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The Weekly Sun: The Inflation Reduction Act of 2022 Takes A Big Step Forward For Clean Energy

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This week in solar, renewable and sustainable news.

In this week’s solar news, climate change response gets a boost on Capitol Hill, Saudi Arabia imagines and invests in the city of the future, and a model for self-reliance in Germany


Meaningful climate legislation in the U.S looked very unlikely just a few weeks ago when Senator Joe Manchin III, a decisive vote in the Senate said he would not support any bill which might exacerbate inflation. The outlook was gloomy for those focused on climate change.

That’s when a former petroleum geologist, perhaps the least likely of climate heroes, started making calls.

Although the legislation is officially known as the Inflation Reduction Act of 2022 and informally as the Manchin Schumer bill, it was Senator John Hickenlooper of Colorado who was key to the legislation’s resurrection.

“When a lot of people said ‘That’s the end’ and everyone’s writing it off, I went to everybody I knew and said, ‘Wait a minute, we can’t quit,” Hickenlooper told the New York Times. “We don’t have a satisfactory alternative.”

Senator Hickenlooper brought in economists from the Wharton Business School and even former Federal Reserve chief Larry Summers to convince Senator Manchin that there was a way to get a deal done that would not place additional challenges on his constituents.

What emerged on the night of July 27th, known as the Inflation Reduction Act of 2022, surprised much of Washington and has the potential to be the most meaningful environmental legislation ever passed in the U.S.

With $369 billion dollars targeted at growing domestic clean energy production, the bill would be transformative for energy production in the U.S. EVs, solar panel manufacturing, wind power, domestic production of minerals essential for batteries and solar panels all get boosts from the bill.

The legislation still has to pass the House and Senate, where the Democrats have no margin for error. The crucial vote of Arizona Democrat Kristen Sinema is still unknown. The week ahead is key.

What emerged on the night of July 27th,…has the potential to be the most meaningful environmental legislation ever passed in the U.S.

“With long-term incentives for clean energy deployment and manufacturing, the solar and storage industry is ready to create hundreds of thousands of new jobs and get to work building out the next era of American energy leadership. This is a crucial window of opportunity that we cannot miss, and now Congress must seal the deal and pass this legislation,” Abigail Ross Hopper, CEO of the Solar Energy Industries Association said in a statement.

So, let’s unpack a few highlights:

Investment Tax Credit Boosted and Extended

The flashing headline for anyone considering buying solar panels is the renewed and improved Investment Tax Credit, or ITC. This ITC has been the central tax incentive for solar energy’s growth in the U.S. over the past decade, but was set to decrease in 2023 from 26% of the cost of a solar system to 22%.

Instead, the ITC will increase to 30% for 10 years, stepping back down to 26% in 2033 and 22% in 2034. The credit offsets 30% of costs for qualified homeowners who install a solar system. The provision includes storage, so even batteries retrofitted to solar systems or standalone backup batteries are included.

Additional language in the bill is focused on low-income communities, domestic manufacturing and labor policy and can drive the federal credits to as high as 50% under special circumstances.

If the legislation passes, the credits would apply retroactively to any installations performed in 2022.

Instead, the ITC will increase to 30% for 10 years, stepping back down to 26% in 2033 and 22% in 2034. The credit offsets 30% of costs for qualified homeowners who install a solar system.

Electric Car Credits Expanded to Used Market

The legislation continues the existing $7,500 tax credit for EVs, but lifts the 200,000 vehicle per manufacturer cap. That’s a big win for manufacturers such as Tesla and Toyota, which had passed that number years ago. A new $4,000 tax credit for used EV purchases targets lower- and middle-income buyers. The proposed credits now include vehicles manufactured in North America, expanding qualifying vehicles from only those made in the U.S.

solar panel manufacturing machines

Renewable Energy Credits for Manufacturers in the U.S.

With so much of the equipment supporting green energy made in China, the Manchin Schumer plan has billions in incentives to bring those manufacturing jobs to the U.S. Production tax credits for solar panels, wind turbines, and batteries headline those numbers, along with critical minerals processing. The plan also includes investment tax credits to build clean technology manufacturing plants.

Other Consumer Energy Perks on the Table

Other tax credits for renewables and high-efficiency technology include qualifying heat pumps, electric HVAC systems and modern water heaters. Nine billion dollars is budgeted for rebate programs incentivizing energy efficiency for low-income homeowners. There’s also an additional $1 billion in grants for affordable housing energy upgrades.

Sources: NY Times, Washington Post, Bloomberg, Utility Dive, Reuters, SEIA, PV Magazine


German biofuel storage tanks

A German District Shows What Energy Independence Looks Like

In the face of Russia squeezing the flow of fossil fuel to the EU, European leaders agreed that they would restrict natural gas usage in anticipation of a hard cold winter. Europeans are worrying about how they will heat their homes, but the Rhein-Hunsrueck district of Germany collectively shrugged its shoulders at the news.

In the mid-nineties, leaders in the rural region decided they wanted nothing to do with the politics and vicissitudes of the global fossil fuel market. They started their journey toward indepdence by pooling resources to install the area’s first wind turbine.

Twenty-seven years later, the district is completely energy-self-sufficient, drawing all its power from its 247 wind turbines and countless solar panels. Biofuel energy plants, powered by woodland waste products, round out the area’s energy portfolio. Not only are all the homes and businesses powered by various renewable sources, but a sharing service for electric vehicles (EVs) and electric bikes (E-bikes) also gets its juice from the green grid.

The investment in energy production has turned out to be a wise investment for local governments as the participating municipalities collectively have over $100 million in reserves with zero debt and an unemployment rate nearly 2% lower than the national average.

Source: Reuters


Saudi Arabia Launches the City of the Future

In 2018, Saudi Arabia broke ground on NEOM, an ambitious reimagining of the built human environment. The centerpiece of the project is a new city, The Line. Packing nine million people into 37 square kilometers, built as a 17-kilometer-long mirrored wall 200 meters thick, the project aims to run on 100% renewable energy.

This past week, the organization released a video to showcase its vision. Social media reaction has ranged from harsh to harsher, with “dystopian” being one of the most common adjectives to appear. The Line would be unlike anything else ever attempted, but it certainly reframes the conversation around what is possible for a sustainable city. As much as the project looks like the CGI set of a sci-fi movie set in the 23rd century, it is backed by the Saudi royal family and has the financial backing to move forward.

Source: NEOM


Bill Gates Throws His Weight Behind Hydrogen

Tech giant Bill Gates recently wrote a blog post supporting hydrogen as a tool in the climate change toolbox. As a zero-emissions fuel, Gates writes, hydrogen has the potential to supplant fossil fuels in ways that battery power cannot, specifically in long-haul transportation and aviation. Additionally, its use as an industrial fuel could move steel and concrete production away from coal.

As the climate has become a higher priority for the Bill & Melinda Gates Foundation in recent years, it will be interesting to see how much emphasis the foundation puts on hydrogen research in the coming years. In partnership with his ex-wife Melinda Gates, Bill Gates announced in July that he has donated $20 billion more of his personal fortune to the foundation to help address “the great crises of our time.”

Source: Gates Notes, Fortune

hydrogen storage tanks


The Weekly Sunshine Song

Last week’s shocking news of climate legislation was a reminder that there’s more joy in good news when it is unexpected.

And for music lovers, nothing was more unexpected than Joni Mitchell’s return to the Newport Folk Festival after having not performed a full set in two decades. Mitchell, who suffered what was thought to be a career-ending ruptured aneurysm in 2016, sang of clouds but shone like the sun.


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