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The Inflation Reduction Act is already transforming America. But is it enough?
In the late spring, a scene happened that might have once — even a few years ago — seemed unimaginable.
Senator Joe Manchin and Energy Secretary Jennifer Granholm visited the town of Weirton, West Virginia, to celebrate the groundbreaking of a new factory for the company Form Energy. The factory will produce a new type of iron battery that could eventually store huge amounts of electricity on the grid, allowing solar and wind energy to be saved up and dispatched when needed.
Manchin was clear about why everyone was gathered in Weirton. “Today’s groundbreaking is a direct result of the Inflation Reduction Act, and this type of investment, in a community that has felt the impact of the downturn in American manufacturing, is an example of the IRA bill working as we intended,” he said.
It’s been nearly a year since the Inflation Reduction Act, President Joe Biden’s flagship climate law, passed. The law is successful. It is transforming the American energy system. And the Biden administration is implementing it as fast as it can: Since the law passed, the Treasury Department has published nearly three dozen pieces of complicated rules explaining how the IRA’s billions in subsidies can actually be used.
But is the IRA successful enough? The pace and scale of the climate challenge remains daunting. A recent report from the Rhodium Group, an energy-research firm, found that the United States would only meet its Paris Agreement goal of cutting carbon emissions in half by 2030 with more aggressive federal and state policy.
Here are some broad observations about how the IRA — and the broader project of American decarbonization — is going:
Politically, environmentally, no matter how you look at it: The power sector is the thumping heart of the I.R.A. Because engineers know how to generate electricity without producing carbon pollution — using wind turbines, solar panels, nuclear plants, and more — the sector is central to the law’s implicit plan to decarbonize the American economy, which requires, first, building as much zero-carbon electricity infrastructure as possible, while, second, shifting as much of the rest of the economy to using electricity — as opposed to oil, gas, or coal — as possible.
The electricity industry is also the site of perhaps the law’s most powerful climate policy — and its only policy tied to a national emissions-cutting goal. The law will indefinitely subsidize new zero-carbon electricity until greenhouse-gas pollution from the American power sector falls 75% below its 2022 levels. That means these tax credits could remain in effect until the 2060s, according to an analysis from the research firm Wood MacKenzie.
This was a first for American environmental law, and it remains poorly understood by the public. Even some experts claim that the electricity credits will phase out in 2032 with the I.R.A.’s other subsidies — when, in fact, 2032 is the earliest possible year that they could end.
Which is all to say that it’s early days for understanding the I.R.A.’s effect on the power sector. The data is provisional.
Yet the data is … good. Better than I expected when I started writing this article. The overwhelming majority of new electricity generation built nationwide this year — some 83% — will be wind, solar, or battery storage, according to federal data. Although that mostly reflects projects planned before the IRA was passed, it’s still a giant leap over previous years, and it suggests that the law might be giving clean electricity a boost at the margin:
The solar industry, in particular, is surging. The industry just had its best first quarter ever, with rooftop installations booming and some big utility-scale solar farms finally coming online.
But solar can’t power the entire grid, and other renewables are having more trouble. I’m particularly worried about offshore wind. To build a new offshore-wind project, companies bid for tracts of the ocean floor in a government-run auction. Yet many of those bids failed to account for 2021 and 2022’s rapid inflation, and some developers are now on the hook for projects that don’t pencil out. Most outside analysts now believe that the Biden administration will fall short of its goal to build 30 gigawatts of offshore wind by 2030.
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The boom in electric vehicle and battery manufacturing is clearly the I.R.A.’s brightest spot. (The two industries are one and the same: If you have a giant battery, you’re probably going to put it in an EV; and about a third of every EV’s value comes from the battery.)
Since the IRA passed, 52 new mining or manufacturing projects have been announced, representing $56 billion in new investment, according to a tracker run by Jay Turner, a Wellesley College professor. If you zoom out to all of Biden’s term, then more than $100 billion in EV investment has been announced, which will create more than 75,000 jobs, according to the Department of Energy.
