Canary Media thanks KORE Power for its support of our special coverage of the Inflation Reduction Act’s first year.

A year ago this week, the Inflation Reduction Act, the first major federal climate legislation in U.S. history, was signed into law. At the time, the bill’s backers employed a familiar phrase to explain its significance. 

With its hundreds of billions in clean energy and climate funding, the law was, they said, a ​“down payment”: an upfront expense meant to set the country on the path to its Paris Agreement pledge of cutting carbon emissions in half by 2030.

But just as a down payment on a house is both a big step toward home ownership and the start of an extended series of monthly payments, the Inflation Reduction Act is just the first step in a long process the country must undergo to meet its climate goals.

It’s a good thing, then, that the law has kicked off a stunning boom in clean energy.

Plans for more than 100 new clean energy manufacturing facilities have been announced in the U.S. since August 16, 2022, the day President Biden signed the law. Renewable energy developers are expected to build projects in the U.S. at a far faster pace than previously forecast. Companies from around the world are plowing billions of dollars into U.S.-based solar, wind, battery and EV ventures. Firms are crafting plans to scale up early-stage technologies like green hydrogen. 

Government actors are not twiddling their thumbs, either. At the federal level, the U.S. Environmental Protection Agency has proposed stringent rules on vehicle and power-plant emissions meant to augment the law’s emissions-reducing power. The Department of Energy has made record-breaking cleantech loans. Meanwhile, a number of states have passed aggressive clean-energy goals and subsidies of their own. The Inflation Reduction Act has even nudged governments abroad to follow suit and subsidize renewables in their countries. 

All of this activity should help move the planet’s most important needle by driving down emissions from the U.S., the largest historical emitter of CO₂.

A recent paper in the journal Science analyzes nine different models and determines that the climate law has put the country on track to cut emissions by between 33 and 40 percent below 2005 levels by 2030. That’s not enough to meet its goal to halve emissions by 2030, but it’s much more than the country would have managed without the law, the analysis concludes. 

Still, nothing about the modeled outcomes is certain. The U.S. could fall well short of those emissions-reduction levels if recent momentum fizzles out, or it could ride the exponential rise of renewables right past them. It all comes down to how effective the Inflation Reduction Act’s subsidies turn out to be. 

Financially speaking, the law is almost limitless; there’s no cap on many of its subsidies for clean energy generation and cleantech manufacturing. This arrangement could mean that the law pours far more federal funding into the energy transition than the government’s official estimate of $391 billion — Goldman Sachs projects that the actual number could end up at a cool $1.2 trillion.

Without a doubt, this shower of subsidies will help clean up the U.S. energy mix at a speed climate advocates had previously only dreamed of. 

But the actual pace will depend on how fast the government can disburse the funding, how quickly companies can scale up to take advantage of that money, how willing and able consumers are to spend money on electrifying their lives, and how much resistance the law’s implementation meets from politicians and local communities alike. All of these factors have begun to play out this past year, but so much more will happen — or not — in the coming years to shape the law’s legacy.

That first measure — speed — has so far been limited by the painstaking process of administering the law’s subsidies, many of which take the form of tax credits. Over the last 12 months, the Internal Revenue Service has been dutifully fielding feedback and releasing guidance around the requirements companies and individuals must meet in order to receive IRA money. But even one year out, some crucial subsidies — most notably those for green hydrogen — have not yet been finalized. 

This process moves slowly for good reason: The stakes are very high. Whether a subsidy has its intended effect or is a money-wasting disaster may hinge on a handful of words written into — or left out of — the tax code. In some instances, the intended effect of a subsidy is itself up for debate. That’s the case with electric vehicle tax credits; certain interests favor strict domestic-production requirements for EVs that prioritize rebuilding American manufacturing, while others want to accelerate EV adoption even if it means depending on foreign suppliers for the next few years. 

But even once the rules for clean energy subsidies are finalized, not everyone will be able or willing to take advantage — or even be aware of the opportunities on offer. That’s especially true when it comes to the incentives meant to spur consumer adoption of climate-friendly products like heat pumps and EVs. As of April, 40 percent of registered voters said they had heard nothing at all about the Inflation Reduction Act, and another 21 percent said they had heard only a little. 

Tools to help close this information gap do exist, like the Department of Energy’s energy savings hub and nonprofit Rewiring America’s online calculator, or even Canary Media’s newest column. But many Americans will still run up against a learning curve when considering home electrification, not to mention a cost barrier — and that’s assuming people are even sold on the benefits of ditching fossil fuels to begin with. 

And then there are the political and social obstacles to implementing the climate law. Even though red states stand to gain the most from the law in terms of investment and jobs, congressional Republicans have attempted to defang it at every pass. Four states have outright refused to apply for Inflation Reduction Act funding, including Florida, where Republican Governor Ron DeSantis reportedly rejected more than $350 million in clean energy incentives from the law. 

Some of this resistance might fade as clean energy jobs are created in Republican communities. In June, Georgia’s Republican Governor Brian Kemp defended his state’s thriving clean energy industry from Donald Trump’s criticism. And in West Virginia, an official from the state’s Republican, Trump-aligned gubernatorial administration recently hailed a new grid battery factory as the state’s largest economic announcement ​“in many, many, many years.”

But a wider political transformation is far from guaranteed, especially in skeptical states that may see less investment from the bill, and renewable energy deployment and factories will likely continue to face opposition.

Several other hurdles could prevent the Inflation Reduction Act from reaching its full potential. These include the interlinked challenges of permitting reform and power lines — right now, the U.S. isn’t expanding and updating its grid fast enough to support the huge amounts of clean energy capacity that are needed. This problem cannot be overstated: Much of the law’s emissions-reducing power will come from decarbonizing the grid, but that’s contingent on the U.S. building power lines at more than double its recent rate — an acceleration that the country has no clear path to achieving.

For well over a year, efforts to speed the permitting process for energy infrastructure have been mired in Congress as Republicans and Democratic Senator Joe Manchin of West Virginia have tried to exploit the moment to make it easier to build fossil infrastructure, while the rest of the Democrats have battled among themselves about how big of a poison pill they’re willing to swallow. The Federal Energy Regulatory Commission has started taking steps to get more clean energy on the grid, but without movement in Congress, it remains unclear whether transmission can be transformed at the massive scale the energy transition demands.

The 2024 U.S. presidential and congressional elections cast further uncertainty over the law’s future. If Republicans end up controlling both the presidency and Congress, they could roll back key clean energy incentives in the legislation, as they proposed to do during debt-ceiling negotiations in the spring. 

Despite the many headwinds the Inflation Reduction Act faces, there’s plenty to celebrate on the anniversary of its passage — namely, the fact that the U.S., which is responsible for one-quarter of all CO₂ emissions since the Industrial Revolution, has finally directed some of its unprecedented wealth toward dealing with the climate crisis. The law’s massive investment in clean energy will help ensure the trend toward a carbon-free future becomes harder to resist with each passing year.

