The Inflation Reduction Act of 2022’s Balancing Act
Creating a Universally Accessible Arsenal to Address Climate Change or… Another Form of Corporate Welfare
It’s true! The passage of HR 5376, the Inflation Reduction Act of 2022, into law is the federal government’s most sweeping measure to decarbonize the energy supply on which our economy depends and address the changing climate threatening our way of life. Those of us who have dedicated our careers to renewable energy resource development and climate action feel that, finally, the federal winds are blowing our way - even though it is a fraction of what’s needed to escape the worst. Skeptics of the bill’s intent and what it might achieve, offer different viewpoints. Those views deserve our industry’s utmost attention.
The most striking of those perspectives sees HR 5376 as just another form of “corporate welfare”. Robert Bryce, an opinion contributor to the Hill, captures this sentiment in his piece: Talk About Corporate Welfare: Federal Giveaways to Wind and Solar Sectors are About to Explode. Coming from the photovoltaic (solar) industry that, starting in the 80s, endured decades of breath-taking losses, it’s hard to fathom how it would not be worthy. It’s time in the sun is now! Isn’t its turn to line its pockets – just like the oil, defense and internet companies have done with government subsidies of the past.
All the folks that I know and work with in the “climate-tech” and clean energy industry don’t see it that way. They recognize that this bill represents a long-term investment in our collective future. “Big winners take all” scenarios, forecasted in above article, would portend the bill’s failure.
Egregious disinformation campaigns overstating the risks of converting to renewable energy undermine sound policy making and implementation. Still, if only utility scale wind and solar emerge victorious from the bill’s passage, the grid’s reliability, and our ability to dramatically cut emissions and meaningfully serve climate justice will be shortchanged. A broad-based suite of distributed energy resources where communities play an early and essential role, complementing utility-scale projects and bolstering the overall architecture must also sprout from this investment if it is to meet its goals and achieve lowest cost.
Fortunately, HR5376 has many elements that clearly strive to balance its impact along these lines. These include significant support for energy storage - complementing the variability in wind and solar, justice 40 terms - ensuring that the most vulnerable communities are well-served in this process, and tax credit equivalent rebates that can flow to non-profit entities - spreading the returns beyond traditional finance vehicles structured to reward the wealthy. To prove his hypothesis, Mr. Bryce’s article conveniently gives those elements short shrift. Still, there are warnings in his position that the climate-tech industry should heed.
In the single-minded pursuit of maximizing shareholder returns, large corporations with vast resources are programmed to recruit lawyers and accountants, trained to seek loopholes and game the system. Most community-centric organizations don’t share this mindset and such focused resources are generally out of their reach. Precisely to Mr. Bryce’s point, even with the countervailing provisions in the current bill, the playing field remains tilted.
My hope, as idealistic as it might be, is that the big utilities, wind, and solar companies standing to benefit from this bill, acknowledge the many ways that it, and the circumstances around it, differ from the past. Climate-change is no longer hypothetical or a matter of belief. Its impacting everywhere. as evidenced by the growing number of power plants, farmlands and inland shipping routes having to cut production with record low water levels or the increasing number of cities and towns contending with flash floods, or the number of exhausted firefighting crews across the globe battling relentless wildfires.
Large corporations looking to implement utility-scale measures to decarbonize and confront climate change must recognize the value of coordinated widespread and empowered community-scale action (e.g., microgrids, virtual power plants, distributed generation & storage). Often-times, early community actions can pave the way for much more effective and universally accepted utility-scale endeavors. Large corporate players seeking to corner a sizable slice of the funds for their own technology or product dominance at the expense of widespread community solutions, undermine the bill’s intent and ultimately their own long-term prospects in a truly decarbonized economy. At the same time, communities that fail to recognize the opportunity/obligation to gain greater control of their local energy destiny by simply deferring to large players – also undercut themselves and the bill’s very purpose.
Beacon Climate exists to help cities, towns and communities realize their distributed energy resource potential in this dynamic setting. It is doing this by creating vibrant avenues and effective tools to work cooperatively with the climate-tech and social resilience firms that can tailor the optimal climate solutions for municipality’s needs. Do you represent a municipal entity, click here to send an email asking for further information. Please include the name and state of the municipality in the subject line of the email.