It remains to be seen, however, whether this investment will produce the kind of durable, unionized voter base that the Biden administration hopes to form. So far, much of this investment has flowed to the Sunbelt — and in particular, to a burgeoning zone of investment from North Carolina to Alabama nicknamed the “Battery Belt.” These states are right-to-work states with a low cost-of-living, like much of the states that have absorbed manufacturing investment since the 1980s.
This might make Republicans think twice about undermining the IRA, but it might also be a missed opportunity.
In order to cheaply decarbonize its grid, America needs better power lines. Building long-range, interregional electricity transmission will allow the country to funnel clean energy to where it’s needed most. According to a team led by Jesse Jenkins, a Princeton engineering professor, 80% of the IRA’s carbon-reduction benefits could be lost if the United States doesn’t quicken the pace of new transmission construction. (Other models are less worried.)
Yet the effort to build more power lines — and the broader campaign to reform some rules governing permitting and land use, especially the National Environmental Policy Act — is probably over, at least in this Congress. Republican lawmakers figured out that Democrats are desperate for transmission reform, and they were prepared to make the party pay a high price for it — too high a price for much of the caucus. The bipartisan deal to raise the debt-ceiling also contained many of the moderate permitting reforms that Democrats might have accepted as part of a broader bargain over transmission.
Democrats are now stuck hoping that the Federal Energy Regulatory Commission, or FERC, will make smaller, more technocratic improvements to the transmission process when they take a majority of the commission’s seats early next year.
The biggest programs in the IRA target mature technologies, like solar, wind, and EVs. But the law is full of unheralded programs meant to encourage the development of early-stage climate technologies, such as sustainable aviation fuel. By encouraging technological progress, these programs could abate hundreds of millions of tons of carbon a year in the decades after 2030. They may prove especially important at reducing emissions outside the United States, according to a new analysis from Rhodium Group.
Which is to say that they could be — from a world-historic perspective — some of the law’s most important policies. But for now, few of these programs have been implemented, and we don’t really know how they’re going to go.
Some of them may also be devilishly hard to set up. My colleague Emily Pontecorvo has reported on the difficulty of setting up the tax credits for green hydrogen, which are some of the law’s most generous. If successful, the credits could give the U.S. a major new industry to tackle the decarbonization challenge; if unsuccessful, they could screw up the American electricity system.
Right now, most of the law’s consumer-facing tax credits are continuations of old policies — such as the longstanding subsidy to install rooftop solar — rather than something new. Perhaps the most expansive subsidy that consumers have seen so far is the new $7,500 tax credit for leasing an electric vehicle.
But many more programs will eventually come, including the IRA’s rebates for heat pumps, induction stoves, and electric water heaters. Those programs, some of which must be administered by state offices, have largely yet to be set up. (Even so — and in keeping with other encouraging trends — heat pump sales outpaced furnace sales in the U.S. for the first time last year.)
The Department of Energy is an agency transformed. The IRA held out the opportunity that the agency could metamorphose from an R&D-focused nuclear-weapons storehouse into the federal government’s dynamo of decarbonization. The Biden administration — and Energy Secretary Jennifer Granholm — has seized that opportunity.
As I wrote earlier this year, the agency has stepped into the role of being America’s bureau of industrial policy, replete with its own in-house bank. It has published some of the most detailed and sophisticated federal industrial plans that I’ve ever seen.
And it is getting admirably specific about each of the technologies in its portfolio. In a recent report on the nascent hydrogen industry, for instance, the department said that companies might not build out enough infrastructure because they can’t count on future demand for clean hydrogen. (It’s impossible for firms to invest in making hydrogen if they can’t be sure anyone is going to buy it.) Then, earlier this week, the agency announced a new $1 billion program to buy hydrogen itself, thus providing that demand-side certainty that producers need.
Let’s return to renewables. The United States is striving — but will likely fail — to build 30 gigawatts of offshore wind by 2030. It is building a couple dozen gigawatts of new solar capacity every year. That may seem like a lot: One gigawatt of electricity is enough to power about 825,000 homes.
