What People Get Wrong About the Inflation Reduction Act
Wednesday, Oct 19 2022
Photo courtesy of Sunrun.
Disagreement surrounding large federal legislation is inevitable, and the Inflation Reduction Act (IRA) is no exception. This law will transform America’s energy system into one powered by clean and affordable renewable resources — a historic change from the status quo.
Undeniably, the IRA is a change for the better. The IRA will create millions of jobs, reduce energy costs, slash pollution and mitigate climate change impacts. The bill’s clean energy provisions represent a win for all American communities, and in fact, today, the most prevalent arguments against the law have little to no basis in truth.
Here are the top four misconceptions about the IRA and the true impact of America’s largest investment in the clean energy economy.
1) Myth: The IRA Hurts American Economic Competitiveness
After the IRA passed, opponents falsely claimed that the clean energy investments would make America less competitive on the global stage. Nothing could be further from the truth.
The law’s solar and storage provisions alone will add more than $600 billion to the economy over the next 10 years, nearly doubling the value of the original investment. These new investments will also lead to unprecedented job and business opportunities. Over the next decade, the IRA will create more than 275,000 solar and storage jobs and triple the size of the solar manufacturing workforce to 100,000 Americans, helping to create a workforce of more than half a million Americans.
The creation of a robust domestic solar and storage manufacturing industry will also enhance energy security and create new market opportunities for American solar products. For example, American-made polysilicon could be exported as soon as mid-2023, and a strong domestic supply chain will reduce overdependence on imports from countries that don’t share America’s values or national interests.
2) Myth: The IRA Won’t Actually Reduce Inflation
Electricity prices are on the rise again due to volatility in the global oil and gas industry, but the IRA can offer families a much-needed reprieve as the United States braces for another cold and costly winter.
Fossil fuels must be continuously extracted, transported, and combusted, and their fluctuating prices and supply can cause rapid changes in prices, making it harder for families and businesses to budget for electricity costs.
Solar and storage is fueled by free, infinitely available energy from the sun and has very low maintenance costs, helping to provide decades of stable energy costs for families and businesses. Families that go solar can expect to see savings right away and can save $10,000-$30,000 over the lifetime of their panels, depending on home electricity costs.
According to the Rhodium Group and the White House factsheet on the landmark bill, the IRA will help America meet the President’s climate goals and save every family an average of $500 per year on their energy bills through residential solar and storage installations, energy efficiency upgrades, and cleaner cars and trucks.
Importantly, many of these rebates and credits prioritize funds for the low- and moderate-income households that can most benefit from inflation relief.
While fossil fuel prices will always be unpredictable, the long-term energy credits in the IRA act as a down payment on climate change and invest in a future of stable, affordable clean energy.
3) Myth: The IRA is Unnecessary Because Clean Energy is Growing on Its Own
As a result of policy whiplash, supply chain constraints and historic price increases over the last year, the solar industry’s average annual growth rate slipped from 48% in 2019 to 33% today.
To meet President Biden’s decarbonization goal by 2035, the United States will need to install ten times the amount of solar that is installed today and deploy 20% more solar every year to catch up. Closing this gap will require bold and predictable federal energy policies like the IRA, but this legislation is only one piece of the puzzle.
The solar and storage industry is still facing a number of roadblocks, and needs to double down on interconnection reforms and supportive state and local policies that expand solar accessibility. Net metering programs, local incentives, and grants can all put solar in reach for more Americans, while programs like SolarAPP+ help to speed the permitting process and help solar customers more quickly realize the benefits of their rooftop solar systems.
In addition, community solar and power purchase agreements are a powerful way to expand solar to Americans that rent their homes, don’t have suitable rooftop space or want to minimize upfront costs. Some states, like Pennsylvania, still need to pass legislation to allow these programs to move forward, showing that local roadblocks can be a major impediment to clean energy growth.
4) Myth: The IRA Won’t Work Fast Enough to Address the Climate Crisis
Some claim that the IRA is too little, too late to fuel meaningful climate action. This is yet another fallacy.
The IRA is the single largest investment in climate action in U.S. history, and its impacts are already apparent.
The IRA immediately spurred new investments in solar manufacturing. In as little as two years, SEIA expects to see significant investments in domestic solar module, tracker, inverter and racking production. Within five years, solar installations will triple. And within 10 years, there will be enough solar capacity installed to power nearly every home east of the Mississippi River.
Put simply, the IRA is already working and it’s working fast.
The IRA is injecting new hope for climate action, but this is not a time for complacency. Knocking down barriers to clean energy deployment such as clogged interconnection queues, supply chain constraints, land use issues and workforce development is essential for delivering on the promise of this legislation.
The merits of the IRA for America’s workers, economic competitiveness and climate future are clear, with few fact-based arguments left to challenge it. Despite these facts, IRA opponents will continue to malign the landmark bill, but the dollars saved today and, in the years ahead, will be undeniable proof of the bill’s success.