Headquartered in Coeur d’Alene, Idaho with clients on every continent, KORE Power provides functional solutions to meet the growing demand for green economic expansion and a decarbonized future. As a fully integrated provider of battery cells and clean energy technology and solutions, KORE drives the energy transition through direct access to superior tech, clean energy manufacturing, and unmatched support for clean energy jobs and resilient, sustainable communities worldwide. KORE Power’s robust portfolio provides the commercial, industrial, utility and defense markets with next-generation battery cells, advanced energy storage systems that scale to grid+, intuitive asset management, and EV power and charging infrastructure support.

Canary Media thanks KORE Power for its support of our special coverage of the Inflation Reduction Act’s first year.

When the Inflation Reduction Act was being debated and voted on in Congress, all eyes were on a handful of key Democratic politicians: Senator Joe Manchin of West Virginia, Senator Chuck Schumer of New York and President Joe Biden.

But while this cast of powerful political characters deserved attention for their outsize role in the process, hundreds if not thousands of others worked tirelessly behind the scenes to craft and ultimately pass the first-ever major piece of U.S. climate legislation. For months, climate activists, environmental justice advocates, scientists, lobbyists, policy analysts and Hill staffers helped write the initial Build Back Better bill, brokered crucial agreements, kept the dream of climate legislation alive when Sen. Manchin walked away, and advocated for the programs and provisions that made it into the final text, which President Biden signed into law one year ago this week. 

For many, that moment was the culmination of years of research, lobbying, advocating and organizing. In honor of the legislation’s one-year anniversary, Canary Media asked seven of these unsung heroes to reflect on their experiences and share some insights into how federal clean energy policy actually takes shape — and what’s still left to accomplish for the U.S. climate movement.

These responses have been edited for clarity and brevity. 

Canary Media thanks KORE Power for its support of our special coverage of the Inflation Reduction Act’s first year.

Michelle Moore, CEO of the Washington, D.C.–based nonprofit Groundswell, sees a world of new opportunities opening up for the churches, colleges and community centers her organization helps to access clean energy. 

The key to unlocking that opportunity? Two words: ​“Direct pay.” 

Tax credits have been the primary engine of federal clean energy policy for the past two decades, and the Inflation Reduction Act continues that legacy. But up until now, these powerful incentives have been available only to for-profit companies seeking to offset their tax burdens. 

“From a policy perspective, tax credits reward wealth with ownership, and everyone else gets left behind,” Moore said. 

But nestled within the Inflation Reduction Act is a provision that has unleashed hundreds of billions of dollars of clean-energy tax credits to city and county governments, schools and universities, nonprofits, tribal communities and other entities that don’t pay federal taxes. The provision is known as direct pay, and it’s ​“a game-changer,” according to Moore.

In the past, nonprofits had to try to partner with for-profit groups to access clean-energy tax credits — a process that’s time-consuming and labor-intensive, and which erodes the value of incentives as different middlemen take their cut. Now, they can access benefits directly.

This under-the-radar provision could fuel untapped decarbonization opportunities in key areas like cities, public utilities and rural electric cooperatives. But perhaps more importantly, it will help advance equity and energy self-determination for underserved groups.

More municipalities may decide to build their own clean power projects, more tribes can draw investment into sovereign solar and wind projects, and more nonprofits can work with community centers and houses of worship on solar- and battery-backed microgrids.

In June, Moore joined senior Biden administration officials in unveiling official guidance from the Treasury Department that allows tax-exempt entities to apply for and receive the value of the Inflation Reduction Act’s tax credits, which range from 30 percent to as much as 60 percent of the value of clean energy, low-carbon fuel and other eligible projects, in the form of checks from the IRS. 

Just months after that guidance was finalized and one year after the act was signed into law, examples of its impact are already springing up. One example is the first direct-pay project Groundswell is developing — a rooftop solar and backup battery installation at the main campus of faith-based nonprofit City of Refuge in Baltimore. 

The project will involve the same solar and battery contractors and financial partners as a previous third-party-owned solar-battery project Groundswell developed with the nonprofit at its youth center in Baltimore, but this time, it will be owned directly by City of Refuge, Moore said. 

“What that opens up is not only more equitable access and the ability to more fully realize the economic benefit,” she said. ​“It also opens up the opportunity for community ownership,” which can increase property values and improve the ability of community organizations to borrow at lower interest rates and attract capital investments for further improvements. 

How direct pay makes clean energy more affordable for nonprofits

The main thing to know about direct pay is that it makes the process of nonprofits accessing cheap, carbon-free energy much simpler and much more certain. 

“Before direct pay, for nonprofits like churches to realize the value of tax credits, you had to bring a tax-equity investor into the picture,” Moore said. 

That space has been dominated by a relatively small number of large banks and other financial institutions that prefer ​“large, repeatable projects,” such as utility-scale wind and solar projects or clean energy and efficiency investments across large corporate property portfolios. 

Community power projects don’t fit that model. Because they’re much smaller than the $100-million-and-up projects traditionally targeted by tax equity investors, they have in the past required the intervention of intermediaries willing to aggregate them into larger portfolios.

Direct pay, officially known as ​“elective pay,” ​“flips that on its head,” Moore said. 

Efforts to take advantage of this new and streamlined process are underway in cities and municipal utilities around the country. Some entities are even reworking in-progress projects on the fly, adjusting them to seize the new opportunity for direct ownership. 

Take Peninsula Clean Energy, one of California’s many community choice aggregators formed for the purpose of offering clean energy at lower prices than those of the state’s investor-owned utilities. In April, PCE unveiled one of the country’s earliest large-scale implementations of the new direct-pay provision: 1.7 megawatts of solar projects it’s developing on the rooftops of public buildings across its territory of San Mateo County and the city of Los Banos in California’s Central Valley.

“Direct pay wasn’t on the table” when work on this project started several years ago, said Rafael Reyes, PCE’s director of energy programs. PCE had planned to take a standard approach: partnering with a third-party solar developer capable of bundling its project into a portfolio that could attract tax-equity financing. 

But those deals involve a lot of costly legal and administrative work, he said. The aggregators and investors also need to earn money, cutting into the value of the tax credits that could be passed back to the public agencies hosting the solar systems. 

Reyes estimated that the third-party structure PCE initially envisioned would have reduced the value of the incentive for the participating agencies by more than a third. ​“That’s a pretty big bite,” he added.

With direct pay, by contrast, ​“not only do we get the direct benefits, but we dramatically reduce the legal expenses,” he said. That allows PCE to lower the cost of the solar systems it’s helping its county and city partners build. 

This summer’s Treasury Department guidance also clarified that community choice aggregators like PCE are eligible for direct pay, allowing them to retain their role as project developer, he said. Now it can help cities and counties assess the best sites for solar, vet different contractor proposals and bundle multiple projects to get better deals. 

PCE is planning a second round of public-building projects for construction next year aimed at delivering between 5 and 10 megawatts of rooftop solar, and it plans to share its experience with other CCAs, Reyes said. ​“That’s our intent — to democratize this approach.”