But annual power demand in the United States is closer to 4,000 gigawatts — and it’s on track to grow as we electrify more and more of the economy. While decarbonizing the grid isn’t as simple as switching one energy source for another, still, it would take more than a century to build 4,000 gigawatts of renewables electricity at our current rate.
It’s a similar story in electric cars. The growth is good: EV sales rose 50% year over year in the first half of 2023. But the challenge is daunting: Electric vehicles made up only 7% of all new car sales in the U.S. during the same period, and decarbonizing the car fleet will eventually require making virtually all new car sales EVs, and then — over the next decade — replacing the 275 million private vehicles on the road.
And that’s the story of the IRA — from renewables to EVs, geothermal to nuclear energy. The trends have never been better. The government has never tried to change the energy system so quickly or so thoroughly. That, by itself, is progress: For decades, the great obstacle of climate change was that the government wasn’t trying to solve it at all.
But decarbonization will require replacing hundreds of millions of machines that exist in the world — and doing it fast enough that we avoid dealing catastrophic damage to the climate system. The IRA is about to take on that challenge head-on. Now we find out if it’s up to the task.
The real work, in other words, is just beginning.
Read more from Robinson Meyer:
The East Coast’s Smoke Could Last Until October
The Weird Reasons Behind the Atlantic Ocean’s Crazy Heat
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Defenders of the Inflation Reduction Act have hit on what they hope will be a persuasive argument for why it should stay.
With the fate of the Inflation Reduction Act and its tax credits for building and producing clean energy hanging in the balance, the law’s supporters have increasingly turned to dollars-and-cents arguments in favor of its preservation. Since the election, industry and research groups have put out a handful of reports making the broad argument that in addition to higher greenhouse gas emissions, taking away these tax credits would mean higher electricity bills.
The American Clean Power Association put out a report in December, authored by the consulting firm ICF, arguing that “energy tax credits will drive $1.9 trillion in growth, creating 13.7 million jobs and delivering 4x return on investment.”
The Solar Energy Industries Association followed that up last month with a letter citing an analysis by Aurora Energy Research, which found that undoing the tax credits for wind, solar, and storage would reduce clean energy deployment by 237 gigawatts through 2040 and cost nearly 100,000 jobs, all while raising bills by hundreds of dollars in Texas and New York. (Other groups, including the conservative environmental group ConservAmerica and the Clean Energy Buyers Association have commissioned similar research and come up with similar results.)
And just this week, Energy Innovation, a clean energy research group that had previously published widely cited research arguing that clean energy deployment was not linked to the run-up in retail electricity prices, published a report that found repealing the Inflation Reduction Act would “increase cumulative household energy costs by $32 billion” over the next decade, among other economic impacts.
The tax credits “make clean energy even more economic than it already is, particularly for developers,” explained Energy Innovation senior director Robbie Orvis. “When you add more of those technologies, you bring down the electricity cost significantly,” he said.
Historically, the price of fossil fuels like natural gas and coal have set the wholesale price for electricity. With renewables, however, the operating costs associated with procuring those fuels go away. The fewer of those you have, “the lower the price drops,” Orvis said. Without the tax credits to support the growth and deployment of renewables, the analysis found that annual energy costs per U.S. household would go up some $48 annually by 2030, and $68 by 2035.
These arguments come at a time when retail electricity prices in much of the country have grown substantially. Since December 2019, average retail electricity prices have risen from about $0.13 per kilowatt-hour to almost $0.18, according to the Bureau of Labor Statistics. In Massachusetts and California, rates are over $0.30 a kilowatt-hour, according to the Energy Information Administration. As Energy Innovation researchers have pointed out, states with higher renewable penetration sometimes have higher rates, including California, but often do not, as in South Dakota, where 77% of its electricity comes from renewables.
Retail electricity prices are not solely determined by fuel costs Distribution costs for maintaining the whole electrical system are also a factor. In California, for example,it’s these costs that have driven a spike in rates, as utilities have had to harden their grids against wildfires. Across the whole country, utilities have had to ramp up capital investment in grid equipment as it’s aged, driving up distribution costs, a 2024 Energy Innovation report argued.
