you can present dialogue and facts. There are communities that will decide they don’t want data centers. That’s fine. Some communities have made that decision. There are others who want them.
I’m not looking at next week. These developments are going to go on regardless of the election because there’s a huge demand for digital infrastructure, and a lot of communities do want these developments.
What do you see as the role of your polling when it comes to convincing the American public or the news media that this isn’t an election being decided by data centers?
IFA was created to tell stories about data centers and the benefits we provide to communities. These are real stories from real people and real companies. They’re mom-and-pop food trucks, electricians, real people all around the country. IFA is geared toward telling the story, a very positive story that is getting lost in the national debate.
When I think about the ads I see every day, the negative ads about data centers, these are real jobs. People making money wearing hard hats. I actually think it's unfortunate because I see people’s lives being lifted by data center development, and then they turn on their TV to see attacks on their industry.
The biggest companies in the world right now are taking their money and investing in the United States, creating a blue-collar jobs boom, and for some reason our politics make it something people want to oppose.
I think after the election there’ll be some kind of level set on both sides of the aisle because I think people were caught by surprise about some of the early polls on the AI issue that came out earlier this year. The industry wasn’t quick enough to talk about the benefits. But I think there are a lot of governors who’ve been balanced since they came into office about data center development, where they haven’t pushed moratoriums because they realize there are benefits from data centers.
The AI issue is great on the campaign trail, but separating AI from data centers and the investments they bring to a community is important. Data centers provide digital infrastructure. The demand for that is only going up.
Why should a skeptic of this industry believe this information from a developer?
I mean, have they talked to the IBEW? Have they talked to the unions? There are a lot of constituencies out there that see the benefits of data centers. Don’t take my word for it. Go to a community and talk to people.
There’s going to be people who don’t want a data center in their community, but if we do it openly, transparently, and tell the story of who we are — we’ve been around for 25 years! There’s all sorts of information out there about our company. And we’re going to keep talking to communities.
Why should they believe us? We don’t have anything to hide, and we’ll bring benefits to their community. That might sound like a cliché answer, but it’s the case.
What do you think the outcome will be from so many attack ads about data centers?
I think it's unfortunate, and I think it's bad for the country because elected officials right now are spending tens of millions of dollars in political ads telling people data centers are bad when in fact they bring huge benefits to communities.
We’re going to have to spend lots of time and energy and resources to make up for that. Perhaps we should’ve been doing this sooner. I’m sure we’d all in this industry loved to have gotten our story out before the campaign cycle took hold. We can’t go back and change the past.
I always say, we have the truth and physics on our side. What I mean by that is, we’ve got a great story, these developments have tons of benefits, and the demand is only going up. People have two phones. They have connected devices in their homes. Flat-screen TVs and Oura rings and Ring cameras. When you think about the digital products and services you use every day, it’s massive.
We’re going to have to tell our story. I do think a lot of elected officials at all levels of government want us to go do that. When I sit behind closed doors with folks, they know the benefits. People of both parties.