Connecting Policy and Innovation in Renewable Energy

The Inflation Reduction Act (IRA) and the CHIPS Act have been the most significant policies passed in the modern era. The two together have brought about a half trillion in private investments and $300b in public infrastructure spending to the United States.  

As we come closer to the November general elections, both sides of the aisle have been clamoring to shine a spotlight on the efficacy of these sweeping reforms. On one hand, proponents align ideologically with the goals of the collective policies: decrease the harmful effects of climate change over a 25-year period, decrease inflation, and revitalize American industry by reshoring job and allowing manufacturers to compete. 

The opposition claims that regardless of the positive intentions of these policies, they are merely stopgaps that poorly cover up long dead systems that are incapable of revitalization. Many critics point to the federal incentives, packaged mainly as tax credits, as ineffective or in some cases dangerous – doomed to backfire horribly.

These concerns, coupled with China’s dominance in manufacturing, give the United States plenty to be anxious about. Coal mines are shutting down around the country. Oil continues to lack significant enough decreases in price for the general American in order to be affordable. Whispers of economic recession, political instability, and regional conflicts are at the forefront of our thinking. And yet, very little is done to quell the concerns of everyday people. Between the rising cost of living and availability of well-paying jobs, working class Americans on both sides of the aisle are losing confidence in their government.  

To be sure, the partisan nature of US politics plays a large part in this crisis of confidence. But the landscape would look very different if the material needs of everyday people were taken care of by companies with proven track records in manufacturing, working alongside state governments that are charting out their vision for a green economy. IRA and CHIPS must be preserved in the coming years, if not expanded, so that the United States can expand its commitment to securing energy independence through the development of a competitive energy marketplace. 

Creating new jobs through the green economy

Since IRA’s passage a year and a half ago, already the focus is shifting away from federal regulations and towards state-level implementation. States that jumped on the green revolution early and had industry to support the transition are seeing the largest benefits. California projects that 140,000 jobs will be created through the IRA alone.

The IRA has also led to a revitalization of manufacturing in states controlled by the GOP, classically the most hardline detractors of welfarist policy. Texas estimates around 116,000 jobs will be created through the IRA. In addition, although adamant against the spending of public dollars, the states of Georgia, Tennessee, South Carolina, and Kentucky (among others) have all emerged as the “battery belt”, a zone of American manufacturing seeing rapid opening of electric vehicle battery manufacturers. Georgia alone is expected to see creation of 40,000 jobs through 2030 from the IRA, while states that used to have significant manufacturing presences, like Ohio and Pennsylvania, will see 40,000 and 44,000 jobs created respectively. 

These projections must be followed through with projects that pencil out, and with immediate deployment of green energy solutions. The growth and innovation in the tech industry across the last decade cannot be used as a proxy for what an industrial economy can look like — public works and infrastructural changes take time, but the payoff will be immense. 

This revitalization of a once thriving country, where families were built and sustained by working class jobs, comes at a critical juncture for both our economy and the climate. With the creation of more high-quality jobs comes a better quality of life for American workers, and not just for those with an advanced degree. 

We can also expect to see emissions decrease across multiple states as more emergent green technologies are adopted, leading to fewer negative health outcomes. California, for example, expects to see a decrease of 126 million metric tons of carbon emissions by 2030.

Using policy solutions to achieve price parity

IRA and CHIPS are accelerating investment into a decarbonized future while allowing manufacturers to explore technologies at the fringe, which just ten years ago were deemed unfundable. We are weaning ourselves off cross-Pacific trade dependence in order to answer the needs of the American people, and securing a resilient energy future. 

The recent trade concerns around China’s production capacity, however, has divided the industry. Once the US builds up manufacturing capacity to achieve price parity, both upstream and downstream stakeholders will be in alignment, but the short-term tensions are causing conflicting narratives.

Drawing a hard line on trade by increasing anti-dumping and countervailing duties and restrictions for Sections 201 and 301, forces the US to start building capacity for manufacturing silica, wafers, and cells. But production capacity cannot happen overnight. If duties are increased, then smaller manufacturers and developers are right to be concerned about their business models, as American components are still too expensive. On the other hand, if duties are held steady, investment into upstream manufacturing may slow down. Already, companies have had to cancel previous commitments due to the glut of solar components coming from China, making projects unprofitable.

Once the US builds up manufacturing capacity to achieve price parity, both upstream and downstream stakeholders will be in alignment, but the short-term tensions must be addressed. More consideration is needed for our short-term ability to deploy energy solutions so that we can continue decarbonizing while building up energy security. If startups and small businesses can't meaningfully participate due to lack of investment, we won't have a competitive marketplace. The Biden Administration should better support all energy stakeholders by considering policy levers (such as refundable tax credits in 45X) rather than focusing on trade, so that projects of all types could pencil out. 

Trade is not a panacea, and building capacity must not come at the expense of immediate solar deployment. Focusing on trade dynamics throws too much uncertainty into the US market. Policy solutions, rather, can better accelerate our clean power ambitions and keep the US competitive in the global marketplace. Actions we take around renewable energy must ensure that we create a thriving and competitive marketplace, democratize access to reduce costs for all Americans, and rebuild pathways to well-paying, middle-class jobs. All three of these goals must be met so that we have a vibrant ecosystem.

Conclusion

Climate change is exponential. Delaying mitigation and adaptation now only means more time and resources we have to spend in the future. We must continue — if not accelerate —the pace of deployment in the US to create more resilient communities. 

Reinvestment in American manufacturing has made America more competitive in a sector it which it lagged for decades, content with allowing a global solution to relatively local issues. For years, progressives decried the shipping of American jobs overseas to countries accused of human rights violations and prone to civil conflicts. The great recession of 2008 and the covid pandemic further proved that large-scale global events prove harmful for years, even after recovery has taken place.

So long as the incentive continues, so long as public money is present, the green transition will accelerate and our supply chains will become more robust. No single bill, or set of bills, is going to fix every issue we face as a nation. Manufacturing can and is making a significant turn toward the future, and it must be done with significant government assistance. As we’re seeing, these massive investments are already paying off.