A similar analysis by Aurora Energy Research (the one cited by SEIA) that just looked at investment and production tax credits for wind, solar, and batteries found that if they were removed, electricity bills would increase hundreds of dollars per year on average, and by as much as $40 per month in New York and $29 per month in Texas.
One reason the bill impact could be so high, Aurora’s Martin Anderson told me, is that states with aggressive goals for decarbonizing the electricity sector would still have to procure clean energy in a world where its deployment would have gotten more expensive. New York is targetinga target for getting 70% of its electricity from renewable sources by 2030, while Minnesota has a goal for its utilities to sell 55% clean electricity by 2035 and could see its average cost increase by $22 a month. Some of these states may have to resort to purchasing renewable energy certificates to make up the difference as new generation projects in the state become less attractive.
Bills in Texas, on the other hand, would likely go up because wind and solar investment would slow down, meaning that Texans’ large-scale energy consumption would be increasingly met with fossil fuels (Texas has a Renewable Portfolio Standard that it has long since surpassed).
This emphasis from industry and advocacy groups on the dollars and cents of clean energy policy is hardly new — when the House of Representatives passed the (doomed) Waxman-Markey cap and trade bill in 2009, then-Speaker of the House Nancy Pelosi told the House, “Remember these four words for what this legislation means: jobs, jobs, jobs, and jobs.”
More recently, when Democratic Senators Martin Heinrich and Tim Kaine hosted a press conference to press their case for preserving the Inflation Reduction Act, the email that landed in reporters’ inboxes read “Heinrich, Kaine Host Press Conference on Trump’s War on Affordable, American-Made Energy.”
“Trump’s war on the Inflation Reduction Act will kill American jobs, raise costs on families, weaken our economic competitiveness, and erode American global energy dominance,” Heinrich told me in an emailed statement. “Trump should end his destructive crusade on affordable energy and start putting the interests of working people first.”
That the impacts and benefits of the IRA are spread between blue and red states speaks to the political calculation of clean energy proponents, hoping that a bill that subsidized solar panels in Texas, battery factories in Georgia, and battery storage in Southern California could bring about a bipartisan alliance to keep it alive. While Congressional Republicans will be scouring the budget for every last dollar to help fund an extension of the 2017 Tax Cuts and Jobs Act, a group of House Republicans have gone on the record in defense of the IRA’s tax credits.
“There's been so much research on the emissions impact of the IRA over the past few years, but there's been comparatively less research on the economic benefits and the household energy benefits,” Orvis said. “And I think that one thing that's become evident in the last year or so is that household energy costs — inflation, fossil fuel prices — those do seem to be more top of mind for Americans.”
Opinion modeling from Heatmap Pro shows that lower utility bills is the number one perceived benefit of renewables in much of the country. The only counties where it isn’t the number one perceived benefit are known for being extremely wealthy, extremely crunchy, or both: Boulder and Denver in Colorado; Multnomah (a.k.a. Portland) in Oregon; Arlington in Virginia; and Chittenden in Vermont.
On environmental justice grants, melting glaciers, and Amazon’s carbon credits
Current conditions: Severe thunderstorms are expected across the Mississippi Valley this weekend • Storm Martinho pushed Portugal’s wind power generation to “historic maximums” • It’s 62 degrees Fahrenheit, cloudy, and very quiet at Heathrow Airport outside London, where a large fire at an electricity substation forced the international travel hub to close.
President Trump invoked emergency powers Thursday to expand production of critical minerals and reduce the nation’s reliance on other countries. The executive order relies on the Defense Production Act, which “grants the president powers to ensure the nation’s defense by expanding and expediting the supply of materials and services from the domestic industrial base.”
Former President Biden invoked the act several times during his term, once to accelerate domestic clean energy production, and another time to boost mining and critical minerals for the nation’s large-capacity battery supply chain. Trump’s order calls for identifying “priority projects” for which permits can be expedited, and directs the Department of the Interior to prioritize mineral production and mining as the “primary land uses” of federal lands that are known to contain minerals.
