Actions by Congress Driving Renewables Boom
by Katie Rock, Campaign Representative - Iowa Beyond Coal Campaign
On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) into law completing two years in Congress with the largest investments to date to address climate change. Together the Infrastructure Investment and Jobs Act (IIJA), Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act and IRA resulted in over $500 billion dedicated to accelerating the clean energy transition to meet the President’s goal of cutting greenhouse gas emissions 50% by 2030. You can learn more about the strategic investments made by these bills in our recent lunch and learn.
Though many details are yet to come on how exactly to tap into these opportunities, others are already clear. Our Iowa state energy offices are just now receiving guidance on the investment opportunities in the IIJA that was passed in November 2021. For the IRA, details will take some time. Rules are currently being written for how the Department of Treasury will use the tax credit provisions in the IRA and a public comment period will soon open this fall.
Yet some utilities have begun crunching the numbers on just how much further renewable energy will be thanks to the IRA. In Iowa, MidAmerican reviewed the economic impact to its proposed Wind PRIME project and found the IRA would yield an additional $1.3 billion in production tax credits. Unfortunately, MidAmerican has yet to change its plans to keep its coal plants running for decades in spite of the IRA. The savings apply to solar energy too. In Minnesota, Xcel found a planned solar project's costs will decline 27-32% thanks to the IRA.
The IRA includes a list of incentives on top of expanded tax credits for renewable energy to accelerate the coal to clean energy transition. A 10% bonus increase for tax credits are offered for projects in certain brownfield and coal mining communities, including at or adjacent to retired coal plants, and for projects meeting domestic content requirements. Extra bonus incentives are available for hiring from local apprenticeship programs and paying a prevailing wage. The IRA also allows developers to convert tax credits into cash payments by selling the credits, opening the door for direct ownership and potentially creating extra income from unused credits. Plus, to cover additional costs the IRA approved a new loan program through the Department of Energy called the Energy Infrastructure Reinvestment program. This program will provide qualified projects with low-cost loans to support the transition to cleaner energy, including the ability to refinance higher-cost debt and equity, saving ratepayers billions of dollars.
We are now poised to see a massive buildout of renewable energy across the midwest this decade. No where is that more evident than in the applications to join our regional electric grid, the Midcontinent Integrated System Operator (MISO). Last month was the deadline for developers to apply to build new energy projects in the 14-state MISO territory. The result, for the third year in a row, was a record for renewables including over 8 GW of potential wind, solar and battery projects for Iowa. Many of these projects may not be built, but it speaks volumes to how much interest exists post-IRA.