Federal Inflation Reduction Act to Benefit R.I.’s Renewable Energy, Efficiency Programs
August 11, 2022
Congress is poised to make the largest federal investment in renewable energy in U.S. history.
The Inflation Reduction Act (IRA), expected to be signed into law by President Biden later this month, contains more than $350 billion in climate, energy, and decarbonization investments.
Senate Democrats claim the bill will reduce greenhouse gas emissions to 40% of what they were in 2005. While that figure sounds like a lot, it falls short of Biden’s target of a 50% reduction from 2005 levels that he announced last year.
The bill has also received some scrutiny from environmentalists, as part of the compromise for the bill to pass requires the federal government to start auctioning oil and gas leases on federal land and in the Gulf of Mexico. There’s an added kicker: renewable energy land leases are contingent on fossil fuel leases being made available.
But despite the drawbacks, environmentalists are celebrating.
“While there’s still much more to do to lead the planet to safety in the race against climate change, this is by far the biggest step the United States has ever taken to lower emissions,” said Sen. Sheldon Whitehouse, D-R.I., in a statement after the bill’s Senate passage. “It is a good reason for hope.”
The exact amount Rhode Islanders can expect to see remains unknown, because of the bill’s swift passage through Congress. But the climate provisions should enhance a number of existing state programs and laws already on the books.
The bill sets aside $9 billion for consumer home energy rebate programs, with a focus on low-income customers to help them electrify home appliances and retrofit homes for energy efficiency. There’s another 10 years of tax credits to make heat pumps, rooftop solar, electric HVAC, and water heaters more affordable, and a $1 billion grant program for making affordable housing energy efficient.
State officials in Rhode Island have already made renewed commitments to spur heat pump installations. The Office of Energy Resources (OER) is accepting comments this month on the $25 million in American Rescue Plan Act funding proposed by Gov. Dan McKee for additional heat pump incentives.
About 35% of total greenhouse gas emissions come from residential, commercial, and industrial heating in Rhode Island, with more than 85% of the state relying on natural gas, heating oil or another fossil fuel to warm buildings in the winter.
Energy-efficiency programs are designed to reduce ratepayers’ electric usage, saving them money in their monthly utility bills by reducing the amount of electricity consumed. It also has the added effect of reducing household emissions.
“If we manage these programs right, Rhode Islanders will benefit significantly from the comprehensive and sustained efforts outlined in the IRA to develop local, renewable sources of energy that won’t be subject to global markets and geopolitical high-stakes poker,” said Hank Webster, Rhode Island director of the Acadia Center.
Consumers can also expect to see a tax credit if they buy an electric vehicle. Lower- and middle-income consumers could receive a $4,000 credit for buying a used electric vehicle (EV) or $7,500 for a new one.
However, the tax credit comes with a lot of caveats: the vehicle must be assembled in North America; cost less than $55,000; and buyers have to make less than $150,000 a year (the income cap is higher for married couples and heads of households). The car battery also has to be assembled in North America or a country in which the United States has a free-trade agreement — e.g., not China, where many batteries are sourced.
A previous version of the tax credit capped it at the first 200,000 cars sold by each manufacturer; the new legislation would permanently erase the cap.
State EV incentives made a comeback this year. The state budget included $1.25 million for a DRIVE EV program that includes a $2,500 rebate for new battery-operated EVs, and a $1,500 rebate for plug-in hybrid electric vehicles. OER has an additional rebate of $1,500 for used BEVs, and a $750 rebate for used HEVs.
A Green Energy Consumers Alliance analysis indicated even the used-car rebates may be out of reach for many Rhode Islanders. The supply of used EVs remains tight, and prices of used EVs are 40% higher than they were a year ago, whereas new EVs only increased by 9%.
Good news for the state’s solar developers: the bill includes $30 billion in production tax credits to accelerate production of solar panels, batteries, and mineral processing — all the components to make solar-array materials more widely available after prices and stock fluctuated wildly over the past few years — and another $10 billion in tax credits to build the facilities to manufacture renewable energy technology.
Lawmakers also set aside another $30 billion for renewable electricity and battery storage, and $27 billion to spur renewable energy technology in disadvantaged communities.
Crucially for Rhode Island, the National Oceanic and Atmospheric Administration (NOAA) will receive a glut of new funding for coastal conservation, restoration, and protection of marine habitats — a key mission of the state’s unfunded Coastal Resources Management Council. The state agency currently receives around half of its $5 million budget from NOAA.