Critical minerals are used in all kinds of clean tech, including solar panels, EV batteries, and wind turbines. Trump’s executive order doesn’t mention these technologies, but says “transportation, infrastructure, defense capabilities, and the next generation of technology rely upon a secure, predictable, and affordable supply of minerals.”
Anonymous current and former staffers at the Environmental Protection Agency have penned an open letter to the American people, slamming the Trump administration’s attacks on climate grants awarded to nonprofits under the Inflation Reduction Act’s Greenhouse Gas Reduction Fund. The letter, published in Environmental Health News, focuses mostly on the grants that were supposed to go toward environmental justice programs, but have since been frozen under the current administration. For example, Climate United was awarded nearly $7 billion to finance clean energy projects in rural, Tribal, and low-income communities.
“It is a waste of taxpayer dollars for the U.S. government to cancel its agreements with grantees and contractors,” the letter states. “It is fraud for the U.S. government to delay payments for services already received. And it is an abuse of power for the Trump administration to block the IRA laws that were mandated by Congress.”
The lives of 2 billion people, or about a quarter of the human population, are threatened by melting glaciers due to climate change. That’s according to UNESCO’s new World Water Development Report, released to correspond with the UN’s first World Day for Glaciers. “As the world warms, glaciers are melting faster than ever, making the water cycle more unpredictable and extreme,” the report says. “And because of glacial retreat, floods, droughts, landslides, and sea-level rise are intensifying, with devastating consequences for people and nature.” Some key stats about the state of the world’s glaciers:
In case you missed it: Amazon has started selling “high-integrity science-based carbon credits” to its suppliers and business customers, as well as companies that have committed to being net-zero by 2040 in line with Amazon’s Climate Pledge, to help them offset their greenhouse gas emissions.
“The voluntary carbon market has been challenged with issues of transparency, credibility, and the availability of high-quality carbon credits, which has led to skepticism about nature and technological carbon removal as an effective tool to combat climate change,” said Kara Hurst, chief sustainability officer at Amazon. “However, the science is clear: We must halt and reverse deforestation and restore millions of miles of forests to slow the worst effects of climate change. We’re using our size and high vetting standards to help promote additional investments in nature, and we are excited to share this new opportunity with companies who are also committed to the difficult work of decarbonizing their operations.”
The Bureau of Land Management is close to approving the environmental review for a transmission line that would connect to BluEarth Renewables’ Lucky Star wind project, Heatmap’s Jael Holzman reports in The Fight. “This is a huge deal,” she says. “For the last two months it has seemed like nothing wind-related could be approved by the Trump administration. But that may be about to change.”
BLM sent local officials an email March 6 with a draft environmental assessment for the transmission line, which is required for the federal government to approve its right-of-way under the National Environmental Policy Act. According to the draft, the entirety of the wind project is sited on private property and “no longer will require access to BLM-administered land.”
The email suggests this draft environmental assessment may soon be available for public comment. BLM’s web page for the transmission line now states an approval granting right-of-way may come as soon as May. BLM last week did something similar with a transmission line that would go to a solar project proposed entirely on private lands. Holzman wonders: “Could private lands become the workaround du jour under Trump?”
Saudi Aramco, the world’s largest oil producer, this week launched a pilot direct air capture unit capable of removing 12 tons of carbon dioxide per year. In 2023 alone, the company’s Scope 1 and Scope 2 emissions totalled 72.6 million metric tons of carbon dioxide equivalent.
If you live in Illinois or Massachusetts, you may yet get your robust electric vehicle infrastructure.
Robust incentive programs to build out electric vehicle charging stations are alive and well — in Illinois, at least. ComEd, a utility provider for the Chicago area, is pushing forward with $100 million worth of rebates to spur the installation of EV chargers in homes, businesses, and public locations around the Windy City. The program follows up a similar $87 million investment a year ago.