Publicly owned utilities could also harness direct pay to expand their clean energy ambitions, according to Eric Dresselhuys, CEO of flow battery company ESS. His company was working on the largest-ever U.S. flow battery deployment with California’s Sacramento Municipal Utility District before the Inflation Reduction Act was passed, and it has since followed up with deals with other public utilities including Turlock Irrigation District and Burbank Water & Power.

“We think there’s a lot of pent-up demand,” he said. ​“I don’t know if I can put a number to it. But I do believe this has tipped the economics for a lot of the non-taxpaying entities.” 

Katrina McLaughlin, an associate on the U.S. energy program of nonprofit World Resources Institute, noted that clean power projects aren’t the only investments that can receive direct pay. Tax credits for commercial electric vehicles and EV charging equipment are also eligible, and ​“local governments have fleets, and have electrification plans for those fleets,” she said. 

Building the support structures to put direct pay to work

That’s not to say that tapping into direct pay is a trivial task. Just ask Janean Weber, assistant director of sustainability at the city of Columbus, Ohio’s Department of Public Utilities. 

Columbus wants to cut citywide emissions by 45 percent by 2030, and to help hit that goal, it’s planning to build solar, backup batteries and biomethane to power projects at its wastewater treatment plant, Weber said during a July webinar hosted by WRI.

Being able to use direct pay ​“substantially reduces the capital that we need to generate for our projects, and we also move up the timeline substantially,” she said. 

It took a lot of work for Columbus and its developer partners to make sure that switching the projects from third-party ownership to city ownership would pencil out financially, however. The city’s municipal utility had already signed a power-purchase agreement with developer NextEra when the Inflation Reduction Act was passed, and ​“we were sort of scrambling on the back end” to figure out whether switching to a city-owned project ​“would be worth it,” Weber recounted. 

One key question was what type of tax credits the project could qualify for. The Inflation Reduction Act offers ​“adders” to the base 30 percent tax credit for clean energy projects, including an additional 10 percent for projects located in ​“energy communities” — census tracts where coal, oil or fossil gas infrastructure has caused environmental harms, or where closing coal mines or power plants has led to lost jobs and declining tax revenue. 

Back when Columbus started looking at direct pay, the criteria defining energy communities hadn’t yet been released. That made it hard to know if its wastewater treatment plant qualified for the additional credit, she said. Since then, the federal government has issued clear guidance on which census tracts are eligible for the additional tax credit. 

Columbus also ​“wanted to make sure that prospective bidders on this contract would understand how we were planning to bridge the gap” in financing, Weber said. While tax credits will cover 40 percent of the project’s cost, direct-pay recipients must wait a year after the project begins operation to receive their funds. That means they have to work with financing partners to secure equity and debt capital financing to cover those upfront costs, as well as the remaining project costs. 

“You need construction and bridge financing to get the value of the tax credit,” said Moore. ​“That will be a little bit of a new trick for solar developers,” as well as the banks and project financing partners they work with, many of which aren’t used to working directly with community groups and nonprofits. Groundswell recently launched a Community Power Fund initiative that aims to help sort through issues like this. 

Marginalized or under-resourced communities might also require additional investment, Moore said — ​“things like new electrical infrastructure or new rooftops” — to prepare buildings for solar, energy-efficiency or electrification projects. That’s going to require ​“more community-based developers whose vision is broader than just the return on investment of solar as an asset class.” 

The Inflation Reduction Act’s 10 percent tax-credit adder for projects located in designated lower-income communities could help draw investment to cover these costs, particularly ​“in neighborhoods that have been subject to redlining [and] areas where you need to make all kinds of reparative investments,” Moore said.

Building clean energy ownership in underserved communities

One way that the Treasury Department’s guidance will help counterbalance the challenge of investing in underserved communities is by allowing direct-pay tax credits to ​“stack” with other federal grants and loans, Moore said. That’s a shift from many previous federal programs that limited how many different sources of federal funding could be used to pay for a single project. 

That means that other major pots of money, like the $27 billion in loans being made available from the Environmental Protection Agency’s Greenhouse Gas Reduction Fund — the official name of the federal ​“green bank” created by the Inflation Reduction Act — can be combined to further improve the financial equation for community power projects, she said. 

Keith Dennis, president of the nonprofit Beneficial Electrification League, described a similar ​“stackable” option now available for the more than 900 rural electric cooperatives that provide power to about 42 million people across the country. These cooperatively owned entities are eligible for direct pay, and they’re also allowed to compete for $10.7 billion in U.S. Department of Agriculture grants and loans under two Inflation Reduction Act programs that opened up for applications this spring. 

By combining those grants and loans with the most lucrative direct-pay tax credits available for energy communities and low-income communities, co-ops can ​“get close to 100 percent” of a project’s cost covered by the federal government, said Dennis, who spent nine years as an executive with the National Rural Electric Cooperative Association. 

Dennis said his organization is now working with co-ops seeking low-interest loans from a $1 billion pool of these new USDA funds to build and own clean energy projects. ​“Those people will probably be looking at using direct pay to supplement that funding,” he said. ​“The only way you wouldn’t use it is if you miss the deadline accidentally.”

But co-ops have other options. The majority of the USDA funding — $9.7 billion of it — offers co-ops loans or grants they can use to sign power-purchase agreements with third-party developers as well as build their own projects. ​“It’s going to take some practice in seeing how this works” for co-ops to understand which is a better deal, he said. 

Chéri A. Smith, founder and CEO of Alliance for Tribal Clean Energy and a descendant of the Mi’kmaq Nation of present-day Maine and the Canadian Maritime provinces, cited similar uncertainty among the tribal nations and Indigenous communities she works with to finance and build clean energy projects on tribal lands. 

“There’s an enormous amount of capacity-building that needs to be done, with our federal partners and others, to get this funding to work,” she said. Alliance for Tribal Clean Energy is working on what she described as a ​“capital-stack planning tool,” a cloud-based repository of data on tax credits, grants, loans and financing options for ​“tribal leaders to go in, with support from our technical team, to slice and dice the different options” and to ​“show how direct pay will come in at the end.” 

Tribal communities have a particular interest in controlling the clean-energy assets being built on their land, given the history of private-sector exploitation of their fossil-fuel and mineral wealth, Smith said. 

Similar concerns animate much of the interest in clean energy development among the nonprofits and faith-based organizations that Groundswell works with, Moore said. She cited the example of the Interdenominational Theological Center in Atlanta, a group of five historically Black seminaries that considers building the assets of Black churches for wealth creation as one of its missions. 

“Asset ownership of solar — bringing the ownership of that asset into your community and literally owning your own power — is very vital to that mission,” she said.

Headquartered in Coeur d’Alene, Idaho with clients on every continent, KORE Power provides functional solutions to meet the growing demand for green economic expansion and a decarbonized future. As a fully integrated provider of battery cells and clean energy technology and solutions, KORE drives the energy transition through direct access to superior tech, clean energy manufacturing, and unmatched support for clean energy jobs and resilient, sustainable communities worldwide. KORE Power’s robust portfolio provides the commercial, industrial, utility and defense markets with next-generation battery cells, advanced energy storage systems that scale to grid+, intuitive asset management, and EV power and charging infrastructure support.

