By Sheldon Kimber, CEO, Intersect Power
It’s that time of year to count our blessings and for the clean power industry, there are many. But as the Bible tells us, “For unto whomsoever much is given, of him shall much be required; and to whom men have committed much, of him they will ask the more.” The Inflation Reduction Act (IRA) is giving much to the clean energy industry and much will be required of us. I am left daunted by the sheer magnitude of the task at hand. We as energy companies are charged with not just building successful companies, but also decarbonizing the entire country while being better stewards of the communities in which we work and creating high paying and lasting American jobs.
America’s historic climate legislation cleared a big hurdle when our worst fears about the midterm elections were not realized. Opponents of the IRA will not have the leverage in Congress to significantly undermine this new law.
With long term climate policies now on a firmer footing, this is an important moment for the clean power sector to come to terms with the job at hand. There are many details to parse in the IRA and parse it we have.
Right now, companies, including my own, are neck deep reworking our business plans. But, those who are putting these new policies into their financial models and are fixated on their swelling bottom lines are missing the point. It is our responsibility in this new era to build projects differently and invest in ways that we haven’t in the past. That includes buying American made equipment, paying for union or prevailing wage labor, and financially supporting the communities we work in.
It’s the right thing to do but it’s also necessary for ensuring the legislation’s broader goals. Every American must have a near-term stake in this to ensure the long-term stakes are realized. As enactment begins, it’s worth stepping back from the minutiae to better understand what this bill really is.
At its core, the IRA is not a tax policy. Fundamentally it is a climate policy, but perhaps more importantly it is an industrial policy for a country that has lacked one since the collapse of the Soviet Union. I was raised in the early days of globalization where even Democrats were coming around to the primacy of free trade. Economic gains from trade and the cleansing light of capitalism, as the story went, would root out autocracy and foster global democracy.
When it came to our policies towards China, in particular, this approach simply did not work primarily due to the willingness of the Chinese government to engage in industrial policy and state support for industry on a scale never before seen in human history. The predatory, state-funded capitalism practiced by the Chinese government targeted large segments of the global manufacturing base and used highly subsidized exports to crush domestic industries around the globe.
The IRA is a response to this reality.
If we’re the biggest consumer market then we should make a much larger portion of what we buy. The IRA aggressively provides financial support to our industries and protects our markets to insulate them from the practices of rivals, finally allowing them to reach the scale where they can overcome the competition. All of this is incredible news for US workers, consumers and taxpayers.
Overall, our industry has finally been given the government backing that many other industries from energy to automobiles have benefited from in the past. Now, we must do what they have done and become a key pillar of prosperity for a broad coalition of American workers. If we are to solve the climate crisis and build enduring political support for our industry then all Americans must benefit from the energy transition.
The IRA is also a clear reiteration that US energy policy is national security policy. As the world diversifies its energy mix to cleaner sources we will not be subject to the whims of autocrats. The IRA will make the United States the unrivaled low cost producer of green fuels globally. The robust green hydrogen policy support in the IRA is a very intentional move by the US government to take the same leadership role we are establishing in global LNG in the emerging global trade of low carbon fuels such as green hydrogen, ammonia, methanol and other derivatives. These may be much smaller markets for a long time to come, but the foresight of those who wrote the IRA will allow the US to never again find itself in the position it did many times prior to the shale revolution. Green energy will soon be stored and moved at scale. This may be the single largest impact of the IRA and will fundamentally alter the course of history.
Finally, the IRA is also the most impactful piece of climate legislation ever enacted anywhere. It is up to the industry now to deliver on the promises we have been making for so many years. It will not be easy and it will involve choices based on our shared values and the inclusion of all Americans as much as the profitability of our businesses.
Indeed, much has been given and much will be required.