Federal dollars, once the most visible source of financial incentives for EVs and EV infrastructure, are critically endangered. Automakers and EV shoppers fear the Trump administration will attack tax credits for purchasing or leasing EVs. Executive orders have already suspended the $5 billion National Electric Vehicle Infrastructure Formula Program, a.k.a. NEVI, which was set up to funnel money to states to build chargers along heavily trafficked corridors. With federal support frozen, it’s increasingly up to the automakers, utilities, and the states — the ones with EV-friendly regimes, at least — to pick up the slack.
Illinois’ investment has been four years in the making. In 2021, the state established an initiative to have a million EVs on its roads by 2030, and ComEd’s new program is a direct outgrowth. The new $100 million investment includes $53 million in rebates for business and public sector EV fleet purchases, $38 million for upgrades necessary to install public and private Level 2 and Level 3 chargers, stations for non-residential customers, and $9 million to residential customers who buy and install home chargers, with rebates of up to $3,750 per charger.
Massachusetts passed similar, sweeping legislation last November. Its bill was aimed to “accelerate clean energy development, improve energy affordability, create an equitable infrastructure siting process, allow for multistate clean energy procurements, promote non-gas heating, expand access to electric vehicles and create jobs and support workers throughout the energy transition.” Amid that list of hifalutin ambition, the state included something interesting and forward-looking: a pilot program of 100 bidirectional chargers meant to demonstrate the power of vehicle-to-grid, vehicle-to-home, and other two-way charging integrations that could help make the grid of the future more resilient.
Many states, blue ones especially, have had EV charging rebates in places for years. Now, with evaporating federal funding for EVs, they have to take over as the primary benefactor for businesses and residents looking to electrify, as well as a financial level to help states reach their public targets for electrification.
Illinois, for example, saw nearly 29,000 more EVs added to its roads in 2024 than 2023, but that growth rate was actually slower than the previous year, which mirrors the national narrative of EV sales continuing to grow, but more slowly than before. In the time of hostile federal government, the state’s goal of jumping from about 130,000 EVs now to a million in 2030 may be out of reach. But making it more affordable for residents and small businesses to take the leap should send the numbers in the right direction, as will a state-backed attempt to create more public EV chargers.
The private sector is trying to juice charger expansion, too. Federal funding or not, the car companies need a robust nationwide charging network to boost public confidence as they roll out more electric offerings. Ionna — the charging station partnership funded by the likes of Hyundai, BMW, General Motors, Honda, Kia, Mercedes-Benz, Stellantis, and Toyota — is opening new chargers at Sheetz gas stations. It promises to open 1,000 new charging bays this year and 30,000 by 2030.
Hyundai, being the number two EV company in America behind much-maligned Tesla, has plenty at stake with this and similar ventures. No surprise, then, that its spokesperson told Automotive Dive that Ionna doesn’t rely on federal dollars and will press on regardless of what happens in Washington. Regardless of the prevailing winds in D.C., Hyundai/Kia is motivated to support a growing national network to boost the sales of models on the market like the Hyundai Ioniq5 and Kia EV6, as well as the company’s many new EVs in the pipeline. They’re not alone. Mercedes-Benz, for example, is building a small supply of branded high-power charging stations so its EV drivers can refill their batteries in Mercedes luxury.
The fate of the federal NEVI dollars is still up in the air. The clearinghouse on this funding shows a state-by-state patchwork. More than a dozen states have some NEVI-funded chargers operational, but a few have gotten no further than having their plans for fiscal year 2024 approved. Only Rhode Island has fully built out its planned network. It’s possible that monies already allocated will go out, despite the administration’s attempt to kill the program.
In the meantime, Tesla’s Supercharger network is still king of the hill, and with a growing number of its stations now open to EVs from other brands (and a growing number of brands building their new EVs with the Tesla NACS charging port), Superchargers will be the most convenient option for lots of electric drivers on road trips. Unless the alternatives can become far more widespread and reliable, that is.
The increasing state and private focus on building chargers is good for all EV drivers, starting with those who haven’t gone in on an electric car yet and are still worried about range or charger wait times on the road to their destination. It is also, by the way, good news for the growing number of EV folks looking to avoid Elon Musk at all cost.