Part 2. New FEDERAL CLIMATE BILL to SuperCharge U.S. Energy Transition

Buckle up: federal climate bill will supercharge energy transition
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From an Article by Ivy Main, Power to the People, August 10, 2022
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Energy storage will stand on its own

The VCEA established one of the most ambitious goals for energy storage development in the nation. But current federal law offers tax credits for energy storage only when it is part of a renewable energy project. The limitation has led to the proliferation of solar-plus-batteries projects around the country. It’s an ideal combination because it allows solar energy to be used when it is needed, unshackled from the time of day that it’s produced.

But uncoupling storage from renewable energy projects is a more efficient way to manage the grid, said Steve Donches, a Loudoun County attorney who represents battery storage companies and recently served on the Virginia Energy Storage Task Force.

“In many instances, the best location for storage supporting the grid is not where the renewables are located but rather near grid chokepoints or inside load pockets,” he said. “Moreover, site selection flexibility can often be important from a zoning permitting perspective. The new approach allows developers to be more nimble and locate where it is most useful and cost efficient.”

Recognizing this, the IRA provides a tax credit of up to 30% for energy storage whether or not it is part of a renewable energy facility.

This will make grid storage less expensive and easier for our utilities to install, and it will also benefit customers who want to put batteries in their buildings for back-up power. Amundsen noted that her customers sometimes can’t afford to include a battery at the time they install solar; the IRA will let them take the tax credit for storage even if they buy the battery later. This is especially important, she said, for resilience in low-income neighborhoods, where adding a battery to a solar-powered church or community center allows it to “island” during a power outage and provide a refuge for neighbors.

Homeowners will see huge benefits from building electrification

A cleaner electricity grid makes it possible to decarbonize other sectors of the economy by substituting electricity for fossil fuels in transportation and buildings; hence the climate advocates’ mantra “Electrify everything.” Yet while new electric appliances have become more energy efficient and attractive to consumers than the ones they replace, the switch comes with a price tag.

Under the new law, price will no longer be a barrier. The IRA offers rebates to residents to upgrade their homes with new electric technology such as heat pumps for heating and cooling (up to $8,000), electric induction stoves ($840), heat pump water heaters ($1,750) and upgrades to home electrical systems to support all the new load ($4,000). The rebates phase out for higher-income earners. Lower-income families replacing old and inefficient appliances will see the greatest energy savings as well as the highest rebates.

The federal rebates are a fantastic complement to existing Virginia programs for low-income energy efficiency upgrades. A major attraction of Virginia’s participation in the Regional Greenhouse Gas Initiative is the hundreds of millions of dollars it raises for low-income efficiency programs such as those devoted to upgrading multifamily housing like apartment buildings. Coordinating the state programs with the new federal rebates should be an urgent priority to ensure the broadest possible benefits to low-income Virginians.

Meanwhile, gas utilities had better start planning for the end of their business. There is no longer any reason to expand and upgrade gas distribution pipelines, because from here on in their customer base will be shrinking, not growing, resulting in stranded assets.

Electric vehicles aren’t just for the rich

The IRA provides a $7,500 EV tax credit for new vehicles, including those made by manufacturers like Tesla and Toyota that had reached volume caps in previous law. Restrictions apply, including income limits, vehicle price caps and supply chain sourcing rules. The act also now adds a credit of up to $4,000 for used vehicles, making ownership possible for more people at all income levels.

Virginia is committed to vehicle electrification through its adoption of clean cars legislation in 2021 and a 2022 law requiring state agencies to buy electric light-duty vehicles whenever the total cost of ownership is less than it would be for a vehicle with an internal combustion engines. But further speeding up the transition to EVs will create ripple effects requiring careful planning. Electricity demand will increase and do so unevenly, requiring load management programs and upgrades to parts of the distribution grid.

Charging all these vehicles will also be an issue. Many would-be EV customers lack the ability to charge at home, either because they don’t own the space where they park or because their homes aren’t wired for easy installation of a charger. The problem is especially acute for people who rent apartments in buildings that lack charging stations.

No matter how generous the credits, people won’t buy EVs if they can’t charge them. Virginia must require multifamily buildings to include enough charging stations for all the residents who want them, ensure public charging stations are plentiful and convenient in low-income neighborhoods and improve its residential housing code to ensure new homes are wired to facilitate installation of chargers.

For best results, lean in

Virginia law requires each new governor to produce an energy plan in October of the first year in office, so Virginia’s Department of Energy is currently in the process of writing a plan that will have Gov. Glenn Youngkin’s stamp on it. The plan must be one that “identifies actions over a 10-year period consistent with the goal of the Commonwealth Clean Energy Policy set forth in § 45.2-1706.1 to achieve, no later than 2045, a net-zero carbon energy economy for all sectors, including the electricity, transportation, building, agricultural, and industrial sectors.”

Governor Youngkin hasn’t shown much enthusiasm for Virginia’s energy transition to date, having tried to gut the VCEA and repeal RGGI. Yet with the IRA making so many incentives available for clean energy and electric vehicles, leaning in to the energy transition now will allow the commonwealth to reap huge rewards in the form of economic development, job growth, cleaner air and lower energy bills.

The opportunities for Virginia are enormous; the governor should make the most of them.

This article originally ran in the Virginia Mercury on August 9, 2022.