Canary Media thanks KORE Power for its support of our special coverage of the Inflation Reduction Act’s first year.

There’s no doubt that the Inflation Reduction Act, in just one year’s time, has fundamentally reshaped the trajectory of the U.S. clean energy industry.

But history will not judge the Inflation Reduction Act based on the billions in investments it spurred in 2023. When measuring the law’s effectiveness, one immutable criterion looms above all else, and that is carbon emissions. On his first day in office, President Joe Biden signed an order reinstating the U.S. to the Paris Agreement and pledged to cut U.S. emissions in half by 2030, relative to 2005 levels. The law he signed last August is the strongest effort yet to deliver on that promise. 

Is it working?

Answering this question requires peering seven years into the future — a dicey proposition even in less turbulent times. Nonlinear feedback loops, S-curve adoption trends and sociopolitical obstacles abound, making any definitive predictions impossible. 

But energy-system modelers have published a veritable library of detailed studies to illustrate the emissions-reducing potential of the law, and their research converges around a general outlook: The U.S. is far closer to meeting its 2030 emissions-reduction goals thanks to the Inflation Reduction Act, but it’s still not all the way there. Keeping the Paris goals alive will require follow-on policies at the city, state and federal levels, exceptional performance by the clean energy industry, and an overhaul to the permitting and grid interconnection regimes that threaten to slow essential clean energy projects today.

Averaging across nine independent studies, a report in Science concludes the country is poised to cut emissions by 33% to 40% by 2030, compared to a 2005 baseline. Before the IRA passed, the country was on track for reductions of just 25% to 31%, so the floor is now higher than the ceiling was prior to the legislation. 

Jesse Jenkins, a Princeton professor and one of the modelers featured in the Science paper, put it this way: Factoring in the IRA, we’re running four to five years behind schedule on the Paris goals.

“For the first time in U.S. history, the full financial might of the federal government is aligned behind the clean energy transition,” Jenkins said. ​“Is that necessary? Absolutely. Is it sufficient? No.”

The Inflation Reduction Act will make its biggest dent in power-sector emissions. And that’s for good reason: Electricity is a major emitter itself, but clean electricity can drive decarbonization in transportation, buildings and at least some of the heavy industrial processes. As a result, the near-term success of the law will depend on how rapidly it can drive down emissions from power plants.

The task is made more difficult because the grid can’t just get cleaner than it’s ever been; it has to expand to shoulder this new demand from other sectors. And as it stands — even though power-sector emissions are expected to nosedive by nearly 70 percent compared to 2005 levels — it doesn’t look like the sector will cut carbon fast enough to make the Paris targets come true.

Still, Jenkins doesn’t think the 2030 goals are out of reach.

“There are a number of positive feedbacks that could close the gap,” Jenkins said. ​“I’m optimistic because I think we can get the work done, and the IRA itself will encourage more work to be done.”

The grid is about to get cleaner, faster than you ever imagined

The Inflation Reduction Act strikes hardest and fastest at the power sector, and the emissions outlooks reflect that. A helpful chart from the Rhodium Group breaks out each sector of the economy and shows the precipitous plunge in emissions from the electricity sector, far outstripping the progress in transportation and buildings, and the lack of any improvement in agriculture and heavy industry.

Canary Media thanks KORE Power for its support of our special coverage of the Inflation Reduction Act’s first year.

The Inflation Reduction Act has created the biggest federal investment in home energy efficiency in history, with $8.8 billion to weatherize homes, install efficient electric heating and appliances, and help households save billions of dollars in energy costs and cut their carbon emissions. 

Now, nearly a year after the law’s passage, the rules for how U.S. states and territories can access these unprecedented federal incentives have been released — and the hard work of putting the money to use can begin. 

Late last month, the U.S. Department of Energy issued its requirements and instructions for accessing $4.3 billion from the Home Efficiency Rebates Program, which offers whole-home efficiency grants, and $4.275 billion from the Home Electrification and Appliance Rebates Program, which offers rebates for electric-powered home systems.

Those two programs — along with $225 million in grants for tribal governments that haven’t yet been finalized — represent a ​“groundbreaking” effort to bring efficiency to millions of homes and apartments across the nation, DOE Deputy Secretary David Turk said during a July 27 press conference revealing the new rules. 

“Just to underscore how big a deal this is, families will be able to save hundreds and thousands of dollars on insulating their homes, installing heat pumps, upgrading to electric energy appliances, and much, much more,” he said.

DOE forecasts that these incentives could drive up to $1 billion in annual energy cost savings across the country. They could also help create over 50,000 jobs, ​“from manufacturing all the way to installation,” Turk said.

If these programs can meet DOE’s goals, they could have remarkable implications for the energy transition. More efficient homes can reduce demand for the fossil-fueled heating and cooking that makes up roughly 13 percent of U.S. carbon emissions. They can also ease strained U.S. power grids at a much lower cost than building new power plants. 

Energy efficiency remains an under-tapped resource, however. The Inflation Reduction Act’s newly finalized programs offer a chance to reverse that. But that will only happen if the programs, which will be administered through states rather than the federal government, are set up correctly, experts say. And now that the DOE has issued its guidance, it’s up to the states to figure out exactly what ​“correct” looks like.

This critical task is not going to be an easy one for states and territories — especially those that don’t already have a robust staff on hand to sort through the complexities of administering these programs. 

“The goal is to set up a program that makes it easy for states to do outreach and collect inputs from the marketplace, and then quickly implement it themselves,” said Panama Bartholomy, executive director of the Building Decarbonization Coalition. ​“I think the jury’s still out on whether or not the DOE did that.” 

Big money for efficiency, but still just a start

States and territories will receive their share of the money via formula grants, which range from as low as $30 million for smaller states and U.S. territories to hundreds of millions of dollars for the most populous states.

This funding comes with plenty of requirements for the state energy offices that will be in charge of most of the money. 

These entities, set up by state governors’ offices or legislatures, must craft education and outreach strategies to reach households across demographic and income boundaries. They’ll need to create consumer protections to guard against fraud and abuse, as well as community benefits plans to boost economic and social impacts in underserved communities. State energy offices must also figure out how to get the all-important utility billing and energy metering data necessary to measure their impacts. 

But most important to the long-term success of this effort is DOE’s requirement that every state and territory develop a ​“market transformation plan” that can ​“catalyze a sustained increase in supplier participation and consumer demand for energy-efficient electrification upgrades,” including for lower-income households and disadvantaged communities. 

Making efficiency improvements across the country’s 121 million households will cost a lot more than $8.8 billion, energy efficiency experts say. In fact, they likely add up to hundreds of billions of dollars. These transformation plans are meant to make the impact of the climate law’s efficiency programs last well beyond the money allocated. 

“IRA funding alone isn’t nearly enough to transform our nation’s housing stock,” said Greg Smithies, a partner and co-head of building-focused climatetech investment for venture capital firm Fifth Wall. ​“Impact beyond the home energy rebates is just as, if not more, important.” 

