The Inflation Reduction Act Is Law, but Implementation Will Determine How it Works for Decades to Come
Thursday, Nov 03 2022
The landmark Inflation Reduction Act (IRA) has changed the trajectory of the U.S. energy market, sparking a projected five-fold increase in the size of America’s $33 billion solar and storage industry over the next decade. This immense growth seems inevitable with such a transformative law in place, but the moment President Biden’s pen came off the document, a mammoth implementation challenge was set in motion.
Let’s start with what implementation means in practical terms.
The IRA is a massive law with provisions that cut across several executive branch agencies and offices, including the U.S. Department of Treasury, U.S. Department of Energy, U.S. Department of the Interior, Environmental Protection Agency, U.S. Department of Agriculture, and many others. Those agencies must pull together resources, personnel and policies to distribute funding on time and in a way that adheres to the legislative text. This is no easy task for a law as significant as the IRA.
The first step is the request for information (RFI) process where federal agencies ask for public input on the new policies that they are tasked with implementing. Already, the Internal Revenue Service (IRS) and Treasury are asking for public comments ahead of new guidance and rules they are rolling out on the IRA’s clean energy tax provisions. EPA has similarly issued an RFI requesting comment on new programs that it must implement, and USDA is hosting listening sessions on how to use Inflation Reduction Act funding to advance clean energy for people in rural America.
These are important opportunities to shape the rules before they’re in place. The Solar Energy Industries Association (SEIA) ran a successful, multi-faceted campaign to get the IRA’s clean energy provisions over the finish line, and now the organization is shifting its full attention to the smooth implementation of the law. This work, led by SEIA’s regulatory affairs experts, will help to make sure homeowners and clean energy companies can fully realize all of the benefits laid out in the IRA.
Here are the top implementation issues SEIA will be tracking over the next few months and years ahead.
Details, Details, Details
If your eyes glaze over when reading dense bill text, you’re not alone. Fortunately, there are professionals in government and at organizations like SEIA who scrutinize every word and phrase to ensure there is no ambiguity or misinterpretation of the law’s text.
These details matter in every legislative implementation process, and the IRA is no different.
For example, the law offers additional tax credits to clean energy projects that are sited within an “energy community.” Those sites include areas around closed coal mines, but what does “closed” actually mean in this context? Does this include abandoned, sealed or idled mines?
SEIA is looking for clarity on many IRA provisions in its engagement with the Biden Administration’s implementation task force, including on new apprenticeship standards, prevailing wage credits, project siting requirements and several others.
SEIA will tackle these issues in depth in a subsequent blog post.
Hundreds of IRA provisions must be implemented, but not all at once. Some pieces do not become effective until 2024, some existing tax credits are retroactive to the start of 2022, and some, like advanced manufacturing tax credits and low-income community credits, are brand new policies that must be up and running by early 2023.
A majority of the IRA’s clean energy provisions are tax credits that will be administered through the IRS, and some new adder credits will kick in just 60 days after Treasury issues guidance. In addition to having the statutory language defined in a timely manner, SEIA and its members hope the RFI process offers clarity on exactly how companies should comply with the range of provisions.
In order to be successful, collaboration is key.
SEIA’s primary ask during this process is to have meaningful engagement with the Biden Administration and its implementation task force. SEIA experts have spent years working on the IRA provisions and can serve as a bridge to connect government officials with the companies affected by IRA provisions. The solar and storage industry is also working at this moment with organized labor, environmental NGOs, community organizers and environmental justice advocates to present solutions that can spare government time and resources.
It is critical for SEIA to have clear direction on when, where and how to engage throughout the implementation process.
Staff and Resources
A law this size requires thousands of personnel and agency staff to work through its details and release critical guidance in a timely, accurate manner.
A law’s success or failure depends on how effectively it is put into practice, and it takes people and resources to make that happen. It’s time for federal agencies to staff-up and hire the right people and experts that will do this work, and the solar and storage industry stands ready to collaborate with these leaders.
America can cut its power sector emissions in half by sourcing 30% of its electricity from solar by 2030. The Inflation Reduction Act is the biggest step the U.S. has taken toward a prosperous clean energy future, and proper implementation is key to set forth a new era of American energy leadership.