The Biden administration’s landmark climate legislation, the Inflation Reduction Act (IRA), is one year old. The bill infuses the opportunity for US consumers to access billions of dollars in tax credits, rolled over a 10-year span, to buy electric vehicles (EVs) and to assist companies that produce renewable energy. It’s all part of the White House plan to decarbonize the US power sector. The result has been more than $70 billion investment in the EV supply chain.
The IRA investment numbers are nearly staggering.
- $86 billion in private investment
- At least 210 major new clean-energy projects
- 51 new or expanded plants for producing solar panels
- 10 new factories for making batteries
- More than 100,000 clean-energy jobs
The IRA provides for a tax credit for EVs — both new and pre-owned. Buyers can receive up to $7,500 depending on the make and model of the car. There are income limit of $150,000 for single filers and $300,000 for joint filers. EVs have to be assembled in North America, and cars that cost more than $55,000 aren’t eligible. Any vans or truck that exceeds $80,000 is out of range of the tax credit program. Yes, there is still some confusion over EV credits. The law wants to see US manufacturers protected, so cars that use parts made in China aren’t eligible for the credits. Here is a government website that lists eligible EVs — new and pre-owned.
As reported by Politico, Biden spoke amidst contract talks between automakers and the United Auto Workers (UAW) recently, reaffirming his support for EV jobs as a path to the middle class while he also appealed to automakers to address the union’s concerns over the transition. “I support a fair transition to a clean energy future,” Biden said in a statement. The UAW has expressed hesitancy about federally subsidized work going to non-union battery plants.
The IRA & Its Goal To Serve Disadvantaged Communities
A Department of the Treasury report released this week points out that, for several key investments, the IRA provides additional place-based bonuses for companies to locate in underserved communities where job creation will have the largest impact on the well-being of those communities and where such investments can produce higher economic returns.
The report analyzes how investments that have been recently announced in the IRA-related sectors of clean energy, electric vehicles, and batteries are concentrated in relatively disadvantaged communities with lower wages, lower college graduation rates, and lower employment rates. Investing in such communities, the Treasury says, helps provide opportunity to those who live there but also helps boost national productivity growth.
Such a Made-in-America approach to the clean energy transition is evident in the South, where battery and EV production plants are expanding. We need look no further than South Carolina, which says on its Department of Commerce site that the state “is making the future a reality. From electric vehicle battery manufacturing to the creation and maintenance of electric vehicle charging stations, we are supporting automotive businesses and component manufacturing.”
South Carolina seems now to see itself as a fine site for EV manufacturing companies that are seeking a location “that helps them keep operating costs down and maximize their return on investment.”
All is Not Clear about the Effects of the IRA
What is the IRA all about? Because so many people in the US profess little understanding or even knowledge about the IRA, there’s a campaign underway to better explain to people in the US what, exactly, the IRA does. (We first reported about this problem in late 2022.)
What is the cost of the IRA? A team of researchers at the University of Pennsylvania’s Wharton School, working with Goldman Sachs, continue to monitor the range of climate and energy provisions within the IRA. They’ve revised their previous estimate to cost $384.9 billion over 10 years (FY2022 – 2031) due to new implementation details — their estimate is now $1,045 billion.
How can utilities manage load as more electric cars come online? Energy Hub outlines 3 programs that can solve unique challenges.
- Managed charging programs actively control a vehicle’s charging load via EV telematics or EVSE integration. Programs range from simple load shifting and peak reduction to innovative vehicle-to-grid (V2G) programs.
- Behavioral charging programs shift EV charging load by incentivizing customers to charge at a time of day when demand for energy and/or electricity prices are lower. Utilities set an EV-specific Time-of-Use rate or an off-peak charging rate to incentivize customers to charge at off-peak times.
- Charging analytics programs enable utilities to learn more about EV charging behavior and impacts. Customers receive a one-time or ongoing incentive for sharing their data with their utility which allows for strategic planning and analysis, ensuring readiness for EV adoption in a utility’s service territory.
How can the IRA help to strengthen critical mineral supply chains? The IRA’s critical mineral provisions are equally reflective of the need to deconcentrate clean energy supply chains, many of which begin in China, according to the Atlantic Council. The IRA incentivizes partnerships with partner countries — defined as those with a US free trade agreement (FTA)–whose minerals count towards the escalating domestic battery content requirement for EVs to qualify for one-half of the $7500 consumer tax credit. The Minerals Security Partnership (MSP) is another way beside the IRA that helps the US to leverage its political heft to engage partners to build sustainable and well governed supply chains for the energy transition.
Final Thoughts about the IRA & its First Year
In June, the US Department of Energy released a notice of intent to invest $2 billion from the Inflation Reduction Act to accelerate domestic manufacturing of electrified vehicles. These investments were expected to be made available in the coming months and will boost American production of clean energy technology, create and retain good-paying jobs with the free and fair chance to join a union, and support President Biden’s national goals for electric vehicles to make up at least half of all new vehicle sales by 230 and to transition to a net-zero emissions economy by 2050.
After decades of stagnant private investment and declining public investment in the real economy, it is projected that the US will see manufacturing of up to 14 million new light-duty electric vehicles between 2022-2030. The Center for American Progress argues that the IRA will shape the future of America in the coming years and decades—and in just the first year since its passage, it has had tangible impacts on everyday Americans.
On the anniversary of the IRA, President Biden looked back over the last year and spoke about the gains and challenges of the historic legislation.
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