There’s a tension between the fastidious work required to make these programs transformative and the need to disburse the money as quickly as possible, however. Turk highlighted the ​“thousands of conversations” that the DOE has had with states, territories, tribes and other stakeholders to help craft this balance, and he promised an ​“array of assistance to states and territories” from DOE to come. 

Turk said some states may begin providing rebates as early as this year. But efficiency experts said that timeline is unlikely for all but the most sophisticated state energy offices. In fact, many states will face challenges in simply meeting the programs’ core requirements, Bartholomy said. 

A handful of states such as California, New York and Massachusetts have energy offices with hundreds of employees, he said. But most have just a handful of full-time staffers, including many that have only two to four people. Those short-staffed agencies will need lots of support to comply with the programs’ requirements and make decisions on the parts of the programs left up to their discretion, he said — and do it in a way that doesn’t overly complicate how the money rolls out to contractors and households.

“You have to design these programs to work for the market,” Bartholomy said. ​“If the contractors say, ​‘It’s not worth it,’ then these programs are going to fail.” 

How billions of dollars in home electrification incentives will be rolled out

HEEHRA: The big home electrification rebate program

Of the two programs, the Home Electrification and Appliance Rebates program — often called HEEHRA after the High-Efficiency Electric Home Rebate Act, a bill that was folded into the Inflation Reduction Act — will likely be simpler to get rolling. 

That’s because its $4.275 billion in funding is structured around a fairly straightforward set of incentives for specific electric appliances that can replace fossil-fueled equipment such as water heaters, furnaces, stoves and clothes dryers, as well as associated insulation and ventilation work and electrical panel and wiring upgrades. 

HEEHRA is strictly for low- and moderate-income households earning less than 150 percent of their area median income as defined by the federal government. Those earning less than 80 percent can receive rebates equal to the full cost of a project, while those earning between 80 and 150 percent can receive up to half. 

These rebates can be combined, or ​“stacked,” with many other efficiency incentives, said Kara Saul Rinaldi, CEO of policy strategy firm AnnDyl Policy Group. Those include long-standing federal programs such as the Weatherization Assistance Program and the Low Income Home Energy Assistance Program, as well as the tax credits for home efficiency investments created by the Inflation Reduction Act, she said. State agency and utility-funded efficiency programs can also be stacked with HEEHRA rebates, she said. 

This can yield benefits beyond the $14,000 total per household from the full value of all HEEHRA rebates combined, Saul Rinaldi noted during an August webinar hosted by the Building Performance Association, where she serves as chief policy officer. Her firm has calculated that low-income households could potentially receive more than $22,000 in combined federal incentives, while moderate-income households could reach $19,000.

One of the biggest challenges for implementing HEEHRA — verifying the income of eligible households — is left up to the states, she noted. DOE will be working with states, territories and the Internal Revenue Service on methods to streamline that process, which can add complexity and administrative costs. The Biden administration has already started offering states access to federal databases of income-qualified customers to help them manage these complexities. 

DOE is also working with states and territories to balance ease of access to funds with consumer protections, Michael Forrester, an official with the DOE Office of State and Community Energy Programs, said during last month’s press conference. 

“We want to make sure that these rebates can be available at point of sale so that individuals aren’t required to provide upfront expenses,” he said, since low-income households ​“oftentimes can’t front that cash.” At the same time, DOE will be reviewing state consumer-protection plans to ensure ​“the contractors working on individual homes are trained and qualified to do the work.”

HOMES: Billions of dollars for broad-based home efficiency

Unlike HEEHRA, the Home Efficiency Rebates Program — also known as the HOMES program — isn’t limited to low- and moderate-income consumers. Nor is the $4.3 billion flowing through the HOMES program tied to straightforward incentives for equipment and projects. 

Instead, the HOMES program’s incentives are based on the energy savings that result from efficiency investments. The Inflation Reduction Act allows states to implement this in two primary ways. One is using computer models to assess the impact of different efficiency upgrades on individual homes — what’s known as a ​“modeled” approach. The second is by using real-world measurements of the difference between energy consumption before and after those improvements are made — a ​“measured” approach. 

The HOMES program’s modeled approach offers $2,000 per home that can establish a 20 percent energy savings against an individual state’s average home energy usage baseline and a $4,000 incentive for those that reach 35 percent energy savings. The measured approach pays incentives based on energy savings above a 15 percent reduction threshold, which could allow particularly deep efficiency retrofits to earn more than they would under the modeled approach. 

The total amount of incentive is limited to no more than half a project’s cost for households above 80 percent area median income and no more than 80 percent of project cost for those below that income threshold. 

As for ​“market-rate” households — those that aren’t low- or moderate-income — an analysis from AnnDyl Policy Group indicates that the average household could receive more than $7,200 for an efficiency project using HOMES incentives and the Inflation Reduction Act’s home efficiency tax credits. That’s likely ​“a fraction of the cost of the upgrade,” but still provides ​“a key incentive,” the firm notes in the analysis.

Just how states and territories may implement these HOMES incentives is an open question, however. DOE’s guidance allows states and territories to ​“choose to implement the modeled path, measured path, or both.” But it’s not clear that every state will be able to easily meet the requirements that DOE has set out for creating programs that meet its requirements. 

These modeled and measured savings calculations are far more complicated tasks for state energy offices to take on than the simple rebates available under HEEHRA, said Erica Larson, senior manager of regulatory affairs and market development for energy consultancy ICF. 

Right now, most of the country’s energy-efficiency programs follow the simpler tack of tying rebates and incentives to the cost of the appliances, equipment and retrofits being installed in homes and businesses. 

Actually determining how much energy they save, by contrast, requires real-world energy data from utility bills, smart meters or sensors. ​“At a minimum, data from utilities is vital” to implement a modeled or measured program, Larson said. 

Some utilities still collect customer billing data via monthly utility meter readings, which is the bare minimum of data to work with, she said. Advanced metering infrastructure (AMI) — the smart meters that can record energy usage in 15-minute or hourly increments and share that data in digital formats — is even more useful. 

“Existing state infrastructure, particularly the availability of AMI, is really important to consider,” she said. About 80 percent of U.S. homes and businesses will have smart meters by the end of 2023, according to the research arm of utility trade group Edison Electric Institute. 

But that still excludes many homes that state energy offices are obligated to serve. And even utilities that collect home-by-home energy data may not be willing or able to easily share it, Larson said. Some state regulators have ordered utilities to make smart-meter data available to customers and help them share it with chosen third parties like efficiency providers. But most of the country’s utilities have failed to adequately share data, according to companies and nonprofit groups tracking the sector. 

This combination of data-availability challenges and complexity may make it hard for less-resourced state energy offices to implement the HOMES program. That challenge will be greater in states where utilities and regulators haven’t already started instituting modeled or measured efficiency methods, as has happened in only a handful of states such as California.

This complexity has led to some debates in the run-up to the release of DOE’s guidance, with some state energy offices and other parties asking DOE to allow simpler, ​“deemed-savings” structures that don’t use real-world energy data. Opponents warned that loosening the rules could weaken the impact of the federal funding and miss an opportunity to create more effective state efficiency programs once that money has run out. 

