- August 12, 2022
- Posted by: Admin
- Category: Developers, Innovation, Purchasing, Utilities
Energy innovation has never been more needed than now. With the expected enactment of the August 2022 Senate Climate Act, officially HR 5376, dubbed the “Inflation Reduction Act of 2022”, the U.S. has a once-in-a-lifetime opportunity to create a new energy and cleaner climate path forward. The changes will not happen overnight, and the most profound changes will offer improved energy economics and differentiated projects that meet customer needs. Tax incentives by themselves can sometimes produce misguided offerings. As industry leaders, we collectively have the potential to do a lot of good and the complex challenge of actually doing so.
HR 5376, in 755 pages, outlines transformative incentives, including:
- 30% ITC for 10 years for renewable projects and stand-alone storage projects with specific wage and apprentice standards
- 10% ITC incentives for US manufactured equipment
- 10% ITC incentives for disadvantaged areas as defined in the Act
- 45Q incentives of $85/Mton for Carbon oxide capture and sequestration
- Production tax credit (PTC) incentives for solar
- Specific tax credit monetization options
Many nuisances will be sorted out in the coming months and years ahead. These incentives should help the U.S. develop meaningful climate solutions, renewable projects, and U.S.-based employment and supply chain opportunities.
In a January 25, 2022 report, PV Magazine cited 639 GWac of solar projects at the end of 2021 in the top transmission queues waiting for interconnection to the grid compared to 139 GWac at the end of 2019. This does not mean that there are 639 MWac of economically viable new utility solar projects. It most likely means that a large number of projects are competing with each other for interconnection space at reasonable cost and to be judged as the most viable economic projects. The competition between projects, along with substantially more new projects in the queue, is to be expected.
For the sake of customers and climate change, it will be important for the industry to only advance the most competitive projects. These projects should be as efficient and environmentally beneficial as possible. If we fail to create the most competitive energy projects, we will create a transformation without any real progress or long-term positive economic impact on the US economy. The challenge has now shifted to how we can continue to innovate in the energy space and use the above incentives in the best manner. Failure to do so will embed economically non-attractive projects into our energy ethos and create a lost climate change opportunity.
As a developer, there has never been a better time to advance the most competitive, innovative energy projects. As a utility, the time to select only the most competitive projects is now, or customers may suffer long-term impairment. As a regulator, the time to help make wise and prudent decisions has always been the present.