FRANKFORT, Kentucky (AP) — On a recent day under the July sun, three men heaved solar panels onto the roof of a spacious, two-story home near the banks of the Kentucky River, a few miles upriver from the state capital, where lawmakers have mined coal for more than a century.
The US climate change law passed a year ago provides a 30% rebate on this installation via a tax credit, helping to drive clean energy where coal still provides cheap electricity. It was good business for Heather Baggett’s family in Frankfurt.
“For us, it’s not politically motivated,” Baggett said. “It really came down to the finances, it made sense.”
On August 16, after the hottest June on record and a scorching July, America’s long-awaited response to climate change, the Inflation Reduction Act, turns one year old. In less than a year, this has led to investments in a massive expansion in battery and electric vehicle production across the states. According to the American Clean Power Association, nearly 80 major clean energy production plants have been announced, an investment equivalent to the sum of the past seven years.
“It seems like there’s a new factory somewhere being announced every week,” said Jesse Jenkins, a Princeton professor and leader of the REPEAT project, which was heavily involved in analyzing the law.
“We’ve talked my entire life about bringing manufacturing jobs back to America. We finally made it, right? It’s pretty exciting,” he said.
The IRA is America’s most significant response to climate change after decades of lobbying by oil, gas and coal interests stalled action while carbon emissions soared, creating a hotter, more dangerous world. It aims to drive the expansion of clean energy on a scale that will change the arc of greenhouse gas emissions in the United States. It also aims to build domestic supply chains to reverse the early dominance of China and other nations in this vital sector.
The story goes on
A goal of the law is clean transportation, the largest source of climate pollution for the United States. Siemens, one of the largest technology companies in the world, produces charging stations for electric vehicles. Executives say this alignment of U.S. climate policy is leading to higher demand for batteries.
“If the federal government makes an investment, we’ll get to the tipping point faster,” said Barbara Humpton, CEO of Siemens USA, adding that the company has invested $260 million in battery or battery storage projects in recent years.
The law also encourages more batteries that feed electricity into the grid during low winds or at night when the sun isn’t shining on the solar panels. It could put the storage business on the same upward path that solar took a decade ago, said Michael McGowan, head of North American infrastructure private markets at Mercer Alternatives, a consulting firm.
Derrick Flakoll, North America Policy Associate at Bloomberg NEF, pointed out that sales at the US’s largest solar panel maker, First Solar, skyrocketed after the bill passed, leading to a large backlog of orders.
“That’s years of manufacturing capacity that’s already booked because people are bullish on the US-made solar market,” he said.
The IRA also supports technologies that are expensive but show promise for near-term decarbonization.
Jason Mortimer is senior vice president of global sales for EH2, a company that makes large, low-cost electrolysers – machines that split hydrogen from water. Hydrogen as a clean energy is still in its infancy. “The IRA accelerates the large-scale implementation of hydrogen by about four to five years,” he said, making the US competitive with Europe.
But these changes, significant as they are, could be just the beginning, experts say.
“I think we’re going to see a whole spate of investment in wind and solar production in the US,” Jenkins said, adding that the law will take full effect in 2026-2028.
Other countries, some of which are ahead of the US in tackling climate change, have made further efforts of their own to accelerate the clean energy transition. Canada has announced such a policy and Europe has its own measures to attract production, similar to the IRA.
“European and Japanese automakers are trying to think about how to change their supply chains to remain competitive,” said Neil Mehrotra, associate vice president and policy adviser to the Federal Reserve Bank of Minneapolis and a contributor to a report on the U.S. law published by the Brookings Institution.
The Congressional Budget Office originally estimated the IRA’s tax credits would cost about $270 billion over a decade, but Brookings says companies could use the credits much more aggressively and the federal government could pay out three to four times as much.
According to a new analysis by Princeton researchers, the law aims to cut emissions from the United States — the country historically most responsible for greenhouse gases — by up to 41% by 2030. That’s not enough to meet US targets, but it’s a significant improvement.
However, these crucial greenhouse gas savings are partially at risk if the US power grid cannot grow enough to connect new wind and solar farms and handle new demands such as bulk vehicle charging.
Despite the new investments in the red states, not everyone likes it. Republicans recently proposed repealing significant portions of the law. And Frankfurt resident Jessie Decker, whose neighbor has solar panels, said he wouldn’t consider them and doesn’t think the federal government should “waste money on dubious climate programs”.
Nor does the law mean that climate-warming oil and gas will go away.
“Honestly, we’re going to be using fossil fuels for many decades to come,” said Fred Eames, a regulatory attorney at the law firm Hunton Andrews Kurth.
On Baggett’s rooftop, Nicholas Hartnett, owner of Pure Power Solar, is excited to see business thrive and homeowners opening up to solar power once they see how it can benefit them financially.
“You have the environmental side that takes care of the left and then you have the opportunity to use your own tax money that the government would have otherwise taken and the right gets ticked off,” he said.
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