DOE’s guidance retained the data requirements, although it offers some workarounds for collecting data on hard-to-measure settings, such as multifamily housing units that don’t have separate meters, or homes with furnaces and boilers that use ​“delivered fuels” like oil and propane. 

“We realize that every state is different — every state has different housing stock, every state has different climate zones, every state has different fuel mixes,” DOE’s Forrester said during last month’s press conference. ​“We will be building a robust set of data tools in order to track what is installed and as rebates are claimed so that we can monitor and measure the impacts over time.”

AnnDyl’s Saul Rinaldi, who lobbied to have the HOMES program included in the Inflation Reduction Act, said that finding ways to unlock home energy data will be key to establishing programs that outlast this initial burst of funding. 

“You can’t manage what you don’t measure,” she said. ​“This is a great opportunity for states to work with their public utility commissions and with their contractors to provide safe and secure data access.” 

How can states pull this off? 

All in all, state energy offices have a complicated road ahead to meet the requirements in DOE’s guidance, Bartholomy said. 

“The guidance is very thorough and gives a lot of discretion to the states, but also enforces a lot of process on the states,” he said. ​“That’s a pretty rough combo for state energy offices, which by and large are poorly staffed.” 

Many of DOE’s rules come straight from the Inflation Reduction Act, he noted. But others were added by DOE. One major addition is a requirement that every state must allocate at least half of its total funds to households at or below 80 percent of their area median income and at least 10 percent of their funds to multifamily housing.

“The heavy focus on low-income [households] is great to see,” Bartholomy said, because ​“that’s the hardest part of the sector to address — and quite often, the part of the sector that requires the greatest additional measures for remediation efforts in homes,” such as repairing roofs, replacing out-of-date windows and air ducts, and other structural work. 

DOE will require states to hit these low-income minimums, as well as meet DOE’s multiple planning and measurement and verification requirements, to receive the full scope of funds allocated to them.

Canary Media thanks KORE Power for its support of our special coverage of the Inflation Reduction Act’s first year.

The Inflation Reduction Act has unleashed what could be a trillion-dollar flood of tax credits for U.S. clean energy and decarbonization investments over the next decade. 

To capture as much of the value of these tax credits as possible — and, in turn, build as much new clean energy as possible — project developers need to partner with companies and financial institutions in what’s called a tax-equity market. Thanks to three decades of tax-credit-focused clean energy policy, this is a well-established ecosystem; it’s become the financial engine that makes solar, wind and battery subsidies work in the U.S.

But here’s the problem: The volume of tax credits introduced by the climate law is unlike anything these tax-equity marketplaces have ever dealt with — and without serious changes, these new credits would almost certainly overwhelm this key market.

A provision of the climate law known as ​“transferability” aims to solve this. The rules for how it works are as complicated as major new federal tax-credit policies tend to be, but the concept is relatively simple. For decades, financiers have had to become co-owners of the clean energy projects they invest in in order to claim the associated tax credits. In contrast, the new deal structure introduced in the Inflation Reduction Act allows investors to buy those credits on an open market, drastically lowering barriers to entry and potentially unleashing a torrent of new project funding worth billions. 

“This will truly transform the way clean energy projects are financed,” said Andy Moon, CEO and co-founder of Reunion Infrastructure, one of a number of startups that have launched to facilitate and support the emerging market for tax-credit transfers. ​“It’s hard to overstate. This will be a huge deal.” 

Many clean energy projects aren’t financially feasible without the help of tax credits, but the amount of money a project developer can receive from those credits is limited by the size of its tax bill — and most developers don’t pay nearly enough in taxes to make use of those credits. Today’s tax-equity markets help solve this: Clean-energy project developers partner with big banks and financial institutions with massive tax bills that are looking to reduce how much they owe to the federal government. In turn, these deep-pocketed partners return some of that value to the project developers in the form of cash payments. 

That allows project developers to maximize the value of the credits and build far more clean energy projects much faster than would be possible if developers relied on their own tax liability alone. 

At its peak prior to the new law, the U.S. tax-credit investment market processed about $20 billion in clean-energy projects per year. Under the Inflation Reduction Act, that annual figure is expected to be at least two to three times larger, according to multiple analyses. And with the supply of clean energy tax credits uncapped by the federal government and restricted only by the volume of creditworthy projects, the eventual demand could grow even further. 

To incentivize project developers to build out clean energy as quickly as the climate crisis demands, the tax-equity market also needs to rapidly expand its capacity. That’s where transferability will play a vital role — and big banks, new startups, renewable energy developers and armies of lawyers and consultants are all rushing to put it into practice. 

Reunion Infrastructure is benefiting mightily from the flood of interest in tax-credit transfers. In July, the startup announced it had amassed more than $1 billion in credits from ​“high-quality solar, wind, battery storage, and biogas projects” that are ready to be snapped up by corporate buyers. By mid-August, the total had doubled to $2 billion, Moon said. 

The pace of deals is likely to pick up even further in the wake of the U.S. Treasury Department issuing guidance in June on transferability and another option for streamlining tax-credit transactions, known as direct pay.

“There have been deals literally waiting on the sidelines to be implemented once the structure was in place,” said Allison Nyholm, vice president of government affairs at the American Council on Renewable Energy, a trade group representing clean energy companies and customers. An ACORE survey of clean-energy developers and investors in June indicated that more than 80 percent of them intended to use transferability or direct pay in their investments over the next three years.

This week, Bank of America unveiled details of the first tax-credit transfer deal to be made public, an agreement to buy $580 million in wind energy tax credits from a $1.5 billion wind farm being built by clean power developer Invenergy. ​“We’re creating a market where you can have more players around the table all participating in the clean-energy transition,” Karen Fang, Bank of America’s global head of sustainable finance, told The Wall Street Journal.

But Patrick Worrall, vice president of the asset marketplace at clean energy marketplace provider LevelTen Energy, warned that ​“the only way that the IRA can fulfill its promise is if there are many more parties who jump into the tax investment game.” That’s because the relatively small pool of large financial institutions that now do tax-equity deals don’t have the investment appetite or capacity to finance nearly as many projects as the Inflation Reduction Act’s expanded tax credits can support. 

Transferability makes such expansion possible — but it doesn’t guarantee it. ​“There’s nothing there if these parties don’t start coming to the market and making these investments,” Worrall said. ​“This was all set up by the federal government to enable these corporations to enable this transition.” 

From tax equity to transferability: A sea change in how clean energy is financed

Why can’t today’s tax-equity markets handle the coming wave of clean energy tax credits initiated by the Inflation Reduction Act? Simply put, the traditional way of doing things is just too complicated and expensive to meet the scale and scope of investments coming, Moon said. 

Moon and his co-founder at Reunion Infrastructure, Billy Lee, both come from the tax-equity investment world, starting together at solar development pioneer SunEdison and then working separately at large banks and private equity firms. ​“We’ve pitched tax equity [deals] to corporates for 15 years — and they very rarely do it,” Moon said. ​“It’s very complex.”

