Biden climate law spurred billions in clean energy investment. Has it been a success?
(WASHINGTON) — When President Joe Biden signed the $369 billion Inflation Reduction Act in August, supporters hailed the measure as the largest climate investment in the nation’s history — but questions remained about what the spending would ultimately achieve.
The majority of the funding took the form of tax credits meant to incentivize private investment in clean energy, such as wind and solar, and in theory, boost U.S. production of renewables as the nation pursues ambitious carbon emissions goals and a supply chain less dependent on China.
The success of the strategy, however, in a large part hinged on the willingness of companies to pursue those tax credits. So far, dozens of firms have announced projects that qualify for government relief, totaling more than $40 billion in clean energy investment and adding nearly 7,000 jobs, according to a report from Clean Power America, an industry group representing green energy companies.
New plans range from a battery manufacturing plant in Georgia to a solar complex in Alabama to the expansion of a wind turbine facility in Colorado, the report found.
As the global supply chain struggles to recover from the pandemic, the early wave of investment proves the wisdom of the landmark energy law, foretelling significant growth for U.S. clean energy and easing the sector’s reliance on China, some industry representatives and analysts said.
But some climate experts cautioned that the tens of billions in investment makes up a fraction of the scale required, leaving the effectiveness of the environmental measure in question. The law left out key parts of the climate change fight that could imperil carbon emissions goals regardless of the amount of investment, they added.
“Friction in the global economy is causing difficulties getting solar panels and lithium batteries,” David Victor, a professor of innovation and public policy at the University of California, San Diego, told ABC News. “It’s hard to deploy the commitments we’ve made, let alone bring a radical expansion.”
“This is a massive amount of money behind that ambition that we’ve never seen before in American history,” he added.
To be sure, a host of industry groups and economists opposed the Inflation Reduction Act altogether, warning that the billions in spending would exacerbate inflation rather than alleviate it. Congressional Republicans tried to obstruct the law with a party-line “no” vote.
“We share the goal of addressing climate change,” the American Petroleum Institute, a trade group representing about 600 companies in the oil and natural gas industry said in a letter to House leaders before the law’s passage. “The considerable tax increases and new government spending in the IRA amount to the wrong policies at the wrong time.”
Last decade, the use of renewable electricity in the U.S. skyrocketed. Between 2011 and 2020, the U.S. quadrupled the share of electricity it gets from wind and solar, according to a report from the nonprofit Environment America Research and Policy Center and the nonpartisan research organization Frontier Group.
Over the first six months of 2022, nearly a quarter of U.S. electricity generation came from renewable sources, according to the Energy Information Administration, a government agency. But the progress falls well short of the Biden administration’s goal of 100% clean electricity by 2035.
The need for additional U.S. clean energy capacity has drawn attention to the nation’s renewables manufacturing sector, which pales in comparison to China, the source of more than 80% of components in all of the key stages of solar production, the International Energy Agency said in July.
As global supply chain bottlenecks amid the pandemic have weighed on China’s economy and hindered U.S. access to key parts, the need for a fix has gained added urgency, some analysts said.
“Frankly, we’ve seen a slowdown,” John Hensley, vice president for research and analytics at American Clean Power, told ABC News. “The inability to source solar modules is front and center.”
The three-month period ending in September marked the slowest quarter for renewable energy growth in three years, a report from American Clean Power found. Wind installations fell 78% compared with the previous quarter, while solar installations dropped 23%, the report showed.
By dramatically expanding U.S. clean energy production, the Inflation Reduction Act, or IRA, will help the nation circumvent a fragile global supply chain and return it to a trajectory of robust growth, industry representatives and some analysts said.
A pronounced impact is expected in the solar market. The law will lead to over $600 billion in new investment over the next decade, bringing 50% more solar investment than the country would’ve drawn without the measure, the Solar Energy Industry Association found.
Hanwha Qcells, a Korean solar company, announced earlier this month more than $2.5 billion in new investment to build a manufacturing facility about 50 miles northwest of Atlanta. The company said it will also expand an existing plant in Dalton, Georgia, bringing a total of 2,500 new jobs.
“The U.S. solar manufacturing industry has really struggled over the last couple decades,” Scott Moskowitz, senior director, head of market strategy and public affairs at Qcells North America, told ABC News. “The IRA marks a turning point in the history of the industry.”
The Republican party, whose members on Capitol Hill uniformly opposed the energy law, retains one-party control of Georgia’s state legislature. But government officials in the state have backed the solar project, Moskowitz said.
“We’ve had nothing but support from our elected officials,” he said. “We’ve found there’s universal support for manufacturing jobs and pretty wide support for a diversified and cleaner energy mix.”
Despite signs of success, some analysts warned that the investment so far remains far short of what the country will require to achieve its climate goals.
“It’s definitely good,” Mark Jacobson, a professor of civil and environmental engineering at Stanford University, told ABC News. “The issue is we need much more.”
The law hamstrings itself, Jacobson said, since it includes tax credits for what he says are unproven technologies like carbon capture, a way of reducing emissions at their source by trapping and storing carbon before it releases into the air. Such tax credits are “basically taking money away from real solutions,” he said.
The market will limit the use of credits for technology that proves ineffective, limiting that potential waste, said Hensley, of American Clean Power.
“If you have a project that doesn’t have great economics, that doesn’t have a great production profile, that isn’t delivering on goals and benefits, not many of those projects are going to get done,” he said.
While improving the output of clean energy, the IRA doesn’t address the issue of fossil fuel consumption, Jacobson said. As long as cars, homes and offices use fossil fuels, the benefits of clean energy will prove limited, he said.
“The IRA isn’t addressing that problem of getting rid of fossil fuels,” he said. “The big problem is we need to stop burning things.”
Hensley acknowledged that the climate fight will require initiatives that extend beyond clean energy production.
“It will take a joint effort to get there,” he said. “The country has a good track record of rising to the occasion.”
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