Rick Bowmer/AP Photo
Cecil Crow walks through an electricity substation at Intermountain Power Plant, June 22, 2022, in Delta, Utah. In three years, the power lines will start being used to transport power generated with hydrogen to consumers in California and elsewhere.
Nathan Iyer, a senior associate with climate analyst RMI, joined David Dayen and Lee Harris on the Prospect’s latest Twitter Spaces event to talk about why he thinks President Biden’s climate bill is a game changer for clean-energy industries.
Iyer argued that the Inflation Reduction Act (IRA) is chock-full of “wild cards” stemming from the different paths that cities, states, tribes, private businesses, public power agencies, and other stakeholders could take as they respond to a new set of incentives to adopt green technology. Many of the tax credits laid out in the IRA are uncapped, meaning they can be drawn upon to meet all existing demand. The tax credits do not phase out until certain decarbonization goals are met.
In the coming months, Iyer expects to see what Atlantic writer Robinson Meyer has called the “green vortex,” an accelerating confluence of market incentives as deployment drives down the costs of energy technologies. As more people buy green appliances, electricians get better at installing them, and the technology becomes cheaper as economies of scale kick in.
Beyond that, Iyer anticipates other positive sources of uncertainty, like changes in political economy, as new coalitions emerge around big green industrial giants. “If you look at the coalitions that killed earlier climate action across the country—the auto companies, the electric utilities, the oil and gas industry—it’s kind of wild how little they joined up to kill this proposal,” he said. “Some folks might come at that from a cynical perspective. Others look at it and say, wow, these huge industries with massive pull see opportunity here for a clean future.”
Electricity demand, which has been static for years, will also rise. That will be a boon not only for utilities, but also for heavy-industry sectors like steel and fertilizer, as they shift to production powered with hydrogen. Another group that previously benefited from early electricity credits was Big Tech companies, which used cheap renewable electricity to power big data centers.
The picture is not entirely rosy. The IRA may shrink domestic demand for fossil fuels, but rapid electrification in America could be accompanied by an export boom in oil and gas. (That promise is one element that made fossil fuel executives so delighted with the IRA.) As fuel prices have soared in Europe and Asia, American producers have rushed to meet demand, with oil fracking trailblazer Chesapeake Energy moving entirely into natural gas. Berkshire Hathaway’s Warren Buffett was recently cleared to acquire a 50 percent stake in Occidental Petroleum.
All of this would be facilitated if Sens. Joe Manchin (D-WV) and Chuck Schumer’s (D-NY) permitting side deal goes through next month, clearing the way for new pipelines and gas export terminals.
Even here, Iyer sees a bright side. U.S. liquefied natural gas (LNG) exports could simply be displacing other resources, rather than adding additional fuel. The bigger question, he argues, is whether global fuel demand will stay hot, as Europe engages in a campaign of demand destruction, and as the war in Ukraine has underscored the high cost and security threats of remaining a gas importer. That new “high-cost regime for fossil fuels,” he said, will start to look less appealing as the global market for solar and battery manufacturing achieves scale.
Iyer’s pitch for an investment-led approach reckons with the reality of the green transition. “If you look at this as a problem of fossil fuels, and their political power, and their technology stack, then the ‘keep it in the ground’ movement makes a ton of sense,” he said. “But there’s a second part of this where you have to pull down fossil fuel infrastructure, and replace it with something. You have to build a billion machines.”
You can listen to the entire conversation by clicking the link below.