At the core of that complexity is the long-standing rule that allowed only the project owner to claim tax credits associated with the project. The government structured the rules that way to ensure that the benefits of the tax credits would go to an entity with a vested interest in ensuring the project was actually built and operated properly. 

But it also complicated the process of using tax credits to build clean energy projects. Project developers and deep-pocketed tax-equity investors used complex transaction structures, such as partnership flips and sale-leasebacks, to make the investor the owner of the project for as long as it would take for them to be eligible to claim the tax credit. After that, they would ​“flip” ownership back to the developer for the remainder of the project’s lifespan. 

These labyrinthine partnerships can take millions of dollars in legal and administrative costs to put together, and because of their inherent complexity, there is little opportunity to streamline or standardize based on past efforts and make future deals simpler or cheaper, Moon said. They also force investors into the position of owning a clean energy project for years at a time, exposing them to risks that very few companies are willing to take on. 

That’s why the pool of tax-equity investors is as small as it is, LevelTen’s Worrall said. ​“Over 50 percent of it is JPMorgan and Bank of America,” with about 40 other institutions rounding out the market, he said. And because these deals are so complex and risky, these investors have little appetite or capacity to expand how much new business they can take on — ​“they’re investing regularly, and they’re full.” 

These conditions have led to a ​“huge supply-demand imbalance for tax equity,” Moon said. ​“Projects that could previously get tax equity are in the last six months struggling — there just isn’t enough. And if you don’t get tax equity, you can’t build a project.” 

Another problem with the status quo is that tax-equity investors tend to only target deals of $100 million and up. That has forced developers of smaller-scale projects like community solar to sell to project aggregators that bundle numerous smaller projects together into high-dollar portfolios valuable enough to attract the interest of banks.

The IRA’s new transferability option upends this landscape entirely, Moon said. ​“Now there’s an option for those developers to build the projects and sell the credits themselves.” 

Would-be buyers of tax credits also have a much simpler road ahead under the new transferability option, Worrall said. ​“There’s no longer a partnership investment with a ton of due diligence upfront and a ton of maintenance over the lifetime of the investment. You’re talking about a simple transfer: corporate tax credits for cash.” These deals also have much simpler accounting requirements, he added.

Some projects making use of the new tax-transfer deal structure have already started to be put together. Moon said that participants in his company’s marketplace include developers of smaller-scale projects that would struggle to get the attention of traditional tax-equity investors. 

Crux Climate is another recently launched startup that provides software and services to manage this new breed of tax-credit transfer transactions. CEO Alfred Johnson said Crux has ​“gotten past the term-sheet stage,” which precedes the writing of a binding contract, on its first deal with a smaller clean-energy project developer and an unnamed corporate tax-credit buyer that’s new to the tax-equity market.

While tax-credit transferability opens the door to smaller developers and inexperienced corporate investors, it could also be an option for those already active in the existing tax-equity markets, Moon added. ​“Large and very experienced developers are talking about how this will be part of the portfolio. All the banks and tax-equity investors are looking at how to integrate transferability,” with financiers including Bank of America reporting deals in progress.

That’s a good thing, because the growth needed to expand the pool of investment capital flowing into clean energy projects that must be built at an unprecedented pace and scale to combat climate change is immense, Johnson said. 

“We need to move from a world where there are 40 or 50 credible” financial institutions investing in the market and processing about $20 billion in traditional tax-equity deals per year, to one capable of processing about “$85 billion in credits per year” by 2031, as per a Credit Suisse forecast of the market spurred by the Inflation Reduction Act, Johnson said. That $85 billion figure would be roughly equivalent to 20 percent of all corporate taxes paid in the U.S. last year, representing an unprecedented level of commitment from corporate America to a form of investment that barely exists today. 

Hurdles to clear to make a market: Recapture and insurance

A lot of industry watchers say the new tax-credit transfer deal structure will make things simpler, but it won’t exactly make them easy. That’s why companies like Reunion Infrastructure, Crux Climate and others have sprung into being. 

The first challenge is ​“finding the big corporations and making them comfortable with it,” said Ben Ullman, founder and CEO of transferability marketplace startup Common Forge. That leaves it up to companies like his to ​“find a way to standardize this for corporations” so it’s as simple and painless as possible for the tax departments of the companies being courted as buyers of clean energy tax credits, he said. 

One way to make the new tax-credit transfer deals more appealing to skittish corporate buyers is by reducing their risk exposure as much as possible, according to Ullman. ​“The key to that is the buyer protections” that dealmakers must structure to protect companies from the risks they take on when they purchase large amounts of tax credits, he said. ​“No corporation looking to buy a tax credit is going to start on a big deal process” without a clear understanding of the risks and how to protect themselves against them. 

Right now, the biggest risk lies in what’s called ​“recapture,” Ullman said, referring to the Internal Revenue Service’s right to reclaim the tax credits from failed, sold or otherwise ineligible clean energy projects. Many clean-energy tax credits, including those for solar power projects, are pegged to the value of investment into a project in the year it begins operating. These credits can then be used to offset a buyer’s tax liability in the following year. 

But what if that project ends up going bankrupt and shutting down, or is destroyed by extreme weather, or is sold to another party, or otherwise fails to meet the rules that allowed it to claim the tax credit in the first place? If that worst-case scenario occurs, the IRS can claw back the value of those tax credits. 

When the project owner is the same entity using the tax credits to offset their tax bill, that’s a fairly straightforward process. But any third party looking to buy those tax credits and retain their value over time will need to find a way to protect themselves. 

That’s what makes the risk of ​“recapture a headache” for would-be corporate tax-credit buyers, Ullman said. ​“The company has to defend itself to the IRS and to pay the IRS — and they could either pay out of pocket when that happens or buy an insurance product and pay that premium over time.” That’s why Common Forge and other players in this market are building insurance into their standard transaction structures, he said. 

The good news is that there are already established ways to mitigate this risk. ​“Recapture insurance and qualification insurance is a mature market — all the big carriers and brokers carry that insurance,” Moon said. ​“We’re working closely with them.” 

In fact, Ullman noted, ​“Insurers are all quite excited by the market opportunity.” And because insurance rates tend to decline when there’s a bigger pool of stuff to insure, that’s another argument in favor of encouraging standardization across deal terms in the burgeoning tax-credit transfer market, he added.

Building markets that work at scale — and that sellers and buyers can trust 

Crux CEO Johnson believes that another key to successful standardization will be the availability of reliable technology to connect clean-energy developers selling credits with potential buyers. His company is focusing on providing its software to the big banks and financial institutions that are already the key players in the traditional tax-equity market, he said.

Clean-energy developers need software ​“to easily list…their credits for sale” to the widest audience possible and ​“to distribute the credits at the highest net price” they can hope to secure, Johnson said. Buyers need to be able to ​“find projects that meet their desired characteristics” and access project data they need to do their due diligence, and they need this information both before making a decision to buy and afterward, in case ​“the IRS comes knocking.” And companies like Crux are needed ​“in the middle” to ​“distribute these credits and make markets,” he said. 

Ullman warned that this new market is not going to develop overnight. ​“The first thing — the existential thing — is getting buyer interest,” he said. ​“You have to do a bunch of transactions this year, show that buyers can engage with minimal overhead time internally, show a bunch of savings, and show it didn’t blow up at the end.” 

Eventually, a healthy market will be able to sort tax credits from project developers with weaker or stronger underlying financial underpinnings and price them accordingly, Johnson said. It will also be broad-based enough to ride out disruptions that dogged the traditional tax-equity investment markets during the recessions of 2008–2009 and 2020–2021, when big tax-equity investors were making less money and thus had smaller tax bills, and had largely stopped looking for tax credits as a result.

A vibrant tax-credit transfer market could also create a new way for climate-conscious companies to invest in decarbonization, Worrall noted. For clean energy to grow at the rate needed to reach the Biden administration’s carbon-cutting commitments under the Paris Agreement, ​“these corporate taxpayers need to step up to support this federal policy,” he said. 

Headquartered in Coeur d’Alene, Idaho with clients on every continent, KORE Power provides functional solutions to meet the growing demand for green economic expansion and a decarbonized future. As a fully integrated provider of battery cells and clean energy technology and solutions, KORE drives the energy transition through direct access to superior tech, clean energy manufacturing, and unmatched support for clean energy jobs and resilient, sustainable communities worldwide. KORE Power’s robust portfolio provides the commercial, industrial, utility and defense markets with next-generation battery cells, advanced energy storage systems that scale to grid+, intuitive asset management, and EV power and charging infrastructure support.

Canary Media’s chart of the week translates crucial data about the clean energy transition into a visual format.

Two things are true about the Inflation Reduction Act: It is the biggest piece of climate legislation in U.S. history — and it’s likely not enough on its own to get the U.S. to its Paris Agreement goals.

In order for the U.S. to close the remaining gap between its post-IRA emissions trajectory and its goal of halving carbon emissions by 2030, the country will need to rely on state action, according to a new report from the Environmental Defense Fund.

EDF projects that in 2030, net U.S. emissions will be 36 percent lower than 2005 levels, leaving the country well short of its goal of achieving a 50 percent reduction by that time. In this scenario, the remaining emissions gap would stand at 962 million metric tons of CO₂ equivalent. 

The EDF report identifies 24 states that already have emissions-reduction commitments aligned with national goals. If those states hit their targets, they could cut that emissions gap by 418 million metric tons of CO₂e — a 43 percent reduction. The remaining shortfall will have to be overcome by factors such as new rules limiting pollution (EPA is working on this), faster-than-expected clean energy deployments and the introduction of carbon-pricing mechanisms, EDF writes.

“States have a leading role to play in driving U.S. climate progress, and our country is counting on them to deliver on their promises,” Pam Kiely, associate vice president for U.S. climate at Environmental Defense Fund, told Canary Media. 

But right now, the 24 states with nationally aligned climate goals are not on track to actually meet those targets. As a group, they’re on track to cut emissions between 27 and 39 percent by 2030, a wide range that still falls short of the 50 percent reduction threshold.

The Inflation Reduction Act will be key to helping states close their own emissions gaps, Kiely said. 

In just its first year, the law has spurred more than $80 billion in new investment across more than 100 new clean energy manufacturing facilities and expansions to existing ones. And development of new U.S. solar, wind and battery storage projects is booming, too. The incentives sparking this nationwide surge in clean energy development also make it much easier — and cheaper — for states to meet their climate commitments, Kiely said.

“Federal investments from the IRA give these governors an unprecedented boost by buying down the cost of clean energy solutions. Governors must take this golden opportunity to enact bold climate policy that curbs emissions in line with their commitments, unleashes clean energy jobs and slashes health-harming pollution,” said Kiely. 

It’s hard to boil down an explanation of the Inflation Reduction Act into a six-minute television segment. But when the hosts of The Weather Channel’s climate-focused weekday show Pattrn asked me to give it a try on the one-year anniversary of the landmark climate law’s passage, I couldn’t resist. 

My August 16 conversation with meteorologists Stephanie Abrams and Jordan Steele managed to cover the highlights of the law’s impact on U.S. clean energy investment, including the roughly $80 billion invested to date in solar, wind, electric vehicle and battery manufacturing. We also discussed how the law promotes investment in lower-income communities and ​“energy communities” transitioning away from the environmental and economic impacts of fossil fuels. 

Stephanie and Jordan asked about rural communities, which stand to benefit from $10.7 billion in grants and loans being made available to electric cooperatives, as well as about nonprofit organizations, which can utilize the law’s ​“direct-pay” provisions to capture the value of tax credits that were hitherto restricted to for-profit companies. And we touched on the tax credits for electric vehicles and EV charging aimed at smoothing the road to a fossil-free transportation sector.

A lot more needs to happen before the U.S. is on track to hit its goal of halving economywide carbon emissions by 2035, of course. And as I noted at the top of the conversation, most of the hundreds of billions of dollars in climate and energy investment to be spurred by the law are yet to come. Still, there’s a lot to celebrate at this first birthday party. 

David Crane was ​“happily and comfortably retired” when the Bipartisan Infrastructure Law passed and he got a call offering him a job implementing it. 

Now, as Under Secretary for Infrastructure at the Department of Energy, Crane oversees billions of dollars allocated by the infrastructure law and the Inflation Reduction Act to remake the electric system and bring a host of new clean technologies to market. Crane joined Canary Media’s Julian Spector live from a room in the White House on August 16, the one-year anniversary of the Inflation Reduction Act becoming law, to discuss how the job is coming along. 

“Time is not on our side; we’re on the clock,” Crane said. ​“This bill, IRA, together with the Bipartisan Infrastructure Law — and to us they’re very much two sides of the same coin — to me, this is the last great opportunity we have basically as the human race to bend the curve in a positive direction, and we have to do it right now.”

Crane knows something about how to integrate clean energy into the fabric of the power industry, because he did that as CEO of NRG, one of the nation’s largest competitive power producers. Crane famously made a moral and business argument that the industry needed to adapt to cleaner, more distributed energy.

“When I went down this ​‘Brown to Green’ path at NRG 10 to 15 years ago, we were out there alone,” Crane said. ​“There was no other company in the U.S. power sector that I could say, ​‘Oh, let’s follow those people.’”

Crane didn’t get to complete that transformation at NRG, but now he is using his role at the DOE to streamline the adoption of newly demonstrated technologies, so that power companies can quickly put them to work on the grid. 

“What we don’t need at this critical moment in time is a bunch of people looking around for another player in their industry to go first,” he said. 

Crane also discussed the rise of domestic manufacturing and how the boom in local production insulates the energy transition from geopolitical uncertainties abroad.

“It becomes a self-fulfilling prophecy when the boss suddenly says, ​‘Let’s build this factory in the U.S.,’ and suddenly the people searching for the best factory site aren’t flying to China or Mexico or Vietnam; they’re flying around the country. And that’s a win-win for the American people.”

Watch the full conversation to hear how the power sector became more receptive to clean energy, which up-and-coming technologies could make the biggest dent in carbon emissions, and what to say to the reported 71% of Americans who don’t know what the Inflation Reduction Act is.